ACCORDING to the IGI and the US Bureau of Statistics, the Services Sector, also called the tertiary sector provides a service, not an actual product that could be held in hand. Service industry companies/individuals are involved in retail, banks, hotels, real estate, education, health, social work, computer services, information services, warehousing, tourism, travel and transportation services, social assistance services, securities, recreation, cleanliness, waste management, media, communications, electricity, gas, water supply and many others.
According to Statista data, in 2022, in Pakistan agriculture contributed around 22.35 percent to the GDP of Pakistan, 20.42 percent came from the industry, and over half of the economy’s contribution to GDP (52.2 percent) came from the services sector. There are three main sectors of the economy in Pakistan: The primary sector encompasses agriculture, fishing, and mining. The secondary sector is the manufacturing sector, also known as the industry sector; and last but not least, the services of the tertiary sector, or the services sector.
Now, let us look at the share of the services sector in the world economies. As per the World Economic Forum, Eurostat and World Economy.com data 2022, the services sectors of all the developed economies of the world are contributing almost between 62 to 70% to their GDP. In Luxembourg, which has a large financial services sector, 87% of the country’s gross domestic product came from the services sector.
Tourism economies like Malta and Cyprus also had an above 80% share of services in their GDP. Malta’s and Cypris’s services sectors are the 2nd and 6th in the world ranking contributing 78.8% and 72.4% towards their GDPs respectively. China is 81st, Nepal is 88th, Pakistan is 90th and India is 101st in the world ranking as their services sectors contribute 52.7, 52.2%, 51.5 %, and 48.5% respectively to their economies.
According to the Trade Development Authority of Pakistan (TDAP), with 64% of the population younger than 30 years, the services sector has a promising outlook. It has been transforming an agrarian economy into a knowledge-based economy. Pakistan has the 4th largest freelancer population in the world and its 173 HEC-recognized universities are pouring more than 73,000 professionals into the market thereby expanding the base for the services industry.
ICT, Other Business Services, Government Services, Transport, Travel, and Tourism are the major sub-sectors of services in Pakistan. Pakistan has exported worth 7.3 billion USD in services in FY 2022-23. Therefore, Pakistan’s services sector, especially its IT sector has a huge potential to grow and contribute much more towards Pakistan’s GDP in the coming years.
It is good news that the IT Minister in the current caretaker government, with the assistance of the Army’s High Command, has taken a major initiative to develop the IT sector and the government has prepared/approved a comprehensive plan for the coming elected government to follow to develop the IT sector. Starting in 1997, India is now earning about 188 billion USD annually from the export of IT software and IT services.
Anyway, Pakistan has great potential and hopes that its services sector will grow and transform its economy into a dynamic knowledge-based economy shortly. Economic Survey 2022-23 cited that Kearney’s Global Services Location Index (2021) ranked Pakistan as the second most financially attractive location in the world for offshore outsourcing of IT and Information technology-enabled services (ITeS).
“Likewise, the International Labour Organization (ILO) Flagship Report (2021) has ranked Pakistan as the second largest supplier of digital labour services, such as clerical and data entry services, creative and multimedia services, professional services, sales and marketing support services, software development and technology services and writing and translation services,” the document added.
Major tech hubs of the IT and ITeS industry; Lahore (36.4%), Karachi (28%), and Islamabad/ Rawalpindi (27%) and 10% freelancers together have posted the largest trade surplus among all services after the textile sector. The USA is the largest market accounting for 54.54% of the export remittance receipts, followed by the UK (7.99%), UAE (6.91%), Ireland (6.73%), and Singapore (4.95%).Pakistan’s IT and ITeS industry is exporting its services to over 170 countries and territories.
“Over the past five years, a phenomenal upward growth of 178% in IT and ITeS exports has been witnessed at a compound annual growth rate of 30%, the highest growth rate in comparison to all other local industries in services,” the survey said. Pakistani freelancers contributed foreign exchange earnings through remittances of $269.8 million (IT: $156.9 million and non-IT: $112.9 million) during July-March FY2023.
Given the above discussion following are suggested to advance the services sector, with a special focus on Tourism and IT sub-sectors’ development. The future governments in Pakistan should focus on the development and expansion of the services sector including the Tourism and IT sub-sectors. They should facilitate the private companies providing IT and other services by favourable law-making, giving tax concessions, developing IT infrastructure, and facilitating online payments by foreign clients.
To train the professional experts/specialists and lower technical staff to provide better services inside Pakistan and to export better-trained manpower to earn valuable foreign exchange, the training facilities in the universities, colleges and technical institutes should be improved/expanded with necessary modern training equipment/aids with the enhanced budget. The syllabi of courses and the teaching staff’s quality should also be improved.
Moreover, all private companies and individuals/freelancers providing various services in the country and abroad should be encouraged and financially assisted. These measures, if implemented seriously, will greatly help the services sector contribute much more to Pakistan’s GDP and earn large amounts of foreign exchange than what this sector is contributing/earning now, ultimately making the economy self-reliant.
—The writer is also a former Research Fellow of IPRI and Senior Research Fellow of SVI, Islamabad
Email: [email protected]
views expressed are writer’s own.
