IT NEW CHALLENGES

The challenges have provided the much needed opportunity for the industry to look inwards to make appropriate change in direction and attitude

By SYED M. ASLAM
July 08 - 14, 2002

The software-driven IT industry of Pakistan is slowly coming out of the shadows of that fateful September day last year. The challenges thrown can be termed as a blessing in disguise to give the much needed time to the industry to take a long hard look inwards, assess its visible weaknesses and inherent strengths and to keep moving forward in search of better tomorrow.

While the things are improving, prominent sources within the industry feel that the problems faced by the industry would not go away in a night but would rather take months to wash off. The sluggish global economy, where every sector is inter-related and inter-dependent on every other sector, has slowed down all industrial activities like elsewhere in Pakistan and the IT was no exception. It hurt the IT Industry not only in term of reduced software export orders but also in term of development of human resources in a country where the majority of youths viewed IT as a sure shot way to get a work or immigration visas in the developed West.

According to well placed sources in the IT industry, software export orders decreased substantially after September last year and have only begun to show signs of recovery recently. They also say that the situation resulted in the closure of many small and medium software houses while many large ones were forced to resort to downsizing. It also resulted in closure of a large number of IT institutions due to decreased enrolments indicating that the stricter visa policies in the developed West, which thus far was viewed as the dream destination of the majority of IT savvy young generation, have also taken a heavy toll on the IT education in the country.

Talking to PAGE, Javed Naushahi, a member of government's Task Force on e-commerce, said that while the situation of software exports from the country has started getting better due primarily to easing of the global economic recession which affected every and all sectors of the economy and industry, the fiscal ended June 30 this year is not expected to depict a better performance this year.

He agreed that the challenges thrown at the software-driven IT industry of the country provides it with a unique opportunity to help develop the much needed local base, a prerequisite for a strong export base for the software development and exports. "It's time for the financial sector, which is viewed as the catalyst for IT development anywhere, to play its due role to help develop the software-driven IT industry. Though the financial sector is spending more funds on the IT-related projects in the country the majority of it is more on individual than collective basis.

THE ROLE OF COMMERCIAL BANKS

"The commercial banks foreign, domestic, and nationalized are allocating a very small portion of monies on the IT which remains much below the global standard by their counterparts in other parts of the world. According to an estimate these commercial banks enjoy a collective deposits of Rs 1700 billion. Even if they collectively spend 2 per cent of their deposits on IT-related projects it would mean a substantial spending of Rs 34 billion annually which can benefit the local IT industry immensely.

"The five nationalized banks United, Habib, National, Allied and Muslim Commercial Bank which collectively share among themselves 70 per cent of the deposits are poised to vital role to give a boost to the local IT industry. However, except for Muslim Commercial Bank the rest of the nationalized banks seem not inclined to investment in the IT. Compared to the global standard of upto 5 per cent of the deposits the commercial banks in Pakistan on the whole are spending much less than on ICT (Information and Communication Technology) due primarily to lack of capability and decision-making. The commercial banks in Pakistan are not even spending one per cent or Rs 17 billion of their collective deposits on the IT which could make all the difference for the software-driven IT industry of the country."

Javed said that nationalized commercial banks, which till today enjoy the lion's share of the deposits, should realize that investing in IT is a must to keep their edge. "They should not see it as an investment but rather a return as absence of the high-tech edge will ultimately deprive them of quality clients to the foreign banks who are much more IT-driven. Failure to invest in IT due to administrative failure of timely decision making or on the pretext of lack of capability of human resources will hurt the nationalized banks in the long run as they would not be able to compete with the foreign banks to add, or even retain, customers who are growing constantly demanding of quality and value-added services."

Besides the commercial banks, such public sector entities as Karachi Port Trust which handles the bulk of the foreign trade and the premier tax collecting agency as the Central Board of Revenue can play an important role to give a boost to the national IT industry. This, in turn, will also immensely cut the costs related to manual processing of collection of duties and taxes, reducing the paper economy and most of all abolishing the rampant corruption at all stages of tax collection. The electronic-based foreign trade and tax collection would help usher in an era of documentation and transparency as it would allow the port users to process the commercial documents electronically. It will help stop pilferage and reduce complaints to increase the tax 'collection; efficiency of the government.

