Find solace in small things. The country’s digital exports may be insignificant, but they didn’t go unnoticed in FY20. As per latest central bank data, exports related to “telecommunications, computer, and information services” (referred to here as ‘ICT exports’) had in FY20 their fastest yearly growth in the past seven years. At $1.44 billion, these proceeds grew by 21 percent year-on-year, thanks mainly to healthy growth in revenues from call centers, software exports, software consultancy and other IT services.
Not bad fetching an extra quarter billion dollars! The double-digit growth contrasts well with more than 10 percent fall seen in other service-sector exports last fiscal. In fact, ICT exports accounted for over a quarter of $5.5 billion total services exports in FY20 – this share has tripled from 8 percent seen at the start of the last decade. It’s another story that overall services exports have stalled around the $6 billion mark.
Back when the coronavirus struck the world, there was chatter in the industry that Pakistan was getting more IT outsourcing business because traditional hubs like India and the Philippines were locked down. Indeed, between March and June 2020 – the so-called corona months – Pakistan’s ICT exports aggregated $521 million, which is 22 percent more than the same four-month period in the previous fiscal.
However, it is to be noted that the growth in ICT exports in the months prior to coronavirus’s onset was even higher. So it can’t be implied that overall FY20 growth was corona centric. Still, it’s clear that ICT exports proved resilient during recent difficult months and continued on their growth path. That’s an achievement, securing half a billion dollars in those months when many other sectors were feeling blue.
On to the big picture heading into a new decade, the ICT exports have multiplied three times over the last decade. Coming off from a small base and considering Asian peers have grown their IT export base exponentially, this scorecard isn’t that impressive. In total, the ICT industry provided close to $9 billion in exports in the last ten years. Adjusted for economic scale with, say India, Pakistan’s ICT sector ought to be generating that export figure every year!
Whispers have continued for long that Pakistan’s actual ICT exports range, on the conservative side, between 2 to 3 times the officially-recorded figure. The problem isn’t as simple to solve as asking banks to correctly record digital exports in official forms. And it also doesn’t work when government officials end up appealing to patriotism of big software companies to bring most of their export revenues back home.
The key lies in making it easier for IT companies to move their money in and out of Pakistan, buy and sell other IT firms, and access financing from local and regional banking system to expand their operations. (For more on that, read: “ICTs in the budget,” published June 17, 2020). Besides, the government can introduce a competitive digital contracting/procurement regime to provide scaling opportunities to domestic IT SMEs, so that they can level up their game at home to compete abroad over time.