Pakistan’s IT exports increased because telecom services exports increased by 12% in just one month.
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IT Sector Growth
In a remarkable turn of events, Pakistan’s IT sector has witnessed a substantial 10% month-on-month (MoM) increase in exports for August 2023, which totaled an impressive amount of $235 million.
This growth comes in the face of persistent challenges faced by the IT industry of Pakistan, this hints at a potential revival of the industry in Pakistan.
Federal Minister for Information Technology & Telecommunication, Dr Umar Saif, has set high targets for the industry, Promising to improve Pakistan’s information and communication technology (ICT) exports from $2.62 billion to a staggering $10-20 billion.
His predecessor, Syed Aminul Haque, had similar targets to boost IT exports up to $15 billion, even though there are high targets set by the ministers, but still the IT sector has struggled to achieve significant growth in the last few years.
Challenges Faced By IT Sector
The IT industry has faced many challenges, like not having enough foreign currency. This has caused several factories, including new smartphone assembly plants, to close down.
Moreover, the government charging fees in dollars to allocate spectrum to IT companies, which has raised concerns in the current economic situation. High taxes still burden IT companies, stopping them from growing as much as they could.
IT sector experts stress the immediate importance of putting a lot of money into the sector, supported by stable rules, and fixing current problems, especially high taxes.
In August 2023, the IT export surge was propelled by a 12% MoM increase in telecom services exports and a 9% MoM increase in computer services exports.
The August 2023 figures have eclipsed the 12-month average of $218 million.
A report from Topline Securities attributes the MoM improvement to a higher number of working days compared to July 2023.
Among computer services, hardware and software consultancy exports experienced impressive growth, with a 21% and 18% MoM increase, respectively, in August 2023. Services exports (excluding IT) of Pakistan also increased by 14% MoM, partly due to the reasons mentioned above.
On a year-on-year (YoY) basis, IT exports for August 2023 increased by 3% to $235 million. This growth was driven by an 11% YoY increase in telecom and a 1% YoY increase in computer services. These figures represent the amount remitted back to Pakistan by technology companies, though many IT companies retain a significant portion of their proceeds outside the country due to declining business confidence and exchange rate volatility.
According to the IT minister, IT companies are holding around $1-2 billion outside Pakistan. In the first two months of FY24 (2MFY24), IT exports increased by 5% YoY to reach $449 million.
Double-Digit Growth
The software segment is expected to see double-digit growth in 2023, presenting opportunities for companies like Systems Limited (SYS), considered a top pick in the IT sector. In August 2023, telecom services exports increased by 12% MoM and by 11% YoY to reach $46 million. Computer services exports increased by 9% MoM and by 1% YoY to $189 million. The total share of telecom and computer services exports for August 2023 stood at 20% and 80% respectively, compared to an 18% and 82% share in August 2022. In 2MFY24, the telecom and computer share of exports remained at 19% and 81%, similar to the same period last year.
On a year-on-year (YoY) basis, IT exports for August 2023 increased by 3% to $235 million. This growth was driven by an 11% YoY increase in telecom and a 1% YoY increase in computer services. These figures represent the amount remitted back to Pakistan by technology companies, though many IT companies retain a significant portion of their proceeds outside the country due to declining business confidence and exchange rate volatility.
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