News Analysis |
Owing to the incentives given by the Government to IT and Information Technology Enabled Services (ITeS) industry and various international tech startup launch pads opening up in Pakistan, Pakistan’s IT exports have grown to an estimated $2.9 billion which includes Pakistani freelancers estimated to be earning more than $300 million annually, according to a report presented by the Software Exports Board and the State Bank.
The governments’ incentives to the IT & ITeS industry include entail tax exemption on IT exports until June 2019, 100% foreign ownership, 100% repatriation of capital and dividends, 3-year tax exemption for IT startups, and a tax holiday for venture capital funds till June 2024.
4G user base expanding and operations of various new broadband players to make a lucrative investment hub for IT companies, entrepreneurs, and start-ups in Pakistan and from around the world.
While speaking to a publication, Managing Director Pakistan Software Export Board (PSEB) Iftekhar Shah said that Pakistani domestic market for IT & IT Products and services is also strong, estimated at over $ 500 million in annual revenue, and it is growing exponentially. The total annual revenue of Pakistan’s IT Industry is nearing $3.5 billion.
Pakistan’s IT industry has exhibited positive growth trends for the last four years with 100% growth in export earnings, he added. ‘Incentives, programs, and projects focused towards IT industry’s growth are closely scrutinized and regularly reviewed to ensure that the maximum benefits accrue to the growth of the local ICT Industry, he added.
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He mentioned that PSEB also puts together trade delegations including Pakistani IT companies to encourage collaboration and cooperation between Pakistan’s IT sector and relevant entities in various countries that are important to Pakistan’s IT sector.
According to the stats put together by the State Bank of Pakistan (SBP), exports of IT industry classified as telecommunication, computer and information services surged to the level of $938.640 million in the last financial year recorded.
The measures of the central bank for streamlining forex inflows in IT sector coupled with the government policies are likely to give impetus to IT companies and software houses especially to enhance the exports of different services and products worldwide.
The exports earning the IT industry registered a double-digit growth of 19 percent or $ 150 million from the financial year 2015-16 which stood at $788.640 million. Exports of IT or ICT services, in generics– are mostly delivered to countries and regions such as USA, Middle East, and South African countries.
Pakistan Software Export Board (PSEB) which is an apex government body designated to promote IT growth and to make policy suggestions, reported 3 times higher exports as compared to SBP’s numbers ($2.81 billion) through the input of various companies/software houses.
PSEB’s estimation is based on the services various IT companies and software houses rendered to different countries but their reporting is done in different sectors such as financial services, healthcare sector and etc, as well as e-commerce, e-health, and e-education.
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Also, the umbrella of freelance projects is usually reported through overseas remittances. It should be mentioned that Pakistan is considered as the fourth largest freelance market in the world. The approximate estimation of PSEB suggested that exports of freelancers of the IT sector stand at more than $200 million per year.
Also, the umbrella of freelance projects is usually reported through overseas remittances. It should be mentioned that Pakistan is considered as the fourth largest freelance market in the world.
Pakistan’s freelance IT industry ranges from digital marketing to content creation and Pakistani freelancers operate for clients around the world. The largest clientele for Pakistani freelancers is based in the United States. Hence, the foreign exchange inflows in IT sector is not reported as its original potential.
IT and Telecommunication is counted as a single industry in Pakistan either under one ministry or by reporting the inflows of this sector. State Bank of Pakistan has various steps to streamline exports income of the IT industry through the banking sector, which could reduce the under-reporting foreign exchange earning of IT and its enabled services.
Government’s Incentives for IT Sector
The government laid down its projection of incentives for the IT sector and proposed the following steps to aid its growth:
- Zero income tax on IT exports until June 2019
- 100 percent equity ownership allowed to foreign investors
- 100 percent repatriation of capital and dividends allowed
- 7 year tax holiday for venture capital funds.
The measures of the central bank for streamlining forex inflows in IT sector coupled with the government policies are likely to give impetus to IT companies and software houses especially to enhance the exports of different services and products worldwide.
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IT Parks and CPEC
Besides, a number of IT parks are being developed in the country along with the continuous expansion of broadband services in the different cities with 4G user base expanding and operations of various new broadband players to make a lucrative investment hub for IT companies, entrepreneurs, and start-ups in Pakistan and from around the world.