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Here Is Pakistan IT Industry: Prospects and Challenges




Pakistan IT Industry: Prospects and Challenges

Here Is Pakistan IT industry

 

There has a lot of talk lately of the growth of IT in Pakistan. It is one of the few bright spots in the growth story of Pakistan’s industry. The IT industry recorded total revenues of US$ 4.1 billion in 2018 and exported $3billion worth of IT exports.

The total industry is forecast-ed to double to $7 billion by 2020.

information technology services  ICT sector of Pakistan has shown impressive growth in recent years. A large labor pool of English-speaking people and affordable rates makes it an attractive destination for a significant number of international IT/ITeS companies looking to relocate their operations offshore.

 

Freelancing In Pakistan

Pakistan’s freelancers offer rates 30%-50% less than their Indian counterparts and the recent depreciation in Pakistani ruppee will make outsourcing even cheaper, thus boosting Pakistan’s attractiveness. For example, recently, a US-based IT company shifted its 125 remote jobs from Indian city Noida to Islamabad.

This is a positive sign for the sector. However, because of this and other similar events there has been talk that India is losing IT jobs to Pakistan. This shift though is happening elsewhere also and these low-level jobs have been shifting to other countries like Bangladesh, Philippines, Indonesia, etc. too. It should be noted that India’s IT industry is highly developed and mature.

Thus, it is moving away from low cost outsourcing jobs and is moving higher up the value chain, focused on specialized and high-tech IT services based on AI, Big Data, Internet of Things (IOT) and automation. So, India actually is not at a comparative disadvantage. “India is gearing up to be a part of the AI revolution,” report author Prakash Mallya wrote.

The average gross salary of an Indian employed in the IT industry is also much higher than in Pakistan. That is why a lot of the low-cost outsourcing jobs are moving away from India to countries like Bangladesh, Vietnam and Pakistan.

Solid growth in IT sector has to be supported by robust infrastructure development with carefully planned government support and incentives.

The 15-year tax holiday given to the IT industry along with other facilitating measures has contributed greatly to the development of IT industry.

Other incentives like tax holiday for venture capital funds till 2024, zero income tax on IT exports till June 2025, income tax exemption to Pakistan Software Export Board (PSEB) registered IT startups for three years, with no or minimum withholding tax, incentivizing entrepreneurship and innovation in the country have a potential for increasing ICT exports to $20 billion by 2025 according to Mohammad Nafees Zakaria, High Commissioner to United Kingdom, while speaking at “Tech Pakistan 2019 Initiative, the next big opportunity”.

However, there are other areas that need attention. There should be more government support for training purposes as ‘education at formal institutions has more to do with conceptual learning and rote learning’, according to Hussain, who leads Ignite, adding that students do not graduate with the necessary skillset to fit into the industry.

 IT Industry In Pakistan

Pakistan has a budding IT industry. It has been growing at a 20-30 percent growth rate compared to India’s present growth rate of 7-8 percent. However, India’s IT sector has been growing for 30% for more than two decades and its current 7-8% growth is still impressive considering its huge size and global market share.  India has one of the world’s biggest IT sectors with 5 IT companies having yearly revenues exceeding $10 billion US dollars; just two behind the US and far ahead of China. Tata, Wipro, Infosys are household names not just in India but in US as well.

Moreover, Google, IBM and Microsoft have their local offices in India, promoting the country’s industry through research and development. Furthermore, India is home to the prestigious  IT institutes delivering world class education. In 2018, with 37% share of the global outsourcing market, its total sales crossed more than US$165 billion in revenue with $117 billion in exports and two thirds of those exports going to US.

Therefore, we shouldn’t be comparing ourselves to India at this moment but competing with other countries that are taking the lower cost jobs in order to increase our market share in that segment.

While growth in IT services is impressive it is growing from a very low level so it is easier mathematically to show great growth numbers. Plus, most of the IT outsourcing is going to Eastern European and East Asian countries like Ukraine, Poland and Vietnam that have good education systems, ample talent and none of the security concerns that come with doing business in Pakistan.

The global strategy and management consulting firm A.T. Kearney releases a ranking of top 50 countries based their potential and fit to deliver business services to global companies.The list is dominated by India along with east Asian and eastern European countries.

According to the 2019 Global Services Location Index (GSLI), India, China, Malaysia, Indonesia and Vietnam occupied the top 5 slots. Bangladesh came in at 32nd while Pakistan came in at 37th.

