LAHORE: Systems Limited CEO Asif Peer has suggested a set of overarching reforms to boost IT exports from Pakistan in the wake of Covid-19 pandemic.
Speaking to a local publication, Asif Peer said that the pandemic offers a great opportunity for IT companies across Pakistan, and Systems Limited in particular, to boost up their exports and grow.
The CEO said that the work-from-home model has proved itself, besides, the pandemic has forced many businesses to explore digital transformation, cloud services, disaster recovery, and so on, bringing technology to the forefront.
“This has opened up opportunities for information technology companies like Systems Limited to grow.”
He claimed that the fortunes of all global technology companies have risen during the pandemic because of the digital transformation journey that is taking place.
Talking about the government’s role in placating the impact of the pandemic, Asif acknowledged that the government’s decision to keep call centers open was crucial to sustain the BPO industry. However, he suggested government interventions on numerous policy fronts to take IT exports ahead.
Asif elaborated that under current policy, IT exporters were allowed to obtain Export Refinance Facility (ERF) to the extent of 50 per cent of the export remittances received during a certain tax year that most of the companies can hardly utilise because banks require hard collateral (fixed assets) to extend the facility.
“There should be at least 20 per cent of value of export remittances that should be allowed under ERF without any collateral. This will ensure that even small IT setups can avail the facility to further grow their businesses,” he said.
“To enhance exports, IT companies need to explore other markets. This has been a challenge due to restrictions in remitting funds outside of Pakistan to establish subsidiaries or support subsidiaries in their working capital requirements,” Asif elaborated.
He recommended that IT companies should be allowed to make foreign investments in a subsidiary as per some limits.
“New exporters should be allowed to remit up to $100,000 directly through authorised banks. For existing exporters, if the value of export remittance is between $1 million to $5 million, they should be allowed to remit up to $500,000 directly through the authorised bank. And if exports are over $5 million, investment should be allowed up to $1 million directly through the authorized bank. These limits should be allowed once a year; provided the company continues to be an IT exporter,” he elucidated.
A key factor Asif highlighted that impedes growth of IT companies were impediments in making foreign investments in subsidiaries.
Asif further commented that foreign subsidiaries of IT companies usually are liaison offices and were unable to secure direct financing from banks to meet their working capital requirements due to not having the required collaterals to secure the financing.
“To resolve this issue, SBP should allow local banks to issue cross-border corporate guarantees to their foreign branches to the extent of 20 per cent of export remittance of the parent company. This will help the foreign subsidiaries to avail banking facilities backed by the parent company’s position,” he said.
“Furthermore, Pakistani IT companies at times need to acquire companies in the target markets so that they can shift their work offshore. The publicly-listed IT companies in Pakistan will often use their shares as equity swap to acquire target companies. Hence, these companies should be allowed to swap equity for investment up to 25pc of their average export remittances of the last three years,” said Asif.
The CEO also called for a uniform federal and provincial sales tax regime as the current taxation system was overrun with anomalies. He recommended that the government should synchronise provincial and federal sales tax rates on goods and services, reduce provincial sales tax rates, rationalise minimum tax on services and introduce a provision to carry forward minimum tax.
Besides this, the CEO recommended consolidation of government entities trying to promote the IT industry and their budgets, to improve efficiency and consensus among these departments.
