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
$ 87 Billion
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
BREAK-UP OF PROJECTED $ 87
BILLION IT INDUSTRY
$ 39 Billion
IT Enabled Services
$ 19 Billion
$ 10 Billion
PAKISTAN IT EXPORTS GROWTH RATE
$ 5 Million
$ 8 Million
$ 11 Million
$ 16 Million