IT exports seen doubling this fiscal with fresh incentive injection

KARACHI: Pakistan’s exports of information and communication technology would likely double this fiscal year under the raft of government measures including cash rewards to the IT companies, rebates on tech products and services exports, and profit repatriation for multinational firms, experts said.

IT exports could jump to $4 billion in a year if the package for the IT and telecom sector announced by the government gets implemented, according to experts.

Pakistan Business Council (PBC) CEO Ehsan A Malik said unlike the export of goods, which was supported by rebates and concessional loans, the export of services was not receiving comparable incentives.

“The PBC has been advocating parity much along the lines of the Services Export from India Scheme (SEIS). For a country with a large young population, services can provide a meaningful source of foreign exchange earnings. The package just announced is in the right direction,” Malik said.

However, the provincial general sales tax (GST) regime has to stop taxing call centres and business process outsourcing units for services rendered to overseas clients, he said.

He said banks need to review their collateral policies and lend against accounts receivable and work in progress. The service industry seldom has physical collateral like real estate and stock to secure borrowings. The cash incentive reward offered will incentivise exporters of software to remit earnings instead of holding these abroad, Malik added.

“Having achieved $2 billion exports, the IT industry can strive to overtake rice and become the second-largest export earner. The $2 billion was achieved without any incentives.”

Now with incentives, he believes IT exports should double in the current fiscal year.

IT exports rose 20.2 percent to $196 million in July 2021. These exports surged 47 percent to $2.1 billion in FY2021. This higher growth is attributed to the coronavirus-related rise in freelancing activities.

The gradual reopening of the economies around the world, and persistently strong demand for tech products to support remote working and studying during the Covid-19 pandemic led to the increase in the country’s IT exports to the various countries.

Every country that has established itself as an IT exporter was able to do it because their government was committed to strategically invest in and develop their IT sectors for nearly 20 years. The governments invested in and backed initiatives such as IT zones, incentives, and tax relaxations.

“Pakistan is in the same position as these countries and this package is a big step by the government in helping Pakistan establish itself as an IT exporter,” said Umair Gadit, Co-founder and CEO, Savyour – Pakistan's first-ever cashback app.

“In addition to this, Pakistan is being perceived as the next big opportunity by the global tech investors’ community. We are clearly seeing a significant increase in the volume of investment being brought in by startups that have attracted over $228 million from international VC (venture capital) funds this year,” Gadit said.

“With increased support to PSEB (Pakistan Software Export Board) for export promotion, our overall industry stands to benefit, and tech companies should seize the opportunity and focus on building their capabilities to accelerate growth and contribute to increasing exports.”

There is a shortage of IT talent in the world right now and we have one of the largest populations of young talent. Brain drain poses a great threat to our economy.

By developing our tech ecosystem and creating opportunities for increasing IT exports we can create ample opportunities for them and retain them through high-paying jobs, Gadit suggests.

Last month, the government announced to establish Rs10 billion funds for providing cash rewards to IT companies against their exports. The government is also set to offer a five percent rebate on these exports. Freelancers would be allowed to open a special dollar account to receive payments for their individual IT exports.