Pakistan’s economy has been struggling to enter into a high growth era in the past decade but now it has emerged from the pandemic crisis and is set to take off in coming years due to the revival of traditional sectors as well as the emergence of startups and information technology. The government’s effective policies have not only managed to control damage from rising inflation, supply chain shocks and high energy prices, but also put the economy on right track to achieve up to six per cent sustainable economic growth in the years to come.
The PTI government, led by Prime Minister Imran Khan, and the State Bank of Pakistan have introduced various policy measures to revive traditional economic sectors such as agriculture, textiles and other industries in the past three years. At the same time, the cricketer-turned-politician laid a solid foundation for ‘Digital Pakistan’ that will trigger an economic boom in the country by revolutionising the information technology (IT) sector through startups, which are turning out to be a silver lining for the country.
Govt officials upbeat
Finance Minister Shaukat Tarin said Pakistan’s IT sector has an immense potential to grow, and the government is keen to revolutionise this sector to boost exports in the coming years.
“We can double our traditional exports in the next four to five years and lift IT exports by providing incentives to the sector and building a strong ecosystem for startups in the country,” the Finance Minister told Khaleej Times in an interview during his recent visit to Dubai.
He further said the government has taken out-of-the-box measures to revive IT sectors by resolving their problems and bottlenecks as well as offering them tax holidays and incentives to put the country on the investment radar of international investors in general and tech leaders in particulars.
“In the next five years, our traditional exports will touch $60 billion-plus while IT exports could be at $50 billion, pushing the tally to over $100 billion annually. In addition, $30 billion remittances per annum will help ensure a sustainable current account surplus,” Tarin said.
Foreign Minister Shah Mahmoud Qureshi echoed similar views and said the IT industry will lead to an economic boom in the coming years as the government is keen to utilise the true potential of the sector.
“Thanks to the Gulf region’s economic resurgence in the 1970s, Pakistan’s labour class revolutionise the economy by availing job opportunities in the region. Today, we have laid a solid foundation for the IT sector and it will bring another economic revolution in coming years,” Qurashi recently said while addressing the media at the Pakistan pavilion at Expo 2020 Dubai.
Startups power the IT sector
Pakistan is one of the few untapped markets for startups and investors to offer internet-based services similar to those in other parts of the world. These services including ride-hailing, e-commerce, logistics, fintech, food and grocery delivery, among others, have set the stage to bring an IT revolution in the country.
More than 250 startups since 2015, are going to provide impetus to Pakistan’s IT sector and are expected to boost IT services and exports to record $50 billion in the next five years.
About 83 Pakistani startups, which raised approximately $350 million last year compared to $65 million in 2020, are expected to post exponential growth in the next five years due to the conducive environment and incentives provided by the government.
Airlift ($85 million), Bazaar ($30 million), Tajir ($17 million), Qisstpay ($15 million), and TAG ($12 million) were the top five largest disclosed startup funding rounds last year.
The sector, which has already raised $136 million this year so far, is expected to grow 10 times by 2030 and will lead to an economic boom in the country. Industry leaders estimate that Pakistani startups will be worth $50 billion by 2030 compared to the present value ranging between $3 billion to $4 billion today.
ICT exports surge
ICT exports have been rising consistently since the Covid-19 outbreak, as Pakistani firms and freelancers capture the growing global demand for tech-related services in the wake of remote working and e-learning arrangements. The latest data released by the State Bank of Pakistan indicated that the information and communications technology (ICT) exports surged 30 per cent to $1.69 billion from July 2021 to February 2022. The Central Bank data pointed out that ICT has become the top among the services sector in terms of its contribution to the economy. It is an encouraging sign that within the ICT sector, exports increased across almost all segments, including software consultancy, call centres, and telecom services, during the July-February 2022 period.
“Due to higher inflows in this sector, the overall exports of the services sector also registered 18 per cent year-on-year growth at $4.49 billion during the first eight months of the current financial year of 2021-22,” according to an industry executive.
He said the government, as well as the centre, are actively working to promote this rapidly growing services segment, including facilitating receipt of export earnings, tax rebates and incentives.
Govt efforts yielding results
Industry leaders acknowledged that the present government has been efficiently working to promote the IT sector through its program of Digital Pakistan.
Referring to the latest central bank data, they said the government efforts reflected in the growth of the IT industry and its exports during the last couple of years in the country.
They were of the view that the government’s ambitious target of $50 billion in IT exports could only be achieved if incentives like tax holidays and local potential of the industry were realised in letter and spirit.
“The removal of taxes on IT services will not only encourage freelancing but it will also attract skilled professionals to take a leap of faith toward entrepreneurship and expansion of their businesses at local and global levels,” they said.
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