THRIVING IT & TELECOM SECTOR

FOZIA AROOJ
(feedback@pgeconomist.com)

May 21 - 27, 20
12

The IT & Telecom industry in Pakistan has undergone a dramatic change. It has been a long journey from the beginnings of Posts & Telegraph Department in 1947, establishment of Pakistan Telephone & Telegraph Department in 1962 and emergence of PTCL as a major player to the deregulation and enormous expansion.

TELECOM

The year 2004 was a crucial year for the telecom sector in Pakistan owing to the implementation of deregulation policy and provision of access to foreign investors. New licensed companies started rolling out their networks across the country. Prices of all telecom services dropped down drastically and revenues of existing operators improved significantly. There is a broadening base of cellular subscribers too. At the top of the list of Pakistani mobile companies is Mobilink, the Pakistani unit of Egypt-based telecom company Orascom. It has been in the country since 1994.

Telecom sector has attracted substantial investment after the deregulation of the sector. During the last six years, over $12 billion have been invested in the telecom infrastructure and new technologies. According to Pakistan Telecommunication Authority (PTA), telecom sector investment in the second quarter of fiscal year 2012 crossed the mark of $96 million against $41.2 million in the first quarter. This increase is solely due to an increase of $53 million in the investment by cellular mobile operators, whereas investment by local loop (LL), wireless local loop (WLL) and long distance and international (LDI) license segment in the telecom sector are not rising. Pakistan has a sizable equipment manufacturing base to meet the requirements of local telecom operators to some extent. Many foreign companies like Siemens, Alcatel, ZTE, Huawei, Nortel Networks, and Ericsson Pakistan (Pvt.) Ltd. have set up telecom manufacturing facility.

The annual contribution of telecom sector in the national exchequer over the last four years remained over Rs110 billion on account of fees, taxes and duties. During the first six months of the fiscal year 2012, telecom sector contributed Rs58.1 billion as compared to Rs56.9 billion during the corresponding period of last year. With increasing trends in the revenues of telecom operators, expected fee payment in the next two quarters and a six monthly growth trend in FED/other tax contributions, it is expected that the total contributions in the current fiscal year will be over Rs120 billion.

There is still a long way to go for Pakistan telecom industry. Pakistan needs to increase telecom research and development work within the country. China and India are in the process of becoming world's major R&D centers for technology and telecommunication. Two top Chinese telecom equipment firms have announced their plans to collaborate with Pakistan. Huawei is working with UET Lahore and ZTE will set up R&D center in Islamabad.

IT

Information technology industry is probably the most exciting and dynamic sector in the country today. There are more than 75,000 professionals, major ongoing IT projects within the government and the private sector to the tune of hundreds of millions of US dollars, and world-class software products and services companies.

The IT industry of Pakistan has witnessed rapid growth in recent years and at present, the industry size is estimated at US$13.8 billion. The industry has attracted a foreign direct investment of US$ 6.63 billion during FY 2006-10 and is offering numerous business opportunities both in public and private sectors. The software houses have enabled our export industry to become more competitive in international market. It is expected that over the next decade exports of information technology industry would easily reach $10 billion besides providing about one million people the livelihood opportunities.

The turnover of the software industry is remarkable. Presently, there are 270 software houses based in Pakistan, catering to the domestic market as well as overseas requirements of the major software markets. The major ones are the USA, UK, EU, South Africa, Japan, Australia, and the Middle East. The ability of Pakistan to produce quality software at competitive costs is based on abundant pool of IT professionals and well-managed processes.

Nevertheless, computer hardware manufacturing is extremely capital intensive in nature and at present there is no computer hardware manufacturing activity in Pakistan in the true sense. Hardware components are available in abundance and at fairly cheaper rates.

CHALLENGES

Currently, Pakistan has lesser number of people than the actual required count in order to compete worldwide. We are in need of producing thousands of high quality IT graduates every year. There is a strong need to build a powerful infrastructure of IT. Pakistan has developed a modern telecom infrastructure, which is accessible throughout the country, and it is available at an affordable price. This will help in developing Pakistan as a regional hub of information flow and telecommunication.

Recently the Global Information Technology Report (GITR) of the World Economic Forum (WEF) has reflected the lack of seriousness on part of the Pakistan government in the IT sector. The report highlights that Pakistan lost its competitive advantage on fixed broadband internet tariffs, dropping its ranking from 36 in 2011 to 79 in 2012, showing that residents were using less internet in terms of purchasing power parity (PPP).

However, Pakistan improved its competitiveness in certain areas including efficiency of the legal system in challenging regulations, where Pakistan improved from 95th in 2011 to 79th in 2012 out of 142 countries.

The future of IT in Pakistan is very bright. It would be more appropriate to say that there would be no desired economic development of any country without fully adopting this technology. If Pakistan wants to come in line with the progressive nations of the world it would have no alternate except to strive more and more for the development of information technology, which includes communication technology and robotics as well.