IT exports down 23% to $199M in July

Global slowdown coupled with uncertainty on the local front has hit the information and communication technology (ICT) exports of Pakistan, as it declined 23 per cent to $199 million in July, compared with $259 million in March.

Syed Azfar Hussain, project director at the National Incubation Centre (NIC), Hyderabad, said that the global slowdown, uncertainty on the local front, besides payments issues facing freelancers, are among the reasons for a decline in exports.

“Trade embargo on routers, switches and other devices used by the freelancers and enhanced regulatory duty on laptops are among the problems facing by the participants of the gig economy,” he added.

The country is said to be the fourth fastest growing freelance market. However, the export remittances do not justify this statement, as the IT exports of the country show no significant contribution in the inflows.

Pakistan has been ranked the fourth fastest growing freelance market with 47 per cent growth in freelance earning during the second quarter, compared with the same period of the last year, as stated by Forbes Magazine.

According to the global payment platform, Payoneer’s Global Gig Economy Index, Pakistan was among the top freelance markets leaving behind regional countries, including India, Bangladesh and Russia.

Freelancers working on various platforms may contribute to boost the exports of the country, provided they are trained with the market-required skills-set and resources.

“The biggest issue I think is the lack of training and in-demand skill-set. The local freelancers who render their services to foreign companies or individuals are charging a very minimum amount for their work,” Hussain said.

“The Pakistani freelancer market is mostly used for outsourcing by the foreign organisations who pay minimum wages and the end product get sold on a much higher price.”

The lack of a proper and continuous policy regarding the receipts of the IT companies has also dented the sectors, as the current government withdrew the tax exemption given to the IT companies, only to reverse the decision, he added.

Former prime minister Imran Khan during his government, announced a complete tax exemption for IT companies and freelancers, reverting the earlier status of the IT industry as tax-exempt.

A 100 per cent capital gains tax exemption was given for investments in the IT startups, besides easing foreign exchange restrictions for the industry.

The IT exports clocked-in at $259 million in March 2022, which declined to $199 million in July, while the analysts expect the declining momentum to continue in August.

Malaika Tabassum, an analyst at Alpha Beta Core, attributed the global slowdown and the rupee depreciation to the dismal performance of the IT sector in exports.

Although on a month-on-month basis, the exports have declined in July but showed an increase, compared with the same month of the last year, Malaika said, adding that the major contribution to the exports came from hardware and software solutions, which have the potential to significantly boost the exports.

“The global economic slowdown has impacted the overall ecosystem in the world and Pakistan is no exception. The rupee depreciation against the dollar has also dented the business activities. However, with the new investment in various technologies, the ecosystem in Pakistan will flourish,” she added.

The startup space has also been severely impacted primarily by liquidity squeeze with the advent of the monetary tightening pausing on the historic monetary stimuli thrown by the various central banks in the wake of the pandemic, she added. She believes the IT sector will rebound, as the businesses are shifting towards digitalisation. “The dynamics of the current enterprise’s IT expenditure is different from the past, as the businesses are approaching technology rather more strategically as a digital transformation initiative than operationally.”

She called for introducing incentives and subsidies for the freelancers to boost exports. The government needs to promote the startup ecosystem and vocational training institutes, which can go a long way in developing the IT sector of the country.