Trade Surplus in IT Sector Reaches $1.72 Billion
Pakistan’s Information Technology and Telecommunication (ITT) sector has achieved remarkable growth, making significant contributions to the country’s economy and export earnings. The Economic Survey 2023 reveals that the IT sector has recorded a trade surplus of $1.72 billion from July to March in the fiscal year 2023, marking a substantial 16.7% increase compared to the previous year.
During the same period, IT exports reached $1.94 billion, accounting for the highest share of 35.1% in all services exports. This impressive growth in IT exports highlights Pakistan’s potential to harness its highly skilled workforce and capitalize on the advantages of the IT industry.
Nasheed Malik, an ICT analyst at Topline Securities, emphasizes the advantages of focusing on IT exports. Unlike traditional industries that heavily rely on raw materials, the IT sector primarily deals with intangible products and services, such as software development, digital marketing, and IT consulting. This allows the Pakistani government to tap into a highly skilled workforce, including women who can contribute significantly through freelancing. Encouraging women to participate in freelancing activities not only boosts the economy but also promotes social empowerment, he states.
To foster the growth of the IT industry, the Pakistan Software Exports Board (PSEB) has established seven Software Technology Parks in cities like Faisalabad, Gujrat, Jamshoro, Karachi, Multan, Peshawar, and Rawalpindi. These parks aim to facilitate the IT sector and create a conducive environment for its development.
In addition, IGNITE, an organization promoting entrepreneurship and innovation, has set up eight National Incubation Centres (NICs), including specialized incubators for agri-tech and aerospace. The NICs have successfully nurtured over 1,317 startups, generating more than 126,000 jobs and attracting a total investment of Rs15.43 billion ($74 million). Through the program, over 2,300 women entrepreneurs have been empowered, showcasing the positive impact the IT industry can have on job creation and economic growth in Pakistan. Malik also emphasizes that empowering women to engage in freelance work taps into an underutilized talent pool and highlights the diverse skills and expertise they possess, which can significantly contribute to the IT sector and the economy.
The telecommunication industry in Pakistan has also played a vital role in the country’s economic growth. During July to December of FY2023, the industry attracted an investment of $632 million, with revenue reaching Rs 137.7 billion. Muhammad Azfar Ahsan, former Minister of State and Chairman of the Board of Investment, emphasizes the telecommunications and cellular industry’s crucial role as an enabler for Pakistan’s economic growth.
However, Ahsan also highlights the challenges faced by the telecommunications industry, particularly heavy taxation. He emphasizes the need to create a growth-friendly environment for the industry, as it serves as the basic infrastructure for the IT sector. High taxes, including a GST of 19.5%, additional withholding tax of 15%, and corporate tax of 34%, have hindered the telecommunications industry’s growth, impacting the overall trajectory of the economy’s digitization and IT-related exports.
Pakistan holds immense potential in the IT sector, ranking as the 4th largest nation contributing to the global IT freelancing segment. With its young population, English-speaking IT professionals, and technological capabilities, the country is well-positioned for greater success. However, Ahsan states that the current level of IT exports, standing at just $2 billion, does not fully reflect Pakistan’s potential.
The former Minister of State emphasizes that the telecommunications industry is an integrated and enabling sector, and any decline or collapse would have far-reaching consequences. Immediate facilitation by the government, along with a long-term policy framework, is crucial to stabilize the telecommunications sector and strengthen Pakistan’s overall economic infrastructure.
The IT sector in Pakistan holds immense potential and plays a vital role in the country’s economic growth. It ranks as the fourth-largest nation contributing to the global IT freelancing segment. Pakistan’s young population, English-speaking IT professionals, and technological capabilities position it for even greater success in the future. However, it is important to recognize that the current level of IT exports, standing at just $2 billion, does not fully reflect the true potential of the sector.
Muhammad Azfar Ahsan, the former Minister of State, emphasizes the significance of the telecommunications industry as an integrated and enabling sector. Its decline or collapse would have far-reaching consequences for the country. Thus, immediate facilitation by the government, coupled with a long-term policy framework, is crucial to ensure the stability and growth of the telecommunications sector. This, in turn, will strengthen the overall economic infrastructure of Pakistan.
Despite the promising growth of the IT and telecommunications sectors, challenges still need to be addressed. Heavy taxation poses a significant obstacle to the telecommunications industry’s progress. High taxes, including a GST of 19.5%, additional withholding tax of 15%, and corporate tax of 34%, have hindered its growth. These tax burdens impact the overall trajectory of the economy’s digitization and IT-related exports.
In summary, Pakistan’s IT sector has recorded a trade surplus of $1.72 billion, showcasing its remarkable growth and contributions to the economy. With the potential to leverage its highly skilled workforce, the country can further boost its IT exports and tap into the advantages of the industry. However, the telecommunications industry, as the backbone of the IT sector, requires immediate facilitation and a growth-friendly environment to realize its full potential. By addressing challenges such as heavy taxation, Pakistan can foster a robust IT ecosystem, create job opportunities, and strengthen its position in the global IT market.
Published in PakWeb, June 9th, 2023.
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