Navigating Pakistan's IT odyssey: The Quest for unprecedented heights

Pakistan needs to enhance its IT industry's image and attractiveness by creating favourable policies, legal framework

Despite the fanfare surrounding the 60-day achievement shouted by the caretaker government, the harsh reality is that Pakistan's IT exports plummeted by 0.5% in the initial nine months of FY23, amounting to a meagre $1.94 billion. This decline starkly highlights the formidable hurdles in achieving the ambitious $5 billion annual target, exacerbated by cutbacks in global capital investment within the tech sector driven by escalating interest rates.

Pakistan did experience a notable surge in its IT exports, reaching a record high of $303 million in December 2023, but achieving the government's ambitious target of $5 billion for the fiscal year remains a challenge.

Projections for FY24 indicate that exports may range between $3-4 billion, showing an increase from the previous year's $2.6 billion. The telecommunication sector, especially call centre services, played a key role in driving this growth with an 11.11% increase.

Another factor that contributed growth is State Bank of Pakistan's move to raise the retention limit for exporters from 35% to 50% in January 2024, aimed at encouraging IT companies to repatriate more foreign income and boost the country's foreign exchange reserves. However, the question that requires an honest answer is this: do we possess the foundational pillars necessary to catapult Pakistan's IT industry to unprecedented heights?

However, these positive developments are not enough to ensure the long-term sustainability and competitiveness of Pakistan's IT industry, which faces several structural and systemic challenges. One of the primary obstacles to expanding exports is the inadequate talent pool in the IT sector, which limits the quality and quantity of IT services that can be offered to the global market. Experts recommend training 100,000 IT professionals annually to meet the industry demands, which are expected to grow exponentially in the coming years. However, the current output of 35,000 IT graduates per year falls short of these requirements, and many of them lack the relevant skills and experience to work in the IT sector.

Talent retention stands as a critical linchpin in delivering premium-value tech services and propelling the IT industry's growth. Presently, Pakistan is grappling with a rapid brain drain fuelled by political and economic instability, posing a significant threat to its tech sector's advancement. The existing IT workforce is also vulnerable to the phenomenon of brain drain, as many talented and qualified IT professionals leave the country in search of better opportunities and working conditions abroad.

In contrast, India, which is Pakistan's main competitor and neighbour in the IT industry, has implemented effective strategies to retain top talent within the tech sector, such as offering attractive salaries, benefits, and incentives, creating a vibrant and innovative ecosystem, and providing opportunities for career growth and development. These factors have contributed to India's success as a global IT powerhouse, with IT exports reaching $191 billion in 2023.

Another important segment of Pakistan's IT industry is the freelance market, which consists of individuals who provide IT services to global clients through online platforms such as Upwork and Fiverr. Pakistan has a large and growing cohort of freelancers, who are estimated to number around one million and earn around $1.2 billion annually. Their pivotal role in broadening the global footprint of Pakistani IT services cannot be understated, as they offer a diverse range of skills and solutions, from web development and graphic design to data analysis and digital marketing.

However, the freelance market also faces daunting hurdles that impede its scalability and profitability, such as erratic internet connectivity, persistent blackouts, and inadequate broadband penetration nationwide. These factors affect the quality and reliability of the IT services delivered by the freelancers, and also limit their access to the global market and opportunities. Furthermore, the freelancers also face challenges such as lack of legal protection, taxation issues, payment delays, and low bargaining power, which reduce their income and security.

To overcome these challenges and unleash the full potential of Pakistan's IT industry, it is imperative to revamp the current infrastructure, spanning from secondary education to university curricula, to churn out graduates who are finely attuned to the industry demands and the latest technological trends. This requires investing in quality education, training and research, as well as fostering linkages and collaborations between academia and industry.

Moreover, the scarcity of funding for technology ventures poses a significant obstacle to growth, as Pakistan's nascent venture capital sector is unable to provide adequate and timely support for entrepreneurs and ground-breaking ideas. According to a report by Invest2Innovate, Pakistan's tech startups raised only $87 million in 2023, compared to $16.2 billion in India. This indicates the need to create a more conducive and facilitative environment for investment in local startups, by providing incentives, mentorship, networking, and exposure to potential investors and partners.

In addition to addressing the internal challenges, Pakistan also needs to enhance its IT industry's external image and attractiveness, by creating robust policies and a favourable legal framework that can entice foreign tech companies to invest in Pakistan and avail its IT services. This includes offering incentives such as tax breaks, subsidies, and special economic zones for foreign tech companies, ensuring data protection and privacy laws are in place and enforced, and providing a stable and predictable regulatory environment that can reduce the risks and uncertainties for investors. By fostering transparency, accountability, and good governance, enforcing intellectual property rights, and promoting a business-friendly and innovation-friendly atmosphere, Pakistan can build trust and confidence with the global tech giants and attract more investments and contracts for IT service delivery.

While Pakistan struggles to recover from yet another crisis after the recently-held controversial elections, Microsoft unveiled a major skilling initiative a day prior called "Advantage India," which aims to equip two million people with AI skills by 2025 to empower India's workforce with future-ready skills.

Pakistan's IT industry holds immense potential for growth and development, as it can leverage its large and young population, its low-cost and high-skill advantage, and its strategic location and connectivity. However, to realise this potential, Pakistan needs to address the multiple challenges that hamper its IT sector's performance and competitiveness, and adopt a holistic and proactive approach that can foster a culture of innovation and excellence in the IT industry.