Could a poorly-crafted budget be the end of the IT boom?

Eminent voices warn of impending crisis as policy failures threaten digital prosperity and brain drain

KARACHI:

The sombre policies of the poorly-crafted federal budget for 2024-2025 could hinder digital prosperity and significantly impact the IT sector, which had recently begun gaining momentum after Covid-19. This situation might lead to a potential fiasco, exacerbating the brain drain of highly-skilled IT professionals.

Policy makers and the elite are seen as neglecting the country’s foundations while enjoying increasing privileges funded by the hard-earned income of the salaried class. It appears that the budget, seemingly prepared without benefiting any industry, is strangling the IT sector.

Although the government allocated a budget of Rs79 billion for the IT sector, IT professionals have raised grave concerns, deeming the allocation a dead loss. Professor Tahir Mehmood Chaudhry, Chairman of the Computer Society of Pakistan (CSP), a prominent IT think tank, criticised the establishment of IT parks or software technology parks as merely attempts to make abandoned places commercially viable, benefiting landlords without providing necessary infrastructure or cost-effective facilities. With 13 software technology parks proving ineffective, many IT companies or freelancers have opted to relocate their offices to more suitable domestic or low-cost commercial areas. The government’s policies are not yielding fruitful results, especially for end-users. The IT industry was entirely disregarded when forming tax policies in the budget.

The government has allocated a substantial amount for the Benazir Income Support Programme (BISP), with a 27% increase to Rs593 billion. Half of the BISP funds should be directed towards reviving ailing industrial units in the country. A single factory employs thousands of workers, contributing to the national economy by enhancing exports and maintaining a balance between imports and exports.

“We seem to be regressing instead of progressing. Despite touching $32 billion, our exports plummeted to $18 billion. Among this, the IT industry’s exports stand at $3.2 billion out of the total $18 billion. We had hoped to reach $5 billion by year-end, with IT exports potentially reaching $10 billion in the next five years. Achieving a $10 billion export figure solely from the IT industry could address concerns raised by the International Monetary Fund (IMF) and the World Bank (WB),” he stated.

Key decision-makers are failing to recognise the sustainable growth potential of the IT sector. Countries like India, Bangladesh, and others have established IT parks and offered services at nominal rates to foster IT industry growth, providing a shortcut to earning foreign exchange. With 130 reputable IT universities nationwide, the government should establish incubation centres in each university, promoting the establishment of software houses. It is imperative to provide training in software employable skills. Pakistan boasts 260 universities, and if each one trains 500 students annually in IT skills, the country will witness a surge in IT professionals within a few years. Substantial subsidies should be allocated to this sector to facilitate its growth.

Eminent AI Consultant and IT Analyst Khawaja Fahad Shakeel expressed concerns regarding the government’s proposed allocation of an extraordinary budget of Rs79 billion to the IT sector, stating that it may not effectively benefit the industry. Out of this total amount, the government earmarked Rs48 billion for its own projects, including the digitisation of the Federal Board of Revenue (FBR) with Rs7 billion, the establishment of Karachi and Islamabad IT parks with Rs19 billion, allocation of Rs2 billion to the Pakistan Software Export Board (PSEB) to encourage IT exporters and internships for IT students in IT firms, and initiatives for digital infrastructure information with Rs20 billion. Following these allocations, only Rs31 billion remains for the IT sector, a portion of which has historically gone unspent, leading to deficits as usual.

Shakeel stressed the need for the FBR to digitise its tax system using its own allocated budget and revenue. He criticised the practice of diverting the IT budget to other departments for computer and technology needs, calling it utter injustice.

When it comes to establishing IT parks in Karachi and Islamabad, there’s concern that a significant portion, around 20% to 25%, may be encroached upon by ministries. This could lead to the setting up of offices for chief ministers and bureaucrats, with additional security measures limiting access for IT learners and professional freelancers. Furthermore, these parks may be manipulated for political gains during election campaigns, as seen in recent malpractices. It appears that the budget for IT parks is not primarily intended for the IT sector’s benefit.

Regarding the Pakistan Software Export Board (PSEB) budget, he said there is uncertainty about its allocation and spending. It’s unclear when stipends for internships are disbursed. Additionally, concerning digital infrastructure information (DII) initiatives, funding from other sectors seems to be utilised, raising questions about its relevance to the IT sector.

In terms of fostering growth in the IT industry, the focus should be on cutting-edge computer technology training, facilitating firms, ensuring easy access to information, providing subsidised internet services for software companies, streamlining registration and documentation processes for IT firms, and offering a one-window operation for ease of doing business and remittances, he said.

However, the budget fails to address critical issues such as easing business operations for IT firms and professionals, tax relaxation, and other necessary considerations. The government’s budgeting process appears to have overlooked the growth potential of the IT sector. Moreover, new taxes on the salaried class could exacerbate brain drain, as IT professionals may prefer freelancing over traditional employment.

THE WRITER IS A STAFF CORRESPONDENT