IT exports rise by 10% MoM

Information technology exports for August 2023 amounted to $235 million

ISLAMABAD:

Despite facing numerous challenges in the IT sector, Pakistan’s Information Technology (IT) exports for August 2023 have amounted to $235 million, marking a significant 10% increase on a month-on-month (MoM) basis. This boost was primarily due to a higher number of working days compared to July 2023.

The Federal Minister for Information Technology & Telecommunication, Dr Umar Saif, recently pledged to elevate ICT exports from $2.62 billion to a staggering $10-20 billion. His predecessor, Syed Aminul Haque, had also aimed to push Pakistan’s IT exports to $15 billion from the existing $2.6 billion over the next few years. However, despite these ambitious claims, IT exports have not witnessed any major growth in recent years, owing to various challenges and uncertainties in the economic landscape.

Foreign exchange constraints have led to the closure of several factories across various industries, including newly established smartphone assembly plants. Another pressing issue is the government’s practice of charging fees in dollars for allocating spectrum to IT companies, which has raised serious concerns in the current economic situation. Additionally, high taxes continue to burden IT companies, hindering their growth potential.

Experts in the IT sector stress the need for significant investment, which can only be achieved through sustainable policies and the resolution of existing issues, particularly high taxation.

Segment-wise, telecom and computer services exports increased by 12% and 9% MoM, respectively.

These August 2023 IT export figures surpass the 12-month average of $218 million. According to a report released by Topline Securities, “The MoM improvement in IT exports for August 2023 is primarily attributed to a higher number of working days compared to July 2023.”

However, it is worth noting that an increase in clearing days affected the realisation of proceeds from IT exports, although the proceeds per day remained flat MoM in August 2023.

design: Ibrahim Yahya

Among computer services, hardware and software consultancy exports experienced impressive growth, with a 21% and 18% MoM increase, respectively, in August 2023. Services exports (excluding IT) of Pakistan also increased by 14% MoM, partly due to the reasons mentioned above.

On a year-on-year (YoY) basis, IT exports for August 2023 increased by 3% to $235 million. This growth was driven by an 11% YoY increase in telecom and a 1% YoY increase in computer services. These figures represent the amount remitted back to Pakistan by technology companies, though many IT companies retain a significant portion of their proceeds outside the country due to declining business confidence and exchange rate volatility.

According to the IT minister, IT companies are holding around $1-2 billion outside Pakistan. In the first two months of FY24 (2MFY24), IT exports increased by 5% YoY to reach $449 million.

The growth in IT exports reflects the global increase in IT spending, with worldwide IT spending projected to reach $4.7 trillion in 2023, a 4.3% increase from 2022 according to Gartner Inc., a technology research and consulting firm. Going forward, software and IT services spending are expected to increase by 13.7% and 8.8%, respectively, in 2023, according to Gartner research. This growth is attributed to increased utilisation, reallocation of spending to core applications and platforms, and vendor price increases.

Net IT Exports (Exports-Imports) for August 2023 increased by 7% MoM and by 3% YoY to $204 million. In 2MFY24, net IT exports increased by 4% YoY to $394 million, compared to a 5% YoY increase in the overall IT exports number. On a trailing twelve-month (TTM) basis as of August 2023, net IT exports have grown by 13% YoY to $2.3 billion.

The software segment is expected to see double-digit growth in 2023, presenting opportunities for companies like Systems Limited (SYS), considered a top pick in the IT sector. In August 2023, telecom services exports increased by 12% MoM and by 11% YoY to reach $46 million. Computer services exports increased by 9% MoM and by 1% YoY to $189 million. The total share of telecom and computer services exports for August 2023 stood at 20% and 80% respectively, compared to an 18% and 82% share in August 2022. In 2MFY24, the telecom and computer share of exports remained at 19% and 81%, similar to the same period last year.

Published in The Express Tribune, September 20th, 2023.

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