Let us for a moment forget about why the caretaker minister for Information and Technology is busy unveiling strategies to export IT products and services over the next five years. Let us also, just for the sake of it, forget how badly researched and presented this policy was.
Instead let’s take a look at just what these proposed “IT exports” are, where Pakistan stands in this sector on the international market, and what potential paths to growth there are in this case.
Very briefly put, IT exports is an umbrella term that includes both goods and services related to the field of information technology. That would mean on the goods end of the spectrum products like computers, software, mobile phones, and most manner of computerised electronics. On the other hand, IT services include individuals and companies providing clients with solutions to problems such as security services, data management, software as a service, cloud computing etc.
It is a pretty significant difference. To dumb it down, it is the difference between running a business and doing work for a salary. Pakistan is already a service sector oriented nation. And this is also true in the case of the IT sector.
The size of the pie
We need to start by measuring up just what the IT industry holds in Pakistan. Data from the Pakistan Software Association (P@asha) indicates the estimated sector size is $280 billion, with more than 12000 companies operating in Pakistan and contributing nearly 5% to the GDP. All of this amounts to a total export revenue of just over $2 billion. Naturally, our current numbers are miniscule as compared to other regional players.
Not only this, but a vast majority of this sector is focused on services rather than goods. Data from the SBP indicates that services account for nearly 70% of the already meagre funding that this sector receives showing a very clear preference.
And here is the catch, these services do not just include software services. In fact, this also covers many IT companies operating in Pakistan that hire young talent at good salaries in PKR before placing them on projects that they have from foreign clients that pay them in dollar terms. This 70% also includes services like website development and management, social media marketing, content creation etc. So if you have any friends or know any youngsters that are “content writers” on upwork they are considered a part of our IT exports.
In the IT-export policy unveiled by caretaker minister Umar Saif, he said the plan is to add 200,000 skilled professionals to the workforce, increasing exports to $5 billion. The eventual aim is to propel the nation’s IT exports to $10-$18 billion by 2028. Other than the platitudes about increasing skilled workforce and promoting exports, there really doesn’t seem to be much of a plan.
As Profit’s columnist Asif Saad sums up in this week’s column, “we are educating and training for low-quality skills and using these resources to service international customers for basic services. This implies that we do not have products to sell. We are only cheap suppliers of service and the output of hundreds of Information Technology institutes is basically following the demand from the lowest end of the IT universe.”
The gig workers
Perhaps nothing is proof of this than the rising number of gig workers making up this IT sector in Pakistan, particularly on the exports side. Freelancers in the country earned around $400 million in both 2021 and in 2022 which accounts for about 15% of Pakistan’s total $2.6 billion ICT (information-communication-technology) exports. At the recently held 16th edition of the annual ‘Managing Pakistan’s Economy’ hosted by the Lahore School of Economics (LSE), Dr Theresa Azam Chaudhry presented a paper titled “The Global Gig Economy: Pakistan’s Opportunity to Become a Leader in Service Exports.”
Pakistan contributed to over 8% of the global gig economy. Pakistan stands at 4th position due to a rising number of qualified graduates who are working by freelancing their expertise. These young graduates do not find jobs that pay them as per their skills so they simply do work at cheaper rates for foreign clients — a classic example of employment arbitrage.
“There are many different kinds of gig-workers. The most well paid ones are software engineers and people that can code. For that, however, a lot of people have set-up entire companies in Pakistan. They hire talented graduates at a competitive salary range and get them to work for many clients that they have. The graduates doing the work barely get a cut,” explains one person that worked at one such software house before becoming a freelancer. “I am making much more money freelancing now, but it took me time to build a profile and gain the trust of regular clients.”
That is generally a problem. The research paper presented at LSE was based on data scraped from the popular freelancing website Guru.com. The data of Pakistanis on the platform revealed that out of the 85,314 freelancers that were members of this platform only about 1100 (1.3%) ever completed a transaction. This means that almost 99% of the people that sign up for these websites do not end up finding clients. Now put this into context. As mentioned before, freelancers are accounting for about 15% of Pakistan’s total ICT exports — and these are just individual freelancers. On top of this, IT services like web development, logo design, graphic designing, and developers of mobile apps and java actually fell while non-IT services such as content writing, translation, and virtual assistantship rose. This means that there is a growing demand for gig-work among young individuals that are not able to meet their needs from the job market in Pakistan.
This means that a lot of the talk about rising IT exports we have heard in recent days has been the doing of enterprising young men and women that are charting their own course in the international workforce. While it should not be the job of any caretaker setup to be setting out policy or making recommendations for years and years ahead, one would hope they would at least do a good job of going beyond their mandate.
For a dissenting opinion and alternative opinion on the IT exports policy, read on in this piece by Profit’s in-house tech expert Taimoor Hassan: Dissenting note: Here is what the government might be thinking