Continued growth of IT outsourcing faces headwinds from multiple.They don’t like taking risks – especially when they’re associated with security concerns”, according to Hussain of Ignite. Other kinds of headwinds facing Pakistan are infrastructure (broadband and electricity) and education. Load shedding remains a problem. Electricity for industrial use should be subsidized and serious efforts have to be made to ensure 24/7 availability of electricity to industry and industrial parks.

 

 

Mobile Broadband services

Pakistan’s telecommunications industry has shown impressive growth and FDI recently. It has contributed a lot in bringing Mobile Broadband services – 3G, 4G, LTE, to the country. The number of mobile phone users using 3G/4G for internet services has grown rapidly too, reaching 58 million by 2018. However, access to fixed broadband remains limited with poor speed and service compared to neighbouring countries. Access to highspeed broadband is vital to any country’s IT development. This infrastructure handicap constrains IT industry’s development.

According to the World Economic Forum’s (WEF) latest Global Information Technology Report Pakistan was ranked at number 110 out of 139 countries in terms of development and growth of Information Communication Technology-the ICT readiness index.

The foundation of any information-based industry in made on a solid education system. Unfortunately, Pakistan fares poorly in this regard. Our education investment is horribly short of what is required. Pakistan was ranked 150th out of 188 countries in adult literacy by UN’s HDI. It has the second-lowest literacy rate in South Asia after Afghanistan and has the second highest number of out of school children in the world at 22.7 million.

The worrying trend is that the literacy rate has been falling instead of increasing. In December 2018, Shafqat Mahmood, Pakistan’s minister of education, announced that the literary rate fell 2 percent to 58 percent from 60 percent a year earlier. He noted that it was because of Pakistan’s population growth, as the explosive population growth strains its already meagre resources.

This is compounded by the fact that we barely spend 2 percent of our GDP on education which is one of the lowest in the region. Pakistan spends just $1500 per student compared to India’s $5000. Furthermore, Pakistan’s higher education system was also rated as the worst by QS rankings. It was rated 50th in a survey of 50 countries with US and UK taking the first two spots, China at 8th and India 24th.

Automation, AI and 3D printing will eat up human jobs but new jobs will be created that will be knowledge intensive and require creativity and innovation. Thus, quality education will be even more important going forward and will decide the fate of nations.

IT industry

There has a lot of talk lately of the growth of IT in Pakistan. It is one of the few bright spots in the growth story of Pakistan’s industry. The IT industry recorded total revenues of US$ 4.1 billion in 2018 and exported $3billion worth of IT exports. The total industry is forecasted to double to $7 billion by 2020. ICT sector of Pakistan has shown impressive growth in recent years.

A large labour pool of English-speaking people and affordable rates makes it an attractive destination for a significant number of international IT/ITeS companies looking to relocate their operations offshore. Pakistan’s freelancers offer rates 30%-50% less than their Indian counterparts and the recent depreciation in Pakistani ruppee will make outsourcing even cheaper, thus boosting Pakistan’s attractiveness.

For example, recently, a US-based IT company shifted its 125 remote jobs from Indian city Noida to Islamabad. This is a positive sign for the sector. However, because of this and other similar events there has been talk that India is losing IT jobs to Pakistan. This shift though is happening elsewhere also and these low-level jobs have been shifting to other countries like Bangladesh, Philippines, Indonesia, etc. too.

It should be noted that India’s IT industry is highly developed and mature. Thus, it is moving away from low cost outsourcing jobs and is moving higher up the value chain, focused on specialized and high-tech IT services based on AI, Big Data, Internet of Things (IOT) and automation. So, India actually is not at a comparative disadvantage.

“India is gearing up to be a part of the AI revolution,” report author Prakash Mallya wrote. The average gross salary of an Indian employed in the IT industry is also much higher than in Pakistan. That is why a lot of the low-cost outsourcing jobs are moving away from India to countries like Bangladesh, Vietnam and Pakistan.

Solid growth in IT sector has to be supported by robust infrastructure development with carefully planned government support and incentives. The 15-year tax holiday given to the IT industry along with other facilitating measures has contributed greatly to the development of IT industry.

Other incentives like tax holiday for venture capital funds till 2024, zero income tax on IT exports till June 2025, income tax exemption to Pakistan Software Export Board (PSEB) registered IT startups for three years, with no or minimum withholding tax, incentivizing entrepreneurship and innovation in the country have a potential for increasing ICT exports to $20 billion by 2025 according to Mohammad Nafees Zakaria, High Commissioner to United Kingdom, while speaking at “Tech Pakistan 2019 Initiative, the next big opportunity”.

