Pakistan’s IT exports reached US $ 1Billion
- Posted by Ghaus Iftikhar on October 28th, 2006.
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Loading ...If you're new here, you may want to subscribe to my RSS feed or E-mail Newsletter. Thanks for visiting! The IT and IT-enabled Services (ITeS) marketplace offers lucrative opportunities for developing countries to join the ranks of the developed world. The scale and pace of growth in this sector is faster than in any other industry, and a number of developing countries are attempting to emulate the success enjoyed by countries such as China, Thailand and India. The Government of Pakistan has been proactively developing the IT sector in Pakistan since the last few years. A few of the incentives offered are tax exemption till 2016, establishment of IT parks with low rent, foreign ownership of equity invested in IT and 100% repatriation of profit allowed to IT companies. State Bank Reporting Earnings Estimated Total Domestic Export Earnings Estimated Global Export Earnings The World Trade Organization (WTO) lists Mode 3, revenue generated by commercial offices overseas, and Mode 4, compensation received by temporary workers who have traveled abroad, as export revenue streams which must be included in trade revenue calculation. Further there is strong evidence, discussed latter, to suggest that other countries such as India in fact employ global services export figures when reporting or estimating revenue. Mode Description IT Exports Therefore total IT services exports from Pakistan in FY 05 amounted to USD 1.050 billion or conservatively USD 1 billion dollars.
A recent Bearing Point study places Pakistan’s Global IT Export Revenues in FY04 at around USD 400 million. The basis of the figure was State Bank of Pakistan IT export revenue figures of just under USD 50 million. Bearing Point multiplied this figure by two to account for IT export revenue brought into the country but not registered as such with the State Bank. BP further estimated that for each dollar brought into the country three dollars is retained by Pakistani IT companies overseas. Therefore global IT revenue of Pakistani companies added up last year to USD 400 million. Therefore for official IT export figures of just under USD 75 million reported by the SBP for FY 05, actual global receipts of Pakistani IT firms should be around USD 600 million.
USD 75 USD 150 USD 600
The following table describes the four WTO modes for export in services recognition. The need for the four mode model arises because trade in services are much harder to monitor than trade in physical goods. Physical goods pass through air, sea or land ports, and are accompanied by detailed financial and other documentation. On the other hand services trade can be transacted over the Internet, through post or through travel of personnel with revenue flowing into company or personal accounts which can exist anywhere in the world.
1
Cross Border Represents services that are sold by the exporting country to the importing country, with only the service crossing the border e.g. architectural drawings sent by courier, consultant report sent by email, call center support provided over the Internet, or software programs sent over the Internet. USD 150 million
Represents services sold in the exporting country to foreigners or foreign owned entities in the exporting country itself e.g. IT services sold to the World Bank, the USA Embassy or to one of the 700 multi-nationals operating in Pakistan. USD 200 million
(Average USD 250,000 expenditure by over 800 entities)
3
Commercial Presence Abroad Represents revenue of national firms established abroad selling services in a foreign market. USD 450 million
4
Temporary Movement Represents services that are sold or delivered through the presence of the service provider temporarily in the foreign market e.g. the annual salaries of all H-1, L-1 and B-1 Pakistani IT workers in the USA. USD 250 million
(At least 5000 workers earning at least USD 50,000 per year on average)
Pakistan offers various competitive advantages over other outsourcing destinations like high quality software development, swift and easy establishment of business, lowest cost basis and Emerging and state-of-the-art Communication Infrastructure – Telecom and IT etc. Experts thus estimate an average annual growth of 33 % in the sector. This will result the total IT export revenue crossing USD 10 billion in next five years.
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