IT SECTOR IN PAKISTAN AND ITS ECONOMIC SIGNIFICANCE
AROOJ ASGHAR (firstname.lastname@example.org)
Aug 04 - 10, 2008
It was essentially nineties when IT industry in Pakistan was effectively emerged. During the 90s, private sector in Pakistan invested heavily in IT. It was the time when global IT started showing its potential in contrast to that there was a blink initiative in Pakistan on software development. Those Pakistani investors can be grouped into two categories, one as mature and other as trendy investor. Mature investors entered in the industry with the clarity of mind to stay in the business, worked immensely hard, hired expensive specialized persons, did excellent marking both within Pakistan and abroad and were able to develop good quality software. Software and IT related services saw a bombastic boom during that period worldwide, American and European companies started outsourcing software development and other related IT services to underdeveloped countries. Due to this, software revolution came in South Asian region specifically where hundreds of software houses emerged overnight. Whereas other category in Pakistan, the trendy investors were basically the kids of elite class of Pakistan; they did enter into the industry but were never interested in the rules of business. Like clothes, watches, and shoes, few businesses also fall under fashion like development of software house and/or a wind power project etc...
For some reasons, expectations from IT sector in Pakistan have been unnecessarily overmuch since its inception though this sector was ignored in earlier years by almost everyone. After so many years, IT industry in Pakistan is still in its infancy and is struggling to catch up with the regional and global industry. Most of the software houses are basically one-man shows. Although, there are a few medium to large size players who are a part of Pakistan business houses. The software industry is currently employing over 15,000 professionals. Whereas industry is also facing a serious shortage of quality technical and marketing professionals caused by the massive brain drain of high-level professionals and IT trainers.
We are in the last quarter of this decade; we have over 10 years of data, information and experience in this sector. Initially things went well, on one hand, there were companies which got assignments from USA and Europe as well, delivered their products according to the requirements/specifications in time with quality after sales service on the other hand there were handfuls of companies which either couldn't complete their projects in time and/or had numerous bugs which clearly showed lack of quality control procedures, if delivered somehow. This is a business of goodwill, establishing goodwill is hard but to maintain it is even tougher. Every industry and business travels on good to bad phase pendulum. Most of those serious entrepreneurs are now in much better position; they have achieved or near in achieving their pay back period. Now fresh investment is flowing into this sector, developers are putting efforts to explore and capture their share of market but getting fresh business and building goodwill takes time.
Over a decade, Pakistan companies and business community have pumped millions of dollars into IT investments, covering procurement of computer hardware, software, and telecommunications equipment from worldwide. Clearly we can observe by looking at the impressive growth numbers of Pakistan's economy in general and IT sector's in particular. Business community in Pakistan is investing in their IT department, presumably in the hope of improving their performance, liquidity, profitability and quality of professional and personal life. We also witness the steady adoption of IT which is becoming the source of development of software industry and thereafter unprecedented decline in the prices of computer related equipment. The piracy of software is yet another big issue which can be addressed later, though hampering software industry of Pakistan.
Pakistani software developers and companies are considered better than Indian as far as the quality is concerned. It is widely believed that Pakistani software developers are of much better quality but lack presentation. Few seasonal and selfish investors in past badly distorted Pakistan's image worldwide by backing out their commitment. But if we go into detail, we find various success stories within Pakistan on software development. This is also not fully correct that India has noticeable edge against Pakistan in software development; the mater of the fact is that India is mainly getting major junk of outsourcing assignment for call centers.
ROLE OF GOVERNMENT OF PAKISTAN
With the passage of time, Government of Pakistan has also realized the importance of IT and launched an IT policy in order to compete with the technologically developed and developing countries. The strong economic performance of the Pakistani economy and apparent success of some IT-related firms of Pakistan, the industry experts are arguing that IT industry is changing rapidly by providing solutions to the businesses which afterward provide them to operate effectively and efficiently.
As in many other areas; Pakistani government showed its stereotype laziness thus nation faces traditional red tapism, IT sector is no exception. Pakistan has great potential in IT sector but unfortunately it is not being utilized properly and weirdly wasting time without realizing the fact that there are long queues outside business providers' offices for capturing fresh business. As it is said, time and quality are two basic ingredients of every business. Pakistan has lagged behind other regional countries in exploiting IT as a catalyst for economic progress. However, it is felt that the explosive growth of the Internet and the continuous wave of E-Commerce still provide immense possibilities for Pakistan to exploit their potential and use these for accelerating its economic revival.
