Pakistan’s market for computer software has seen a steady growth for the past several years. According to local industry sources, the total size of the software sector is approximately $3.0 billion, which is expected to grow despite challenges posed by the post-global pandemic business practices and domestic macro and microeconomic fluctuations. The Pakistani ICT sector consists primarily of software development and IT-enabled services (ITeS) for data centers, technical service/call centers, and telecom services. Sixty percent of ITeS serve international customers. Much of the growth is driven by the work of freelancers who earned subpar certifications from local institutions and support specialized fields in the local market. Other freelancers use the outdated ICT curriculum as a jumpstart to self-educate in software development. Pakistan is currently the fourth largest freelance provider after India, Bangladesh, and the United States, with gaming software development leading the charge in services provided. Most of the Pakistani ICT sector is export-oriented. The Pakistan Software Export Board (PSEB) counts more than 19,000 ICT companies in Pakistan with about 6,000 exporting ICT products and services to over 120 countries. In FY 2021 (July 2020-June 2021), exports of telecommunication, computer, and information services surged to $2.1 billion, up from $1.4 billion in FY 2020, a growth rate of 47 percent, according to PSEB. PSEB data show ICT exports to the United States, Pakistan’s largest market, grew 55 percent in FY 2021, from $847 million to $1.3 billion. Authorities hope exports will reach $3.5 billion in FY 2022 and $5 billion in FY 2023. Despite its impressive growth during the pandemic, Pakistan’s ICT sector contributes only about one percent of GDP (c. $3.5 billion in FY 2021).
In addition, there is a growing interest from local companies and freelancers to enter the online social media and cellular applications, especially after the launch of 3G and 4G cellular spectrums in Pakistan. Most of these development activities involve consumer applications based on Android or Apple platforms, website development, e-wallets/fintech, e-commerce, and gaming categories. Foreign firms operate either through their appointed local distributor or by having their own office with fully equipped technical and support teams to cater to their customers’ needs.
The Government of Pakistan on both federal and provincial levels places a high priority on developing the IT industry, including the software development sector. According to Pakistan Software Export Board (PSEB), the government has launched several policies to encourage local and foreign companies to invest in Pakistan. Some of these incentives include: (1) 100 percent ownership of equity; (2) income tax exemption on IT exports revenues;(3) 100 percent repatriation of profits; (4) tax holiday for venture capital funds until June 2024; (5) accelerated depreciation of 30 percent on computer equipment; (6) the State Bank of Pakistan (SBP) has allowed banks to open Internet Merchant Accounts; (7) development of Special Technology Zones; and (8) availability of instant, reliable, and high-speed internet connectivity. In addition, the federal government and the private sector have made concerted efforts to improve existing internet availability and connectivity throughout the country. According to official statistics, approximately 85 percent of the local telecommunication infrastructure is via fiber-optic lines, which provides internet access to over 3,000 cities and towns. In addition, the government and private sectors have initiated an aggressive strategy to develop new IT educational institutions and introduce new curriculums and short training programs to consistently maintain the local human resource pool.
The most promising sub-sectors for U.S. companies within the computer software sector for FY-2023 are:
- Company Acquisitions and Mergers
- IT Parks
- Venture Capital Funds
- Software Companies
- Call Centers
- Gaming and Animation Studios
- Data Centers
- Cloud Computing
- Cybersecurity Applications & Services
- Training Centers
- Virtual and Augmented Reality
- Consulting Centers
The local software market offers substantial business opportunities for U.S. companies that offer products for the corporate sector, including financial management and business forecasting, online IT training portals, e-commerce, e-payment, embedded tools, and other web-based applications. Industry experts have expressed optimism about growth prospects in the e-commerce sector, projecting $1.6 billion in revenue by 2023. Increased use of mobile wallets, coupled with cheaper and more accessible smartphones, has helped increase the user base for Pakistan’s eCommerce industry.