Pakistan’s IT sector has shown significant growth, with exports reaching $3.2 billion in FY2024, a 24% increase from $2.59 billion in FY2023. India leads the region with IT exports of approximately $250 billion in 2024, while the Philippines also boasts a strong IT and business process outsourcing (BPO) sector, which contributes significantly to its economy. Pakistan ranks second in South Asia, behind India, in computer services exports (Classification 9.2). However, globally, it is positioned lower, around 31st in exports for computer services in 2020, with a 0.2% market share.

Main IT Export: Pakistan’s primary IT exports fall under Classification 9.2, Computer Services, which accounted for $1.666 billion in FY2021, representing 78.6% of its telecommunications, computer, and information services exports. These services include software development, IT consulting, and business process outsourcing (BPO), with a focus on low to mid-tier services like web development, basic app development, and network support. Key markets include the United States (17.3% of total exports), the Gulf Cooperation Council (GCC) region, and Europe, with a growing client base in the GCC due to relaxed retention limits and currency stability.

Impact on Competition and Clients

Competition:

• Regional Rivalry: Pakistan competes with India and the Philippines, which benefit from lower labor costs and more developed IT ecosystems. India’s IT exports, driven by high-tech services like AI, blockchain, and enterprise software, dwarf Pakistan’s at $250 billion. The Philippines excels in BPO and call center services, leveraging English proficiency and cost advantages. Pakistan’s lower labor costs are an advantage, but its focus on low-tech services limits competitiveness in high-value segments.

• Challenges: Pakistan faces hurdles like outdated tech curricula, a shortage of skilled professionals in high-demand fields (e.g., blockchain, IoT, data science), and inconsistent policies, which drive brain drain to places like the UAE. These factors make it harder to compete with India’s robust R&D and the Philippines’ established BPO infrastructure.

• Opportunities: Pakistan’s Revealed Comparative Advantage (RCA) in computer services suggests potential to capture niche markets, but it needs to improve technology parks and policy consistency to rival India and the Philippines.

Clients:

• Client Base Expansion: Pakistani IT firms are expanding globally, particularly in the GCC, due to relaxed foreign currency retention policies (from 35% to 50%) and rupee stability, encouraging repatriation of profits. Clients benefit from cost-effective services, with Pakistan offering rates as low as $15/hour for low-tech IT services compared to $40/hour for high-tech services in other countries.

• Quality Concerns: Clients often face challenges due to Pakistan’s lack of exportable original software and reliance on foreign software customization. Slow internet and firewall issues also impact service delivery, though firms have still managed growth.

• Client Trust: Initiatives like the IT and ITeS Export Strategy and the Pakistan Startup Fund aim to build trust by improving workforce skills and allowing IT firms to invest abroad, enhancing service reliability.

Growth Potential

Pakistan’s IT sector has substantial growth potential, with projections targeting $5 billion in exports by 2025 and $10–18 billion by 2028, potentially quadrupling current levels. Key factors driving this potential include:

• Government Initiatives: The IT and ITeS Export Strategy, led by the Ministry of IT and the Pakistan Software Export Board, focuses on training 200,000 IT professionals and improving infrastructure. The Special Investment Facilitation Council (SIFC) aims to enhance nation branding and attract FDI.

• Policy Reforms: Allowing IT firms to retain 50% of their earnings in foreign currency accounts and investing abroad boosts exporter’s confidence. Consistent policies could reduce brain drain and encourage reinvestment.

• Market Expansion: Targeting non-traditional markets like Africa and Central Asia, alongside growth in the GCC, offers new opportunities. Digital marketing and global visibility through platforms like PSEB and PASHA could further boost exports.

• Workforce Development: Only 10% of IT graduates are currently employable, but initiatives like the “Hub and Spoke” model could create 650,000+ jobs by 2028 through better training and apprenticeships. Investments in high-tech skills (e.g., AI, blockchain) are critical to moving up the value chain.

• Challenges to Overcome: Growth is constrained by inadequate technology parks, policy inconsistency, and brain drain. Political stability and R&D investment are essential for sustainable growth.

• Comparative Context: If Pakistan achieves $5 billion in exports by 2025, it will still lag behind India ($250 billion) and the Philippines, but could close the gap with smaller competitors like Sri Lanka or Bangladesh by focusing on high-value services.

Conclusion

Pakistan’s main IT export is computer services, including software development and BPO, with robust growth driven by cost advantages and an expanding GCC client base. However, it faces stiff competition from India and the Philippines due to their advanced ecosystems and struggles with quality and infrastructure issues that affect clients. With a projected $5 billion export target by 2025 and up to $18 billion by 2028, Pakistan’s growth potential is significant, but realizing it requires addressing skill gaps, policy instability, and infrastructure deficits to compete globally and meet client expectations.