Urgent Reforms Needed to Tap Pakistan’s $20 Billion IT Export Potential, Says Industry Leader

Karachi: Mian Zahid Hussain, a prominent figure in Pakistan’s business circles, has called for immediate structural reforms in the country’s IT sector to address unresolved institutional issues that are hindering the sector’s growth. According to Hussain, these issues are preventing the realization of over $1.2 billion in annual export revenue.

Pakistan’s IT and IT-enabled services sector saw significant growth in the fiscal year 2024-25, doubling to $3.8 billion and comprising about 1% of the nation’s GDP. Hussain pointed out that actual IT exports exceed $5 billion, but a $1.2 billion gap persists due to policy inefficiencies. He noted that many companies and freelancers avoid formal banking channels due to complex foreign exchange repatriation and tax compliance processes.

Hussain identified three critical actions to enhance IT exports by at least 25% and ensure competitiveness. First, he called for the replacement of a temporary tax exemption, set to expire in June 2025, with a permanent 100% income tax credit. He argued that temporary incentives discourage long-term foreign direct investment and intellectual property growth, citing Ireland and Singapore as successful examples.

Additionally, Hussain suggested that the State Bank of Pakistan establish a ‘Digital Exporters FX Simplification Window.’ This initiative would require banks to accept digital transaction proofs, such as Payoneer statements, to expedite the issuance of Proceeds Realization Certificates. This measure could potentially add $1.2 billion to the nation’s recorded exports swiftly.

Hussain also raised concerns about Pakistan’s heavy reliance on imported IT hardware, which poses risks to foreign reserves and security. He urged the Special Investment Facilitation Council (SIFC) to prioritize local IT hardware manufacturing, recommending permanent incentives such as subsidized land and tax breaks to attract foreign direct investment and enhance local value addition.

Addressing the skills gap in the IT sector, Hussain highlighted that 90% of the 75,000 IT graduates produced annually are not prepared for export-oriented jobs. He advocated for a national upskilling program focused on artificial intelligence and machine learning, emphasizing that AI could contribute an additional $20 billion to the economy by 2030. He also stressed the need for regularly updating educational curricula every 12-24 months to keep pace with technological advancements.