Pakistan’s IT sector could earn up to $2 billion if banking regulations are changed

Pakistan’s currencies could rise by up to $2 billion if banking regulations are changed to allow faster payment options for IT companies that keep their revenue offshore to pay customers more easily.

The government’s current IT strategy is apparently weak, meaning the industry was operating well below its potential.

Uzair Arshad expressed his thoughts in an exclusive interview. Uzair is a fourth generation entrepreneur, computer science graduate and founder of Emblem Technologies, one of Pakistan’s leading software game production companies.

He said current IT policies were not feasible as they did not define the government’s digital agenda and commitment.

“To impose authority, IT policy must also lay the foundation for a governance structure and a plan to achieve clearly defined and quantifiable results. The successful implementation of a digital strategy cannot be left to one ministry alone. Its ownership must extend beyond government departments, ministries and programs,” he stated.

Through long-term investment and government commitment, India has attained status as an international hub for the IT industry. Because achieving IT-led growth requires a long-term commitment, such a strategy requires public-private collaboration.

Pakistan’s IT policy makes no mention of human resource development. Accordingly, Pakistan must implement a policy of brain gain.

“Brain gain means attracting not only ‘Wapistanis’ (Pakistanis returning from abroad), but also foreign nationals who can lead Pakistan’s IT industry to greater heights,” he said, citing IIT (Indian Institute of Technology) as an example of how the Indian government has brought foreign brains to India who have educated, trained and now led the industry.

India employs nearly 5 million IT workers and its IT exports total around $150 billion. This was accomplished through the long-term policy. Pakistan, on the other hand, employs about 300,000 people, with a reported sectoral export of $1.9 billion.

Uzair said most Pakistani IT companies have a global presence and other overseas offices, despite problems with banking rules. These organizations prefer to use only a portion of their global revenue to pay for the maintenance of their local infrastructure and staff.

Because “it is not easy to transfer money out of pakistan to pay for other overseas expenses and maintenance of the team like freelancers, consultants and international teams and maintenance of international infrastructure, IT companies kept their money offshore.

Pakistan’s software exports amounted to around $1.9 billion in the financial year 2020-21. Just changing banking laws could increase it by $1 billion to $2 billion, according to Uzair.

Uzair continues on the subject, admitting that it was not practical to build an electronic cable in Pakistan since the government wants to block dollar thefts, which the IT sector knows. However, for many businesses, this has created additional barriers to sending payments to their overseas headquarters.

For example, while paying freelancers, a company cannot pay to a personal account using the company account. To perform tasks in the IT sector, you need to recruit high-quality freelancers. Moreover, companies were not able to keep 100% of their brought money (earned by exporting software and IT services) in USD accounts. Payments for their server fees, online software and other services cannot be made in USD. It is debited from a company’s PKR accounts, which adds about 10% to the interbank exchange rate.

There are also unnecessary administrative delays in banks crediting payments abroad. Even if the funds are received, they are not instantly deposited into the bank account. In some circumstances, it takes them almost 8 hours of work to reconcile the payments. Similarly, banks require a signature on R forms before they can credit it, which is a significant manual step dependent on the availability of signers.

These banking laws are hampering the expansion of the sector and need to be rectified as a matter of priority, as the IT sector operates internationally in addition to physical offices, according to Uzair.

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Michael J. Birnbaum