Time is changing continuously, millions of people in Pakistan use internet, computers and software either developed by non-Pakistani companies or pirated. One of the best things happening in IT sector is the awareness among people about the need and requirement of IT which in turns transforms this awareness into business for the industry. Due to this trend in society, economist expects to get few billion rupees from the export of software and IT related services. In the last few years a lot has been done to enhance the IT sector in Pakistan mostly by private sector. The Government of Pakistan has, over the last few years, also granted numerous incentives to technology companies wishing to do business in Pakistan . A combination of decade plus tax holidays, zero duties on computer imports, notional sales tax, government incentives for venture capital and a variety of programs for subsidizing technical education, have been initialed in order to boost the IT industry. Government is also providing relief to companies by decreasing bandwidth prices and making arrangements for more easy access to internet but above all the most critical aspect is the opportunity to strengthen the software industry in the private sector. Government has recognized that IT industry is one of the most important sectors in days ahead but the right size of the sector has not yet been determined. It wouldn't be wrong to say that time is running out and our policy makers are yet failed to tackle the challenges facing this industry.
ECONOMIC IMPACT OF IT SECTOR
According to the statistics provided by the Pakistan Software Export Board's ("PSEB"), it is consistently exceeding the expectations for the last few years. Having said this, one has to analyse the output IT sector is providing against the input they are requiring. IT exports in 2007-08, as reported by the State Bank of Pakistan, was US$ 100 million, though with minimal margin but exceeded the target of US$ 75 million. As per the analyses of the PSEB, export target for the fiscal year 2007-08 was US$162 million; in next few weeks we would be better able to evaluate this year's performance after the compilation of actual numbers. It is also said that size of Pakistan's software industry only is above US$2.8 billion now, keeping in mind that this is calculated according to the formula provided by WTO whereas over US$1.4 billion was exported in 2007-08 by private and public sector. It is interesting to note that exports account for 20% of the total revenues of the IT sector in Pakistan. Therefore, by this, one can easily judge the importance of this sector in the development of the economy. As of now Pakistan has over 1215 software houses formally registered with PSEB out of which more than 100 companies are ISO certified, and over 60 foreign companies are operating in Pakistan. PSEB has proposed a four-year draft strategic plan, which will increase the IT Industry's size to US $11 billion in the calendar year 2011. Eight strategic areas with missions and annual targets have been identified. These include facilitation; human resource development; industry finance; marketing; office space provision; public policy; quality and telecom bandwidth provision. PSEB has provided an export plan to the Planning and Development Division for incorporation into Pakistan's overall export strategy and targets.
STEPS TO BE TAKEN
Industry sources are estimating that Pakistan's software industry is growing at a massive pace of more than 50% p.a. In order to further increase the revenues and cash proceeds from export of software and other related IT services, following steps can be taken both by the investor and government collectively and individually depending upon the requirement;
* Development of packaged and customized software
* Quality training and development of specialized human resources
* Utilization of available educated human resources pool and also to retain them as well
* Computerization of public sector and private sector organizations
* Reorganization and growth of communications infrastructure
* Development of call centers and training of staff
* Formal and authentic documentation by Government related to IT sector
* Consumer awareness through IT and the Internet
* Effective promotion and networking in international markets
* Reputation for timely delivery and quality of services and products and also provide after sales support and maintenance services
* Ability to provide needed referrals and guarantees to foreign buyers
* Collaboration with international software houses
* Provide concession packages to attract major foreign IT related companies for investment in Pakistan
* Risk taking and forward looking managerial attitude
* Provide strong financial base by giving subsidies and support in obtaining financing from the banks
* Continuous induction of new value added technology products and services
* At least one fully operational technology city in Pakistan
* Holding road shows, exhibitions, international conferences and seminars on IT on regular intervals worldwide
It is widely believed that Government can play only the role of a facilitator in this sector otherwise it would create complications if it starts acting as regulator for the sector. One also must be aware of the fact that the change in the IT domain is of continuous and hyper nature. This means that any meaningful decisions for the IT industry in Pakistan are to be implemented immediately. Any significant IT initiative in Pakistan can only be effective if experts from the private sector are given authority in drafting policy which off course will be discussed and approved by the Government. One does not often listen any serious root cause analyses of any failure even most of concerned people are sometime so hostile that they are hardly willing to listen any of their fault. A consensus has now built that IT sector indeed has a major role in the recent revival of the Pakistan's economy. One must remember that concrete focus on IT development would not only bring huge foreign exchange for Pakistan but would also become the most attractive sector for foreign investor to invest in Pakistan. Last but not the least, our policy makers should decide once for all how they want to see IT sector of Pakistan going forward, either they want to build this sector to challenge the world in software and technology development or merely be a adopter of technology developed by other countries.