Pakistan’s IT Industry has registered exponential growth of late, says Pakistan High Commissioner Mohammad Nafees Zakaria
Pakistan’s IT Industry has registered exponential growth of late, and its positive trajectory does not show any signs of slowing down. The sector has a promising future, brimming with talent, and the potential to become the country’s largest export industry.
With global attention shifting to Pakistan and the surrounding region, trends give confidence to the calculations that the IT sector’s revenues may rapidly rise from the current figure of US$3.5 billion to reach a figure of US$20 billion and beyond in the not too distant future.
Pakistan is a preferred source of software developers, programmers, designers and Business Processing Outsourcing (BPO) specialists, and currently ranks as the third most financially attractive location in the world for offshore services. With 64 per cent of the 220 million population under the age of 29, there is an enormous human and knowledge capital potential.
Global enterprises like Bentley, Ciklum, IBM, Mentor Graphics, S&P Global, Symantec, Teradata, and VMware have established consulting service centres, research and development facilities, and BPO support services in Pakistan. Other leaders in Pakistan’s IT industry with global market outreach include NESTOL, Systems Limited, TRG Pakistan, i2c Pakistan and LMKR among others.
There are around 3,000 IT and allied companies currently registered. Pakistan was ranked the third most popular country for freelancing in the Online Labour Index published in July 2018 by the Oxford Internet Institute.
According to the Pakistan Software Export Board (PSEB), freelancers and independent consultants are estimated to be generating US$500 million in export earnings of US$3.5 billion.
Pakistan’s areas of expertise in IT and IT Enabled Services (ITeS) include:
mobile app design and development, product design, development and testing, ERP (General, Specialised-Verticals), information security, IT governance and strategy, data warehousing and business analytics, BPO, virtualisation and computing, web businesses and e-commerce, office productivity and document management, exploration and production software (oil and gas), health related software, and much more.
Investment opportunities in Pakistan’s IT & ITeS Sector include:
company acquisitions and mergers; high growth IT startups; venture capital funds; IT parks; software development centres; software testing centres; technology incubators; gaming and animation studios; IT global consulting centres and data centres.
Pakistan’s government incentives for investors in the IT industry include:
1. A tax holiday for venture capital funds until 2024
2. Zero income tax on IT exports until June 2025
3. Income tax exemption to PSEB registered IT start-ups for three years, with no minimum or withholding tax, incentivising entrepreneurship and innovation in the country
4. 100 per cent equity ownership allowed to foreign investors
5. 100 per cent repatriation of capital and dividends
Pakistani start-ups are rapidly gaining international recognition and investment, and SME businesses are driving innovation, economic growth and job creation. Pakistan is home to successful tech start-ups such as Zameen.com; Airlift; Rozee.pk; Bykea; Deraz.pk; inov-8; Finja; Sastaticket; oladoc; Tez Financial Services; well.pk; Pakwheel.com; QMobile; Pakistanistores.com; Patari; Find My Adventure; Home Stove and Sehat Kahani.
National Incubation Centres have been established across Pakistan to provide support, impetus and direction for start-ups and to create an enabling environment for young IT professionals and entrepreneurs.
Recognising the potential of e-commerce in Pakistan, Ali Baba, China’s largest e-commerce company, invested US$200 million in the country, and has also acquired Pakistan’s ecommerce site Daraz.pk.
Private equity firms and venture capital firms are invited to explore similar lucrative opportunities in Pakistani startups, and to enjoy the tax holidays offered by the Pakistan government for venture capital funds in IT. Investment opportunities exist across various areas including: custom software, mobile apps, gaming and animation, e-commerce, payment systems and next generation technologies.
With over 70 million broadband users and a GSM penetration percentage in the region at circa 74 per cent (172 million), Fintech in Pakistan is all set to become the largest feeding sector for aiding financial inclusivity.
According to Rehan Akbar, Digital Financial Services Head at Karandaz, Pakistan’s Fintech startups can nudge a 7 per cent increase in Pakistan’s GDP in the next five years, roughly translating into US$36 billion. Pakistan’s e-tail is expected to grow from US$900 million in 2019 to US$2.5 billion by 2024. Meanwhile, the mobile payment industry in Pakistan is expected to record a Cumulative (Compounded) Average Growth Rate (CAGR) of 20.7 per cent to reach US$54 billion by 2025.
As Pakistan strides towards digital banks and cardless payment systems, our highly skilled IT resources industry is well placed to augment growing global demand in the hi-tech space. With more than 320,000 English-speaking IT professionals and with the addition of over 20,000 IT graduates to the existing pool annually, Pakistan has prioritised nurturing new tech skills such as AI and data engineers, data scientists, computer vision and machine learning experts, etc. to cater to domestic as well as global market skills and resources requirements.
The telecommunication sector in Pakistan is open and deregulated. The environment offers a level playing field to telecom operators, and a firm foundation in terms of infrastructure. Fibre optics-based telecommunications were introduced in Pakistan in the mid-1980s on a mass scale, and a high-speed efficient infrastructure has since been introduced. The telecom networks in Pakistan use 3G and 4G services and will now be upgraded for 5G service. The telecom sector has received FDI to the tune of US$ 4.5 billion from telecom companies in Pakistan over the past four years, which is indicative of the investment prospects and quick returns in the sector. More than 75 per cent of Pakistan’s population (165 million) are mobile phone subscribers, and tele density has been constantly increasing, with an ongoing appetite for the latest telecom devices.
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