Pakistan Tech Exports Jump 51% in November 2020
Pakistan's technology export growth is continuing to accelerate with a 51% jump in November 2020 over the same month in 2019. The country's tech exports rose 39% in the first 5 months (July-Nov) of fiscal year 2021 over the same period last year. This came on top of a 21% increase in FY 2020 over FY 2019.
|Pakistan Technology Services Growth|
Pakistan exported $763 million worth of services related telecommunications, computers and information technology from July to November 2020 period. This represented a 39% increase from the same period in 2019. In November 2020, the country exported IT services amounting to $168 million, a 51% jump from tech exports November 2019.
|Pakistan Trade Data|
Currently, Pakistan relies heavily on three categories of products for exports which are often derided as 3 Cs: chadar (textiles), chamra (leather) and chawal (rice). Lately, the country has begun to diversify to higher-value added exports like technology services and pharmaceuticals.
Pakistan’s exports are growing in spite of the COVID19 pandemic, growing for the third consecutive month in November to $2.161 billion, up 7.67% from $2.007 billion in the corresponding month last year, according to data released by Pakistan Bureau of Statistics. Exports grew in home textiles (20%), pharma (20%), rice (14%), surgical goods (11%), stockings & socks (41%), jerseys & pullovers (21%), women’s garments (11%)and men’s garments (4.3%).
From July to November, exports slightly increased by 2.11% to $9.737 billion, from $9.536 billion over the corresponding months of 2019. In spite of rising exports, Pakistan still had a trade deficit of nearly $10 billion in the first 5 months of the current fiscal year. The country managed to show a current account surplus in 5 months, thanks to inflow of $11 billion in worker remittances, a 27% jump over last year.
Pakistan can not rely on remittances from overseas Pakistanis to avoid recurring balance of payments crises that have forced the country to seek IMF bailouts repeatedly. The best way to do it is by building an industrial base, developing foreign markets and ramping up exports, particularly exports of high-value products and services such as pharmaceuticals and technology.
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The earning through this channel is MASSIVE and not recorded neither registered in the state’s economy. Govt just earned extremely minimum amount of fee from the wire-transfer through bank to bank channels. Many freelancers not even transfer their earnings into Pakistan accounts. The conversion rate is worst. They leaves amount in their Skrill, Paypal etc accounts. Many freelancers doesn’t even know that their “freelance” earning is legally non-taxabe.
In the west, freelance earning is taxable.
Pakistan government has approved the country’s first drone policy in an effort to boost local drones manufacturing industry and to usher in a new era of automation.
Prime Minister Imran Khan on Tuesday gave the green light to set up a committee to formulate a legislative and regulatory body that would expand a safer and legalised use of unmanned aerial vehicles (UAVs) in diverse sectors. Drone technology can greatly benefit the country’s agriculture and urban planning sectors and maintain law and order situation, Khan said after a meeting with Minister for Science and Technology Fawad Chaudhry in Islamabad.
Develop local drone manufacturing industry
The drone policy is seen as the first step towards building the drone industry in the country where the import of drones is practically banned due to security concerns. Talking to Gulf News, Minister Fawad Chaudhry explained the government has decided to lift the ban “to develop and boost the local drone manufacturing industry” in the next five years. The regulation would help Pakistan tap into the commercial drone market, which is expected to touch US$43 billion by 2025 with an annual 20 per cent growth rate, he said. “To develop its drone industry, Pakistan looks forward to joint ventures with China and Turkey,” the minister said.
Focus on agriculture and police drones
The planned legislation is designed to effectively “use drones in precision agriculture and by law enforcement for public safety.” He said that his ministry is in contact with police departments to create special drone units to help curb street crimes in cities such as Karachi. As police departments around the world are increasingly turning to drones to fight crimes, Pakistan’s police can also make full use of high-tech surveillance tools, he said.
WHICH SECTORS CAN BENEFIT THE MOST?
Recently, drone technology is increasingly being used to improve emergency services and public safety, due to its low cost, easy deployment, and ease of maintenance. Experts have suggested Pakistan government expand the use of drones in these sectors:
• Health and medicine
• Rescue missions such as natural disasters and fire-fighting
• Construction and infrastructure inspection
• Survey and exploration
This year, Islamabad Police started using drones to track suspects especially those involved in street crimes, expand the scope of police surveillance and ensure public safety. In July 2020, Pakistan introduced locally developed drones, designed and manufactured by ABM SATUMA (Private) Ltd, initially to fight the locust attack and later to enhance agricultural productivity.
