Foreign direct investment in telecom
The telecom sector has been a star performer lately when it comes to foreign direct investment. The sudden rise in telecom FDI this fiscal, however, owes mainly to the license renewal. Telecom companies have made partial payments to renew their right to operate in Pakistan. The government, meanwhile, pocketed valuable non-tax revenues to meet IMF targets. There have been rounds of inflows and outflows in the telecom sector but since the ministry is vacant, the government needs to come up with some ideas for sustaining high level telecom FDI as there are plenty of avenues. The issues of declining average revenue per user and regulatory uncertainties could be addressed by instituting a fairly-priced and predictable spectrum-auction regime, offering fiscal incentives for greater fiber-optic connectivity, and making it easy to invest in telecom tower business.
Pakistan, with more than 30 percent population between the 15-20-year age brackets, is touted as one of the financially attractive destinations for outsourcing services. With more than 5,000 IT companies providing services to entities in around 100 countries, Pakistan information communication technology (ICT) sector is undergoing a boom as more than 10,000 application developers, freelancers enter into the workforce each year. The export sector remains focused on animation, software development, gaming, systems integration, billing and telemarketing services. Pakistan’s information technology (IT) and IT enabled Services (ITeS) export remittances have surged to $550.503 million at a growth rate of 24.71 percent during the first six months of the fiscal year 2019-2020 (July-December), compared to $441.435 million during the same period last year.
The number of Pakistan Software Export Board (PSEB) registered IT & ITeS Companies has risen to 2,163 as of December 30, 2019 compared to 1,873 valid registrations as of December 2018 at growth rate of 15.5%. The size of the country’s total software sector is likely to grow further by more than 3 percent during the next five years. The government is also trying to boost software exports to $10 billion. Following steps have been taken so far:
A 40-acre software city will be constructed in Islamabad.
All Pakistani organizations will use locally developed software.
The government will also be putting together a relief package for small software exporters and abolishing the double tax being levied on exporters by both the provincial and federal governments.
Exporters will be given foreign currency at better rates than what’s in the market.
Pakistan is ranked 4th in terms of broadband internet growth in the world. Due to the emergence of 3G and 4G, the size of e-commerce market, one of the most important drivers of a digital Pakistan, is expected to grow up beyond US$ 1 billion by 2020. Pakistan is making good progress on Business to Business (B2B) front as software industry has achieved the goal of US$ 5 billion export mark through software development and service out-sourcing. Furthermore, the IT industry has various medium-sized IT firms earning nearly US$ 530 million. Consumer buying trend in Pakistan is also not just limited to buying products online, there are also websites for cars, property and travel, which shows that consumers in Pakistan are using internet to experience a wide range of economic activities.
[box type=”note” align=”” class=”” width=””]The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan[/box]