Pakistan's IT industry to quote prices in dollars for foreign clients
Decision comes in wake of hefty rupee depreciation
A US Dollar note is seen in this Reuters illustration photo.
KARACHI:
Major players in the information technology (IT) sector of Pakistan have decided to quote prices in US dollars for foreign clients considering the hefty rupee depreciation in the past one year.
A letter has been circulated by top players of the IT industry including JBS, Premier Systems, Silicon Technologies, IBL Unisys, Infotech and Abacus Consulting and they have sent it to their customers as well, informing them about the change.
“IT industry has borne a massive loss while quoting prices in rupees,” said JBS CEO Veqarul Islam while talking to The Express Tribune.
IT hardware and software in Pakistan are completely made up of imported goods, therefore, the industry faces problems when the rupee value fluctuates. When the rupee was stable, price quotations in rupees were affordable but last year, the currency dropped 35%, which caused problems for the entire industry.
“In this situation, the survival of business is difficult,” said the JBS CEO. “Many companies have endured heavy losses due to the rupee fluctuation.” He added that IT businesses in Pakistan were already working on meagre profit margins, which fell within the range of 1-4%.
With the dollar getting expensive, the financial cost has also increased, he said. “If we want to stay in business, we have to quote prices in dollars.” He stressed that IT businesses were not currency exchanges which gained or lost money with fluctuation in the rupee value.
Owing to that situation, the IT companies opened and closed rapidly, said the CEO, adding that there were only two or three IT companies which survived for more than 30 years in Pakistan.
IT companies are involved in two kinds of businesses, which are production and trading. Trading of commodities is getting less and less profitable throughout the world compared with production that is becoming more profitable with time.
“In Pakistan, we mainly trade and do not produce,” he said. “For example, we buy licence of any software from Microsoft, Oracle or any other company in dollars and sell it to local users.” In this transaction, the manufacturer made the real money but not the trading business, he argued. “In the trading business, there will be six competitors selling the same software licence and all will try to lure customers by giving up their profit margins.”
Published in The Express Tribune, October 3rd, 2019.
Major players in the information technology (IT) sector of Pakistan have decided to quote prices in US dollars for foreign clients considering the hefty rupee depreciation in the past one year.
A letter has been circulated by top players of the IT industry including JBS, Premier Systems, Silicon Technologies, IBL Unisys, Infotech and Abacus Consulting and they have sent it to their customers as well, informing them about the change.
“IT industry has borne a massive loss while quoting prices in rupees,” said JBS CEO Veqarul Islam while talking to The Express Tribune.
IT hardware and software in Pakistan are completely made up of imported goods, therefore, the industry faces problems when the rupee value fluctuates. When the rupee was stable, price quotations in rupees were affordable but last year, the currency dropped 35%, which caused problems for the entire industry.
“In this situation, the survival of business is difficult,” said the JBS CEO. “Many companies have endured heavy losses due to the rupee fluctuation.” He added that IT businesses in Pakistan were already working on meagre profit margins, which fell within the range of 1-4%.
With the dollar getting expensive, the financial cost has also increased, he said. “If we want to stay in business, we have to quote prices in dollars.” He stressed that IT businesses were not currency exchanges which gained or lost money with fluctuation in the rupee value.
Owing to that situation, the IT companies opened and closed rapidly, said the CEO, adding that there were only two or three IT companies which survived for more than 30 years in Pakistan.
IT companies are involved in two kinds of businesses, which are production and trading. Trading of commodities is getting less and less profitable throughout the world compared with production that is becoming more profitable with time.
“In Pakistan, we mainly trade and do not produce,” he said. “For example, we buy licence of any software from Microsoft, Oracle or any other company in dollars and sell it to local users.” In this transaction, the manufacturer made the real money but not the trading business, he argued. “In the trading business, there will be six competitors selling the same software licence and all will try to lure customers by giving up their profit margins.”
Published in The Express Tribune, October 3rd, 2019.