RECORDING UNRECORDED IT EXPORTS' REVENUE
TARIQ AHMED SAEEDI (firstname.lastname@example.org)
Dec 7 - 13, 2009
First policy on information and communication technology is on the anvil. One can expect that this policy will help integrate this fast growing sector in Pakistan so that the size of the sector and its contribution towards exports revenue can be authenticated. Perhaps, IT is the only sector in the country that is exposed extraordinarily to different viewpoints about its size and exports revenue.
Thus far, no one is unanimous about the actual size of the IT sector and its contribution in total exports' revenue from services, presenting variable statistics.
Intangibility of products is a unique characteristic of IT services that makes it difficult to ascertain the size and volume. Physical objects are readily enumerable.
The upcoming IT policy intends to enhance the visibility of IT companies. The policy can guide leadless progress of the IT sector and entrepreneurs to get access to incentives for promotion of IT exports.
It is noteworthy that there is more than one methods to record exports revenue from the IT sector. World over, different methods are used to register IT exports revenue. Since the reporting of IT exports revenue is complex, various reporting systems are prevalent in accordance with the convenience.
Pakistan seems to adapt to world trade organization's formula and under which the size of the sector is equivalent to $2.8 billion and its annual exports $1.6 billion. However, when it comes to exports revenue central bank is commonly considered as creditworthy reporting institution and according to the State bank of Pakistan annual exports of computer and information services from the country hover around $200 million. IT experts term this as understatement, saying the central bank records exports revenue of only those IT companies that are registered with it.
There is a stark discrepancy in statistics of total numbers of IT companies registered in Pakistan. While Pakistan Software Houses Association (PASHA), representing body of IT companies, records total registered IT companies at 1082, Pakistan Software Export Board, a government-owned export promotion organization, recounts the numbers around 1595. Ironically, the total numbers of IT companies registered with State bank of Pakistan, a recording house of capital inflows in the country, are not more than twenty, revealed in a press statement by Salim Ghauri, chairman of the task force on information and communication technology.
The statement said only 179 IT companies were registered with SBP. Evidently, that implies the central bank would be able to record exports revenue of only registered companies and thus significant amount of exports revenue go unreported.
The reported export figures of computer and information services invite doubt of those who think that the figures would be much higher if comprehensive exports from the IT sector take in to account.
For July-June 2008-09, SBP registered exports of computer and information services at $184 million, which does not correctly represent the actual exports revenue from the sector, according to skeptics.
According to experts, IT sector has annual exports' revenue of one billion dollar. This suggested figure is not even in agreement with the figure of combined exports of computer and information and communication services. Notably, State bank classifies exports of communication services separately, which last fiscal year earned the country $196 million.
Though State bank records inflows and outflows of foreign exchange transacted on banking channels, yet it is scientifically impossible to discern purpose of foreign exchange transactions. Within the complicated structure of IT sector, myriad of business transactions take place across the border and Pakistani entrepreneurs based in Pakistan fetch money against business process outsourcing to their foreign counterparts. It is observed that many such entrepreneurs do not need to be registered prior to sell software or render services to foreign clients. They are paid online in foreign currency. It is unlikely if State bank has a reporting system to categorize this capital inflow.
Government is mulling over a five-year policy for information and communication sector. The policy wants to promote registration of IT companies with the central bank so that their export earnings can be recorded. Recently, task force on information and communication technology submitted draft of the policy to planning commission for review and approval.
Over the last two decades, the definition of IT sector has broadened to a large degree, comprising more IT and IT-enabled companies that include call centers and internet service providers now than before when alone software houses represented the sector mainly.
It is necessary to bring uniformity amid ongoing diversification and expansion in reporting system of IT exports revenue to properly allocate funds for development and propel the sector from informal to formal economy through documentation, which can drive the sector's growth manifold.
Experts estimate an average 33 percent annual growth in the Pakistani IT sector. The rate of growth is not constant across the nation and variable on geographical bases.
There is an ongoing debate in the world about the significance of informal economy that albeit unregulated brings a considerable positive change in employment and poverty graphs. However, in developing economies like Pakistan where social evils like gender discrimination and income inequality caste a shadow over goodness in the society, advantages of informal economy can fade away.
Nevertheless, in view of rising unemployment and poverty nationwide, self-employment is a possible way-out. Skill of human capital is a predominant input of IT business operation and financial resource follows it. Therefore, IT-savvy person can embark on small scale IT business with modicum of investment.
There is a need to weave linkages between formal and informal IT sectors in order to ensure protection of labour force and ensure participation of undocumented and unregistered IT companies in policymaking.