ICT exports, which are a significant portion of all service exports, are a significant source of foreign exchange earnings.
Exports of information and communication technology (ICT) services brought in $2.6 billion for Forex-starved Pakistan during the most recent fiscal year. And according to the State Bank of Pakistan (SBP), ICT exports brought in $2.1 billion in the first ten months of this year. For Pakistan, every dollar is important.
ICT exports, which are a significant portion of all service exports, are a significant source of foreign exchange earnings. They might increase service exports and aid in closing the services trade deficit. In the previous fiscal year, Pakistan’s huge services trade deficit totaled $5.4 billion.
Despite only exporting $7.1 billion in services, the nation had to pay $12.9 billion for those imports. The services trade deficit in the first ten months of this year remained large at $4.7 billion. The total deficit may easily surpass the $5.4 billion from the previous year.
Contrary to the goods trade deficit, the problem with the services trade deficit is that it cannot be reduced by limiting imports.
Imports of services are generally different from imports of goods. Only a small portion of all imports are “luxury” services, but the majority of them—particularly ICT services—are essential to both public and private sector businesses’ ability to conduct business domestically as well as to produce goods and services that can be exported.
One of the factors contributing to India’s high IT exports has been the availability of simple loans for women and students. The only practical way to reduce the services trade deficit is to increase exports of those services.
Additionally, despite the nation’s ongoing economic decline, ICT exports can be increased more easily than others within the group of services exports. So let’s talk about the difficulties ICT exports in Pakistan face and how to effectively address them.
A recent SBP report identified a lack of fully skilled labour as one of the main barriers to the expansion of ICT exports. According to the report, only 10% of Pakistani IT graduates are considered employable because they lack the necessary technical and soft skills.
We are all aware of the nation’s failing educational system, so this estimate seems very plausible. In fact, all sectors of the Pakistani economy, not just export-focused ICT firms, have long lamented the lack of employable skills among recent university graduates.
With a few notable exceptions, the majority of public and private universities nevertheless continue to turn a blind eye and produce thousands of graduates each year who lack the technical and soft skills that potential employers value.
The SBP report correctly advises inviting top-tier foreign boot camp companies to open camps across the nation through public-private partnerships. Bootcamps are short, intense, immersive training programmes that typically last three to six months.
Several boot camp businesses already exist in the nation, and a few relatively recent entrants claim they have plans to enhance the technical and soft skills of IT graduates.
Interrupted power supply and internet connectivity are key impediments to IT export growth. The government must facilitate existing boot camp companies to make IT graduates employable, but this is not enough. To develop and deepen the ICT sector, the government must set its priorities right and cut current expenses to create fiscal room for development expenses.
The private sector must invest in this industry to increase long-term ICT export potential. Large-scale public-private partnerships focusing on big data analytics, responsive web applications, and mobile application development can increase software exports. Additionally, there is a need to motivate and support overseas Pakistanis and young resident Pakistani IT professionals in their ascent up the global IT value chain.
Numerous Pakistanis reside in Saudi Arabia, the United Arab Emirates, the United States, the United Kingdom, and Canada. The economic and working conditions for IT entrepreneurs are all much better in these nations than they are in Pakistan.
The government must set up a platform so that the Pakistani diaspora in these nations can communicate with Pakistani IT business owners and ICT firms and reach mutually advantageous business agreements.
Informally, many Pakistanis living in the aforementioned nations are already helping out their family members who still reside in Pakistan by delegating some of their IT-related tasks to them.
However, due to international legal and taxation issues, it is impossible to utilise the full potential of IT workers under such informal arrangements. In addition, the lack of reliable power is a major barrier to Pakistan’s expansion of IT exports and computer-based freelancing.
IT and IT-enabled services projects and freelancers who work remotely for foreign companies cannot fully realise their true potential unless they have access to an uninterrupted power supply and an uninterrupted internet connection.
IT exports and freelancers’ businesses suffered greatly both during and after the mayhem and violence of May 9. Long-lasting power outages are common in the nation even on average days, and internet service quality is still subpar.
Another requirement for the growth of the IT industry generally and for the promotion of IT exports is the financial inclusion of women and students. One of the main factors contributing to India’s high IT exports has been the availability of simple loans to women and students. In Pakistan, the same is possible. $102 billion in IT services and $7 billion in software will be exported from India in 2022.