Huge potentials for IT exports

Observer Report

The export of software and other IT-related services offers huge potential for forex earning provided local companies make a strenuous effort to get more jobs under Business Processes Outsourcing. Under-reporting also needs to be checked.
Foreign exchange earnings through exports of IT and IT-related services totaled $306m in the first half of this fiscal year. And, officials of the Pakistan Software Export Board (PSEB) say full year target of $700m could be met by accelerating exports in the second half.
Incidentally, forex earnings of IT and IT-related services are now being reported and recorded more appropriately now than during July-December 2016. Besides, officials are also anticipating some big export orders after the recent Mobile World Congress, held in Barcelona, where some reputable IT companies like Pentaloop and Verscom Technologies exhibited their products developed completely, or in part, in Pakistan.
The $306m forex earnings which PSEB officials call IT remittances because they originate from half a dozen sources duly coded by the State Bank of Pakistan. These include (1) expor1of computer software (2) software consultancy services (3) hardware consultancy services (4) maintenance and repair of computers (5) other computer services and (6) call centres. Officials insist that reporting errors that originate while documenting forex earnings of the ITsector with banks undermine IT export earnings (or remittances).
This happens because some IT companies and individuals who export IT services do not bother to fulfil reporting requirements so that banks report inflows in their accounts in the category of income through export of non-|T services, or plain remittances. Others simply underreport export proceeds and bring back home only part of them. Last year, before the announcement of FY17 budget, the government had informed the Senate‘s standing committee on IT that an estimated $1.7bn of software exports remains out of the country. The relevant ministry had admitted that exporters manage to keep the bulk of export earnings abroad through under-reporting and misdeclaration.
This was one of the considerations why, in budget FY17, the tax-exempt status of IT-service exports was extended for three more years but with a condition attached to it: Only those IT companies can now avail tax-exemption on exports that bring back home 80pc of their export revenues and keep a maximum of 20pc abroad for meeting any expenses. Rising from just $20m at the turn of this century to possibly $700m during the current fiscal year, the journey of exports of IT and IT-related services is not bad. ‘But the potential is far larger, just very big. We need to tap it with more hard and honest work, says the head of one of the country’s oldest software houses.
‘If you look at the break-up (of IT services exports) you are disappointed to see the low revenue being generated through call centres. That is a sad commentary on both our ethics and efficiency. Forex earnings from call centres remains close to $20m a year, historical data shows. ‘Actual call centre earnings are far larger, several times higher than the reported amount. But those running these call centres or business process outsourcing (BPO) outlets are very clever at underreporting their actual income.
On the other hand, industry sources also concede that the growth of the BPO industry as such has been much weaker in Pakistan than in other countries. Our BPO industry is too small to be compared with that of India. ‘But look at the Philippines: BPO revenue has reached $25bn, ten times higher than our total earning IT sector forex revenue (including domestic and foreign sales),‘ says a member of the Pakistan Software Houses Association. (IT-related exports (of about $700m a year) are part of the total $2.5bn annual revenue that the IT sector generates in various ways, industry officials claim).
With growing realisation of the need to mainstream the BPO industry, the federal government is taking administrative measures through PSEB to promote its smooth progress and the SBP is guiding banks on proper documentation of the proceeds of BPO outlets. The Federation of Pakistan Chambers of Commerce and Industry also has lent more weight to its standing committee on IT and BPO by appointing Naseer Akhtar the chairman of P@sha as its head.
However, in order to keep IT exports growth on track and to improve the BOP industry here, ‘those in this industry will have to make long-term business a priority instead of treating it as a short-term money making opportunity,‘ says an official of TRG. ‘Besides, human resource enrichment, standardised training must be made a top priority. Of late, PSEB has initiated a programme to train young software developers of local companies in CMMI (Capability, Maturity Model Integration) which is a globally recognised standard for software development. Industry sources say that software developers of a number of companies are currently receiving CMMI training and some companies have even got CMMI certification.
This should help them get better and fatter jobs being outsourced by international firms of repute.