Regulation and incentives to private sector urged
Local drone manufacturers suggest that besides regulating the use of drones, the federal government must encourage the private sector by offering direct support and tax incentives to develop the local industry. “Pakistan is missing out on a huge potential to develop our drone industry due to red tape and custom duties” says Imran Wazeer, the COO of ABM SATUMA, the private company that has been developing drones in Pakistan for over two decades and pushed the government for drone legislation.
It appears that the Pakistani developer community has been pretty active this year! According to a new report released by version control platform GitHub, Pakistan ranks among the top 10 countries around the world with the highest growth in open source project contributions since last year.
The past few days have been massive for Pakistani developers. For one, the country managed to bag the most top 50 finishes in one of the most prestigious speed coding competitions in the world. For another, Japan has made it clear that it will be sending more than 500 IT firms to Pakistan to recruit local talent. And now, GitHub’s “The 2020 State of the Octoverse ” report has revealed that the nation’s developers have been among the most active contributors to open-source projects on the platform.
Coming in at #6 in the report’s “Top countries and regions percentage growth in contributions since last year” rankings, Pakistan boasts an impressive 51.5% growth in open-source contributions since last year.
Nigeria takes the lead with a boost of 65.9% in open-source code contributions over the course of this year.
Pakistan’s surge in open-source contributions can largely be attributed to the COVID-19 pandemic and how it compelled more people to work remotely thereby increasing their activity on GitHub and online spaces in general.
Moreover, awareness with respect to open-source projects and their value to the community has definitely increased as well, courtesy of schemes like the GitHub Campus Program.
GitHub’s State of the Octoverse is an annual report that explores a whole year of GitHub highlights and provides insights into developer productivity, security, and how communities developed over the course of the year. According to this year’s report, more than 60 million repositories have been created and over 1.9 billion contributions have been added in total since last year.
Information Technology & IT enabled Services (ITeS) export remittances comprising of computer services and call center services have surged to US $648.940 million at a growth rate of 38.16% during July-November of FY 2020-21, in comparison to US $469.713 million during July-November of FY 2019-20. This is the highest growth rate for the FY 2020-21 (July-November), achieved by Pakistan’s IT sector since 2018 when growth rate for the corresponding period was just 13%.
Minister for IT & Telecommunication Syed Amin Ul Haque, lauded the latest exports performance of Pakistan’s IT Industry. He said that the initiative for bringing the IT companies from secondary and tertiary cities into the mainstream is well underway for ensuring holistic growth of Pakistan’s IT Industry and that the PSEB registration fee for IT & ITeS companies, including call centers and IT startups, belonging to underserved areas of the country have been completely waived in order to boost growth of IT industry in the under developed parts of the country and thus contribute to organic growth of IT Industry across Pakistan.
It’s worth mentioning here that Minister for IT Syed Amin Ul Haque has set a target of $5 billion for export remittances through information technology and IT-enabled Services during the next three years. The PSEB performance in just 5 Month of current Fiscal year a great milestone to reach the targeted destination.
“We are taking all possible steps to ensure sustainable growth of Pakistan's IT industry and to ensure close coordination with the IT industry and associated stakeholders” Minister IT stated.
Incentives to the industry include zero income tax on IT and ITeS exports till June 2025, tax breaks for the PSEB-registered IT start-ups for three years, up to 100 percent foreign ownership of IT and ITeS companies, up to 100 percent repatriation of profits for foreign IT and ITeS investors, tax holiday for venture capital funds till 2024, among other incentives, he added.
This growth is especially laudable keeping in view the current global economic challenges thereby demonstrating the resilience of Pakistan’s IT industry eco system and is a tribute to Pakistan’s IT industry professionals. Pakistan’s IT sector exports products and services to over 100 countries and counts world’s largest entities among its regular clients. Pakistan’s IT sector is the largest net services export industry in Pakistan’s economy.
Managing Director, Pakistan Software Export Board, Mr. Osman Nasir said that all possible efforts are being made to achieve US$5 billion remittances inflow from the country’s IT sector by Year2023 as per target set by Minister IT Syed Amin Ul Haque. PSEB is working on major new initiatives in Marketing, Infrastructure, Capital Availability, Policy and Consulting, HR and Business Development. Efforts are underway to extend maximum facilitation to the startups in all important spheres including access to funding channels. He said that PSEB is being restructured as a front leading global business development and marketing organization, which would help in the development of the IT industry and human capital behind the borders, and generates demand from beyond the borders.
Obviously Covid is majorly to blame but sometimes in talk of Exports rising we forget that they are still worse off from previous year.
