Pakistan’s IT exports exceed $2 billion, says PSEB chief

Published: November 21, 2015
SHARES
Email
The updated figures clearly indicate the PSEB has exceeded its own projection by quite a big margin. PHOTO: FILE

The updated figures clearly indicate the PSEB has exceeded its own projection by quite a big margin. PHOTO: FILE

KARACHI: 

Pakistan’s export of Information Technology (IT) and IT-enabled services (ITES) amount to $2.2 billion in fiscal year 2014-15, according to Pakistan Software Export Board (PSEB) Managing Director Asim Husain.

In an emailed response to The Express Tribune, PSEB’s chief said freelancers’ contribution in the IT exports of FY15 was $100 million – one-third of $300 million the IT sector generated from domestic sales during the year under review.

Pakistan has shut market access routes for itself

“Total revenue of the IT industry is around $2.5 billion a year at present,” Husain said, which means 88% of IT industry’s revenue come from exports alone.

It is pertinent to mention here these figures are based on statistics compiled by PSEB, the apex government body, which has the mandate to promote the country’s IT industry locally and internationally. The aforementioned data therefore, may not reflect the actual size of the country’s IT exports as some IT remittances are not properly documented.

DESIGN: NABEEL AHMED

State Bank of Pakistan (SBP) had estimated the country’s IT exports to be $370 million in FY14. However, the PSEB was not sure if the number was accurate.

Japan to step up textile imports from Pakistan

The central bank categorises IT exports under six categories, PSEB says, but sometimes banks don’t properly report IT exports to the SBP thus, some of it may not show up as IT exports. In most cases, companies are transferring only the cost of their operations to Pakistan and keeping remaining earnings abroad, PSEB says.

To ascertain the actual size of Pakistan’s IT exports, PSEB had started working on this area earlier this year – it had projected the IT remittances (revenues) for FY2015 to clock in at $500 million and set a target to double the amount to $1 billion during the next five years.

However, the updated figures clearly indicate the PSEB has exceeded its own projection by quite a big margin.

Alarming: Pakistan’s exports plunge to 4-year low

“Pakistan’s IT industry has come a long way and is today the fastest growing export sector of Pakistan,” Husain said in a post on the PSEB’s website. From less than $20 million in annual exports as of fiscal year 1999-2000, PSEB says, the country’s annual IT exports have increased to $2.2 billion now at an annual growth rate of 41%.

In 2000, the MD said there were virtually no companies with revenues exceeding $1 million but at present more than 50 IT companies have reported exports in excess of that amount.

IT and ITES, PSEB says in a recent report, “are capable of providing a full spectrum of services, ranging from low-end BPO services to high-end enterprise grade IT solutions.”

Calling it “an extremely vibrant part of Pakistan’s economy,” PSEB says this sector is made up of a significant number of large IT companies, which hold local back offices or representative offices serving some of the world’s largest businesses to meet all their IT needs.

Published in The Express Tribune, November 21th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (11)

  • Seasian
    Nov 21, 2015 - 9:39AM

    These are Pakistani “estimates”. They cook up GDP numbers while under intense scrutiny. Nobody bothers to whet these numbers so, it is a free for all. They might as well make it $40 billion.Recommend

  • Saud
    Nov 21, 2015 - 11:50AM

    I would trust SBP more on numbers than pseb (and asim hussain). Whats the point of counting earnings kept abroad (itself a practice bordering on being illegal) in exports?Recommend

  • Nov 21, 2015 - 11:53AM

    Something fishy in here. For good or bad is a different question.Recommend

  • Waseem Sarwar
    Nov 21, 2015 - 12:01PM

    Working for a very big IT company, more than 80% of IT revenue is coming from US but this can be a lot more. Solve law and order issues and make Pakistan’s image better in US and EU. Recommend

  • RT
    Nov 21, 2015 - 12:16PM

    Still a long way go, the moment there are people who offer better services clients will jump to the other side. India’s software and service exports are in the range of $150-$175 billion. And it is going to increase even further now given that there are start ups popping up every week. Recommend

  • Fahim
    Nov 21, 2015 - 1:02PM

    It is far above then above figure as billion of rupees came through freelancer and small software houses through western union etc. 2 Billion is an amount that is counted upon taxRecommend

  • Umair
    Nov 21, 2015 - 1:10PM

    Lets rephrase the main proposition. USD 2 billion is the value generated by Pakistan’s IT exports. Now that is not equivalent to the export realizations from the software industry, for a few reasons:

    If a company is targetting the US business, customer or there is the possibility of raising VC money for the venture, it is much more likely that they will have to incorporate in the US. So, the software or service may be developed in Pakistan, but the taxes paid will be higher in the jurisdiction of incorporation. In such case, the value is being ‘produced’ in Pakistan, but the entity capturing that value is not in Pakistan.
    Tax and local compliance is a huge problem, and a huge cost. A means to avoid that cost is to incorporate outside, and show the Pakistan establishment as a Branch office. Because it is a branch office, entrepreneurs will not remit the total revenues to Pakistan, just what is required to keep the branch office running.
    Some standard practices in startups cannot be implemented in Pakistan, because the rules and regulations still have to catch up. e.g. ESOPs, ownership vesting, etc. No entrepreneur is allowed to pay for services procured, by issuing shares in their company. For ventures that are by default, short on cash, that is a huge problem.
    Ditto on financial transactions. Incorporate in US, get easy access to services like paypal for business, get merchant accounts, pay foreign persons instantly. The whole process of effecting a payment to a foreign company from a Rupee account in Pakistan, and the approvals required to get this done, is a huge headache.
    For freelancers, the fear of attracting the unwanted attention of FBR, the cost in time and money of having to deal with their illegal demands, and just to avoid the cost of compliance, keeps them from declaring income. Hence, the popularity of services like payoneer, despite the availability of banking channels for receiving funds from abroad.

    Given the significant problems faced by entrepreneurs and freelancers of going about it in the prescribed way, they have to resort to the unconventional and undocumented. Hence, the difference in State Bank’s official numbers and the PSEB’s unofficial estimates.

    PS: The imposition of service taxes and withholding on this sector is going to make the difference much more acute than it is now.Recommend

  • Sameer
    Nov 21, 2015 - 1:47PM

    Can anyone please reply to my query. I have been working as a freelancer for several years. All my income have been through foreign remittances. I registered a sole proprietorship 5-6 years ago just to make my self look a little bit more professional by using a company name instead of individual freelancer. Since then, all my income have been through foreign remittances. I have never filed the tax return on the assumption that tax was exempted till 2016. Can anyone please confirm if I have to PAY any tax while filing the tax returns for all these years? Note: I never registered my self with PSEB however I do have proofs of remittances that always came into my bank account. Recommend

  • AJ
    Nov 21, 2015 - 3:09PM

    Too many agencies giving far too much incoherent data. Where can I find a list of Pakistani IT companies( Software companies) with sales of USD 50 million and more? Surely there ought to be at least 3-4 of such companies. Are any of these Gems listed? This freelancing bit is a bit overblown. I don’t think any country effectively counts it.Recommend

  • Pak Soul
    Nov 22, 2015 - 9:03AM

    AmazingRecommend

  • it guru
    Dec 1, 2015 - 4:30PM

    Well some of the $50 million plus gems include TRG, Netsol, Systems, and LMKR to name a few leading IT companies of Pakistan. The annual revenue of these four companies alone is more than $200 million. so if they are less than 10% of the industry, then total exports of $2 billion are not unrealistic.Recommend

More in Business