INVESTMENT IN IT IMPERATIVE FOR GROWTH
PAKISTAN IS AT THE CROSSROADS OF IT REVOLUTION
June 8 - 14, 2009
Pakistan is at the crossroads of Information Technology revolution. If we do not invest on automation of Pakistan, we may go back to the Dark Age. The upcoming budget must reflect the importance of this in order to ensure an early entry in to the electronic age.
Most of the problems we face today are due to the lack of technology in the public sector. The budget for the fiscal year 2009-10 must emphasize public and private sector need for use of technology. The decision makers should awaken to the fact that in last few years funds were not utilized properly. In most cases, these allocations lapsed with zero impact on the economy.
This year again, we will have bumper wheat crop. Besides lacking the storage capacity for such a heavy inflow of wheat, we also lack the ability to assess the exact quantity of wheat on ground due to the absence of technologies in rural sector. We have witnessed complexities arising out of such a situation back in 2007 when the government exported wheat on low price after having wrong estimates provided by the authorities concerned and later imported on higher price from around the world to pay the price of our non-technological approach.
This situation will continue unless we document our crop production electronically. As a matter of fact, the percentage of allocation on education should register substantial increase in the upcoming budget, especially skilled technology education. We seriously lack skilled resources able to take Pakistan to the comity of developed nations. It is a dilemma that education has been at the last point in our priorities and the results are obvious. The IT exports of Pakistan have reached to half a billion dollar and number of highly skilled human resource is very impressive in the sector but still it needs the government to do more.
Pakistan, with a population of 170 million, 60 percent of which consists of under-25 youngsters, is an ideal country where IT sector can spearhead the economy in the days to come. Once the government realizes this potential and ready to invest on technical training of Pakistan youth, IT revolution will start in the country. The IT industry has already realized the potential and started putting infrastructure in place to have more and more human resource in the years to come. The government can ensure a real economic revolution by providing IT training to youth on war footing basis on the one hand and automation of public sector organizations on the other.
Pakistan is also among few countries in the world where General Sales Tax is imposed on computer hardware. It should be removed immediately in the next budget. This will improve automation campaign to trigger the phenomenon of job creation both at higher and lower levels.
IT industry is the most important segment of Pakistan economy and it will earn precious foreign exchange for the country in the years to come. The education institutions need to be more focused in their curriculums and lectures to discuss ongoing global changes in world economies and its impact on IT industry. While the industry would be cutting cost throughout 2009, yet it would be working on better software simultaneously, that would open new window of opportunities for young professionals.
This is also the time to revisit Pakistan tax policy towards the IT sector. The tax holiday for IT sector is expiring in 2016 and any failure in its extension for another 10 years would cripple the industry from generating hundreds and thousands of jobs in the years to come. We have already seen that a good number of IT companies had shifted their businesses from tax-burdened regimes to tax-free regimes in the past. The government of Pakistan needs to move fast on this front.
Statistics of the Pakistani IT/ITES industry Total number of IT companies registered with PSEB 1419 Number of substantial IT companies region-wise breakup 495 Karachi 373 Islamabad/Rawalpindi 459 Lahore 92 Others Total number of foreign IT and telecommunication companies working in Pakistan 60 Number of CMMI-assessed companies One CMM Level 5 company, one CMMI Level 5 company, three CMMI Level 3 companies and sixteen CMMI Level 2 companies Total industry size US$ 2.8 billion (WTO-prescribed formula) IT and IT-enabled services exports US$ 1.4 billion (WTO-prescribed formula) Percent growth in exports over the last one year 46% Number of IT graduates produced per year Approximately 20,000 Export targets for the current fiscal year 2007-2008 US$ 240 million Number of universities offering IT/CS programs 110 Number of IT professionals engaged in export-oriented activities (software development/call centers etc.) More than 15,000 Total number of IT professionals employed in Pakistan 110,000 Total IT spending in the fiscal year 2005-2006 US$ 1.4 billion Total space utilized in IT & Software Technology Parks Ten IT Parks covering an area of 722,000 sq ft (Source: Pakistan Software Export Board)
The current global financial crisis is different from the Great Depression of 1930's and the IT bubble collapse in 2001-02. In Great Depression, the US economy shrank 14% per year, prices fell 8% per year, unemployment peaked at 25%, and the impact was limited to US. In IT bubble burst of 2001-02, major shakeout of IT firms held with huge value loss to remaining firms but still the impact was limited to the IT industry. However, the present global crisis is unprecedented, as it has collapsed global financial systems, invited recession, global loss of business confidence and virtual drying up of credit.