However, there are other areas that need attention. There should be more government support for training purposes as ‘education at formal institutions has more to do with conceptual learning and rote learning’, according to Hussain, who leads Ignite, adding that students do not graduate with the necessary skillset to fit into the industry.

Pakistan has a budding IT industry. It has been growing at a 20-30 percent growth rate compared to India’s present growth rate of 7-8 percent. However, India’s IT sector has been growing for 30% for more than two decades and its current 7-8% growth is still impressive considering its huge size and global market share.  India has one of the world’s biggest IT sectors with 5 IT companies having yearly revenues exceeding $10 billion US dollars; just two behind the US and far ahead of China.

Tata, Wipro, Infosys are household names not just in India but in US as well. Moreover, Google, IBM and Microsoft have their local offices in India, promoting the country’s industry through research and development. Furthermore, India is home to the prestigious IIT institutes delivering world class education.

In 2018, with 37% share of the global outsourcing market, its total sales crossed more than US$165 billion in revenue with $117 billion in exports and two thirds of those exports going to US. Therefore, we shouldn’t be comparing ourselves to India at this moment but competing with other countries that are taking the lower cost jobs in order to increase our market share in that segment.

While growth in IT services is impressive it is growing from a very low level so it is easier mathematically to show great growth numbers. Plus, most of the IT outsourcing is going to Eastern European and East Asian countries like Ukraine, Poland and Vietnam that have good education systems, ample talent and none of the security concerns that come with doing business in Pakistan.

The global strategy and management consulting firm A.T. Kearney releases a ranking of top 50 countries based their potential and fit to deliver business services to global companies.The list is dominated by India along with east Asian and eastern European countries. According to the 2019 Global Services Location Index (GSLI), India, China, Malaysia, Indonesia and Vietnam occupied the top 5 slots. Bangladesh came in at 32nd while Pakistan came in at 37th.

Continued growth of IT outsourcing faces headwinds from multiple.They don’t like taking risks – especially when they’re associated with security concerns”, according to Hussain of Ignite. Other kinds of headwinds facing Pakistan are infrastructure (broadband and electricity) and education. Load shedding remains a problem. Electricity for industrial use should be subsidized and serious efforts have to be made to ensure 24/7 availability of electricity to industry and industrial parks.

 

Pakistan’s telecommunications industry has shown impressive growth and FDI recently. It has contributed a lot in bringing Mobile Broadband services – 3G, 4G, LTE, to the country. The number of mobile phone users using 3G/4G for internet services has grown rapidly too, reaching 58 million by 2018. However, access to fixed broadband remains limited with poor speed and service compared to neighbouring countries.

Access to highspeed broadband is vital to any country’s IT development. This infrastructure handicap constrains IT industry’s development. According to the World Economic Forum’s (WEF) latest Global Information Technology Report Pakistan was ranked at number 110 out of 139 countries in terms of development and growth of Information Communication Technology-the ICT readiness index.

The foundation of any information-based industry in made on a solid education system. Unfortunately, Pakistan fares poorly in this regard. Our education investment is horribly short of what is required. Pakistan was ranked 150th out of 188 countries in adult literacy by UN’s HDI.

It has the second-lowest literacy rate in South Asia after Afghanistan and has the second highest number of out of school children in the world at 22.7 million. The worrying trend is that the literacy rate has been falling instead of increasing.

In December 2018, Shafqat Mahmood, Pakistan’s minister of education, announced that the literary rate fell 2 percent to 58 percent from 60 percent a year earlier. He noted that it was because of Pakistan’s population growth, as the explosive population growth strains its already meagre resources.

This is compounded by the fact that we barely spend 2 percent of our GDP on education which is one of the lowest in the region. Pakistan spends just $1500 per student compared to India’s $5000.

Furthermore, Pakistan’s higher education system was also rated as the worst by QS rankings. It was rated 50th in a survey of 50 countries with US and UK taking the first two spots, China at 8th and India 24th.

 

Automation, AI and 3D printing will eat up human jobs but new jobs will be created that will be knowledge intensive and require creativity and innovation. Thus, quality education will be even more important going forward and will decide the fate of nations.

Fizza Zafar, Student of Mass Communication, GCT, Lhr

 



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