Economic Survey 2022-23: Pakistan ‘ranks second most financially attractive location for outsourcing IT services’

In a first, the government of Pakistan included the IT and telecommunication sector in its Economic Survey 2022-23 that was unveiled on Thursday, a development welcomed by experts.

Speaking to Business Recorder, Alpha Beta Core CEO Khurram Schehzad said “it’s a good development that the IT sector has been made a part of the Economic Survey”.

Experts in Pakistan view the IT sector as a supporting force for other industries such as manufacturing, transport and finance as it can drive efficiency and address gaps.

Pakistan’s startup funding recovers in first quarter of 2023

The Economic Survey 2022-23 cited that Kearney’s Global Services Location Index (2021) ranked Pakistan as the second most financially attractive location in the world for offshore outsourcing of IT and Information Technology Enabled Services (ITeS).

“Likewise, the International Labor Organization (ILO) Flagship Report (2021) has ranked Pakistan as the second largest supplier of digital labour services, such as clerical and data entry services, creative and multimedia services, professional services, sales and marketing support services, software development and technology services and writing and translation services,” the document added.

Tech hubs of Pakistan

Major tech hubs of IT and ITeS industry are Lahore (36.4%), Karachi (28%), and Islamabad/ Rawalpindi (27%) as they have the highest number of Pakistan Software Export Board (PSEB) registered companies. The remaining 10% of registered companies are in other cities of the country, according to the survey.

Integration Xperts CEO wants concerted efforts to increase Pakistan’s IT exports

There are a total of 5,109 IT and ITeS companies registered with PSEB as of March 2023 and these firms represent exporters.

The survey shared that there are more than 19,000 IT and ITeS companies in software development and technology services, which are registered with SECP comprising both domestic and export-oriented enterprises across 160 cities of the country.

Low startup funding in 2023 goes unmentioned

In the first quarter of the calendar year 2023, startup funding stood at a meagre $23.1 million, which is a number that may not look good on a report card and hence, not mentioned. On the other hand, previous year’s funding amounts are mentioned.

‘Far-reaching effects’: GSMA urges Pakistan to restore internet services

“In 2021, the National Incubation Centres supported 60 startups, generating $373 million in capital, and reaching a valuation of $2.1 billion. In 2022, 40 startups raised $343 million, reaching a valuation of $3.5 billion,” the Economic Survey cited.

Slight decline in IT exports

Meanwhile, a slight decrease of $10 million was recorded in IT exports during July-March FY23, which amounted to $1.94 billion. It was $1.95 billion during the same period last year.

“IT exports have the highest proportion among all services sector’s exports constituting 35.1% of all services exports,” the survey said.

In the IT and ITeS industry, trade surplus of $1.72 billion (88.6% of total IT export remittances) was achieved during the period July-March FY23 (an increase of 16.7%) as compared to trade surplus of $1.47 billion for the same period last year.

First time in three years: no startup deal for Pakistan in April 2023

However, the services sector incurred a trade deficit of $229 million during July-March FY2023.

Pakistan’s IT and ITeS sector posted the largest trade surplus among all services and became the second highest across goods and service sectors after the textile sector. Over half of IT and ITeS exports go to USA

The USA is the largest market accounting for 54.54% of the export remittances receipts, followed by the UK (7.99%), UAE (6.91%), Ireland (6.73%) and Singapore (4.95%).

Pakistan’s IT and ITeS industry is exporting its services to over 170 countries and territories. The top 20 IT and ITeS export destinations accounted for 97.05% of export remittances, while the rest only accounted for 2.95% only.

“Over the past five years, a phenomenal upward growth of 178% in IT and ITeS exports has been witnessed at a compound annual growth rate of 30%, the highest growth rate in comparison to all other local industries in services,” the survey said.

Pakistani freelancers contributed foreign exchange earnings through remittances of $269.8 million (IT: $156.9 million and non-IT: $112.9 million) during July-March FY2023.