Pakistan’s ICT Exports Hit Record High Crossing $3 Billion Mark

Pakistan’s information and communication technology (ICT) exports have been reaching record highs, recently hitting $332 million in May. On a trailing 12-month basis, the proceeds have now surpassed $3.15 billion, finally crossing the $3 billion mark. While this is a significant achievement, examining the longer-term trends reveals a more complex picture.

In 2023, ICT exports grew by only 2.5 percent. Despite the record-breaking numbers, this growth rate is the slowest observed in the ICT sector over the past 14 years, with telecom services exports even experiencing a slight decline of 0.5 percent.

The global macroeconomic slowdown, with some major markets dipping into mild recessions and interest rates remaining high, has likely impacted Pakistan’s ICT industry. In such an environment, spending on discretionary projects is often restrained. Even major companies like Infosys and Tata Consultancy Services have faced sluggish periods recently.

Pakistan’s ICT Exports Hit Record High Crossing $3 Billion Mark

However, comparing Pakistan’s situation to that of these industry giants is not entirely fair. Pakistan’s entire ICT exports are just a fraction of what Tata or Infosys earn in a year. According to the State Bank of Pakistan, nearly two-thirds (65 per cent) of all computer services and 80 per cent of software consulting firms in Pakistan generate revenue under $100,000. This indicates that global economic conditions do not significantly affect the sector, as customer spending at this scale is less elastic.

Between 2017 and 2022, ICT has been the best-performing category in services exports across all regions except Oceania, where it was the runner-up. However, Pakistan’s share in this global value chain is a mere 0.0003 per cent. This small share is also highly concentrated, with nearly half (47 per cent) of the proceeds between FY13 and FY22 coming from the United States, amounting to $9.15 billion. The United Arab Emirates was another significant market, contributing over a quarter (26.5 per cent).

See Also: SECP Introduces Restrictions on Small Digital Loans

Pakistan has yet to make a meaningful impact in other major markets. For instance, the country earned just $533 million from Singapore between FY13 and FY22, despite Singapore being one of the top five importers of ICT services globally. This highlights a missed opportunity to expand beyond traditional hubs and tap into a truly global market.

Technology exports are crucial for addressing Pakistan’s economic challenges, particularly those related to the external account. Over the last two decades, ICT has been the primary driver of growth in the services sector. ICT exports have grown elevenfold since 2006, compared to overall service exports, which grew just 2.2 times during the same period.

Unfortunately, recent trends show a decline. The State Bank of Pakistan projects a dip in the ICT sector’s gross domestic product in the fourth quarter of FY24, marking the sixth such instance in the last eight quarters. This is a stark contrast to previous years, when the ICT sector was a significant growth driver.

There is a silver lining, however. Pakistan’s current ICT export levels are similar to where Japan was 11 years ago. Japan has since grown its ICT exports to over $10.3 billion as of 2022. Poland and Romania have also experienced similar growth trajectories. With the right policies, Pakistan can potentially catch up to the $10 billion mark. However, this requires moving away from the status quo. The latest budget missed an opportunity to implement meaningful reforms for the sector. Policymakers should not be complacent with the recent uptick in proceeds but should instead adopt a holistic approach to set a better course for the future.