The Information and Communication Technology (ICT) services exports have grown in double digits this fiscal thus far. As per the latest data from the State Bank of Pakistan (SBP), the country’s exports of telecoms services, computer services and information services (collectively referred to here as ‘ICT services exports’) reached $1.68 billion during the Jul-Feb period of FY22. That’s a solid yearly growth of 30 percent, or additional exports of roughly $400 million compared to the same period in the last fiscal.
Not only that, the ICT exports have grown to command a far bigger share in Pakistan’s overall services exports. During 8MFY22, 38 percent of Pakistan’s services export proceeds were contributed by ICT services, more than double the level (18% share) that was witnessed back in 8MFY18. The acceleration in ICT exports really picked up during the pandemic, as local IT companies managed to rapidly materialize new business leads from foreign clients by ensuring continued operations during lockdowns.
Within ICT exports, the dominant segment is ‘computer services,’ which provide 80 percent of ICT exports. This segment’s exports surged 32 percent year-on-year to reach $1.35 billion during 8MFY22. The additional $329 million in this export segment was contributed mainly by software consultancy services (8MFY22 exports: $497mn; YoY growth: 46%), software development (8MFY22 exports: $354mn; YoY growth: 41%) and other computer services (8MFY22 exports: $500mn; YoY growth: 16%).
The bulk of the remaining 20 percent of ICT services exports is on account of ‘telecommunication services’ segment. Here, exports increased by 22 percent year-on-year to clock $332 million in the eight-month period. Within telecom services exports, the additional $59 million in proceeds relative to last fiscal were provided by call-center services (8MFY22 exports: $135mn; YoY growth: 51%), followed by telecom services (8MFY22 exports: $197mn; YoY growth: 7%).
At this pace, the ICT services exports may reach $2.8 billion in entire FY22 (up $600 million+ relative to FY21). The 30 percent growth rate of ICT services exports in 8MFY22, albeit significant, has softened a bit relative to 8MFY21 (when it grew by 42 percent year-on-year). In the pandemic’s two full years to February 2022, the average growth per month was 36 percent year-on-year. Now the growth rate has come down in recent months of January and February 2022.
If the relative slowdown in ICT services export growth intensified in coming months, it may suggest that the booming overseas demand for IT services seen during mid-pandemic has normalized. On the supply side, the slowdown may reflect the challenges IT firms have been facing, especially in hiring quality workforce and retaining top talent. To level up the growth trajectory post-pandemic, the policymakers need to ponder hard over whether (and how soon) they can ease the challenges facing local IT firms.