Pakistan Tech Exports Soar 69% in February 2021
Pakistan's technology exports shot up by 69% in February 2021 from the same month last year. Tech exports soared 41% for the first 8 months (July 2020-February 2021) of the current fiscal year from the same period period last year, according data released by the State Bank of Pakistan.
|Pakistan Tech Exports Trend. Source: Arif Habib Securities|
In addition to jump in tech services exports, Pakistan is also seeing double-digit growth in exports of engineering goods, up 19.74% for the first 8 months of the current fiscal year. Export of electric fans posted over 15% growth and other electrical machinery 17.16%.
Technology services exports from Pakistan continued their momentum into February 2021, rocketing up 69% to $179 million, up from $106 million in February 2020. ICT exports for the first 8 months of the ongoing fiscal year 2020-2021 rose 41% to $1.3 billion, on track to reach or surpass the $2 billion mark this year.
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Pakistan’s exports of goods and services to the United State (US) witnessed a surge of 11.86 per cent during the first eight months of the fiscal year 2020-21 (FY21) as compared to the corresponding period last year.
According to details, overall exports to the US were recorded at $3,082.2 million during the (July-February) period against exports of $2,755.2 million during the corresponding period in FY20, State Bank of Pakistan (SBP) data revealed on Thursday.
Meanwhile, on a year-to-year (YoY) basis, exports during February 2021 also increased by 27.68pc, from $314.8 million against the exports of $401.949 million.
However, on a month-on-month (MoM) basis, exports rose by 0.5pc during February 2021 in comparison with exports of $399.9 million in January 2021, SBP data said.
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Overall, the country’s exports to other countries witnessed a decline of 2.26pc in 8MFY21, from $16.438 billion to $16.065 billion.
On the other hand, imports from the US during the period under review were recorded as $1,467.5 million against $1,470.7 million last year, showing a nominal decrease of 0.24pc in 7MFY21.
The overall imports into the country increased by 8.59pc, from $29.6 billion to $32.1 billion.
Earlier, Pakistan’s exports to the United States surpassed the $400-million mark during the months of October and November 2020.
The US also remained the top export destinations of the Pakistani products during the first four months (July-Oct) of FY21, followed by United Kingdom (UK) and Germany.
Meanwhile, Pakistan’s exports to regional countries declined 22 per cent in the first eight months of the current fiscal year due to the impact of Covid-19.
Exports to Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives fell to $1.171 billion in 8MFY21, from $1.504bn the previous year, according to the latest data compiled by the State Bank of Pakistan.
On the other hand, the country’s trade deficit with the region narrowed slightly during the period under review as imports from these countries also dipped.
Pakistan’s exports to Afghanistan fell 13.6pc to $629.324m in 8MFY21 from $728.315m in 8MFY20. A few years ago, Afghanistan was the second major export destination after the United States.
According to the State Bank of Pakistan (SBP), the local unit closed at Rs155.39 against the greenback as compared to Monday’s closing of Rs155.85.
The local currency has gained considerable ground on the back of improved foreign exchange reserves, current account surplus, higher remittances besides less demand of dollar due to the ongoing pandemic.
The rupee has recovered more than Rs12 during the last seven months since it touched an all-time low of Rs168.43 last year in August.
Exports for March in Pakistan reached a decade-high of $2.3 billion, with monthly figures showing growth year-on-year and over the previous month, Adviser to Prime Minister for Commerce and Investment Razak Dawood said Thursday.
“[The] ministry of commerce is glad to share that according to provisional figures, in March 2021 our exports increased to $2.345 billion. This is an increase of 13.4% over February 2021. It is the monthly highest in last 10 years,” Dawood wrote on Twitter.
“This is also the first time since 2011 that exports have crossed the $2 billion mark for six consecutive months,” she said.
The commerce adviser, however, termed the annual growth as misleading because last year’s lockdown kept the industrial wheel extremely slow.
“The export growth of 29.3% over March, 2020 should not be considered as it is misleading since there was a lockdown last year,” Dawood said.
For the nine-month period of July-March of the current fiscal year, exports increased 7% to $18.6 billion as compared to $17.4 billion in the corresponding period last year, according to the Ministry of Commerce’s data.
Due to a shortage in cotton, exports are expected to get an upset. Cotton is the main industrial input of textile industry that accounts for more than 60% of total exports.
The government is uncertain about giving a go-ahead to cotton and yarn import from India, the world’s largest cotton producer. Analysts said textile industry’s growth is tied with cotton import from India to keep up momentum of textile exports from the country.
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“It’s extremely important as there is significant shortfall in cotton production this year. Lack of cotton will result in reduced textile output and hence exports,” Saad Hashemy, an executive of Karachi-based BMA Capital said.
Although some analysts said banning Indian cotton would not deprive Pakistan’s textile industry of the raw material, they still believe cross-border trade is more cost-effective.
“Eventually we will be importing from China and Europe as we are doing it right now,” said Tahir Abbas, head of Research at Arif Habib Limited.
Total knitwear exports were US$3.1 billion, up from from $2.3 billion over the same period in the previous year, according to the latest data from the Pakistan Bureau of Statistics (PBS).
Pakistan's exports increase to $31.3 bln in FY21: Razak Dawood
Adviser to Prime Minister on Commerce and Investment, Abdul Razak Dawood said Thursday that the country’s exports increased to 31.3 billion during the last fiscal year (2020-21), reflecting government’s successful trade policy.
As Compared to the previous financial year (FY2020), exports increased by 18 percent during 2020-21, despite the negative impact of Covid-19, the adviser said this while addressing a press conference here.
He said that during the outgoing financial year, country’s merchandize exports stood at $25.3 billion, while services exports reached to $ 6 billion. He said that during the last month of June 2020-21, domestic exports exceeded $2 billion.
Similarly, Information Technology (IT) exports remained above $2 billion in last Fiscal Year, he added.
He said that the government would sign a Preferential Trade Agreement (PTA) with Uzbekistan on July 7.
He said the government was working on ‘Tariff Rationalization’ and would rationalize 4,000 tariff lines in the next financial year 2022.
Shorooq Partners, a leading VC firm headquartered in the UAE and with offices across Saudi Arabia, Egypt and Bahrain,has been granted approval by Special Technology Zones Authority (STZA) for a Zone Enterprise license and will be opening their first office in Pakistan in theIslamabad Special Technology Zone.
Shorooq Partners is the leading technology investor across emerging markets, partnering with startups, and building enduring businesses through seed stage equity and debt funding with afocus on the Middle East, North Africa and Pakistan.
Earlier this year, Shorooq Partners signed a MoU with the STZA to support efforts to build Pakistan’s technology ecosystem in the presence of the Honorable President of Pakistan Dr.ArifAlvi.Shorooq Partners was keen to establish a physical presence in Pakistan to support local founders and other local investors through a series of ecosystem initiatives.
As part of its new office, Shorooq Partners intends to invest and extend its one-of-a-kind value-creation arm to its portfolio companies in Pakistan and give them a real competitive advantage in the market.
Shorooq Partners was early in investing in Pakistan and have done more than 10 investments incompanies such as Airlift, PostEx, DigiKhata, Retailo, KTrade Securities and Tazah Technologies.
Chairman of STZA, Amer Hashmi, reinforced the government’s commitment to facilitating global venture capital firms in the Special Technology Zones.
“The presence of a VC firm like Shorooq Partners will be significant for Pakistan as it will bring global best practices that will enable Pakistani tech entrepreneurs and investors to forge connections on a global level, tap into other markets, and learn from top-tier founders and investors.”
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.