Here’s Why Pakistan’s IT Industry is an Attractive Investment Destination

Pakistan Software Export Board (PSEB) and the Ministry of Information Technology and Telecommunications (MOIT&T) have released a comprehensive report on the IT industry of Pakistan.

The report not only highlights the strategic and operationally advantageous areas in Pakistan’s IT industry but also lays out the details that may benefit prospective investors in evaluating the scope and potential of the IT sector in Pakistan.

Pakistan’s IT industry has sustained revenue growth of 20 percent to 30 percent every year over the past decade. In the fiscal year 2019-2020, despite the economic downturn brought by the COVID-19 pandemic and the related economic shutdowns, the ICT sector in Pakistan continued to grow. The World Economic Forum (WEF) ranked Pakistan among the best countries in terms of the affordability of ICT services.

Over the last five years, IT export remittances have also shot up by 137 percent at a compound annual growth rate (CAGR) of 18.85 percent. The report also outlines that there is an enormous human and knowledge capital potential with 64 percent of the 207 million in the under-29 age group and almost 30 percent in the 15 to 29 age group.

Pakistan is ranked 5th most financially attractive location in the world for offshore services, according to A.T. Kearney’s Global Services Location Index 2019.

Several international companies, including Global enterprises like Bentley, IBM, Mentor Graphics, S&P Global, Symantec, and Teradata, have already established global consulting services centers, research and development facilities, and BPO [Business Process Outsourcing] support services centers in Pakistan.

There are more than 5,000 IT and ITeS companies currently registered with the Securities and Exchange Commission of Pakistan (SECP), comprising of both domestic and export-oriented enterprises.

Pakistan’s IT exports maintained a tremendous momentum in the current financial year, crossing a mark of $1 billion merely in seven months of the financial year 2020-21.

According to data released by the State Bank of Pakistan, remittances under IT and IT-enabled services surged to $1.119 billion from July 2020 to January 2021 compared to $812 million recorded in the corresponding period of the last financial year, showing a handsome growth of 37 percent year-on-year.

To add to the growth trajectory of already established local and international IT companies operating in Pakistan, the rate of new tech startups springing up is another positive indicator of Pakistan’s IT industry’s potential.

The startup culture has come of age at a breakneck speed, with success stories coming out every year. Pakistan’s IT industry counts as the world’s largest entity among its regular clients and provides its services to 120 countries worldwide.

To briefly outline the industry’s current metrics, Pakistan has:

  • 300+ international companies operating in the country.
  • It is the 5th most financially attractive country.
  • It is 3rd most popular country for freelancing.
  • There are 16 software technology parks across the country.
  • Pakistan’s IT and ITeS services are being exported to 120+ destinations around the globe.

 

Government Incentives:

The aforementioned is all that is already happening in Pakistan. Furthermore, the government has also brought several attractive incentives to further increase the local and foreign investment towards the IT industry in the country. These include:

  1. 100 percent repatriation of dividends and investments is allowed to foreign IT investors.
  2. 100 percent equity is allowed for foreign investors.
  3. A three-year tax holiday is offered for IT startups with no minimum tax and withholding tax.
  4. Zero income tax is applicable on IT exports till June 2025.
  5. There is a tax holiday in place for venture capital funds till 2024.
  6. Accelerated depreciation of 30 percent is allowed on computer equipment.
  7. Export Finance Scheme with the transaction-based facility, whereby Firm Export Order/Export Letter of Credit can be obtained for a maximum period of 180 days.
  8. Revolving finance limit equivalent to 50 percent of export performance during the previous year in concern.

Investment Pyramid:

These measures, along with bottom-line growth and natural potential in the IT industry, have already attracted substantial investment for Pakistan. With the continued progress and advancement of Pakistan’s ecosystem, the IT industry might as well jump to the top in earning foreign exchange for Pakistan from export revenues and foreign direct investments.

Courtesy: Pro Pakistani

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