The Importance of Nurturing Pakistan's Thriving IT Industry

Amongst a struggling economy, wayward politics, and a new scandal overshadowing the last one every other day, Pakistan’s IT industry is a bright spot in an otherwise gloomy landscape. The IT sector has been in the limelight for its impressive numbers over the past few years and 2023 was no exception, with exports reaching $2.6B as per official records. The initial five months of the fiscal year 2023-24 also painted a promising picture with the sector recording a revenue of $1,151M, reflecting a growth of 5.89%.?

Despite the Pakistani IT industry's remarkable success in finding clients all over the world, it is the local market that ironically does not hire them. The government keeps asking how they can better support the IT industry when the simplest answer has always been the one they elude. Instead of fully leveraging the domestic IT industry's capabilities, foreign entities are often favored over it when it comes to implementing IT solutions or procuring technology products. This over-reliance on external demand exposes the industry to global economic fluctuations and limits its growth potential within Pakistan.

Investing in local tech solutions offers numerous advantages beyond mere financial considerations. By engaging with domestic IT firms, the government can leverage its contextual understanding of local challenges and requirements, leading to more tailored and effective solutions. If tech products made by Pakistanis are good enough for foreign companies, they should be good enough for the Pakistani government. Furthermore, supporting local tech companies will stimulate investment in research and development, driving innovation and positioning Pakistan as a hub for technological advancements.?

Despite the clear benefits, the government's procurement processes often create barriers that exclude local IT companies from participating. While there's no aggregated data available, the government spends billions of rupees every year on technology infrastructure.? One of the most significant hurdles is the imposition of stringent prerequisites, such as the requirement to have previously worked with a foreign government – a criterion that inherently favors international firms. Losing out contracts to foreign firms for government tenders is a rare occurrence in these cases because requirements like these ensure that local firms cannot even put in their applications.?

This forces the IT sector to look towards exports as the only viable business model as one of the largest consumers of IT services in the local market is not accessible. This sounds like a blessing in disguise for Pakistan with its shortage of FX flowing in only if these exports led to FX flowing in.? Due to problems with cumbersome processes, uncertainty about taxation policy, and a weak rupee scenario, many of the companies prefer to keep their earnings outside the country in a foreign currency. An article by Data Darbar estimated the current export figure to have an equal portion of undocumented export earnings as much as the documented value of $2.6 billion.??

By revising these criteria and adopting a more inclusive approach, the government can level the playing field and enable local companies to compete on equal footing. This not only promotes fair competition but also incentivizes domestic firms to invest in enhancing their capabilities and aligning with international best practices.

Pakistan can draw inspiration from other nations that have successfully leveraged their domestic IT industries to drive economic growth. Countries like India, for instance, have actively supported their local tech ecosystems, leading to the emergence of global giants like Infosys, Wipro, and Tata Consultancy Services. Similarly, the United States has long recognized the importance of nurturing its tech industry, with the government serving as a significant buyer of locally developed solutions. This approach has not only fueled innovation but also contributed to the nation's technological leadership on the global stage. By embracing a "Buy Pakistani Tech" mindset, the government can unlock the full potential of the IT sector, positioning the nation as a leader in the digital realm.