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How to achieve the target?

Nov 26 - Dec 02, 2001

As the world spins out control it takes a heavy toll on every single aspect of our lives— be it individual or collective not barring social, cultural, political, economic, commercial and trade. Like almost all other exports — for instance cotton textiles, leather, products and seafood — the nascent IT industry of the country has also been hit hard, more pronouncedly in the software exports.

The setback is all the more pronounced as despite contributing a small share in the overall earnings, software exports have increased by over ten times during last five years. Software exports have increased from a negligible $ 5 million to over $ 60 million in last four years though unofficially many put it over $ 100 million citing the rampant and easy misreporting for a service which is hard to be quantified like other commodities or manufactures.

It is not the value of software exports, or even its exponential increase irrespective of the fact that the figure still remains much lower than many other export categories, but rather the opportunity it offers to the country to grow out of traditionally agriculture-based economy. In short, the Musharraf government policy to make IT the focal point of the national economy is moved more by the potential than the value of software exports. And rightly so, as IT does not leave untouched any part of lives today no matter how educated we are or what we do.

Talking about education, the situation has also shattered dreams of tens of thousands of Pakistani youth to immigrate to the financially lucrative and socially attractive environs of the developed world by excelling in one of many IT disciplines. IT becoming the top career choice of youths here in the country is motivated not only by an assurance to a respectably paid job not only within the country but the road to riches with the right expertise, no matter how expensive it may be, in the alluring developed world.

That also explains the reasons for the mushroom growth of IT institutions of all shapes and sizes in all urban centers of the country in last many years. That also explains the heavy investment by the private sector in buildings and equipments which may be an envy to their counterparts even in the developed world. It is needless to mention the cost of study at these institutes where annual fee alone is more than at least double the annual income of a person in a middle class. However, there is an IT institute to suit one's budget, if not the demand for quality.

It is useless to talk about Pakistan's extremely negligent share in the global software market. The value of software exports amounted anywhere between $ 40 million to over $ 100 million depending who you choose to believe — the exporters, the government, the local media or the foreign media. Official figures, however, show that software exports increased from $ 5 million four years ago to over $ 40 million last fiscal and were expected to perform even better this year before the world shook on September 11.

The ripples of the economic slowdown in the US in particular and other developed countries in general has been felt the worldover. The economic slump and the sharp decline in retail sales in the US and EU resulted in the disarray of the global trade activities from which no economy has remained immune including Pakistan. Export orders have come to a standstill the level of which vary from sector to sector and category to category but are expected to cost the country billions of dollars in lost exports this fiscal.

The same is also true for software exports. Software exports orders, like many other commodities and products, have come to a trickle as the US companies in particular seem reluctant to place fresh orders. Many of them are also not honouring the past commitments at the great discomfort of local software exporters, particularly the small software houses, which survive from order to order. The slowdown poses different but as serious challenges to the comparatively bigger software houses which have made heavy investment in infrastructure, employing dozens of high-priced core professionals and paying overhead costs.

For the Pakistani IT industry which only recently started receiving the priority it deserved and whose software industry has started to earn the international stamp of approval the slowing down of global economic activity poses many challenges. On the one hand, it means financial challenges and liquidity crunch for software developers particularly as unlike many other products facing the same dilemma there is no sizeable local market available to them. On the other hand, it means shrinking job opportunities for tens of thousands of IT professionals — only a fraction of them quality — within the country and no more prospects of employment in the developed world in the changed circumstances. What makes the situation all the more serious is that the US is the world's top IT market and that it just started getting warming up to Pakistani software exports despite presence for last many years.

The challenge had come an extremely inappropriate time when the country started taking measures to meet all the necessary pre-requisites for software exports including the fiscal and financial incentives — abundance supply of professional human resource, increased investment in infrastructure both in public and private sector and easy financing. In addition, software houses have been exempted from the income tax for the next 15 years and so are the IT institutions till 2005. The global economic slump has taken a toll of software exports in Pakistan, which unlike their counterparts in the other countries have a cushion in a sizeable domestic market.

The pinch is felt at all levels of the software industry irrespective of the size of an individual software exporter. Software exporters in the three major centers — Lahore, Karachi and Islamabad — have reportedly cut down a substantial number of core jobs. Individual software houses have laid-off core software professionals the numbers of which run from half a dozen to even hundreds. The small software houses which usually comprise 1-3 persons, usually partners who pool up their expertise and resources, are also facing acute problems due to drying up of export orders.

The lay-offs of the highly qualified software professionals poses many problems in a country which produces over 100,000 IT professionals — certificate, diploma and degree holders — and where only a fraction of the fresh degree holders can qualify as world-class poses an immense problem. The most pertinent question is where these quality professionals would be adjusted as the situation affects the whole software industry. Secondly, what kind of a negative impact does losing of this skilled and quality work force would have on the industry even if at a later time the situation gets better and they rejoin their previous jobs. Thirdly, and as important, with the doors of opportunities closed in the developed world what kind of future the IT-crazed youth of the country would have in the months and years to come.

While there are no easy answers and the challenging times nevertheless provide time and opportunity to ample time to come develop solid policies and plans for the development of the IT industry in the anticipation of good times. The lull should be used by the government to ensure that many faucets of its friendly IT policy — be it the fiscal and financial incentives to the software developers and IT institutions, regulating the quality of education, promoting electronic commerce, etc., are being implemented to achieve the best possible returns.