The fact that #Pakistan #exports in 2020 dropped only 9% while the PKR dropped 30% means that the volume of products and services grew by double digits from 2018 to 2020. If this trend continues, expect the dollar value to rise by double digits this fiscal year 2021. #COVIDー19
#Pakistan’s #exports are growing in spite of the #COVID19 #pandemic, growing for the 3rd consecutive month in November 2020 to $2.161 billion, up 7.67% from $2.007 billion in the corresponding month last year. #economy #coronavirus #trade
Adil Bashir, chairman of All Pakistan Textile Mills Association (Aptma) said the textile sector is currently in the mode of rapid expansion to cater with increased orders and demands. “Exports orders for next 6 months are booked and despite COVID our exports have increased significantly compared to our regional competitors whose exports have shrunk,” Bashir said in a statement.
Textile sector that accounts for more than 60 percent of total exports fetched $6 billion from abroad during the five months of the current fiscal year, up around five percent year-on-year, according to the Pakistan Bureau of Statistics.
Textile companies are making capital investments to increase production of fabrics with demand from value-added sector on a strong recovery path compared to stagnation couple of months back due to economic shutdown.
The growth was despite the global economic slowdown caused by the pandemic-related lockdown and waning consumer demand. However, the government’s decision to keep businesses open is leading to benefits of orders diverted from closed economies, while US-China rift is also diverting orders to Pakistan.
Aptma appreciates and acknowledges the much-improved gas supply and pressures of gas and re-gasified liquefied natural gas (RLNG) to the export sector units in December.
“This sustained supply of gas / RLNG will maintain the momentum of enhanced exports as currently the sector is working at full capacity,” said Bashir. “It is absolutely essential to sustain this momentum which is being facilitated by the textile policy currently under approval of ECC [Economic Coordination Committee of the cabinet], the regionally competitive energy tariffs and the sustained provision of gas / RLNG to the export sector.”
While the government decided to curtail gas quota for RLNG-based power plants to 240 million metric cubic feet per day (mmcfd) from 350 mmcfd, export-oriented and consumer sectors have been put on the priority list.
Bashir said there have been isolated cases of low pressure and supply problems in mixed feeders and Aptma has taken up these issues with the petroleum division who have assured us of all-possible assistance to remove any bottlenecks.
Aptma appreciates the role of ensuring that the export sectors are provided gas / RLNG at sustained pressures despite the huge surge in demand and diminished domestic production this winter.
As economies around the globe have remained under intense pressure owing to the COVID-19 pandemic, the Pakistani economy is showing encouraging signs of a promising recovery with improved economic indicators.
According to a recently released Asian Development Bank (ADB) report on development outlook, Pakistan's economy has been getting better despite the persistent challenge of COVID-19.
"Pakistan's economy is recovering, particularly in the manufacturing and construction sectors, supported by the government emergency relief," said the report, a regular supplement to the Asian Development Outlook (ADO) 2020.
Quoting data released by the country's central bank, Pakistani Prime Minister Imran Khan said that the improved economic indicators herald new pace in the economic development of Pakistan despite enormous challenges brought by the pandemic.
"...despite COVID-19, great news on economy -- remarkable turnaround," Khan said in a tweet last week, adding that Pakistan's total current account surplus during the first five months of the current fiscal year from July to November rose to 1.6 billion U.S. dollars against a deficit of 1.7 billion U.S. dollars during the same period last year.
The current account balance turned surplus as the government had made prudent and timely policies to maintain a healthy balance between imports and exports, and sustainability in remittances by overseas Pakistanis, Talat Anwar, a renowned economist and former advisor on macroeconomic policy at the Ministry of Planning, Development and Special Initiatives, told Xinhua.
"Resultantly, the Pakistani rupee strengthened against the dollar due to less demand from importers and considerable inflows of the greenback into the country," Anwar said, adding that rupee is expected to remain strong in the coming period.
Workers' remittances maintained a strong momentum, remaining above two billion U.S. dollars for a record sixth consecutive month in November. The remittances grew to 2.34 billion U.S. dollars, up 2.4 percent over the previous month and 28.4 percent over November 2019, according to the recently released statistics of the State Bank of Pakistan.
Pakistan also witnessed a growth of over six percent in large scale manufacturing in October 2020 as compared to the same month a year earlier, and the exports have increased to 9.732 billion U.S. dollars in the first five months of the current fiscal year as compared to 9.545 billion U.S. dollars a year earlier, according to the official statistics.
