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coronavirus
Coronavirus
VERY HIGH
Source: covid.gov.pk
Pakistan Deaths
29,122
1724hr
Pakistan Cases
1,381,152
6,35724hr
Sindh
529,218
Punjab
466,164
Balochistan
33,975
Islamabad
120,128
KPK
185,683

At the start of the new fiscal year, the Information and Communication Technology (ICT) space has shown interesting results. This is not to brush aside the surprisingly lackluster participation in the recently-held spectrum auction, where three players chose to remain on the sidelines. This will impact the pace of operators’ network expansion, service quality and short-term FDI inflows into the country.

Looking at latest performance of key indicators, ICT exports continue to delight. The figure reached $420 million in Jul-Aug period of FY22, up 46 percent year-on-year, as per SBP data. More than two-thirds of the $133 million in incremental ICT exports in this period was accounted for by the dominant segment of ‘computer services,’ as its 2MFY22 exports grew by 40 percent to reach $313 million. The digital opportunity has been banked by Pakistani IT exporters since the pandemic started.

There is strong growth across all IT export categories, with software consultancy services providing the biggest impact, growing 56 percent year-on-year to reach $114 million. Computer software exports increased by 29 percent to reach $74 million, and ‘other computer services’ rose by 34 percent to clock $125 million. The other ICT export category – ‘telecom services’ – increased by 68 percent to $106 million, thanks to high growth in both call center business and international telephony.

During Jul-Aug FY22, the net FDI in the ICT sector came in at $62 million, about six times the level seen in same period last fiscal, SBP data show. In a role reversal, it is not the telecoms that are providing the bulk of ICT FDI. Telecoms’ net FDI contribution barely budged at $4 million in the two-month period – it is peanuts. Whereas IT net FDI surged by 452 percent year-on-year to reach $43 million, buoyed by foreign investments making their way to local startups in the digital ecosystem.

As a result, ICT contributed 23 percent to Pakistan’s net FDI of $203 million in 2MFY22, much higher than its 4 percent share in the same period last year when the country’s net FDI stood at $255 million. Continuing deal flow in the startup space is expected to further boost IT sector FDI down the fiscal road, helping offset the lack of vigor in telecom sector FDI. By several estimates, startup investment has well surpassed $200 million in Jan-Aug 2021, compared to less than $100 million in entire 2020.

In another encouraging sign, local assembly is picking up as imports of mobile phones contracted by roughly 7 percent year-on-year to $286 million in the Jul-Aug period, as per data from PBS. It appears that local mobile manufacturing policy regime, PTA’s DIRBS system, and import duty incentives are nudging CKD/SKD imports for local assembly and managing finished handset imports. While import trend-line will become visible over coming months, there is uptick in local mobile phone assembly.

As per the PTA, in the Jan-Aug period this year, local mobile phone assembly had comfortably surpassed commercial imports (13 mn vs. 8.5 mn units). Over 40 percent of locally-made phones were smartphones. More than two dozen companies have been issued authorization for Mobile Device Manufacturing. Exports are now taking place, too. Last month, PTA reported that Inovi Telecom shipped Pakistan’s first-ever export consignment of smartphones (5,500 units to the UAE). It will be quite a feat if handset exports started bringing in significant forex. It’s a good start.

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