KARACHI: The State Bank of Pakistan (SBP) has asked for reduction of the duties and taxes on internet and IT devices for rapid growth of IT sector.

According to SBP, fast evolving IT industry requires consistent and concerted efforts to be led by the Prime Minister office or a dedicated Ministry for coordination among public and private institutions.

In Pakistan, the driven by both enabling policies of the government and the central bank, availability of low-cost human capital, and the onset of the pandemic, both IT exports and tech start-ups have witnessed sharp growth in recent years and become one of the leading foreign exchange earning segments of economy.

IT exports mainly led by software and software related exports rose to $2.1 billion in FY22 from $0.29 billion in FY13. However, even after such fast paced growth in recent years, Pakistan’s share in global export of computer services is only 0.3 percent.

However, according to SBP, one of the major hurdles limiting the mass proliferation of IT relates to its affordability and availability, especially for the rural population. “To remedy that, the duties and taxes on internet and the devices used to access it need to be reduced”, SBP suggested.

The SBP in its recent report on economy discussed the IT sector performance and challenges in detail and said that the development of software, technology start-ups and other IT related sectors is not about choosing IT industry as a winner among others; it’s about digital transformation of the economy at large and enabling leapfrogging.

In recognition of this, SBP said, a host of policies and regulations by various ministries and government organizations have laid the right foundations.

“However, the fast evolving IT industry and the enormous nature of this task requires consistent and concerted efforts to be led by the Prime Minister office or a dedicated ministry to direct, coordinate, and align private and public sector actors, sectoral policies and institutions across the country”, the SBP suggested.

Technological advancement offers developing economies an opportunity to leapfrog and catch up with the developed world faster than ever before. However, timely adoption of digitalization is needed to be at the forefront of technology.

The pace of digital transformation and the ongoing fourth industrial revolution is much faster than earlier technologies, which took decades to develop and spread across countries. This means the cost for inaction or late action can be huge.

The report said that the recent growth in Pakistan’s IT exports and start-ups deals may be seen as emerging signs of digitalization.

However, domestic market size of IT and software is insufficient to help the industry scale up; the firms in the sector are very small; and their exports lack market diversification. The start-up ecosystem is still very young and concentrated only in two sectors including fintech and e-commerce.

“For continued growth in these areas and to be amongst early adopters of digital transformation, if not leaders of innovative technologies, it is essential that individuals, federal, provincial and local governments, and businesses across sectors embrace latest technologies”, it added.

The government, as one of the largest IT consumers, can generate demand by digitalizing its services and operations of the public sector. This will bring efficiency in government’s own operations, create facilitative business environment, and improve public services provided to citizens.

Secondly, it will provide the opportunity for the typically small domestic IT firms to develop tech-based solutions for the government allowing them to scale up and professionalize before they can compete in international markets.

Educational institutes and training centers must also be proactive and forward-looking in bridging the supply-demand gap of human capital in IT industry, and keep pace with the fast evolving advanced skills.

Especially needed to increase local investments in areas of edtech, healthtech, and other areas of economy where technology can potentially address Pakistan’s long standing challenges, including those related to savings, insurance, taxation, and documentation of informal economy.

Copyright Business Recorder, 2023