Cover Story
Too far behind
By Syed M. Aslam
Apr 03 - 09, 2000
Despite clinching world-class software orders from blue-chip companies
the worldover by individual companies whose numbers can be counted on, no more than two
fingers, the overall volume of software exports from Pakistan yet remains pathetically
low.
Pakistan exported $ 16 million of software in 1999. Though software
exports have been increased over three-fold from $ 5 million in 1996, the volume still
remains to achieve a dimension of respectability. The general secretary of Pakistan
Software Houses Association (PASHA), Khurram P. Rafiq, Pakistan has yet to cross the
psychological barrier of $ 50 million which is just one per cent of the Indian software
exports in 1999.
The massive lead enjoyed by India which started exporting software in
1983 is expected to touch an envious $ 50 billion figure in 2008. India whose export
earnings from all sources totalled $ 36 billion till recently will be able to boost its
total exports to $ 260 billion in 2008, 35 per cent of it from the IT related exports.
Despite the early start- India started IT related exports as early as
1984, full dozen years before Pakistan woke up to the global IT reality and the immense
economic potential which it offered and keeps on offering — the Indian IT industry
remained in red till 1993. The first and only one multinational company, Texas
Instruments, came to India in 1986. The year 1993 could be called a turning point for the
Indian IT industry when the software exports crossed the $ 330 million figure, over
six-fold that of $ 52 million in 1987. It was also the year when the US MNCs flocked to
India in gangs to reap the profit.
India has not looked back since then but the success did not come
overnight. Today about half of all IT professionals working at the Silicon Valley in
California are Indians who are outsourcing work to their country. At present British,
European and Japanese MNCs have a presence in India for the obvious benefit which it
offers as the developed IT prowess.
The Indian IT experience and its success can be used a role model for
Pakistan to match the Indian process as the two countries share many pluses. Both have a
large reservoir of skilled manpower and professionals — engineers, doctors, MBAs,
graduates, post-graduates, technicians — which can easily be retrained as IT
professionals. Both face no language barrier as English, the language of computer, is the
official language of both the countries. Both the countries houses a huge population of
engineering and science graduates and technicians as well as computer graduates and
technicians.
So what is hampering the growth of IT industry in Pakistan despite the
tall lip service and promises made by successive governments to make IT its top most
priority? There is not one but many reasons the primary being the lack of the much needed
governmental support, absence of allocation of budget for the IT industry, dearth of
quality IT training institutions, low production of top-notch IT professionals, acute
shortage of venture capital and bank loans, an overall lack of focus and direction, and
highly expensive marketing in the international market.
Khurram said that while the mass migration of good quality IT
professionals is good for the country in the long run for such reasons as increased
potential of outsourcing work to the local counterparts, setting an example to emulate for
those remaining behind and a general boost to the local economy, the phenomenon is causing
many short-term problems for the local IT industry. The loss of trained, experienced and
groomed manpower and the resulting dearth of replacement is causing an irreparable damage
to Pakistani IT industry. This all the more highlight the need for a sizeable expansion
not in exports but local works to hold on this fleeting manpower for the benefit of the
developed world, he added.
Secondly, and as important, it is time to realise that we have already
fully exploited our traditional exports and any increase in foreign trade could now only
come from non-traditional exports like software and IT services, IT enabled services and
e-business. However, he added, that the Intellectual Property Rights (IPRs) issue has been
overblown in Pakistan for the benefit of foreign companies who want to have a deeper
penetration of the local market, most of whom are interested in marketing their products
without investing any money in production or industrial activity in the national economy.
He stressed that such a practice is detrimental to the national
interests as not only the local purchasing power could hardly afford to buy original
products and thus can hardly be mindful about the ethics of piracy. The prices of books
and software development tools such as Microsoft, Oracle etc, which form the basis for
software development, are highly unaffordable, particularly when the prices of their
originals is converted into local currency, to render software development a highly
incompetitive business. There is a need to tackle the software copyright issue very very
carefully and diligently and the government should negotiate with the software development
tools' companies to sell their products at discounts, such as the 97 per cent discount
offered to faculty and students of the academic institutions, to the software houses in
Pakistan. As is, the majority of books on software development tools finds their way into
Pakistan from India. Compared to origin hardcover versions these pirated paperback copies
are easily available in Pakistan and are being used extensively in the country. The
similar is the case with the software development tools due primarily to economics and
affordability in a market such as Pakistan.
