Software Industry Overview in Pakistan

The IT and IT-enabled Services (ITeS) marketplace offers lucrative opportunities for developing countries to join the ranks of the developed world. The scale and pace of growth in this sector is faster than in any other industry, and a number of developing countries are attempting to emulate the success enjoyed by countries such as China, Thailand and India. The Government of Pakistan has been proactively developing the IT sector in Pakistan since the last few years. A few of the incentives offered include tax exemption till 2016, establishment of IT Parks with low rent, foreign ownership of equity invested in IT and 100% repatriation of profit allowed to IT companies. Pakistan’s IT industry has been rising steadily since the last three years. A marked increase in software export figures are an indication of this booming industry’s potential. STATISTICS OF THE PAKISTANI IT/ITES INDUSTRY Total number of IT companies registered with PSEB 1141 Number of substantial IT companies region-wise breakup 393 Karachi 362 Islamabad/Rawalpindi 337 Lahore 049  Others Total number of foreign IT and telecommunication companies working in Pakistan 60 Number of CMMI-assessed companies One CMM Level 5 company, one CMMI Level 5 company, three CMMI Level 3 companies and sixteen CMMI Level 2 companies Number of IT graduates produced per year Approximately 20,000 Number of universities offering IT/CS programs 110 Number of IT professionals engaged in export-oriented activities (software development/call centers etc.) More than 24,000 Total number of IT professionals employed in Pakistan More than 125,000 Total space utilized in IT & Software Technology Parks Nine IT Parks covering an area around 700,000 sq ft Top PAKISTAN'S IT EXPORTS The State Bank of Pakistan in its statement for the year 2009-10 reports the export figures of software and IT-enabled services to be US$ 204 million. State Bank of Pakistan adopted BPM 5 reporting system to report the IT exports revenue, which restricted the export figures to US$ 204 million only in 2009-10. In India, the Reserve Bank of India follows the BPM 6 (also called MSITS) Reporting System, which raises its exports to billions of US dollars. State Bank Reporting Earnings Estimated Total IT Industry Export Revenue Estimated Total IT Industry Size US$ 169m US$ 1.4b US$ 2.8b The World Trade Organization (WTO) lists Mode 3, revenue generated by commercial offices overseas, and Mode 4, compensation received by temporary workers who have traveled abroad, as export revenue streams which must be included in trade revenue calculation. There is also strong evidence to suggest that other countries, such as India, in fact employ global services export figures when reporting or estimating revenue. The following table describes the four WTO modes for export-in-services recognition. The need for the four-mode model arises because trade in services is much harder to monitor than trade in physical goods. Physical goods pass through air, sea or land ports, and are accompanied by detailed financial and other documentation. Services trade, on the other hand, can be transacted over the Internet, through post, or through travel of personnel, with revenue flowing into company or personal accounts, which can exist anywhere in the world. Mode Description IT Exports (US$) 1 Cross Border Represents services that are sold by the exporting country to the importing country, with only the service crossing the border e.g. architectural drawings sent by courier, consultant report sent by email, call center support provided over the Internet, or software programs sent over the Internet. USD 242 million   2 Consumption Abroad Represents services sold in the exporting country to foreigners or foreign-owned entities in the exporting country itself e.g. IT services sold to the World Bank, the USA embassy or to one of the 700 multinational companies operating in Pakistan. USD 300 million (Average USD 250,000 expenditure by over 800 entities) 3 Commercial Presence Abroad Represents the revenue of national firms established abroad, selling services in a foreign market. USD 675 million 4 Temporary Movement Represents services that are sold or delivered through the presence of the service provider temporarily in the foreign market e.g. the annual salaries of all H-1, L-1 and B-1 Pakistani IT workers in the USA.  USD 266 million (At least 5000 workers earning at least USD 40,000 per year on average) The total IT services export from Pakistan in FY 2005 amounts to US$ 1.050 billion, or conservatively US$ 1 billion. Pakistan offers various competitive advantages over other outsourcing destinations, such as high quality software development, swift and easy establishment of business, lowest cost basis and emerging and state-of-the-art telecommunication and IT infrastructure. Experts estimate an average annual growth of 33% in the sector. This will result in the total IT export revenue crossing US$ 10 billion in the next five years. Source: Pakistan Software Export Board - Industry Overview