Secretary of the Economic Affairs Division of Pakistan Noor Ahmed said that when the COVID-19 pandemic struck the world, the Pakistani government was confronted with challenges including saving the lower classes of the society from the adverse impact of COVID-19 and supporting local businesses to run the wheel of the already struggling economy.
"The government took corrective measures to protect the country from bankruptcy by rolling out a multi-billion-rupee coronavirus relief package," Ahmed said, adding that the much-needed subsidies given to the construction sector spurred economic activities and helped the lockdown-bruised economy recover from the slump.
He said Pakistan has an import-based economy, which he said is one of the main factors of inflation in the country. "Realizing the negative impact, the government has been making all-out efforts to switch from the import-based economy to export-based by strengthening the local industries."
Among other indicators placing economy on a positive trajectory is Pakistan Stock Exchange (PSX), which has remained one of the best performing markets in Asia during the pandemic.
Despite the coronavirus pandemic, Pakistan exports continued to flourish hitting over USD 2.3 billion, the highest ever in the month of December.
“It gives me immense pleasure to inform that, Alhamdolillah, according to provisional data, Pakistan exports for the month of December 2020 have grown by 18.3 percent to USD 2.357 billion as compared to USD 1.993 billion in December 2019, an increase of USD 364 million over December 2019,” shared Advisor to Prime Minister on Trade and Investment, Abdul Razak Dawood in a series of tweets on Friday.
The advisor said that the figures are “the highest export ever in the month of December.”
For the period July-December 2020, Pakistan’s exports increased by 4.9pc to USD 12.104 billion as compared to USD 11.533 billion in the corresponding period last year.
“This shows the resilience of the economy of Pakistan and it is a vindication of the government’s policy to keep the wheels of economy running during COVID-19 pandemic. I commend our exporters for achieving this feat during these testing times and urge them to aggressively focus on capturing a larger share of international trade,” he said.
Dawood further lauded the exporters calling them 'a great asset’ for Pakistan and saying ‘I salute you all.’
Prime Minister Imran Khan on Friday thanked Pakistani diaspora for keeping remittances above $2 billion for sixth consecutive month.
"I want to thank our overseas Pakistanis for yet another record-breaking month of remittances in Dec: $2.4 bn," the premier wrote on his official Twitter handle.
He said that first time in Pakistani remittances have been above $2 billion for sixth consecutive months.
"Total for 6 months of this fiscal year $14.2 bn - a 24.9% growth over last yr [year]," he further wrote on the microblogging site.
Cumulatively, in the first five months (July-November) of current fiscal year, remittances grew 27% to $11.77 billion compared to the same period of last year, revealed figures released by the State Bank last month.
The SBP said persistent efforts by the government and central bank to bring remittances under the Pakistan Remittance Initiative (PRI) and rising use of digital channels amid limited cross-border travel were some of the important factors behind the sustained improvement in workers’ remittances.
In a statement, the SBP pointed out that orderly exchange market conditions and improvement in global economic activity lent further support to the increase in remittances.
Taurus Securities Head of Research Mustafa Mustansir said that the growth in remittances came because Pakistanis, who had lost their jobs abroad, were transferring their savings ahead of their return home amid the Covid-19 pandemic.
The situation would normalise in the second half (January-June) of current fiscal year 2020-21, meaning that the spell of layoffs would come to an end and remittances would slow down during that period, he said. “Cumulatively, workers’ remittances are estimated to grow 6.5% to $24.6 billion in FY21 (compared to $23.1 billion in FY20),” he said.
Advisor on Trade and Investment Abdul Razak Dawood has anticipated that Pakistan’s ICT exports will cross $2 billion this year, amid impressive growth in December.
“I am glad to share that in keeping with the trend this Financial Year, exports of ICT and Telecommunication Services have grown by 43 percent to $194 million in December 2020 as compared to $135 million in December 2019,” said Dawood in a series of tweets.
“For July-Dec 2020, these exports grew by 40pc to $958 million as compared to $684 million during the same period last year,” he added.
The ITeS export remittances comprising computer services and call centre services have surged to $194 million at a growth rate of over 43 percent in December 2020 compared to $135 million during the same month of 2019.
The IT sector has recorded the highest ever export receipts of $194 million in a single month, the Ministry of Information Technology and Telecommunication claimed. The government has set a target of $5 billion for export remittances through information technology and IT-enabled services during the next three years.
Pakistan’s tech exports have taken a plunge for the first time since February 2021, as new data reveals that the country’s exports in the tech sector dropped by 27 percent in May 2022 as compared to April 2022.
