close
Money Matters

From bytes to billions: navigating the global gig economy

By Khurram Zia Khan
Mon, 06, 24

Pakistan’s demographic of a young population – 60 per cent of them under the age of 30 -- has significant implications for the country’s future, especially considering the tech savvy nature of today's youth. The rise of social media platforms and easy access to technology have empowered young people to take control of their futures by leveraging digital platforms to create opportunities for themselves.

From bytes to billions: navigating the global gig economy

Pakistan’s demographic of a young population – 60 per cent of them under the age of 30 -- has significant implications for the country’s future, especially considering the tech savvy nature of today's youth. The rise of social media platforms and easy access to technology have empowered young people to take control of their futures by leveraging digital platforms to create opportunities for themselves.

Pakistan has experienced remarkable growth in IT service exports and start-up funding, signaling its potential for digital transformation. Between FY20 and FY22, IT service exports grew by an average of 24 per cent, while start-up funding soared to around $709 million in CY21-CY22 compared to approximately $100.8 million in CY19-CY20. The Covid-19 pandemic accelerated the demand for digital services pushing Pakistan into a competitive realm.

The momentum has to be maintained by addressing the human resource gap in the IT sector through education, training initiatives, regulatory frameworks, funding access, and incubation support. Ensuring the availability and affordability of IT services is vital for widespread adoption across various sectors. Moreover, the provision of cross-cutting technology and ancillary frameworks is crucial for seamless integration of digital systems. Pakistan's IT sector presents substantial opportunities for economic growth, job creation, and innovation, with a concerted effort to address challenges and capitalize on emerging prospects.

IT exports – led by software and software-related exports - rose to $2.1 billion in FY22 from $0.89 billion in FY19 and $0.29 billion in FY13. This was a huge leap and now, given a favourable framework, IT exports have the potential to be one of the leading foreign exchange earning segments of the economy.

This progressive trend is expected to continue well into the future. Therefore, it is crucial for policymakers and stakeholders to recognize the potential of the youth demographic and create an enabling environment that fosters their creativity, innovation, and entrepreneurship.

With 2.37 million active freelancers, of which approximately 550,000 are full-time, Pakistan stands at number four in the global ranking regarding the freelancing landscape -- a key player in the market where a nation like India stands at number seven. With better connectivity, combined with institutionalized freelance training, Pakistan can not only further improve its ranking, but also enhance its foreign exchange earnings, and socio-economic status.

Pakistani freelancers need their government to prioritize creating favourable policies to support them by addressing regulatory hurdles as a priority. IT entrepreneurs face challenges in bringing foreign currency home and accessing formal financial services like opening accounts or obtaining credit cards; this impedes a sector’s potential. They can be the largest resource of foreign exchange, if their savings are transferred from international wallets to local accounts.

Additionally, uninterrupted supply of power and WiFi, along with formalizing freelancers' status, is crucial. It is indeed a critical concern when a country shuts down its internet, as it can have far-reaching consequences beyond just economic losses. The internet has become a fundamental tool for communication, commerce, education, and much more in today's interconnected world. Shutting down not only disrupts the daily lives of its citizens but also sends a negative message to the global community about the country’s commitment to openness and connectivity.

Promoting a stable and open digital environment is essential for fostering innovation, economic growth, and global cooperation. Over the past decade, there has been a tangible global shift towards innovative startups, supported by top-notch research, enabling many cities to become the ‘Silicon Valley’ for their respective regions.

In the realm of digital literacy, Pakistan will need to make efforts at par with developing economies, by expanding the digital outreach, and providing access to training and mentorship programmes to create a huge reservoir of foreign exchange.

Supporting and equipping young freelancers with skills, resources, and connectivity to address various economic goals -- including inclusivity, women empowerment, and market connectivity, particularly through fiber optic infrastructure -- will go a long way. The telecom sector stands to play a vital role in expanding outreach with internet access, especially in rural areas of regions like Azad Jammu Kashmir, Sindh, and Balochistan, which can be addressed for developmental disparities and competitiveness on a broader scale.

Telecom service providers deserve recognition for their efforts in spreading connectivity in Pakistan. However, this sector too faces challenges, including high tax rates, hindering its growth and investment potential. We have already seen the exit of one large international service provider. The high tax burden on the telecom sector, including withholding tax (WHT) and general sales tax (GST), is a significant concern. 4G for all is necessary to address the economic targets, and for that there is a strong need for a balanced approach to taxation that ensures government revenue while fostering growth and competitiveness. There should be a focus on broadening the tax base, including bringing untaxed sectors like real estate and agriculture into the tax net.

At the moment, freelancers registered with the Pakistan Software Export Board (PSEB) are subjected to 0.25 per cent tax on their taxable income whereas those not registered have to pay 1.0 per cent tax on their taxable income. The current taxation policies are reasonable but if not checked for consistent stability and support, they can affect the freelancers adversely by going against the broader implications of supporting and empowering this burgeoning community. The point of concern is the 19.5 per cent GST and 15 per cent WHT on the service – meaning that: out of 100 rupees only 65.5 per cent is left to be used by a subscriber. This is where facilitation needs to be provided and that can only happen if the taxation is reduced.

While 100,000 people are directly linked to the industry as employees and stakeholders, millions are connected as beneficiaries of online businesses and freelance work. A quick evaluation of the ground reality can throw us into a spin as Pakistan is way behind regional competitors in terms of fiber infrastructure and penetration. This would need extensive investment and for that telecommunication firms need a more relaxed tax burden. The objective is to boost the IT industry at large and see the spillover of success in the entire connected ecosystem, as well as support the potential of enabling the freelancers to race ahead.

Freelancers are leading the way to Digital Pakistan, with robust development for the IT sector. We need a comprehensive approach to address the challenges facing Pakistan's freelancing industry, telecom sector, and taxation policies. This approach should involve collaboration between the government, private sector, and civil society to create an enabling environment for economic growth, with innovation and consistent progress.


The writer is a publicist, and a freelance contributor. He can be reached at: kzk1972@gmail.com