PM Khan keen to set up Special Technology Zones for IT industry

Lahore: Prime Minister Imran Khan has shown keen interest in setting up Special Technology Zones (STZs) for the IT industry to support its growth and improve ease of doing business.

He expressed support for the idea in a meeting with a delegation from Pakistan Software Houses Association (P@SHA) and other representatives of the industry on Thursday. The prime minister resonated with the industry, telling the delegation he saw a lot of potential and growth in the IT sector.

The meeting was was also attended by Minister for Information Technology, Syed Aminul Haq, Minister for Information, Senator Shibli Faraz, Minister for Industries, Muhammad Hammad Azhar, Advisers Dr Abdul Hafeez Sheikh, Dr Ishrat Hussain, Abdul Razzak Dawood, Special Assistant Dr Shahbaz Gill, federal secretaries, Chairman FBR, Governor State Bank of Pakistan (SBP) and representatives of various companies belonging to the IT sector.

“The IT industry demanded Special Technology Zones (STZs) to provide opportunities for medium and small scale IT enterprises to have less infrastructure cost and overheads to enable them to do their business and earn exports and remittances for the country,” a source told Profit, elaborating the context of the meeting.

Though the proposal made headway earlier and reached the Planning Commission, the budget for it was never approved. The stakeholders are now hopeful that PM Khan has shown a lot of interest in it and he has directed that the details be shared with him and he wants to see it happen.

“PM Khan is himself very interested in seeing this succeed and he will issue instructions and the Planning Commission would have to find ways to get it through now,” said another source.

Two years ago, P@SHA, the official body that represents the IT industry, had recommended the federal government set up IT Clusters, known STZs. The concept was to emulate  Special Economic Zones (SEZs) for other industries, but with certain incentives specific for the IT industry to promote its growth. The proposal was presented during the tenure of Pakistan Muslim League Nawaz (PML-N) government when Anoushay Rahman was the IT Minister.

STZs were P@SHA’s top most recommendation. All the countries that currently excel in IT have STZs like in Singapore, Philippines etc. India, for instance, has over 100 STZs.

In a clustered environment for the IT industry, P@SHA had recommended dedicating clusters of land in major cities with specialised infrastructure, like plug and play buildings, for IT companies. STZs have low land rental, less sales and withholding tax, less utility bill charges, which are all incentives to bring investors and incentives that are necessary for small IT companies to thrive in a low cost environment.

“IT companies get projects that require plug and play and power backups. This is the sort of infrastructure that is necessary for its growth. High rise technology parks do not work it for the IT industry because these buildings have high rentals which increases cost of doing business,” a representative from P@SHA told Profit.

The IT industry has also been pushing to keep FBR in check, with their undue notices to IT companies that increases cost of doing business because businesses are required to respond to these notices that incurs untimely costs. That is also an issue that the industry stakeholders believe could be solved with setting up of STZs with one-window operations, which reduces the cost of doing business.

P@SHA had recommended the government to build these clusters in larger cities first and then move onto setting these up in smaller cities.

“It is encouraging that the prime minister considers IT to hold key to Pakistan’s success,”  said P@SHA Chairman Shahzad Shahid while talking to Profit. “He [the PM] did not only listen to our demands, but also acknowledged our challenges and assured us of quick actions from the government,” he added.

Shahzad further said that P@SHA stressed that ease of business, affordable infrastructure and domestic demand are catalyst of Pakistan’s IT exports growth. “P@SHA will continue to work closely with the government bodies including IT Ministry to ensure the right policy changes so that the exports target of $5 Billion is achieved way before 2025,” he added further.

Besides setting up STZs, P@SHA had also proposed improving the image of Pakistan as a country with high IT potential. The proposal, termed as ‘Brand Pakistan’, urged the government to create an ‘Export Marketing Fund’ for sizing of the industry that how large the IT industry is in Pakistan. There are currently no official numbers that outline how large the IT industry is.

The proposal included doing market research on estimating the size of IT industry in Pakistan and creating a country report. Following that, to improve ‘Brand Pakistan’, IT exhibitions and conferences should be organised in Pakistan, and people should be sent from Pakistan to attend IT conferences and exhibitions abroad.

Furthermore, the proposal recommended for Pakistan to get its name included in reports on IT by Gartetner, Mckinsey and World Bank that investors use to determine where to invest next. Currently, these reports carry the names of Sri Lanka and Bangladesh for IT investments in respective countries but does not include Pakistan.

The proposal on creating Export Marketing Fund is also with the Planning Commission presently alongwith the proposal on creation of STZs, waiting further progress..

Third proposal floated with the government was of demand generation, which is the by-product of ‘Make in Pakistan’ campaign. Under the proposal, P@SHA and relevant stakeholders have urged the government to outsource IT projects to local industry.

The government was urged that the federal and respective provincial governments should outsource their projects to the local industry instead of creating government institutions for such projects that might now even be bigger than many private software houses in Pakistan. This stands completely against supporting the local industry when government departments are bidding for IT projects against local industry.

The final proposal seeks a 5-10% cash reward against exports for the IT industry. That industry stakeholders assert that cash rewards will help bring transparency in the economy and businesses will start reporting to the government instead of running away from fear of intimation by government departments like the Federal Board of Revenue (FBR)