The government should also ensure that the local software developers be
given preference to supply their products to all corporate software used in the country.
The now scrapped deal between the state-owned national flag carrier Pakistan International
Airlines and US based company Sabre at exaggerated costs should not have been awarded in
the first place. Similarly to ensure the transfer of technology the government should
allocate the biggest portion of a IT work within the country at 51 per cent. A repetition
of PIA-Sabre should not be allowed to happen ever again at the cost of the local IT
industry, Khurram said.
It is also important that venture capital and soft-term bank loans
should be made available to the IT professionals to not only help them buy the expensive
hardware but also to help set up marketing offices overseas which is otherwise
unaffordable for many small scale developers who though having a good product could not
efficiently market it overseas for lack of funds. It is also imperative to create a level
playing field for all the software exporters irrespective of their sizes to give a boost
to the local IT industry collectively.
Putting the total number of software houses in Pakistan around 300-350,
including scores of individual free-lancers, Khurram said that there are no more than 25
which are sizeable which are engaged in exports. About 75 per cent of the total software
exports from Pakistan is done by six top software developers — Netsol, Systems
Limited, CresSoft, ITIN Associates, Techlogix, Softnet. The rest of 25 per cent exports is
shared by another 20 or so companies, he added.
While Pakistan does not lag much far behind India as far as per machine
per person monthly revenue ratio average — $ 1000 compared to $ 1,200-1,400- what it
suffers from is the sheer domination of the software output coming out of Indian IT
capital of Bangalore and its counterparts in Hyderabad and Tamil Nadu province. And why
not? The top priority that India has placed on the IT industry is evident from the fact
Bangalore houses 9 universities, 51 engineering colleges, 169 polytechnic institutes, 35
industrial institutes plus an envious population of 40,000-50,000 computer science and
electronics professionals. India is home to some one million IT professionals and
producing another 70,000 IT graduates every year.
Pakistan, on the other hand; is producing less than 2,500 IT
professionals, including computer engineers, computer science graduates, programmers,
technicians; every year which come from a handful of institutions just a small number of
which qualify the international standards. Even this small number of IT professionals
produced has resulted in creating a surplus production as the minimal growth of the IT
industry locally make it hard to absorb them all.
The low IT penetration is also one of the major factors for the impasse
that Pakistan faces to develop its IT and It related exports industry on a firm lines in
Pakistan. In a population of 140 million there are only about 3 million PCs only about
one-third of them are active. The volume of PC sales is also a low 400,000. The lack of
telecommunications infrastructure, lack of its upgradation and high international tariff
due to monopoly of the state-owned Pakistan Telecommunications Company (PTC) which will
last till June 2002, are some of the other major detriments discouraging the expansion of
IT industry in Pakistan.
Talking to PAGE the chairman of Computer Society of Pakistan,
Ahmed Allauddin, said that PTC's monopoly has made it possible for the PTC to charge high
tariffs for international connectivity which are many times higher than those available
internationally. For instance, despite offering an already efficient service at
competitive tariffs, the Hong King government deregulated its telecommunication services
ahead of time to further encourage e-commerce and to attract increased foreign investment.
This should also be done in Pakistan, he added.
He also expressed concerns that absence of valuation process of
software for collateral purposes makes it impossible for the local developers,
particularly the small and medium-sized enterprises, to get any loans from the local
banks. The absence of venture capital for software development in Pakistan makes it even
harder for many IT professionals to even think of starting a business which offers not
only a great potential but also maybe the only option to boost the exports through
non-traditional means.
He said that the existing monopoly of the PTCL shall be ended as soon
as possible and the private investors, both local and foreign, shall be encouraged to set
up their own data communication infrastructure with minimum regulatory hurdles.
The government should earmark a certain percentage of the budget of
each ministry and department for IT products, services and training. Development of a
professional IT force is the prerequisite for the successful adoption and utilisation of
the information technology. It is thus, imperative to have skilled manpower to launch and
sustain such an effort. This will require a massive IT awareness programme aimed at all
sections of the society, review and expansion of the IT degree/diploma education and
proliferation of hands-on training facilities. Such incentives as duty-free import of
teaching aids will be a plus point.
A mass awareness drive to promote the IT use as an everyday tool and
should be aimed at training the end-users of the technology. The IT education should
comprise courses and hands-on training which will cover specific and focused application
of the IT.
