Pakistan's Emergence as a Prime Destination for Software Development

Vision: "To be the leading export sector in the country, and make Pakistan a preferred destination for global IT products and services and the preferred profession for youth."

Pakistan's software sector possesses the essential elements necessary for accelerated growth, as evidenced by the recent surge in export earnings, indicating promising prospects ahead.

The increasing pace of digitalization, propelled further by the transformative impacts of the COVID-19 pandemic, suggests a favorable outlook for the global IT services industry.

This provides ample opportunity for Pakistan, with an already dynamic sector, to leverage this growth and become a leading software services player for regional and global clients.

Recognizing this potential, industry and government stakeholders acknowledge the foundational strengths of Pakistan's IT services sector, paving the way for enhanced growth.

A five-year plan has been devised through collaborative efforts between public and private sector entities, outlining a strategic roadmap for the development of Pakistan's software services sector.

This strategy, an integral component of Pakistan's Strategic Trade Policy Framework (STPF), meticulously addresses existing constraints while identifying tangible opportunities achievable through specified action plans.

Through extensive consultations and research, the strategy process has meticulously evaluated current capabilities, constraints, and forthcoming shifts and opportunities within Pakistan's software sector.

Noteworthy findings underscore the presence of enduring assets such as readily available, affordable talent, significant interest among youth (including those from non-IT backgrounds), sustained venture capital investment, and continued engagement from joint venture partners.

Strategic future shifts for Pakistan’s industry:

Meanwhile, some compelling strategic future shifts for Pakistan’s industry latching on to current trends and innovations – would include:

• Technology and digital transformation consulting
• Collaborating between larger firms and small and medium-sized enterprises (SMEs) to deliver larger projects;
• More women in IT
• Strengthening exports in new markets (e.g. Africa)
• Productivity-based remuneration
• Remote infrastructure monitoring and support services
• More local firms listing on the stock market
• More mobile applications
• Greater emphasis on software products, not just services
• Digital banking and cashless society providing new product opportunities.

By solving some of the key competitiveness and growth constraints, Pakistan’s IT sector and its software firms can position strongly for export growth.

It is necessary to set some strategic objectives for the short to medium term to drive sector transformation, and prioritize some key actions.

key Actions Plan:

In particular, it will be essential for Pakistan to:

• Build a strong pipeline of tertiary educated and appropriately skilled workers while enhancing women’s participation
• Resolve taxation issues related to sector definition
• Ensure international expansion and export growth by enhancing the sector’s global standing as well as firms’ understanding of new market opportunities
• Transform into more product and IP-led growth, driven by innovation and latching on to emerging technologies and industry verticals

This strategy has developed a pragmatic and forward-looking roadmap for upgrading and internationalization.

To achieve the strategy’s targets, stakeholders will need to coordinate actions, monitor progress and mobilize resources for its implementation.

Providing business development support to firms, enhancing innovation and creating an enabling business environment are crucial for successful implementation.

Accordingly, a public–private sector specific council for the software industry is established, operationalized and empowered.

The software sector specific council should be responsible for overall coordination, provision of rapid solutions to regulatory and procedural bottlenecks, policy guidance and the monitoring of industry development against the strategy’s strategic objectives.

The following key areas of intervention are priorities to facilitate the strategy’s implementation:

• Improve and increase the pipeline or talent;
• Resolve, on an ongoing basis, tax and other regulatory issues;
• Strengthen international exposure, branding and export market entry;
• Foster a conducive climate for product development, innovation and start-up entrepreneurship

Pakistani software sector leveraging its comparative advantages:

Pakistan's IT sector holds immense promise, showcasing a wealth of talent and the potential to emerge as the country's leading export industry.

With its contribution to the gross domestic product (GDP) steadily rising to nearly 1%, the sector plays a crucial role in earning valuable foreign exchange and generating high-income employment opportunities.

Over the past few decades, the sector has experienced rapid revenue growth, escalating from a modest $70 million in 2006 to approximately $2 billion today, marking an impressive average annual growth rate of 14% over the past decade.

This robust growth trajectory underscores the sector's substantial potential despite being in its nascent stages.

Moreover, the sector has demonstrated resilience amidst the challenges posed by the pandemic.

As highlighted in the 2021 Commonwealth Trade Review, Pakistan's service exports exhibited strong resilience during the COVID-19 crisis, rebounding swiftly to pre-pandemic levels by September 2020, despite experiencing a temporary decline of 20% in April 2020.

Government policies and investments in infrastructure have played a pivotal role in fostering the growth and potential of the IT and ITeS sector, as well as the broader digital economy.

Noteworthy investments in ICT infrastructure include the establishment of over 16 IT parks equipped with state-of-the-art facilities and IT-enabled infrastructure, along with the expansion of internet access to more than 2,000 cities and towns across Pakistan.

The sector now enjoys greater recognition in national planning and policy development, with numerous pro-investment policy initiatives specifically tailored to fuel its growth introduced in national budgets.

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