INTERVIEW WITH SYED MUSHARAF ALI, DIRECTOR SMA ACCFIN SYSTEMS
Mar 19 - 25, 2012
Syed Musharaf Ali is Director SMA Accfin Systems. His qualifications are ?Fellow Member of Cost and Management Accountants (FCMA), Fellow Member of Public Finance Accountants (FPA), Chartered Institute of Management Accountants (CIMA), Chartered Secretary and CISA.
PAGE: HOW WOULD YOU COMMENT ON BENEFITS OF IT FOR CORPORATE SECTOR IN PAKISTAN?
MUSHARAF: Corporate sector can take advantage of advances in information technology (IT) to improve governance, enhance operations, and increase productivity. Throughout the world, IT has revolutionized corporate sector in many ways. No matter how big or small your company is technology brings both intangible and tangible benefits by making processes efficient and meeting the growing demands and needs of customers. Local businesses can become international due to a simple website. You can see around you that IT has helped businesses in advertising and effective communication with customers thus increasing the sales and creating strong public image. It also allows them to penetrate multiple markets at the least costs. In a fast moving and business environment, it is vital for corporate sector to interact with clients regularly and quickly to gain their trust and obtain customer loyalty. Through internet and online social networks, firms interact with consumers and answer all their queries about the product. You access face book and there are ads for Pakistani businesses. With the use of technological innovations, business owners and entrepreneur can make their business operations effective and save time and money while increasing the production output. Business these days requires a lot of planning. Due to high tech organization systems on computers, planning can be done on an organized pattern, with schedule formats, grant charts etc. Huge databases can now be controlled and stored on network and backup drives. Internet provides a venue for corporate sector to conduct studies to keep themselves ahead of competitors and gain knowledge on the new trends in the market. It allows companies to virtually travel into unknown markets. With technology, business enterprises can communicate effectively with their branch offices to deliver quality financial and operational reports. The modern security equipment enables companies to protect their financial data, confidential business information, and decisions. With the launch of SECP's eService project to conduct online business with the corporate sector in all areas under its purview, Pakistani businesses will be required to invest in IT.
SECP is also geared up to amend the relevant rules and regulations to allow electronic bookkeeping and inspection and modify the regulation for an increased use of IT-based systems. E-commerce, e-banking, e-economics, e-procurement are only possible if the corporate sector creates an understanding and awareness on effective and strategic use of IT in a changing business environment for its survival and sustained growth.
PAGE: YOUR VIEWS ON SOFTWARE DEVELOPMENTS IN PAKISTAN.
MUSHARAF: In 2010, Pakistan delegation won seven silvers at the Asia Pacific ICT Awards held in Kuala Lumpur. In 2011, Pakistani technology industry reached an important milestone and picked up two gold medals in the e-logistics and e-health categories while five silvers in categories of e-inclusion and e-community, security, financial application, communication and e-government.
The software industry in Pakistan can play a greater economic role. Pakistan's software industry is growing at a fairly decent rate and the ongoing boom in I.T is very impressive. Pakistan was ranked eighth among top outsourcing countries in 2010. It is becoming a key destination for software development and information technology services, such as medical transcription and call centers. According to government figures, the country's IT-related exports remained $1.4 billion in the last fiscal year. In a report presented by the State Bank of Pakistan, import of IT and IT-enabled services increased to $64 million in Jul-Nov as compared with $54 million of previous year's same period.
Software development industry is producing high quality software and approaching the international markets with high standard of professionalism. With the right support from the government and by remaining focused and improving on our quality and project management, I am confident that the software development industry has the potential to hit the multi-billion export target within 5 to 10 years.
PAGE: YOUR VIEWS ON TAXES BEING CHARGED ON IT SERVICES.
MUSHARAF: Imposition of taxes on IT services will have negative impact on IT and its related sectors, resulting in closure of business, increase in joblessness and erosion of capital. According to Harvard University exercise under its All World Network initiative to identify the fastest growing 25 companies in Pakistan in 2010, 11 companies were from the IT and BPO industries. This sector is still growing rapidly and can be a major contributor towards creating job opportunities, as well as, to the economic development of Pakistan. However, it is still in early developmental stages, and imposition of taxes will reduce its potential to deliver these high growth rates on a consistent basis thus affecting the economic fundamentals of the country including employment, balance of payments, and exports. IT/BPO providers have been suffering from high cost of operations to perform back-office functions (such as software development or call center services) to their clients.