As per State Bank of Pakistan (SBP) data, IT exports in May amounted to $183 million while in April they were considerably higher at $249 million. Exports have fallen 8 percent year-on-year.
In May 2021, Pakistan exported $198 million worth of technology-related products and services. The technology sector witnessed exports worth $2.4 billion in 11 months of this fiscal year, contributing 38 percent to overall services’ export and marking a 25 percent year-on-year increase.
While IT export performance has certainly been encouraging, and has helped improve the country’s foreign exchange earnings, the monthly drop in exports in May is still far from an ideal scenario.
The reason being touted for the drop in IT exports is the extended Eid holidays. Since the pandemic resulted in a rise in freelancing, the export performance of country’s technology products and services stayed higher.
However, despite the Prime Minister of Pakistan’s ambitious declarations to target $15 billion in IT and IT-enabled services exports, the released budget brings down the industry’s potential to meet this aim. This was noted in a recent P@SHA press release.
According to Chairman P@SHA Badar Khushnood, the current taxation regime in place is “regressive” and has already proven disastrous for the IT industry’s growth.
“This year’s targeted exports of USD 3.5 billion are also not being achieved due to the introduction of an inefficient tax regime,” he stated. “Rather than facilitating the IT industry with more and better incentives to catalyze the existing organic growth, the previously announced one and the only benefit, i.e., ‘tax exemption’ committed till 2025 has been abruptly reneged and revoked. If nothing else, this is a recipe for disaster for a nascent yet fastest growing exports-led sector!”
Analysts say growth hindered due to government indifference, inconsistent policies
Despite being entirely free from the cumbersome process of acquiring Letters of Credit (LCs) and not being dependent on imports for its raw material, the export volume of the information technology (IT) sector only grew a meagre 5% in November year-on-year (YoY). Analysts are laying the blame for this low number on the government’s indifference towards unconventional export sectors.
Speaking to the Express Tribune on the condition of anonymity, an official from the Ministry of Information Technology and Telecommunication said, “Globally, IT companies’ exports grow in hundreds and thousands of times, a potential that Pakistan has in abundance but cannot tap into due to inconsistent policies. The cooperation of the finance ministry, Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) is crucial in this regard.”
“Any suggestion given to them by our ministry, however, is ignored,” said the official, lamenting that, “People in the government do not understand the export potential held by the IT sector.”
According to a Topline Research report by IT Analyst Nasheed Malik, “Pakistan’s IT exports for November 2022 increased by 5% YoY to $233 million due to a 29% jump YoY in telecom services. The exports also increased by 5% month-on-month (MoM) due to a 15% MoM increase in telecom services and 3% MoM in computer services.”
“The latest export number is also above the six-month rolling average of $221 million. Exports, however, are down by 10% from a peak of $260 million recorded in March 2022 but managed to cross the $230 million mark set in June 2022,” said Malik.
However, on a broader level, a slowdown is being witnessed with YoY growth averaging 6% in the last six months (June to November 2022), compared to the average growth of 17% YoY in December to May 2022.
“The IT Ministry has set an export target of $3 billion for FY2023,” said Malik, adding that, “With a current fiscal year monthly average rate of $217 million and a six-month rolling average of $221 million, there are concerns about whether Pakistan will be able to achieve the set target.”
In the five months of FY2023, IT exports are up by 3% YoY to $1.09 billion – the slight growth was witnessed due to a 5% YoY growth in computer services to $864 million.
According to a report conducted by Arif Habib Limited, the SBP’s reserves currently stand at around $6.7 billion, the lowest since January 18, 2019. Including the banks’ reserves of $5.9 billion, the total foreign reserves in the country stand at $12.6 billion – amounting to an import cover of less than one month – 0.99 months to be exact.
ICT Expert Parvez Iftikhar said, “So far, no government has been able to comprehend that the IT sector can help the country earn dollars without incurring any huge expenditures on raw material imports. This just indicates the lack of understanding in the government’s finance management team that decides on taxes and concessions.”
“If we equip our youth, however, with in-demand skill sets, facilitate them with in/out dollar payments, and high-quality internet connectivity, they’re quite capable of doubling the country’s exports within two years,” claimed Iftikhar, adding that the solution “isn’t even out-of-the-box!”
Si Global CEO Noman Ahmed Said told the Express Tribune that, “It is no secret that Pakistan is currently facing one of its worst economic crises yet and whilst the tech sector has consistently outperformed, it is no longer feasible for it to continue doing so at a snail’s pace.”
“Growth has slowed, but the trend still remains positive,” said Khurram Schehzad, CEO of ABCore.