The term 'IT' is generally used to cover hardware, telecommunications
products and related software. While the cost of computer hardware is coming down with
each successive year the cost of developing a software is on the rise. However, Pakistan
enjoys a distinct advantage over comparatively low manpower costs compared to the
industrialised countries where salaries of IT counterparts are on the much high side.
Pakistan having a large pool of manpower potential, particularly the large number of IT
professionals, and science, medical and business graduates and technicians who could be
easily retrained to IT profession offers an attractive opportunity for economic growth.
However, without government support and push an IT conducive
environment can not be created in Pakistan. It is imperative that the government should
make IT the highest priority sector to kick start the much belated IT revolution. It
should encourage the expansion of local IT base by encouraging IT use in the public,
semi-public, autonomous departments and bodies by earmarking a fixed budgetary allocation
of computerisation, software development for the local and the export market. The local
software houses should be given preference over the imported software for the government.
A transparency is imperative to award all the IT related work by the government and there
should be a fair distribution of work depending on the quality to all the local software
houses irrespective of their sizes.
Talking to PAGE Dr Asim ur Rehman, the development manager of
CresSoft, one of the major software house owned by the Crescent Group of Companies, said
that there should be ban on the import of software for the government ministries,
departments, and public companies. Building a respectable base locally is one of the major
prerequisite of exports and if the national software developers are deprived of the local
orders they are being denied of the much needed springboard, he added.
He said that CresSoft, which markets its products in the US through its
Denver based company by the same name, like many other local software developers, is
capable of developing customise software for the local market. In addition to clinching
high-end software orders from such blue-chip US companies as Northwest Airlines,
E-Chemicals, American Airlines, MCI, IPCN, Time Warner Cables, and Philips Netherlands,
Komatsu of Japan and Japan Railway, CresSoft also has local clientele including Engro,
American Express and Citibank. The demand to slap a ban on the imported software from a
company with strong foreign and local clientele base depicts the concerns of the software
developers in general that without building business of scale locally the huge potential
for exports would remain highly underutilised.
Dr Asim also blamed the high tariff charged by the PTC as the major
detriment for the growth of the IT industry in Pakistan. There are no charges for Internet
to encourage and develop IT business in Dubai. The quality of telecommunication in
Pakistan is also not up to the mark to efficiently facilitate Internet connectivity and it
is imperative that Karachi-Islamabad fibre-optic should be connected to international line
to help increase the speed of data transfer substantially, he suggested.
Moreover, he said, like India the broadband width should also be made
available to the software houses to increase the speed and the reliability. We have narrow
bandwidth which is comparatively expensive and unreliable and the government has to make
investments to convert it to help reduce tariffs and then it can expect the local IT
industry to grow in next 5-10 years, he added.
He said that the local software industry is heavily dependent on
imported books and software development tools the price of the original editions and
versions of which are very expensive. The price of the original hardcover editions of
these books are very expensive and starts at an average of $ 50 or an unaffordable Rs
2,600 in local currency. The original paperback edition printed in India on which due
royalties are paid which are less expensive also finds their way in to the country and are
available at one-twentieth of their hardcover editions. However, the selection is limited
as not all IT books, particularly the latest ones, do not find their way in to the
country. But the bulk of the demand for these specialised books in the country is met
through the pirated copies printed locally. These pirated books within the purchasing
power are playing a significant role to IT literacy in the country without ever getting
acknowledged.
India
IT Industry: Scenario 2008
|
Annual Turnover |
$ 87 Billion |
|
Market
Capitalisation |
$225 Billion |
|
Jobs |
2.2 Million |
|
Direct Foreign
Investment |
$ 4-5 Billion |
|
Contribution to GDP
Growth 7.5 Per cent |
|
|
IT would account
for 35 per cent of Total Exports |
|
|
Total Exports at
Present |
35 Billion |
|
In 2008 |
260 Billion |
|
BREAK-UP
OF PROJECTED $ 87
BILLION IT INDUSTRY |
IT Services |
$ 39 Billion |
45% |
Software Products |
$20 Billion |
23% |
IT Enabled Services |
$ 19 Billion |
21% |
e-Business |
$ 10 Billion |
11% |
|
|
|
| Source: PASHA |
|
|
PAKISTAN
IT EXPORTS GROWTH RATE
|
Year |
Revenue |
Percentage |
1996 |
$ 5 Million |
- |
1997 |
$ 8 Million |
+60% |
1998 |
$ 11 Million |
+11% |
1999 |
$ 16 Million |
45% |
