Minor Adjustments, Big Gains.

Traditionally, Pakistan has been dependent on textiles for the major part of its exports, which has continued to grow steadily, sustained various transitions for the good and still accounts for almost two-thirds of all exports the country makes. However, there is only one industry, at the moment, which is poised, positioned and has tangibly demonstrated the potential for exponential growth over the last couple of years, i.e. information technology and information technology-enabled services (ITeS) industry.

As per the latest and official trade statistics, Pakistan IT industry has posted a growth of 87 percent over the past two years collectively and has reached $2.615 in FY22 from $1.4 billion in FY20. However, the projection for FY22 by the ministry of information and telecom was $3.5 billion and industry leaders were expecting $3.12 billion. There was a concrete rationale behind such optimism.

Projection for FY22 IT exports by the ministry of information and telecom (MoITT) was $3.5 billion and projection by industry leaders was $3.12 billion.

Firstly, during the peak of covid-19, Pakistan never experienced the total shut down like many other regional, sub-regional and other competing economies having substantive shares of freelancing, business process outsourcing (BPO) industry and IT exports to North America and Europe. It meant transfer of contracts or sub-contracting for Pakistani IT companies.

Secondly, Covid-19 boosted the global demand for cheap and abundant supply of skilled workforce in IT and Pakistan could fill the gap in a way that proved to be cost-competitive and centered around micro, small and medium enterprises (MSMEs) or home-based freelancers.

Thirdly, Pakistani authorities and banks woke up, for the first time, to the growing demand from the IT industry to acknowledge and enable the inclusion of MSMEs and freelancers into financial and taxation system. That allowed more incomes to be remitted back to the country instead of being parked outside or brought through informal channels.

There has been some avoidable yet glaring mismanagement in the policymaking circles that barred the country from realizing its full potential in IT exports during FY22; and, that is not only limited to ministry of IT alone. There were a few matters that demanded various ministries and institutions to work cross-functionally, i.e. IT, finance, revenue, PSEB and SBP.

To top it all, the government abruptly withdrew tax exemption to IT industry...