IT sector sets sights high to gain AI edge

Tech exports cross $4.6b mark; experts call for shift from low-cost labour to high-value products

KARACHI:

Pakistan, which set its eyes on $5 billion in IT and IT-enabled services exports, closed the 2025-26 fiscal year with a record $4.6 billion in exports, a roughly 21% rise from $3.814 billion in the previous year. The figure marks the highest annual earnings in the sector's history and confirms ICT as the country's largest services export category, though it fell about $400 million short of the government's $5 billion target. Under the Uraan Pakistan framework, the longer-term goal remains $10 billion by FY2028-29.

The performance reflects both structural expansion and persistent constraints. Experts describe an ecosystem that has matured yet remains fragmented and still below its potential.

"Pakistan has a broad but still fragmented ecosystem," noted Habibullah Khan, Founder of Penumbra Digital, saying that the country now hosts roughly 34,420 registered IT and ITeS companies, around 600,000 IT professionals and freelancers, major hubs in Karachi, Lahore and Islamabad/Rawalpindi, and more than 50 Software Technology Parks and e-Rozgaar centres. Universal Service Fund's former CEO Parvez Iftikhar places the registered company count with the Pakistan Software Export Board (PSEB) at over 26,000, concentrated in Punjab (led by Lahore), Sindh (Karachi) and Islamabad/Rawalpindi, with talent extending into secondary cities such as Faisalabad, Sukkur and Sialkot. The skilled base exceeds 600,000.

Growth has been propelled by a young workforce, competitive costs, remote-work demand, freelancing platforms, improving broadband, and the preferential 0.25% final tax regime on IT export income. Khan observes that the five-year ICT-export compound annual growth rate has hovered around 16%. Reaching $15 billion ambitions would require sustained 25-30% annual growth. "Our growth is plateauing," he says. "The direction is encouraging, but performance remains below Pakistan's potential."

Destinations and untapped markets

The export basket is led by software development, enterprise technology services, IT-enabled services, BPO, call centres and freelancing. Cloud, cybersecurity, AI, automation and digital consulting are expanding rapidly. Fintech remains strategically important, though much of its current value is still domestic. The United States remains the dominant market, accounting for more than 70% of software and IT-enabled services exports in some assessments, followed by the UK, the UAE, Canada, Europe, Saudi Arabia, Singapore and other Asian markets. The United States, European Union and Middle East together constitute nearly 75% of destinations.

Khan identifies the strongest under-penetrated opportunities in Saudi Arabia, the UAE and Qatar (especially GovTech, fintech, cybersecurity and digital transformation); Germany, the Netherlands and wider Europe (cybersecurity, Industry 4.0 and green-tech software); Japan and South Korea (higher-value technical work requiring language skills); and Australia, Africa and Central Asia.

Saad Shah, IT exporter and chief executive of Hexalyze, stresses the need to diversify both markets and service portfolios. Companies must move beyond conventional web and mobile application development towards high-value offerings in AI, cybersecurity, automation and enterprise solutions, while expanding presence in GCC and ASEAN markets to reduce dependence on traditional destinations and support the $10 billion target. Ibrahim Amin, Chairman of the Pakistan Freelancers Association, highlights freelancers' rising contribution. By the end of FY26, they accounted for around 25% of total IT exports, generating approximately $1.1 billion. Limited domestic employment opportunities have driven many professionals onto global platforms such as Upwork and Fiverr. Capacity-building programmes are helping, but a long-term national strategy for skills and sustainable freelancing growth is required.

Economic and social impact

The measurable gains are substantial. ICT exports generated roughly $3.9 billion, far higher than textiles relative to import intensity, because the bulk of value consists of wages paid to Pakistani professionals and earnings that largely remain in the country. Freelancer remittances crossed or approached the billion-dollar mark, although there are reports that much of it is misdeclared by the companies to benefit from tax relaxation given to freelancers. More companies are registering, and the sector is one of the few with meaningful job openings, around 32,000 technical vacancies at any given time, according to Khan.

Socially, remote work has expanded opportunities for women and young people and enabled talent outside major cities to participate in the global economy. Yet Pakistan still lacks a sufficiently reliable, unified employment database, so the sector's true contribution is probably understated.

Kapeel Kumar, Founder of The Founders Space, frames the challenge as moving from volume to value. The ecosystem rests on a three-tier pyramid: a large base of professionals and freelancers, mid-tier software houses pivoting towards Asia-Pacific markets, and maturing infrastructure of technology parks and early institutional frameworks. Growth of 20%-plus is commendable, he says, but satisfaction is the enemy of scale. Pakistan is still largely viewed as an offshore coding shop rather than a destination for core intellectual property.

"But the next $5 billion won't come from working harder with more developers," he said, adding that "it will come from working smarter by owning intellectual property, embedding AI natively into our tech stack, and shifting from an economy of task-takers to an ecosystem of global product creators."

AI ambitions and international partnerships

Pakistan has laid foundations for a national AI programme through the National AI Policy 2025, a proposed National AI Fund, Centres of Excellence, regulatory sandboxes, public-sector adoption targets and a goal of training 200,000 people annually – or roughly one million by 2030 – with 10,000 trainers by 2027. The Islamabad AI Declaration emphasises that AI should be sovereign, responsible, use-case-led, auditable and subject to human accountability. The National AI Advancement Initiative is establishing online training programmes and, more recently, seven AI hubs aimed at incubating hundreds of startups.

China's role is significant. As a global leader with indigenous value chains, it can contribute telecom equipment, cloud and data-centre technology, cybersecurity, training, hardware, inference compute and applied research. The China-Pakistan Joint Working Group on IT provides a platform. Pakistan became a founding member of the China-led World Artificial Intelligence Cooperation Organisation (WAICO) in July 2026. Khan stresses that cooperation must build Pakistani capability and intellectual property rather than permanent vendor dependence, with competitive and transparent procurement and negotiated access to high-quality models.

International connectivity has improved. Pakistan now has six submarine cable systems and one terrestrial system, with installed capacity roughly doubled to around 17.7 Tbps under the current IT minister. Twenty operational cross-border fibre links exist, with further systems planned. Broadband expansion and local cloud capacity lower the cost of exporting digital services and support fintech, health, government services and AI. Priorities remain resilience: multiple routes, reliable domestic fibre, better right-of-way regulation, affordable enterprise connectivity and fewer disruptions.

The United States has shown concrete interest. A Pakistan-US Tech Investment Conference produced an initial commitment of more than $20 million, largely from American companies led by Pakistani-American entrepreneurs. The US State Department has highlighted the ICT sector as an investment opportunity. UK engagement appears through trade dialogues, technology missions and business forums. Large-scale hyperscaler investment comparable to domestic AI infrastructure commitments has not yet materialised. Barriers include policy uncertainty, taxation, foreign-exchange restrictions, payment friction, data-protection uncertainty, weak IP enforcement, energy costs, internet reliability, security concerns and capital repatriation difficulties.

The writer is a staff correspondent