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Boosting Pakistan's IT business

From SHAMIM AHMED RIZVI, Islamabad
 Sep 11 - 17, 2000

The Pakistan Software Export Board (PSEB) is an organization that has been established by the Government of Pakistan to ensure development and implementation of a national policy framework for software and related services industry in Pakistan, promotion of software exports, and match making between local and foreign software companies.

Major functions

To act as one Stop shop to cater to all needs of a "Software House/Software Company" for setting up or facilitating its business.

To plan, develop and execute a Technical Assistance Program for computer training institutions as part of its institutions strengthening exercise.

To plan, develop and execute the "Software Technology Parks (STP) Scheme" and to provide office space, international data communication links as well as un-interrupted electric power to Software Houses/Software Companies set up in these parks. To facilitate development of a Computer Training Institute with Export Promotion Bureau's Export Development Fund that will induct graduate engineers and will train them as software engineers in a short span of time.

To develop and execute a marketing plan to help local "Software Houses/Software Companies" reach out to potential clients abroad, to attract and facilitate foreign software firms to establish their software development facilities in Pakistan.

Developing technical assistance programs with the World Bank, IFC, GTZ, Protrade, CBI, and other foreign donor agencies to develop Pakistani Software Industry.

To facilitate projects between the Pakistani educational institutions and the computer industry to bridge the gap between academia and the industry. The government of Pakistan has extended very liberal fiscal and monetary incentives for software exports. The incentive package consists of two major categories i.e. Fiscal Incentives and Corporate Incentives as follows:

Fiscal incentives

All computers and related hardware, peripherals including communications, hardware and software, telematic infrastructure and software development tools to be used exclusively for software exports are exempt from all duties, taxes, surcharges and leviable Octroi etc. The mandatory export obligation on net foreign exchange terms in US dollar value is as follows:

Export obligation to be fulfilled over a period of five years — 3 times CIF Value of the imported computer hardware, software, and/ or software development tools.

"Software Houses/Software Companies" are exempt from corporate income tax on export earnings from "Software and Related Services" besides the exporter need not be a company for availing of this exemption. Export earnings shall be authenticated/verified by PSEB.

Profits and gains derived by an assessor from the running of any computer training institution or computer training scheme approved by the Central Board of Revenue (CBR), set up between the first day of July, 1997, and the thirtieth day of June, 2000, would be exempt from tax for a period of five years beginning with the month in which such institution is set up.

Financial assistance will be provided to the "Software Houses/Software companies" by extending the facility of Refinance for Export of Computer Software by the Software Houses/Companies and in the shape of loans to software houses/companies by the nationalized/ commercial banks. The State Bank of Pakistan under its Circular No.23 has fixed an export re-finance limit of 50% of last year's exports.

The PTCL shall provide international high speed data circuits to "Software Houses/Software Companies" at rates which are highly competitive as compared to rates offered by other telecom companies in the region.

Subsidized rentals for office facilities/office space in Software Technology Parks (Software Technology Parks) shall be charged which shall be competitive to such rentals offered by techno-parks in the region. Software Technology Parks in Pakistan will be made available to Software Houses/Software Companies". The first such park has since been established at Islamabad.

Software Houses/Software Companies" are allowed to re-export capital goods without any levies.

Corporate incentives

Foreign investors will be allowed up to 100% ownership of equity in Software Houses/Software Companies".

The Software Technology Parks will act as a One Stop solution to all the needs of a "Software House/Software Company". Law from piracy will protect software that is developed in Pakistan or part of which is developed in Pakistan and complaints can be lodged with Pakistan Software Export Board (PSEB).

"Software Houses/Software Companies" could be located either within STP or anywhere else in Pakistan. "Software Houses/ Software Companies" located in STP's shall be allowed to carry out Only "Software and Related Services" business within the STP bounds and No Other Business.

The challenge

The rapidly expanding demand for software professionals both domestically as well as worldwide can only be met by a commensurate increase in Pakistan's output of trained software professionals. The key requirements of such an export-oriented expansion is quality and volume. 'The Pakistan Software Export Board (PSEB) has turned this need into a business proposition and insisted private sector to participate in a scheme of setting up educational institutions called the "Action Learning Centers of Software (AL-COS)" program developed by the PSEB.

