Cash reward expected to net $3 billion in IT exports

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KARACHI: Pakistan’s tech players see official IT exports at three billion dollars within next two to three years as cash reward and other incentives announced by the last government are expected to motivate businesses to get documented.

Currently, the State Bank of Pakistan estimates annual IT exports at around one billion dollars; although the unofficial tally is around $2.5 to three billion dollars.

“Freelancers, drop shippers and small ecommerce players prefer to remit export receipts in their personal accounts,” Barkan Saeed, chairman of Pakistan Software Houses Association told The News on the sidelines of an event late Friday. “A main challenge is to get them documented.”

At the end of its tenure, the last government of Pakistan Muslim League (Nawaz) announced five percent cash reward for IT exports in addition to what the industry players said ‘unprecedented measures’.

A six-year extension in exemption of income tax on exports was another titillating incentive for the local firms engaged in tough battle to claw back businesses from Indian, Bangladeshi and south east Asian rivals. The exemption would have ended its life in June 2019. Five percent sales tax in Islamabad capital territory is to promote businesses. Other provincial governments vowed to consider the reduced rates.

Bangladesh is already giving a 10 percent cash reward to IT exporters, while India offers it for subsectors given its IT industry size of $150 billion.

Cash reward is also expected to motivate exporters who keep 20 to 30 percent of their earnings in foreign countries to pay salaries to bring their funds back home.

“Exporters should be incentivised to bring funds back to the country,” Saeed said.

The country has no clusters or special economic zones for IT industry. Pasha chief said India and Philippines have used the same model.

Over the last four year, Philippines has developed special economic zones for IT companies, providing tax reliefs, subsidised land and other facilities and one-window operation to cope up with bureaucratic hurdles. The country brought its exports to $25 billion a year.

President Jehan Ara of Pasha, addressing the networking session, said the whole IT industry is at a stage “where we can really show the world what we can do”.

Jehan Ara said secretary commerce Younus Dagha, during a recent visit, announced setting up of a 24-story IT tower in Karachi in addition to expansion of the city’s expo centre.

Shujaat Ameer, head of business and customer service at a data firm Peekaboo said marketing is a tough job. “I have to visit seven banks before I could sell my product,” Ameer told this scribe, demonstrating on the app how banks and other companies harness data. “We are using heavy words like AI, machine learning. But, we are really at an evolutionary stage.”

Tech entrepreneurs are wary of dicey political situation. They keep their fingers crossed for the measures announced by the last government not to be retracted.

The last government has shown trust on us and commitment, they added.

“We are hoping that one of these two whom we have worked together forms the government,” a senior industry official said referring to PML-N and Pakistan Tehreek-e-Insaf in Khyber Pakhtunkhwa.

“In case of hung government, nobody knows what’s going to happen,” he added, requesting anonymity.

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