This has reduced their net profit (NP) margins in Pakistan, which are inherently very low and typically between five and eight per cent of gross sales/turnover. The imposition of general sales tax will increase the prices of the products and services offered by industry making it even more difficult to do business with clients in Pakistan. Furthermore, this will decrease the scope of opportunities for many Pakistani IT companies.
According to 2007 statistics available on P@SHA's website, 32 per cent of the software/BPO companies in Pakistan are foreign subsidiaries with 54 per cent firms having their front offices abroad. The companies without the capital will be pressured for new opportunities. Another adverse effect of application of GST on computer software and IT services will be a significant increase in software piracy. I am in favor of absolute tax relief in IT industry and it's related components at the moment. It is too early to impose taxes on this fledgling industry, which would sabotage its growth. Allowing tax benefits to the IT industry will help it to grow tremendously at the same time promoting entrepreneurship in this sector.
PAGE: THE BROADBAND INTERNET SERVICE IN PAKISTAN IS WITNESSING SHARP GROWTH AS THE NUMBER OF SUBSCRIBERS HAS GROWN BY MORE THAN 60 PER CENT DURING LAST FISCAL, WITH OPERATORS PINNING HOPES THAT THE CUSTOMER BASE IS LIKELY TO DOUBLE IN NEXT TWO YEARS. YOUR COMMENTS.
MUSHARAF: According to PTA, up to September 2011 there were 1,656,800 broadband subscribers. To provide better internet services in Pakistan, government is making sure that foreign investors bring in their capital and invest in internet section. We now have a healthy set of competition when it comes to speed, availability, and affordability. This is one of the many sectors, where atmosphere for setting up new infrastructures is feasible, which means, there are great chances of success if foreign investors invest in this sector inside Pakistan. It is pertinent to mention that Pakistan endorsed the UN initiatives through the World Summit on Information Society's platform (WSIS) by way of ratification of Geneva Declaration of Principles and the Geneva Plan of Action. Later on, Pakistan also endorsed the Tunis Commitment and the Tunis Agenda set forth by WSIS for the Information Society. These commitments envision the establishment of a global information society by the year 2015, in accordance with the Millennium Development Goal number 8, which calls for developing a global partnership for development including making available, in cooperation with the private sector, the benefits of new technologies - especially information and communications technologies - to all. Pakistan is ranked among the top countries, which registered high growth in broadband internet penetration, around 46.2 per cent in the number of subscribers, and placed fourth on the list by Website Optimizations, LLC, which is a leading website optimizing firm. Pakistan has a large number of bilingual internet users. Its software companies have created a niche in the international market in recent years. Additionally, mobile phone and wireless internet usage are also expanding rapidly.
PAGE: YOUR COMMENTS ON BUSINESS OPPORTUNITIES IN IT SECTOR.
MUSHARAF: Pakistan's strengths lie in its English speaking workforce, complete repatriation of foreign companies' profit, equity ownership, and tax exemption on software until 2016. The government is further promoting Pakistan's software industry by providing low rent IT parks with fiber-optic connectivity, libraries, and conference rooms and has leased 750,000 square feet to IT companies. Software companies are being encouraged to achieve ISO-9000 certification and CMM/CMMI rating through government funding. Among other incentives are the seven year tax holiday for venture capital funds, only 30 per cent depreciation on computer equipment, and ability to open internet merchant accounts in banks.
Work is also being done on capacity building of software developers/programmers. For this purpose, vocational centers have been set up to promote learning of IT skills. Pakistan has also started developing startups for domain expertise, idea content, and intellectual property for graduates who plan to start companies in IT. Another trend is the industry's shift from the "volume driven low-margin voice-based business" into higher values, such as functional BPO. The most popular BPO subsectors in Pakistan are call centers, particularly in the areas of accountancy, medical transcription, animation development, and data entry. Pakistan was ranked eighth among top outsourcing countries in 2010. It is becoming a key destination for software development and information technology services such as medical transcription and call centers. There is a growing trend in the business development and investment by the multinational organizations towards information technology. Companies that have invested in Pakistan include Google, GE, Citi Group, and Bank of America. High-end IT services are also growing with IBM, Microsoft, Oracle and Cisco expanding their operations in the country as well.