Fastest growing IT sector of Pakistan and its potential

Fastest growing IT sector of Pakistan and its potential

IT Sector is the fastest growing sector of Pakistan contributing about 1% of GDP of Pakistan at about 3 billion USD. IT sector exports have grown 30% YOY in the last 5 years. This is great in comparison to other export sectors of Pakistan where growth is either slow or has become stagnant.
There is a tremendous opportunity for growth in this sector and this sector can easily grow to 10 billion USD in the next 2-3 years with the right facilitation from the government.
There are several reasons behind this optimism. First is that security situation of Pakistan has improved. Startups like careem, daraz and their success is bringing investment into Pakistan as evident from the recent acquisition of daraz and easypaisa by AliBaba. Traditional investors from other Pakistani sectors like textile, fertilizers are also taking special interest in the startup ecosystem.
In the traditional IT outsourcing, India and Philippines are become increasingly expensive and these countries are finding it hard to compete in the technology areas like artificial intelligence, internet of things, cyber security, automation etc.
[email protected] along with MOIT under the leadership and directions of Anusha Rehman Khan conducted a study of the regional peers of Pakistan and incentives given by them to their industry. In the light of these and after consultation with industry, a comprehensive package was recently announced by Prime Minister Shahid Khaqan Abbasi for the IT/ITeS sector. This shows the faith in IT as a sector as a future growth sector of Pakistan.
Let’s look at how growth can be enabled in the different sectors of IT.
Outsourcing Sector (BPO)
60-70% of india’s exports and 90% of Philippines exports are from traditional BPO sectors. This growth requires extensive infrastructure. Countries like india and Philippines have enabled infrastructure investments by setting up Special economic zones and giving benefits to special zone developers and companies.
This requirement can only be fulfilled by facilitating setup of Tech Special Zones under Public private partnership model. In India, states provide land at government rates and provide upto 25% subsidy for setting up special economic zones for technology.
SEZ have been seen as a key enabler in all countries where growth has taken place. Tech Special Zones have been included in the PM’s Package so this will help companies bringing business and investment to Pakistan.
Product and Intellectual Property Development
The long term success of Pakistan’s IT sector will depend on if Pakistani companies are able to develop products and intellectual property. BPO sectors generally are good employment generators but margins are low. Products generally have better margins as one product can be sold to multiple clients.
The best way to support product development is by encouraging buying of locally made software and decreasing local taxation so that local software is cheaper for traditional sectors to buy. Countries like india have allowed local buying in many critical projects and have also helped companies increase capacity. This has helped their local companies which now sells the same level of software to international companies.
Reduction of Sales Tax and Minimum withholding tax removal along with encouragement of buying local software by government will result in product development in Pakistan.
Skill Development of our youth
People today are hired in IT based on the skills they have rather than the degrees they posses. As a simple example ,anyone expert in blockchain or artificial intelligence can easily earn 3000$/ month sitting in Pakistan. If we can train 1 million people in these skills, imagine the jobs we can create and the foreign exchange we can bring to Pakistan.
It is very important that we start teaching these skills to our nation. The Digital Skills program by Ignite is a great initiative and will result in jobs to the masses. We also need to focus on higher skills like machine learning, cyber security experts as their demand is much higher and competition will not be there for the next few years. This will require a national effort where industry, hec, ministries and government need to come together and make a national education plan keeping this in mind.
As a nation we are in the right direction and the Prime Minister Shahid Khaqan Abbasi and Minister Anusha Rehman Khan have shown the vision and leadership by announcing the IT package. However, this will need constant oversight and push as it will not be possible to achieve the potential of Pakistan without the government’s constant support and oversight.

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