EDITORIAL: For Pakistan to come out of its recurrent balance of payment rut, exports are required to grow at a fast pace. The best bet is to enhance services exports – mainly in Information Communication and Technology (ICT). One need only look at India where ICT exports crossed the $140 billion mark in fiscal year 2022-23, and the quantum doubled in the past five years.
Pakistan’s ICT exports peaked to $2.6 billion in fiscal year 2021-22, which had more than doubled in three years. However, there was no growth in fiscal year 2022-23. It is important to identify why are ICT exports disproportionately low, what were the reasons for growth in fiscal year 2021-22, why have they stagnated in fiscal year 2022-23, and how do we get ahead?
The primary reason for the huge delta between Pakistan and India is the availability of skilled human resource factor. India has focused on technology and engineering in the last few decades which is yielding results, while the education standards in Pakistan have only moved south.
There is nothing that can be done in the short to medium term to correct the situation. However, there is still much room for Pakistan to enhance its size.
The general complaint by many IT players in Pakistan is that most IT graduates are not skilled enough to help generate exports. This can be boosted by enhanced crash courses to instill the right skills amongst half-cooked graduates. There are many modern skills that can get someone a job without a degree. What actually they require are good analytical abilities and thinking.
However, some experts are of the view that the country doesn’t have a talent supply shortage. The issue is that the technology sector is not creating ample demand. And it is very hard to bring business to the country. There is the problem of remitting money outside, which limits the incentive for companies to grow in Pakistan.
The problem of remitting money outside and the Pak rupee slide is one reason for stagnation in the official ICT exports. Any company that becomes big would try to shift the business to its sister concerns registered outside Pakistan. The story of freelancers and smaller companies is similar as they find alternative ways to keep their dollars abroad.
SBP (State Bank of Pakistan) tried to solve this problem in 2020, which led to higher growth in a two-year period. However, last year’s woeful balance of payment crisis washed away all the confidence, and folks are trying their level best to not bring the money back beyond what is actually needed. The government must work on that.
However, the focus at places is to build physical infrastructure of Special Technology Zones (STZs). ICT is not a real estate play; and it would never be. The focus should be on building talent, improving the country’s investment outlook and ensuring seamless movement of capital in and out of the country.
It is heartening to note that the caretaker minister aims to increase the ICT exports to $10 billion. And he is aiming to bring PayPal and Stripe payment gateways to Pakistan, and wants to enhance the limit of retaining and remitting export proceeds outside Pakistan.
These are good steps, but the fact of the matter is that SBP is not allowing exporters to remit to the existing limits as the country is facing chronic dollar shortages. Without solving this issue, it is near impossible to boost ICT exports in any meaningful and effective manner.
Copyright Business Recorder, 2023