Forex-starved Pakistan earned $2.6 billion last fiscal year through exports of information and communication technology (ICT) services. And within ten months of this year, ICT exports fetched $2.1bn, according to the State Bank of Pakistan (SBP).

Every dollar counts for Pakistan. ICT exports that are part of overall services exports are an important source of forex earnings. They can potentially boost services exports and help reduce the services trade deficit.

Pakistan ran a huge $5.4bn services trade deficit in the last fiscal year. The country had to pay $12.9bn in services imports against exports of just $7.1bn. In ten months of the current year, the services trade deficit remained high at $4.7bn. The full-year deficit may easily exceed last year’s $5.4bn.

The problem with the services trade deficit is that, unlike the goods trade deficit, it cannot be controlled by restricting imports. Services imports come in ways that are essentially different from goods imports. “Luxury” services imports make up only a fraction of total imports, and most of the services that we import, particularly ICT services, are vital for public and private sector companies both for domestic operations as well as for producing exportable goods and services alike.

Easy loans offered to women and students have been one of the drivers behind India’s high IT exports

Boosting services exports is the only viable option for containing the services trade deficit. And within the services exports group, ICT exports can be boosted more easily than others amidst the country’s ongoing economic decline. So, let’s discuss the challenges facing ICT exports in Pakistan and how to respond to them effectively.

According to a recent SBP report, one of the key factors hindering the growth of ICT exports is a dearth of a fully skilled force. The report estimates that only 10 per cent of IT graduates in Pakistan are employable due to weaknesses in technical and soft skills.

We all know about the country’s deteriorating education system, and this estimate seems quite realistic. In fact, all industries in Pakistan — and not just export-oriented ICT companies — have long complained about the skill gaps in university graduates that often lead to their unemployability.

But almost all public and private sector universities — with a few notable exceptions — continue to look the other way and churn out thousands of graduates every year, most of whom lack the technical and soft skills their prospective employers look for.

The SBP report rightly suggests that top-tier international boot camp companies should be invited to set up camps across the country under public-private partnerships. Bootcamps refer to short, often three to six months, high-intensity, immersive training. Some boot camp companies are already operating in the country, and a few relatively new entrants claim they have plans for improving IT graduates’ technical and soft skills.

Interrupted power supply and internet connectivity is another key impediment to the growth of IT exports

While the idea of inviting top-tier global boot camp companies is good, the government must immediately start facilitating the existing boot camp companies so that an increasing number of IT graduates can be made employable. But this is not enough.

There is a need to pursue all the measures required to develop and deepen the base of the ICT sector, but that is possible only if the government sets its priorities right and cuts its current expenses to create fiscal room for development expenses on the ICT sector.

Similarly, the private sector must also make some sizable investment in this sector, taking a long-term view of ICT export potential instead of focusing on short-term gains.

Large-scale public-private partnership projects focusing on mobile applications development, responsive web applications and big data analytics can boost software exports. There is also a need to encourage and incentivise not only young resident Pakistani IT professionals but also overseas Pakistanis to move up the ladder of global IT value chain.

Millions of Pakistanis live in Saudi Arabia and UAE, and hundreds of thousands of others live in USA, UK and Canada. In all these countries economic and work environment for IT entrepreneurs is far better than in Pakistan.

The government must provide a platform for the Pakistani diaspora in these countries to liaison with Pakistani IT entrepreneurs and ICT companies and strike mutually beneficial business deals. Informally, many Pakistanis in the above-named countries are already supporting their loved ones back in Pakistan by assigning them some of their IT-related jobs. But in such informal arrangements, utilisation of the full potential of IT workers is impossible due to cross-border legal and taxation issues.

Besides, the interrupted power supply is another key impediment to the growth of IT exports and computer-based freelancing in Pakistan. Unless IT and IT-enabled services projects and freelancers who work distantly for overseas companies do not have access to uninterrupted power supply and uninterrupted internet connections, they cannot fully exploit their actual potential.

During and after the May-9 violence and mayhem, IT exports and freelancers’ businesses suffered massively. Even during normal days, prolonged power outages are a norm in the country, and the quality of internet service remains poor.

Financial inclusion of women and students is yet another prerequisite for the development of the IT sector in general and for the promotion of IT exports. Easy loans offered to womenfolk and students have been one of the key drivers behind India’s high IT exports. The same can happen in Pakistan. In 2022, India’s IT services ($95bn) and software exports ($7bn) totalled $102bn.

Published in Dawn, The Business and Finance Weekly, May 29th, 2023