The Ministry of Information Technology and Telecommunications has identified several constraints including inconsistency in policies, taxation issues, and banking hurdles which are hampering the country’s information technology sector export potential of $15 billion.
Official documents revealed that over the past five years, phenomenal upward growth of 178 percent in IT & ITeS exports has been realized at a compound annual growth rate (CAGR) of 30 percent, the highest growth rate in “comparison to all other local industries in services and even higher than the textile sector which stands at 148 percent.
However, a number of constraints and hurdles hinder the growth of IT and ITeS exports. Inconsistency of policies has eroded the confidence of local and international investors, customers, and partners not to mention the trade bodies and government entities. Frequent changes in taxation policy on IT & ITeS export proceeds is one such example.
Taxation issues faced by the IT & ITeS industry are causing unnecessary hurdles and challenges for businesses as well as freelancers.
The official documents further revealed that banking hurdles and unnecessary restrictions are discouraging exporters from using formal banking channels and encouraging the retention of export earnings abroad. Ease of travel is a necessity to ensure the growth of IT & ITeS exports for both inbound travel of investors/customers/partners/employees from offices abroad and outbound travel of IT executives and professionals.
The lack of skilled human resources is an ongoing challenge for the IT & ITeS industry. With growing international demand, finding the HR with the right skill set and expertise is difficult. The gap between the demand for skilled HR in the IT & ITeS industry and the supply of IT graduates has significantly increased.
Higher Education Commission (HEC) accredited Institutes are currently producing 45,000 to 50,000 IT-related graduates yearly and less than 5 percent are employable in export-oriented companies.
Lack of IT-ready infrastructure at affordable rates in major cities as well as secondary and tertiary cities are restricting the growth of the IT & ITeS industry and resultantly exports.
Limited access to access to capital is a necessity for IT and ITeS businesses to expand their operations at both local and international levels. The majority of IT and ITeS businesses are SMEs and lack the capital to grow their businesses.
Limited international marketing, branding, promotion, and business development are not enough to become a preferred outsourcing destination in the world. The programs of international marketing and export enhancement need to be expanded at least tenfold with appropriate funding to meet the target of $15 billion in IT & ITeS within five years.
Pakistan’s IT & ITeS sector has delivered the largest trade surplus across Services and the second highest across Goods & Services after the textile sector. The trade surplus of $2.1 (88.84 percent of total ICT export remittances) has been realized by the IT & ITeS Industry during the period July to May of the fiscal year 2022-23 to meet the foreign currency crunch faced by the country, an increase of 15.96 percent as compared to a trade surplus of $1.811 billion for the same period in the fiscal year 2021-22.
Pakistan is 2nd most financially attractive IT & ITeS outsourcing destination in the world according to Kearney’s Global Services Location Index. Whereas, International Labour Organization (ILO) has ranked Pakistan as the 3rd largest supplier of digital labor including clerical & data entry services, creative & multimedia services, professional services, sales & marketing support services, software development & technology services, writing and translation services.
In software development & technology services, Pakistan is ranked by ILO as the 2nd biggest supplier of digital labor.