The government of Pakistan has already formed a Task Force on Information & Communication Technologies (ICT) to place Pakistan as a major player in software exports. Other objectives include the development of domestic software/computer hardware and telecom equipment industry, development of citizen centric applications/services especially in local language, raising quality and enrollment of I.T. education, creating large employment opportunities in IT/Telecom, making Pakistan a major IT manpower exporter, and making recommendations for the promotion of IT/Telecom sectors.
The recommendations of ICT taskforce will go not only into the next five year plan (i.e. 2010-2015) but also to make contingency planning for reducing the impact of global economic crises on Pakistan.
This is right time to identify the competitive strengths of Pakistan's software industry and identify growth opportunities, both domestic and global. This should be based on how the industry can be positioned in competition with other countries that have already established themselves as global hubs of software development.
The large IT companies should also outsource their work to smaller companies at the same time to get them along in a crisis like situation of present day.
The IT companies should also get register with the State Bank of Pakistan to correspond their real export potential. Only 179 IT companies are registered with the SBP and their exports show only a meager amount comparing with the actual size of the industry. A public awareness campaign on IT security issues in both public and private sector is an urgent need of the hour.
The concerns of local and foreign stakeholders on lacunas in IT security within Pakistan should be addressed immediately with successful implementation of policies developed earlier on the subject. The Pakistan Software House Association (PASHA), Pakistan Electronic Media Regulatory Authority (PEMRA) and other industry stakeholders should come up with better understanding and share their knowledge and experience to excel the sector fast.
This is right time to project positive developments on IT security within Pakistan to avoid any further damage to the business coming to Pakistan. There is also a need of implementing the concept of Computer Emergency Response Team (CERT) in Pakistan as early as possible. The IT companies should adopt standardization to win the trust of buyers. The Pakistan Telecom Authority (PTA) should also ensure security of infrastructure through enforcing SLA for PTCL and Cellular companies for its customers and vendors. A government body should be authorized for conducting IT audits, as unauthorized auditors can be a major threat to the IT security.
The Statistics Division should recognize IT and ensure proper data collection using international codes. It is important to recognize the significance of these issues at policy level, in addition to the revenue and export generation capability of the IT industry.
In order to encourage more IT companies to get registered with State Bank, PSEB and PASHA, special incentives or exemption can be extended to all such companies, to the extent of their reported export revenue. A complete picture of industry's revenues would be better for the industry. The International research is of the view that the fundamentals for Pakistan's IT industry are in place. However, the reasons it has not taken off include the scattered manner in which activities are being undertaken, inadequate representation to the government through industry spokesperson, and inadequate marketing. The key areas that needed attention are HR, promotion, infrastructure, IT security and funding.
A strong leadership with a visionary approach towards IT sector is an urgent need of the hour. We would have to decide whether we have to live with 20th century Pakistan or we are determined to enter into 21st century Pakistan. Since majority of Pakistani youth lives away from major cities, i.e. in rural areas, therefore, a strong network of IT training institutes is the only way of spreading IT education in Pakistan.
One way to come out of economic crisis is earliest start of automation of public sector that would double public sector's efficiency. The IT sector of Pakistan has registered 30 percent growth in revenue in a very short span of time and this growth pattern can easily be doubled by simply reviewing our priority list.
This growth in revenues has enabled the industry to hire high-skilled IT professionals and thus contributed to the national economy in a big way. More the trained human resource the IT sector has, more Pakistan's economy will flourish and prosperity will sustain on longer terms.
(The writer is Chairman Federal Task Force on Information and Communication Technologies, Honorary Consul of Australia for the province of Punjab and Chairman & CEO of NetSol Technologies Ltd)