Pakistan’s IT cos like incorporating in Dubai: ease of payments is just one of many reasons
Dubai’s appeal as the preferred destination for Pakistan’s software companies has a lot to do with the streamlined payment process, favourable business environment, and better enforcement of contracts among a number of other reasons.
These factors were highlighted by IT sector companies that added that the emirate’s location and infrastructure act as icing on the cake.
“The advantage of incorporating in Dubai is the seamless access to Stripe and Paypal, facilitating payment collection from our clients,” Danish Ayub, founder of software company Carpe Diem that has incorporated in Dubai, told Business Recorder in an interview.
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“We can effortlessly integrate our merchant account onto our website, enabling easy purchase transactions for our international clients using their credit cards.”
While Pakistan has struggled to attract a player like PayPal – despite repeated assurances from several ministers over the course of several years – access to payments systems is just one reason why firms look to incorporate their office in Dubai.
Additionally, many believe Pakistan’s financial system is too tightly regulated – Pakistan was ranked 119th when it came to ‘getting credit’ on the World Bank’s Ease of Doing Business Index and a poor 161st when it came to paying taxes. The worst score on the index is 190.
In comparison, the UAE does not have a single rank in three digits across all metrics on the World Bank’s Ease of Doing Business Index. A more favourable tax regime – income and corporate – has also attracted capital from all around the world.
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“While Pakistan offers similar services, cumbersome sign-up formalities and extensive documentation requirements make the process lengthy and tedious,” added Ayub, who also highlighted technical issues in the country.
“Integrating our website with their systems is challenging due to outdated APIs.
“These obstacles make it more practical to incorporate elsewhere, like Dubai, where receiving payments is streamlined. Meeting international security standards is crucial for processing credit card transactions on our website, a requirement not easily met in Pakistan.
“Despite Dubai’s 9% corporate tax, the simplicity of payment processing renders this tax insignificant,” Ayub concluded.
Former chairman of Pakistan Software Houses Association for IT and ITeS (P@sha), Syed Ahmad, also highlighted that many IT exporting companies opt to incorporate in countries such as the US, England, and Dubai.
However, he emphasised that Dubai stands out as the most accessible option for Pakistani companies especially for small and medium enterprises.
Ahmad elaborated that incorporating companies outside Pakistan offers more than just payment facilitation.
This factor relates to clients’ preference to deal with entities based outside Pakistan.
Ahmad cited travel advisories against Pakistan in many countries and the challenges nationals face when traveling abroad as reasons for this preference.
Moreover, Ahmad noted that foreign companies are wary of signing contracts solely with Pakistani entities due to concerns about legal enforceability of contracts and the perceived difficulty in pursuing legal action.
He explained that companies feel more at ease signing contracts with entities incorporated in locations like Dubai because of the perceived ease of recourse in case of contract breaches.
The UAE is ranked a highly ninth – out of 190 – on enforcing contracts. It is also ranked the first on the metric of ‘getting electricity’.
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Experts believe incorporating an office in Dubai offers Pakistani software companies a strategic advantage, enabling them to leverage a global hub with required infrastructure and a proper legal framework.
They highlighted these reasons as areas Pakistan’s policymakers need to work on, drawing lessons from Dubai and other financial hubs to ensure improvement in the country’s ranking as well.
Copyright Business Recorder, 2024
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