EDUCATION

As mentioned above the events of last September have also taken a heavy toll on the IT education on the country due primarily to stricter work and immigration visa policies in the developed countries, particularly the US the favourite destination of the majority of IT professionals. Javed claimed that while 'the serious students' are still studying, a number of many IT institutions have been closed while many others are incurring losses. For instance, a foreign IT institution has been taken over by a school.

"Enrolments in IT courses have been dropped by 30 per cent, particularly in such entry level courses as certificate and diplomas. However, enrolments in quality institutions offering degree programmes remain unaffected indicating that serious students are still studying."

Zia U. Khan, a strong advocate of developing top computer skills as well as literacy and the founder of Project Badr, said that the post-September scenario has created "a strange situation for Pakistan, the most visible feature of which is a sudden change in the attitude of the young generation not only in the field of IT but all other professional courses. Enrolments in such non-IT-related degree-level courses as Accounting and Statistics have dropped sharply between 30-40 per cent and the same has happened to degree courses in the IT. About 20 per cent of the IT institutes are already closed in last nine months and I fear that another 40 per cent will close within the next six months if the drastic reduction of enrolments persists."

He said that the trends show that compared to less costly IT courses the costly IT programmes are hurt more profoundly due primarily to unemployment and the resultant decline in purchasing power across all levels. "It's not that the students are not interested to enroll in these professional courses any more. It has more to do with parents who are increasingly finding it highly unaffordable to bear the costs of these students for their children. We at Project Badr have seen a drastic increase in flow of applications for scholarships like never before even though we are already offering Java courses for a low fee of Rs 900 per month, which costs three times at any other commercial institute. Since we have limited funds we are awarding scholarships strictly on the basis of merit."

Zia informed PAGE that Project Badr is operating in three cities presently. It has arrangements with 14 institutes in Karachi to accommodate some 7000 students , about 5 per cent of whom are provided either partial or full scholarships. There are 500 students in Hyderabad and another 200 in Quetta. We will be expanding our services to Lahore on the 14th of this month and to Sialkot by end this month.

He also claimed that like all other exports the volume of software have also suffered in the post-September world due to sluggish global economy. "However, despite the stricter visa policies and the harsh search policies, the climate in the developed countries, particularly the US, has not changed much for an average Pakistani or Muslims. In fact, the people in the developed world have started to understand Muslims much better and the best thing is that the global economy is picking up.

"Another sign of improvement is that the IT-related works within the country have shown sign of increase which will have a positive impact on the domestic software production. The local software industry is also seen poise to benefit from the fact that the international companies are not coming to Pakistan at present and the long needed correction is taking place at present. The bulk of the work is coming from the public sector and the situation will benefit the local software industry."

He said that Project Badr will be starting a two-month (48-hour) basic computer literacy course absolutely free-of-charge initially in Karachi this month. "Education, particularly the professional IT education has become so expensive that at present only the serious students are joining the courses compared to a time not so long ago when non-serious students used to do a 3-month certificate course as a means to fly to greener pastures outside. There has certainly been a correction and it is a welcome change indeed."

CREATING THE DEMAND

The former chairman of Computer Society of Pakistan, Ahmed Allauddin, told PAGE that "there are no signs of recovery and the situation has not yet become normal." Ahmed, who is also runs a software house developing a range of products including those targeted at the industrial sector, also said that the domestic market still remains incapable of absorbing the locally developed softwares as it still remains a comparatively small market and that too in an economy which still remains much sluggish.

This highlights the need for change in direction for the IT industry which thus far has remained pre-occupied with only the supply. The increased PC penetration, healthy growth in internet users, high level of enrolment in the IT institutes surpassing all other professional education and churning out of over 110,000 professionals of all levels certificate, diploma and degree holders each year are all supply oriented. It is imperative to create demand to justify and absorb this immense spending on supply-side IT.

Professor Ali Zaidi, the head of research-based IT company Winson (Pvt.) Limited, expressed concerns about the gloomy software exports. "The software exports are just not growing. Stricter visa policies in the developed world, which used to be the primarily market of Pakistani software, is one of the main reasons for this fluid situation as it restricts the freedom of movement of the professionals to oversee a foreign project if need be arise. A large number of small software houses are already closed while a number of big ones have been forced to resort to downsizing. The 11/9 did not make as much of a difference as the bomb blasts killing the French and Pakistan Naval workers and the one at the US consulate in Karachi. We ourselves have shifted our office to Dubai and are doing our marketing from there not showing that our development houses are based in Karachi.

