IT industry projects contraction in exports

Claims overseas sales have already stagnated, blames govt’s apathy

KARACHI:

Experts and stakeholders have hit out at the government’s apathy towards the information technology (IT) sector, which is capable of earning significant foreign exchange and reversing the ongoing economic meltdown.

They cautioned economic managers that IT exports were stagnating and may even take a negative turn and called on the government to take necessary measures to address the situation.

The lack of attention towards a promising sector raised serious questions about the government’s priorities and its ability to steer the country out of economic crisis, they lamented.

“There is stagnation in IT exports and a possible contraction is on the cards,” said Pakistan Software Houses Association (P@SHA) Chairman Muhammad Zohaib Khan.

Khan was speaking at the 79th executive committee meeting of the Asia-Pacific Information and Communication Technologies Alliance (APICTA) in Perth, Australia while leading a Pakistani delegation.

The situation has caused profound concern across the IT industry as export remittances from IT and IT-enabled services (ITeS) shrank 0.5% to $1.94 billion in the first three quarters of fiscal year 2022-23.

In contrast, there was 47% average growth in IT and ITeS exports for two consecutive years – FY21 and FY22.

Khan, however, added that Pakistan’s IT industry had forged partnerships with 16 economies of the ICT alliance for promotion of IT and ITeS exports.

“The government must come up with business-friendly policies to address the contraction in IT exports. It should ensure ease of doing business and an investment-friendly climate while assuring data protection,” former Universal Service Fund (USF) CEO Parvez Iftikhar told The Express Tribune.

Besides, he said, communication infrastructure needed massive investment, which could be achieved through facilitating and enabling private sector investors, so that they could feel free to invest in information and communication technologies (ICT).

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Furthermore, issues related to the Federal Board of Revenue (FBR) and inflow and outflow of hard currencies must be resolved along with easy access to technologies such as computer hardware, software and smartphones.

In addition, particular attention must be paid to smaller investors, enabling them to not only earn foreign exchange, but also bring their earnings back home, he suggested.

“Pakistan’s IT exports remained flat at $1.94 billion during nine months of fiscal year 2023,” said Topline Securities ICT analyst Nasheed Malik.

However, they increased 14% month-on-month (MoM) due to a 51% increase in telecom and 8% rise in computer services. Exports of other IT-related services increased by 11% MoM and software consultancy rose by 10%.

Earlier, in January 2023, the IT sector’s exports declined by 23% MoM due to a 10-15% gap between the inter-bank and grey market rates of the US dollar, Malik said. However, export proceeds recovered in subsequent months after the gap was plugged at the end of January.

IT exports for March 2023 decreased by 14% year-on-year (YoY) to $223 million due to a 16% decline in computer services. “It indicates the amount has not been remitted back by technology companies,” he added.

JS Global analyst Waqas Ghani Kukaswadia was of the view that the global slowdown in IT investment and continued devaluation of the rupee caused a considerable decline in IT exports, resulting in fluctuating remittances for the IT sector.

Furthermore, “foreign companies are reluctant to trust Pakistani firms due to political instability. One reason for dull exports could be the local businesses deciding to bring less money to Pakistan because of greater earnings potential outside.”

Combined GDP of APICTA countries stands above $30 trillion and they are potentially huge IT export markets for Pakistan.

“This year, Pakistani IT exports are expected to be in the range of $2.5-2.6 billion, which can easily be jacked up to $5 billion in just two years if business-friendly policies are formulated,” the P@SHA chairman stated.

Published in The Express Tribune, May 2^nd, 2023.

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