Pakistan’s IT industry: a fast growing sector

By Alauddin Masood

IT industry is emerging as one of the most promising sectors of Pakistan’s economy, bringing in substantial revenues, foreign direct investment and creating new job opportunities for the youth.

While some Japanese investors are planning to invest $100 million in Karachi’s IT Park, Pakistan’s IT exports standing at $175 million exceeded by $13 million the target of $162 million set for the financial year 2007-08. In the previous year, FY-2006-07, the country’s IT exports worth $116 million exceeded that year’s target of $108 million.

By registering 50 per cent annual growth in exports during the last five consecutive years, the country’s IT sector has displayed a tremendous potential for sustained growth. If nurtured fully, the IT industry could bring in voluminous economic and commercial benefits, according to Pakistan Software Export Board (PSEB).

Considering the pace of progress of the local IT sector and its ambitions, prospects of further growth in future is bright as this is the only industry in Pakistan that has registered a remarkable growth during the last five years. It is believed that Pakistan's annual IT exports could have crossed $220 million if it was not hit by the power crisis. Although the power outages have adversely affected productivity of many ICT companies, it is expected that despite some of the odds the country would be able to achieve the targeted volume of IT exports in the forthcoming years.

Meanwhile, Japan’s Ambassador to Pakistan, Seiji Kojima recently stated that some Japanese companies have shown interest in setting-up a massive database and a call centre, with capacity of 1,000 calls, at IT Park, Karachi. Pakistan has already introduced a package of incentives, including tax exemptions, until 2016, for IT sector, 100 per cent repatriation of foreign equity and earnings and low-rent facilities for IT companies.

Due to its export-oriented nature, the country’s IT sector has contributed significantly in enhancing Pakistan’s soft image as many local IT companies are winning huge contracts from domestic as well as international markets and various leading companies around the globe are deploying solutions developed by the local IT sector. For example, financial enterprise solutions developed by Pakistani IT companies, namely TPS, MIXIT, Autosoft Dynamics and Systems Limited, have been successfully deployed in leading banks/financial institutions around the globe.

As IT companies are growing and establishing contacts, many of them have succeeded in obtaining venture capital funds from foreign investors. Pakistani IT Company, Vopium has recently gained venture capital fund worth $6.75 million from Enex Group SA, Luxembourg. The company’s software allows saving of 40-90 per cent when making international calls or sending SMSs from mobile phones. Two leading US based Venture Capital (VC) firms, ePlanet Ventures and Draper Fisher Jurvetson (DFJ) are providing funds to Naseeb Networks and this speaks volumes of the trust placed in the potential of Pakistan’s IT industry by foreign investors.

NetSol, a local leading IT company, listed at NASDAQ, has recently been dual-listed for trading on the Dubai International Financial Exchange (DIFX). The presence of Pakistani IT companies on international stock exchanges is a positive sign for the foreign investments in Pakistani IT industry.

Pakistani IT companies are also fulfilling the needs of local industry and many leading telecom companies are utilising their services to automate and enhance their operations. For example, Mobilink has singed LMKR, a leading IT company of Pakistan and global provider of Geo technology and information technology services, to automate its warehouse processes. Similarly, Ufone signed Teradata to expand its Data warehouse with state-of-the-art 5550H nodes and to enhance its customer support services.

As an agency of the government, PSEB is mandated to promote Pakistan's IT industry, including software, IT Enabled Services, hardware and call centers locally and globally. In keeping with this mandate, PSEB has been facilitating the IT industry through programmes in Human Capital, Office Space, Marketing, Company Capability Development, Telecom Bandwidth, Industry Finance, Public Policy, Strategy & Research, and Facilitation.

IT Parks: In June this year, PSEB issued Letter of Intent (LOI) to an international consortium, comprising of TelcoNet, Axor Group Inc Canada and Technopolis Plc, Finland , for the establishment of Pakistan ’s first state-of-the-art National IT Park, at Chak Shahazad, Islamabad . To be developed on Built Operate and Transfer (BOT) model on 14.90 acres, the construction work on this IT Park is likely to commence in January 2009 and the project is expected to be completed by January 2011. The nine billion rupees park will provide 1.5 million sq ft. of state-of-the-art office space to local and international IT companies.

Pakistan has set a challenging mission of developing a network of IT parks across the country and Chak Shahzad IT park is the first milestone towards realisation of that goal. A landmark project for Pakistan’s IT industry, this park will house over 10,000 IT professionals. In addition to providing affordable and quality IT enabled work space for companies, this park will generate new employment opportunities, bring in foreign investment, enhance IT/ITeS exports and stimulate economic growth.

To sustain IT industry’s current growth rate, PSEB will develop three more IT Parks, one each at Karachi, Lahore and Islamabad on BOT basis, for which land at prime locations has already been acquired. In future, PSEB intends to extend this network to Peshawar, Quetta and other cities.

Experience tells that in developed and emerging economies IT/knowledge parks have been instrumental to the promotion of knowledge based economies, clustering of knowledge based firms, investment, research innovation and other services. Other benefits of these parks include: promotion of business synergies and facilitation of access to capital, infrastructure, and human capital and policy incentives.

In these IT Parks, PSEB envisages to provide world class infrastructure (i.e. smart buildings, reliable bandwidth, electricity and security) that is required for the success of knowledge based IT firms, nanotechnology, bio-informatics, etc.

Meanwhile, to fulfil immediate office space requirements, PSEB is currently negotiating with several building owners, both in public and private sector, to convert existing suitable facilities into IT Parks. Presently, PSEB is managing over 700,000 square feet of office space in 10 IT parks across the country.

Internship Portal: PSEB has launched its maiden web based Internship Portal (internships.pseb.org.pk) for its Internships Phase-III Project. The Web portal, which is the first of its kind in Pakistan, is dedicated to fresh graduates seeking internships in IT industry.

This Internship Portal is envisaged to act as a catalyst to providing the much needed human resource and facilitate both the graduates and the employers, who can shortlist IT graduates according to their requirements.

PSEB's Internship Programme is one of the most successful human capital initiatives launched in Pakistan, as evident from the participation of leading IT companies, like NetSol, Systems Limited, TechLogix, Bearing Point, etc; in these programmes. Under this programme, 3500 graduates from 220 universities/institutes have been placed in 250 IT companies in the country. The retention rate by the IT companies has been over 80 per cent, while 15-20 per cent graduates received job offers from other organisations because of their internship experience.

Now, PSEB Internships Programme Phase –III aims to place 6,600 fresh IT graduates in the IT industry. In addition to a 12-month paid apprenticeship programme, PSEB has developed corporate training programmes to enhance the skills of IT professionals.

To address concerns of Pakistan’s IT industry with regard to stringent requirements by the European Union (EU) for outsourcing information and data, PSEB has issued Recommendatory Guidelines for adoption of Model Clauses for transfer of personal data from the EU to third countries and Binding Corporate Rules for international transfers of personal data. These Guidelines are recommended for Pakistani IT and IT enabled businesses, especially the BPO (Business Process Outsourcing) businesses, looking to process data and personal information being transferred from anywhere in the EU to Pakistan as well as for businesses with a presence in Pakistan and frequently involved in global transfers of data.