BUC Blogs
Pakistan’s IT exports up by 24% to $3.2bn in FY24 Aug 29, 2024
Pakistan’s Information Technology (IT) exports have soared to $3.2 billion in the fiscal year 2024, marking a robust 24% year-on-year increase from the previous fiscal’s $2.59 billion.
The latest data, released by the State Bank of Pakistan, underscores the sector’s resilience and growth amidst global economic challenges.
For June 2024 alone, Pakistan recorded IT exports worth $298 million, up by 33% compared to the same period last year. Despite a month-on-month decline of 10%, June’s exports surpassed the twelve-month average of $262 million, highlighting sustained momentum in the sector.
Several factors have contributed to this surge in IT exports. Firstly, Pakistani IT firms have expanded their footprint in the Gulf Cooperation Council (GCC) countries, particularly Saudi Arabia, where demand for IT services has been steadily increasing.
Secondly, the State Bank of Pakistan’s decision to raise the permissible retention limit in Exporters’ Specialized Foreign Currency Accounts from 35% to 50% has encouraged IT exporters to repatriate higher profits back to Pakistan, boosting overall export figures.
Lastly, a stable Pakistani rupee (PKR) has further incentivized IT companies to
conduct business and bring earnings back home.
Throughout FY24, Pakistan’s net IT exports, calculated as exports minus imports, amounted to US$2.8 billion, marking a 23% year-on-year increase.
In June 2024, net IT exports reached US$256 million, up by 32% compared to the same period last year and surpassing the twelve-month average of US$230 million.
Industry experts and analysts remain optimistic about the IT sector’s growth trajectory, forecasting a continued expansion of 10-15% for FY25, with anticipated exports ranging between US$3.5 billion to US$3.7 billion.
The Pakistan Software Houses Association (PASHA) conducted a survey revealing that 62% of IT companies are maintaining Special Foreign Currency Accounts, underscoring the sector’s reliance on foreign exchange earnings for sustained growth.
Market observers have highlighted Systems Limited (SYS) as a standout performer within the IT sector, with favorable price-to-earnings ratios of 13x for 2024 and 10x for 2025, making it a preferred investment choice amid the sector’s bullish outlook.
Pakistan is the 46th largest market for eCommerce with a revenue of $5.2 billion in 2023.
95 percent of e-companies receive payments for their online orders via cash-on-delivery. This increases the liquidity requirements for e-commerce companies and also forces them to have dedicated teams that manage cash receipts for the company, thereby raising operational costs. The larger players in the e-commerce space have started to utilize digital payments and are optimistic that the industry will come together to coax consumers into moving away from cash-on-delivery to online payments. Digital payments also represent a hurdle for Pakistan’s e-commerce sector. While a number of products like EasyPaisa, JazzCash, and uPaisa – which are mobile banks - are available today, none of them have high market penetration. This, coupled with the fact that only 24 percent of the country’s population has a bank account, significantly increases the cost of doing business for e-commerce companies.
In 2021, the State Bank of Pakistan (SBP) launched an indigenous digital payment gateway called “Raast”, to enable individuals, businesses, and government to conduct financial transactions. This payment system was launched with the intention to enable small-value retail payments as well as provide cheap and universal access to all players in the value chain of the local financial industry.
ISLAMABAD: 9th The National eCommerce Council (NeCC) on Tuesday decided to develop a five-year roadmap and action plan to promote digital trade.
The decision was reached in the council’s 9th meeting, May 29,2024 which was chaired by Commerce Minister Jam Kamal Khan.
Various sector representatives also made presentations to highlight impediments to promoting e-commerce.
It was decided that the new cross-sectoral policy would be presented to Prime Minister Shehbaz Sharif and Foreign Minister Ishaq Dar before the budget session.
To achieve this short deadline, the commerce minister directed the formation of two to three working groups with clear Terms of Reference (TORs), including a group focused on the payments system.
The minister’s directive for a five-year framework comes just as the national budget is set to be announced on June 7. Many experts say it is unlikely that a policy will be developed in such a short period.
The Trade Development Authority of Pakistan (TDAP) representative briefed the NeCC on the performance of the Pakistan Trade Portal (PTP). The portal currently registers 3,555 sellers and 1,342 buyers and lists 8,345 products across 34 cities.
The minister appreciated the TDAP effort to register clients on the PTP in the last three to four months and recommended linking it with other portals to further facilitate clients’ registration.
Secretary Commerce Sualeh Ahmed Farooqui introduced the upcoming Export Readiness Programme (ERP), which aims to train and counsel small businesses to expand their export markets. The initiative is believed to enhance Pakistan’s export capabilities.
Earlier in the meeting, the Director General (Services) provided an overview, setting the stage for a series of presentations on various facets of the e-commerce landscape in Pakistan. The focus was on leveraging technology to enhance market access and competitiveness.
The State Bank of Pakistan representative presented the current state of digital payment systems, emphasising the need for a robust and secure payment infrastructure to support e-commerce growth.
The Pakistan Software Houses Association (P@SHA) discussed the challenges faced by the IT sector and proposed strategies for its growth.
The chain store association and the first-ever bank-backed e-commerce platform, AlfaMall, also highlighted the dynamics of B2C retail e-commerce in Pakistan, providing insights into consumer behaviour and market trends. It also highlighted its potential to revolutionise online retail in Pakistan.
The meeting also reviewed significant achievements since the approval of the National eCommerce Policy in October 2019.
What’s up with WhatsApp
The disruption in WhatsApp services had a much bigger impact for two reasons: it is used by around 50m Pakistanis, and with fixed broadband connections still out of reach for almost half of the country’s population, many use cheap mobile data for communication on WhatsApp.
E-commerce businesses also rely on WhatsApp for customer service.
Downdetector, a website that provides real-time information about internet outages, received an unusually high number of complaints about disruptions in WhatsApp services from Pakistan over the past few weeks.
In response to a query, a spokesperson for the platform said 20,000 reports were received between August 8 and 12, with most of them being about issues with sending voice messages, media and downloading on mobile data.
The complaints, most of them from Lahore, Karachi, and Islamabad, were made by broadband users of three major telcos: Zong, Jazz, and Telenor (now owned by PTCL).
Dawn reached out to Zong, Ufone and Jazz for comment on the issue, but received no response.
Irfan Ali, who runs Lahore-based tech company Xeven Solutions, told Dawn that online businesses use WhatsApp to communicate with clients and their teams.
“This communication includes data transfer. If we’re unable to communicate, it impacts our [performance]. The delivery rate of my company is down by 50 to 60pc due to communication issues,” he said.
Large businesses have the money to build their chat networks (also called chatbots), leaving them immune from WhatsApp distortions. But small- and medium-sized sellers and social media stores who rely on WhatsApp Business for their work are facing losses due to communication issues.
Ahmed Kamal’s company, Cequens, provides WhatsApp API infrastructure to businesses to streamline their customer service. He told Dawn that users who are connected to mobile data are facing issues in sharing data with service providers through chatbots.
These issues have also impacted people who work for online food delivery services, quick commerce stores and ride-hailing apps.
In a statement to Dawn, a Foodpanda spokesperson said internet disruptions posed “significant challenges” for their business.
“Due to sluggish connectivity, platform orders have been impacted, and delivery riders have struggled [to work] effectively to cater to our customer’s demands,” said Hassan Arshad, who is Foodpanda Pakistan’s Policy and Communications director.
“Sustained degradation in internet quality will have a profound impact on our stakeholders’ earnings — particularly delivery riders.”