Pakistan’s IT and telecom-related services have continued to rise in exports, putting its share of overall service sector exports at more than $1 billion over nine months of the current 2019-20 fiscal year.
According to statistics updated by the State Bank of Pakistan, from July to March the share of the ICT sector in total exports is 24 percent or $1,052 billion in total exports of $4,247 billion from the services sector.
The ICT sector is followed by the multiple sectors which the central bank, which stood at $1,024 billion, named Other Businesses. Government Goods and Services followed with exports of $896 million.
The exports of IT services have increased over the past three years and continue to expand given the fact that the market scenario has entered a recession process due to the COVID-19 outbreak globally.
In the last months of FY 2018 and 2019, the sector crossed the $1 billion mark twice as export prices stood at $1.19 billion and $1.065 billion respectively. In three quarters of the current financial year, the industry reached a milestone this year.
Overall, in the FY20 period from July to March, the IT sector made an export of $1,052 billion compared to the export value of $879 million reported in the same period last year, showing a year-on-year increase of 20 percent or $173 million. The export prices will further increase to another all-time high in the remaining months of the current financial year.
Although IT export growth has been called lower than expected, during this financial year it has picked up the pace with tremendous growth in remittances. The exports driven by government incentives not only increased but also strengthened the reporting practice of the IT sector to the banking channels. In addition, rupee depreciation against the dollar also raised export values for the 2019-20 financial year.
Pakistan’s IT export is primarily on the US market followed by European countries and then a few countries in the Middle East. Exports are mainly concentrated in the areas of software consultancy, BPO / call center, telecommunications services, software development, and development of mobile apps.
What does the future look like?
Internationally, the current market and economic situation are highly challenging. As the major export market for the IT sector, the US and European countries were hit hard by the COVID-19 outbreak which showed no signs of respite.
Recently, the representative body of the IT industry, P@SHA, conducted a survey report which revealed that companies are struggling with business loss, order cancelation, and payment delays.
Globally, customers avoid projects, delay payments of already completed ones, and consider finally dropping their contracts entirely. Product-based businesses will also face late fees, account cuts, and even unsubscriptions, the reports said.
The economic recession has taken its toll on companies and economies and at the present pace, the IT industry may not continue its export growth.
Currently, demand for the workforce has decreased by nearly 35 percent, which may result in major layoffs of about 25 percent of professionals over the next few months, over addition to salary cuts, and unpaid leaves, the study said.
The association received input from more than 200 companies in the survey which employed nearly 35,000.
One of the IT giants Netsol Technologies recently told its staff of a pay cut and shortened working hours with a hint of the worst-case scenario layoffs.
In the current scenario, if a big IT corporation looks at painful austerity steps, it’s easy to imagine what’s going to happen with IT startups or smaller businesses.
IT Exporters viewpoints
Noman Said, CEO of SI Global, said ICT, like other sectors, is facing challenges but can cope with solid strategies and new business growth through diversified goods and services.
He pointed out that technology firms are supposed to win the current situation rather than losers, so Pakistani firms will work on an out-of-box business strategy to gain business opportunities around the world.
There are various fields of ICT where Pakistani firms need to develop capacity and pursue opportunities in different firms rather than a few market places, he added. In the near future, this requires extra effort from the professionals to keep themselves from the survival mode to a stable and evolving phase.
Zeeshan Aftab, Co-Founder 10Pearls, said that not all IT businesses are facing difficulties these days, but medium or small organizations are uncertain about the near future due to economic downturn and lack of demand from the customers.
Explaining the business situation in the export market, he said that an IT company’s small customers currently have no money to spend, medium-sized customers have frozen their budgets, however, large corporations are investing and some are making even more investments in different ventures.
IT firms in Pakistan should concentrate on generating revenue and avenues through new products and commodity price-cutting to draw consumers who could be actively explored, he added. In this way, not only can a business make a difference in export markets regardless of its size but it can also make a difference in the local market.
For example, various video conferencing systems are being used for education and official meetings these days, but these systems should be more engaging and interactive than just a video call.
Owing to the strategic freeze in many parts of the world, education, and healthcare services have been provided online over the past three months so this is an opening for a new way of doing business.
Yeah, the demand for IT in the health and education sector is still pent-up, but now IT services applications are gaining an accelerated boost in these sectors, said Badar Khushnood, P@SHA’s office-bearer.
The core industry of IT and software development is on the decline these days, but businesses can transform the essence of their industry niche to deliver IT-enabled services in the local and export market to various traditional sectors, he added.
According to Badar Khushood, who is also co-founder of Fishery E-commerce Platform and Head of the E-commerce Committee at P@SHA, e-commerce is gradually picking up in Pakistan but it needs to be expanded to every sector particularly in the prevailing situation when businesses can not operate through point-of-sales, shops, and business centers.
This is the time to digitize the company to retail level at B2B, and every product should be sold online maintaining a mandatory social gap, he further said. Our businesses need to update their e-commerce system which is not limited to websites but also includes the implementation of proper systems like logistics, payment systems, product marketing, he added.
The current scenario undeniably portrays a crisis in the IT industry that is not going to end soon but there is a fight for survival, a silver ling for brilliant minds as an opportunity is knocking at their doorstep through diversification and market transformation.
