The Ministry of Information Technology and Telecom has highlighted critical constraints affecting the growth of Pakistan’s IT and IT-enabled Services (ITeS) sector in a report submitted to the federal government. Chief among these challenges is the inconsistency in government policies, particularly concerning taxation.
The report points out that frequent changes in tax policies, including fluctuating tax exemptions, credits, and final tax regimes, have created significant obstacles for IT businesses and freelancers. These policy inconsistencies have eroded business confidence and hindered efforts to attract IT export revenues through official channels.
Additionally, the report identifies significant issues within Pakistan’s banking system, which complicate the use of formal banking avenues for IT exporters. Restrictive banking policies have led many exporters to retain their earnings overseas, negatively impacting remittance inflows.
While the State Bank of Pakistan’s recent relaxation on equity investment abroad has provided some relief, the ministry emphasizes the need for further policy changes to facilitate financial transactions and support sector growth. The report also highlights challenges posed by current travel policies, which limit travel flexibility for IT and ITeS professionals, thereby restricting inbound investments and outbound client interactions.
A major constraint identified is the shortage of skilled human resources. The ministry notes a significant gap between the demand for skilled professionals and the supply of graduates with the necessary technical expertise. Although approximately 75,000 IT graduates enter the workforce annually, fewer than 10% possess the skills required for export-oriented roles, largely due to inadequate training programs. This shortage impacts productivity and limits the ability of IT and ITeS firms to compete internationally.
The report also underscores the lack of IT-ready infrastructure as a barrier to growth, particularly in secondary and tertiary cities where affordable technology parks and infrastructure are scarce. This scarcity restricts IT firms from scaling their operations effectively, resulting in lost opportunities for both domestic and international expansion.
Additionally, limited access to capital for IT small and medium enterprises (SMEs) is cited as a fundamental hindrance, with most SMEs unable to secure the funding needed to scale their operations and reach broader markets.
The ministry stresses the need for enhanced international marketing and business development to promote Pakistan as a preferred outsourcing destination. Current promotional efforts are deemed insufficient, with the sector requiring substantial funding increases to strengthen Pakistan’s global presence.
Despite a 24% rise in export remittances, totaling $3.223 billion in FY2023-24, the report calls for long-term, focused fiscal incentives to encourage companies to bring more of their foreign earnings to Pakistan, which could help alleviate national fiscal pressures.