PAKISTAN SOFTWARE HOUSES ASSOCIATION

Pakistan Software Houses Association is the representative body of software developers. It was formed in late 1992 by nine software houses and today has some 150 members nationwide. PAGE talked to the president of PASHA, Hamza Matin, who was very optimistic that the local software industry has not only come out of the shadows of 11/9 but there will be an increase in the volume and exports this calendar year.

"We expect that softare exports will register an substantial increase this year over the last year's official figures of $21 million not including between 30-40 per cent of the unreported figures. Software exports are thus far remained restricted mainly due to shortage of investment. We need investment to boost our software exports and PASHA has been successful to sign agreement with United Nations Industrial Development Organization (UNIDO) as well as a Thai venture capital company, AccessCAPITAL, to address this problem."

The Joint Cooperation Agreement with UNIDO was made on May 22 in Islamabad to help create investment opportunities. The cooperation is for two years after which we will help PASHA and its members to play a leading role with the help and assistance of UNIDO in the growth and development of the software-driven IT industry of Pakistan.

The primary objectives of the agreement, signed between UNIDO representative Dr Carlos Chanduvi-Suarez and PASHA President Hamza Matin, is to maintain close interaction with central, provincial and local governments on the development and facilitation of the IT sector. PASHA will assist UNIDO in achieving its objectives in Pakistan by creating synergies for projects by providing IT solutions and technical expertise for efficient industrial development and training of human resources. UNIDO'S premier service of technology transfer to developing countries including Pakistan, can be facilitated in the country through PASHA's cooperation.

Hamza said that the agreement will help induct the much needed investment in the funds starved software industry through PASHA which is capable of providing quality IT solutions, telecommunications infrastructure and technical training. "PASHA's decision to become a strategic partner of AccessCAPITAL will also ensure flow of the much needed funds to our members."

Hamza, however, expressed concerns about the performance, or lack of it, of the Pakistan Software Export Board (PSEB) in securing any orders for the software industry. Accusing PSEB of gross incompetence, corruption and arrogance, he said that most PSEB employees, including its top hierarchy of running their own software houses and wasting immense amount of funds on projects which were aimed to benefit a chosen few.

He accused the PSEB of indulging in plans beyond its area of work. Many of these plans, he alleged, undermines the very basis of the software industry and in fact aims to weaken it. "For instance, PC-1 called for establishing an incubator of Software Technology Park at Lahore at the capital cost of Rs 20 million in addition to a foreign exchange expenditure of $ 25,000."

Hamza said that one of the primary objective of the project was to establish small scale software houses. The PSEB, thus instead of spending its energies to secure export orders for the local software industry, one of its primary functions, exceeded its authority to set up an infrastructure of parallel software houses on the pretext of increasing the software exports. "The details are even more amusing. The project called for setting up 20 software houses, each of them requiring a space of 200 square feet and each of whom would have to be provided with 5 PCs. In addition, the project called for providing all services and space at free of cost to the software houses. If this does not undermines the software industry than what will?"

Similarly, Hamza, alleged "the PSEB wasted Rs 1.06 billion on an unviable satellite-based project for the installation of 700 phones in the rural areas within nine months. Each phone cost the government a massive Rs 1.5 million and the project was not even included in the five-year plan.

"Even a more ambitious plan was the project called 'Mergers and Acquisitions' which was developed to aid in the mergers, acquisitions and investments of and through foreign IT companies by a team of individuals specializing in IT markets across the world and Pakistan. The project was 'intended to convince the international business giants to come to Pakistan and get themselves merged with the local Pakistani companies." Hamza said that if it had not been funny "I would have laughed at this particular project aimed at bringing the international business giants to come all the way to the country just to get merged."

IN CLOSING

Summing up the talks with the above IT insiders show that the majority of them agreed that though things are getting better for the software-driven IT industry of the country the problems will not evaporate overnight. It also highlights the realization that the challenges have provided the much needed opportunity for the industry to look inwards to make appropriate change in direction and attitude. The importance of developing a strong domestic base for the locally developed software and the need of creating a demand side IT is a imperative to absorb the human resources which no more are welcomed with open arms in the developed countries. The closing of doors outside, however, makes it all the more important for the policy makers to come up with strategies which are centred to create demand side IT.