In a number of previous issues PAGE strongly objected the awarding of multi-million IT contracts by the public sector like the State Bank of Pakistan's contract to a foreign company and highlighted the need for awarding them to the competitive local companies. The SBP awarded a $20 million contract to a Korean firm for the development of software for its day-to-day operations and for training its employees of which only 20 per cent went to the local firms. Last month the government said said that it would not more award public IT contracts to the foreign companies. The current impasse makes it all the more necessary for a planned development of a local market which should be lead by the government and the public sector. This is necessary to lessen the impact of the decline in software exports which pose a range of socio-economic problems for the country.

This will help stabilise the shaky grounds the software companies are standing by creating a local market for the products which they are not able to export to the foreign markets at present. The failure to do that would result in further lay-offs in the hi-tech and hi tech-oriented software sector which needs all the help which it can get at present.

It is easy to see that without the support of the government the local software industry will remain dependent on the foreign markets and buyers and to external factors which will remain out of its country. The changing scenario necessitates a fundamental change in plans and policies to help lessen the impact in the post-Septmeber,11 world and should not be irrespective of the number of measures such as the duty-free import of hard-ware/software and accessories and national testing and certification agency for IT training and education

It is also time to fully comprehend the demand and supply side mechanisms of the IT — the former comprising data-entry/messaging/MT, content development/messaging, call centers, body shopping, Web development, software application development, software products and software product services and the later including human resource development, infrastructure comprising hard-ware/software, telecommunications, utilities and fiscal and financial incentives.

The Government as the facilitator of services and development of policies can and should play its due role to help provide efficient and quality service. With a-friendly minister of Science and Technology, Dr Ata-ur-Rehman, the IT industry has a friend at the top levels of the government who seems to much better understand the realities to turn IT craze into a passion for the Pakistanis, particularly the all important segment of the populace, the youth.

However, while the universal internet accessibility has increased from just about 30 to over 400 cities and towns during last 15 months. There has also been substantial reduction in the PTCL's bandwidth rates for the benefit of the internet users to help expand its base. However, despite ministerial decisions the PTCL took long time to implement the decisions to the chagrin of some of the top ISPs whose whole expansion plans collapsed due to the delays that could had been easily avoided. This highlights the need for the timely implementation of the governmental decisions and the removal of the bureaucratic delays for reasons that are most often non-genuine than not. It is time to take the 'ouch' of getting work done at every level of the bureaucracy. What is also lacking is the efficient knowledge and information management and effective and efficient delivery of service to the users of the IT.

In this digital age of ours where information travels no geographical barrier and travels at the speed of light it is also necessary for a government or a private department or company to manage and utilize its information in the best time consuming way possible. The information and communication revolution has provided a new way for businesses to interact and to pass the information between different agencies in the least possible time. The important thing is to make the best possible liaison and implementation of the policies and plans.

This has also changed the way of doing business between government to government, government to private sector by giving way to the electronic business. This in turn has revolutionized the way for both the private and public sector to improve their existing processes or even create new ones. The combination of these processes has paved the way for the importance and implementation of electronic government. The e-government concept is based on the utilization of the new technology infrastructure either for building better processes or re-engineering the existing ones in order to increase the efficiency of service delivery, which forms the basis of e-government- a 24-hour-a-day and 365-days-a-year round the clock service unlike the problem-packed dealings of yesteryears.

The electronic government is a way and means of providing the government services as and when required by the people at their own convenience. Needless to say the e-government plan due to its very nature is capable of absorbing a large number of IT professionals which the country is producing each year to cut the rampant unemployment in the field. Besides saving intangible costs in terms of time, transportation and energy the system also allows the government to develop the much needed data bank to boost its revenues and taxes from a satisfied people who are thus far been treated shabbily at every stage of the taxing process.

In addition, creating a viable and conducive electronic government environment also allows the people to get more involved in the day-to-day affairs of a government. The interactivity thus allows the people to have a greater voice and provides them with a medium through which they can immediately access the relevant public servants to better cater to their needs. In short, the creation of e-government at the earliest possible can help tackle many of the problems faced by the IT industry in general and software exporters in particular to meet the challenges of the changing times that we live in today.

Early last month the Governor of the central bank, the State Bank of Pakistan, Dr Ishrat Hussain stressed the need for the induction of IT in all the departments to help eradicate the fearsome dependence of international donor agencies. He said that the expansion of IT in all the sectors of economy and life can help boost the national income by Rs 143 billion a year to help cut the dependence on the international loan donors.

Highlighting the need to promote IT to help boost the national income he said that the government was providing financial assistance to quality IT institutions adding that thus far IT has been contributed only Rs 1.42 billion which made up only ten per cent of the aid provided by the international donors annually to the country. He stressed that promoting IT in all walks of life in the country can help push the national income by Rs 143 billion annually to reduce dependence on foreign loans to zero.

The Sindh Finance Minister, Abdul Hafeez Shaikh, has said that the government is providing all the help possible to the software companies expand the base and value of exports. He said that during the current fiscal the government would spend Rs 3.5 billion to promote the IT industry and the development of e-government structure in the country. He made these observations while chairing a meeting of Pakistan Software Houses Association (PASHA) soon after that tragic day in September.


The post-September, 11 scenario and the beginning of the US war in Afghanistan on October 8 and the ensuing situation since then in the backdrop of global economic slowdown are taking a heavy toll on the Pakistani IT industry, particularly with the sharp decline in the software orders, the majority of which come from the US. The news of hundreds of lay-offs of the core professionals in the software industry and the closure of employment opportunities in the developed world pose many challenges for the local IT industry which can only be overcome by prudent planning and policies to help create a local market to help lessen the impact.