Pakistan could potentially boost its IT services exports to $10 billion in the near future, according to a recent study by the Pakistan Institute of Development Economics (PIDE).

However, the study emphasizes that “strategic policy interventions are essential across short and long-term horizons to propel the IT industry into a robust era of sustainable growth and global competitiveness.”

IT exports for the first four months of FY25 (July-October) reached $1.21 billion, while exports in FY24 clocked in at $3.2 billion.

Currently, Pakistan ranks 45th globally in software exports, despite having several strengths. For example, while Systems Ltd in Pakistan started around the same time as Tata and WIPRO in India, it only has an annual revenue of $189 million compared to Tata’s $26 billion and WIPRO’s $11 billion.

A report by PwC Pakistan suggested that the country could grow its IT/ITeS export revenues to $10-$18 billion by 2028, making Pakistan a global IT hub. However, it noted that “the export market growth will be sub-optimal if the macro-conditions in the country are not also made more favorable.”

The software industry, unlike textiles and sports goods, faces minimal physical limitations but has struggled to scale up due to factors like insufficient technical skills and a lack of coordinated effort to build the IT industry.

The PIDE study highlights the need for improvements in Pakistan’s education system to focus more on STEM education and continuous learning. It also calls for a coordinated approach involving government support, industry alliances, and educational institutions to create a vibrant ecosystem for innovation and growth.

“Many IT firms in Pakistan suffer from incoherent and poorly developed strategic frameworks,” the study notes.

It stresses the importance of a coherent strategy, engagement in mergers and acquisitions, and the establishment of effective boards of directors to provide strategic direction and drive operational excellence.

The study also points out that the IT industry has primarily relied on commoditized growth avenues such as BPO and basic software development services, which are prone to rapid saturation due to high competition.

The industry needs to evolve towards more innovative and high-value IT services to ensure sustainable expansion and value creation.

Moreover, Pakistan’s IT industry faces considerable talent challenges, including brain drain and skill gaps.

Addressing these through robust talent development programs and creating attractive career prospects is essential for retaining top talent.

It also suggests creating a favorable business climate through regulatory reforms, tax incentives, and fostering relationships with global tech giants to attract international companies to establish offices in Pakistan.

Encouraging university startups and fostering a startup culture at the university level can help close the knowledge gap between industry and academics.

EXPANDING DOLLAR ACCOUNT CAPABILITIES

PIDE study suggests to enhance the economic flexibility and stability of IT companies in Pakistan, it is essential to advocate for policies that support the expansion of dollar account capabilities within the country.

Allowing IT companies to maintain dollar accounts domestically eliminates the need for opening accounts abroad, streamlining financial operations and reducing foreign exchange risks.

By increasing the holding capability of these accounts, the government can empower IT firms to manage international transactions more efficiently, fostering a conducive environment for business growth and investment.