In recent years, Pakistan’s information technology (IT) and IT-enabled services (ITeS) sector has demonstrated remarkable potential to drive economic growth, facilitate innovation, and uplift quality of life through digital transformation. However, realising the full potential of this dynamic sector requires not only substantial investment but also robust policy support to ensure sustainable growth and global competitiveness.

The “Digital Pakistan” initiative envisions comprehensive digital transformation across sectors, from healthcare and education to finance and government services. This vision aims to unlock economic growth, spark innovation, and promote inclusive development. Spearheaded by the government and supported by strategic partnerships, this transformative agenda focuses on leveraging digital tools to make public services more accessible and efficient, thus enhancing overall societal welfare.

The China-Pakistan Digital Corridor, under the China-Pakistan Economic Corridor (CPEC), symbolises a milestone for the country’s digital economy. Through this initiative, along with the formation of the Joint Working Group (JWG), Pakistan is fostering an ecosystem of innovation, investment cooperation, and digital technology deployment. The Corridor aims to position Pakistan as a regional technology hub, with potential spillovers into job creation, skill development, and broader economic growth.

Financially attractive IT outsourcing destination

According to Kearney’s 2023 Global Services Location Index, Pakistan has emerged as the most financially attractive destination for IT outsourcing.

Pakistan emerges as a financially attractive destination for IT outsourcing due to its cost competitiveness and growing talent

The index highlights Pakistan’s cost competitiveness and the growing talent pool in the IT and ITeS space, solidifying its position as a major player in global outsourcing markets.

Over 20,000 IT and ITeS companies are registered with Pakistan’s Securities and Exchange Commission, which includes both domestic and export-oriented enterprises. These companies contribute significantly to Pakistan’s foreign exchange earnings, technological advancement, and job creation.

Pakistan’s IT sector exports reached an impressive $2.28 billion during FY24 (July-March), making it the highest contributor to the country’s service exports, accounting for 39.31 per cent of the total services exports. Notably, freelancers based in Pakistan also play a critical role in boosting foreign exchange inflows, remitting $350.15 million during this period. These figures underscore the potential of the digital economy to attract investment and support the country’s foreign exchange reserves despite challenging global economic conditions.

The Pakistan Software Export Board (PSEB) launched its first-ever Women’s Software Technology Park at the Women’s University of Bagh in Azad Jammu and Kashmir during FY24. This initiative is part of a broader strategy to empower women in the tech industry, supporting over 2,800 women entrepreneurs through various programs. Such initiatives not only promote gender diversity but also harness an underutilised segment of the population, fueling economic empowerment and productivity gains across sectors.

The IT sector exports reached an impressive $2.28bn during FY24 (July-March), making it the highest contributor to the country’s service exports, accounting for 39.31pc of the total services exports

Furthermore, through National Incubation Centres, Pakistan has incubated over 1,480 startups, with more than 710 successful graduates as of March 2024. These startups have collectively generated over 128,000 jobs and attracted investments exceeding Rs23bn, contributing to a combined revenue of more than Rs16bn. This incubation ecosystem not only nurtures innovation but also addresses the country’s pressing need for job creation and skill development, particularly among the youth.

Telecom sector resilience

Pakistan’s telecom sector has shown remarkable resilience, expanding its services while generating an estimated Rs735bn in revenues during FY24 (July-March). With over 194m total subscriptions and a teledensity rate of 80.7pc, the telecom sector is instrumental in driving digital transformation. The sector also directly contributed Rs213bn to the GDP during the same period, reflecting its role in strengthening the country’s economic foundations.

The integration of IT and telecom services in finance, healthcare, education, agriculture, and government services has been transformative. For instance, digital finance tools make financial services accessible to unbanked populations, while telemedicine improves healthcare delivery in remote areas, setting the stage for long-term socioeconomic development.

A strategic path forward

To fully harness the potential of the IT and ITeS sector, Pakistan needs a two-pronged approach: enhanced investment and strong policy support. It is essential to prioritise investments in digital infrastructure, including broadband expansion, cloud computing, and cybersecurity. The government must continue offering incentives for the IT industry, such as tax breaks and funding grants, to make Pakistan an attractive destination for local and foreign investment.

Education and skills development will also be critical for sustaining growth in the IT sector. Pakistan should focus on specialised training programs in high-demand areas such as data science, artificial intelligence, and blockchain. The establishment of partnerships between academia and industry can bridge the skill gap and prepare the workforce for global challenges, enhancing Pakistan’s reputation as a skilled outsourcing destination.

Moreover, gender inclusivity remains a strategic imperative. Initiatives like PSEB’s Women’s Software Technology Park exemplify the potential of inclusive policies to uplift Pakistan’s workforce. A balanced approach that empowers both men and women in the digital economy will amplify Pakistan’s growth potential, driving it towards a more equitable and sustainable future.

The global digital economy is rapidly evolving, and by strategically investing in the IT and ITeS sector and nurturing an inclusive digital environment, Pakistan can unlock unprecedented opportunities for economic growth and development.

The path forward requires commitment, resilience, and collaboration among government, industry, and academia to create a thriving digital ecosystem and a technology-driven future for the country.

The writer is the head of content at a communications agency

Published in Dawn, The Business and Finance Weekly, November 11th, 2024