Under this program the private sector has entered into a business relationship with the Pakistan Software Export Board and imparting training to students leading to a Post-graduate Diploma in Computer Science. The will to create and sustain an IT education industry in Pakistan is at the core of the ALCOS project.

The ALCOS Program ensures that maximum flexibility is available to investors to tailor a large part of the curriculum to their chosen area of expertise. The program is focused to develop thousands of software professionals programmes to enter the market armed with software development and engineering theory, basic management concepts, business communications, knowledge of the Internet, a bursh of English and another foreign language as well as plenty of combat experience in his/ her own area of expertise. These graduates will be formidable candidates for employment in the most challenging environment possible.

Import procedure

Software houses/companies are exempt from customs duties and leviable taxes on import of hardware/software tools which are not manufactured locally and to be used for software development and export purposes. CBR Notification NO. SRO 551(I)/98. A software house/company must 'be a member of PSEB and hold membership certificate to avail the incentives.

To get your equipment/tools released from Customs, please get the invoice, whenever you purchase the items. Send copies of invoice airway bill (if any) and items' list with a covering letter to PSEB for verification. Your invoice and other documents will be examined and verified by PSEB and sent back to you. The verified invoice along with copy of PSEB's membership certificate should be presented to Customs Authorities for clearance of items being imported by your company.

Realization of earnings against export of software by software companies.

Pakistan Software Export Board (PSEB) had approached the State Bank of Pakistan (SBP) for evolving a procedure for realization for export earning by the software houses/ companies for export of software. Accordingly, the State Bank of Pakistan has evolved a procedure, & issued Circular NO.2/FEB.1(51) Software-96 in this regard.

A software house/company must be registered with PSEB and the State Bank of Pakistan, in order to realize its earnings and to avail Export Finance/Refinance Scheme.

Call centres

The Government of Pakistan has decided to allow setting up of Call centres in Pakistan in spaces controlled by Pakistan Software Export Board (PSEB).

The PSEB will take care to provide International Private Leased (IPL) circuits for these call centres. A 2MB IPL Circuit has been extended to STP at Islamabad and similar arrangements are being made at Lahore and Karachi once STPs are established.

Islamabad is the ideal location for setting up such Call centers because of its high literacy rate in Pakistan, friendly environment, good logistics and a large population of bilingual persons readily available.

A prospective Call center operator can take advantage of low manpower cost and very low rentals of the STP at Islamabad. The PSEB is willing to provide all possible help to facilitate setting up of Call Centers.

Software Technology Parks

Providing state of the art facilities at lowest possible cost.

In late 1997 it was decided that the Awami Markaz building in Islamabad may be earmarked for conversion into a STP. This step was taken by the Government in recognition of the software industry's immediate need for infrastructure. The STP project in Islamabad is now well under progress. Several software companies have already signed up for space in the STP.

The rent, certain terms and conditions and salient features as determined by the government are:
The tenants of the STP must be registered with the Pakistan Software Export Board and should be in the business of Software development/software education/ exports of software.

Option of furnished or unfurnished space.

Fully air-conditioned.

Rent payable quarterly in advance.

Ready connectivity via STP's high-speed communication links. Network cabling.

Business centre complete with conference room and video conferencing facilities is planned.

Ample room for further expansion.

Car Park.

Security services.


Minimum of 1000 sq.ft. available for rent.

Total of 40,000 sq.ft. available immediately.

The Software Technology Parks (STPs) for Islamabad, Karachi and Lahore have been conceived as one-stop-shop for all software houses which seek working conditions conducive to create inexhaustible bandwidth and power supply, "high IQ" (or not just intelligent) buildings, minimum regulatory overheads, maximum flexibility in the choice and use of space and minimal costs. The project companies which will build and administer these STPs will ensure that all these facilities are available with the barest minimum hassle to the software houses themselves.