Overview
Pakistan’s market for computer software has seen steady growth for the past several years. According to local industry sources, the total size of the software sector is approximately $3.2 billion, which is expected to grow despite challenges posed by the business environment and macroeconomic challenges. 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 and tech start-ups who earned subpar certifications from local institutions and support specialized fields in the local market. Other freelancers use outdated ICT curriculum as a jumpstart to self-educate in software development.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. According to the Ministry of Finance 2022-23 Pakistan Economic Survey, more than 19,000 ICT companies in Pakistan are registered with the Securities and Exchange Commission of Pakistan (SECP). As of March 2023, the Pakistan Software Export Board (PSEB) counted 5,109 IT and ITeS company registrations primarily based in Lahore, Karachi, and Islamabad/Rawalpindi. Pakistan is exporting ICT products and services to over 170 countries. In FY 2023 (July 2022-June 2023), exports of telecommunication, computer, and information services were relatively flat compared to the previous year. Between July 2022 and March 2023, IT exports totaled $1.94 billion compared to $1.95 billion during the same period the previous fiscal year. PSEB data show ICT exports to the United States, Pakistan’s largest market, accounted for 54.5 percent in FY 2023. Authorities hope exports will reach $3.5 billion in FY 2024. In addition, there is a growing interest from local companies and freelancers to enter the online social media and cellular applications markets, 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 the development of the IT industry, including the software development sector. According to 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 export 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) Internet Merchant Accounts in local banks; (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 98 percent of the local broadband penetration is via mobile services. At the end of March 2023, the combined mobile and fixed telecom subscriptions were 197 million with total tele density within Pakistan reaching 83.2 percent. The government and private sectors have also initiated an aggressive strategy to develop new IT educational institutions and introduce new curriculums and short training programs to consistently improve the local human resource pool.
Leading Sub-Sectors
The most promising sub-sectors for U.S. companies within the computer software sector for FY-2024 are:
- E-commerce
- Company Acquisitions and Mergers
- IT Parks
- Incubators
- 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
Opportunities
The local software market offers substantial business opportunities for U.S. companies who 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 e-commerce industry.AnchorAnchorAnchorAnchorAnchorAnchorAnchorAnchorAnchor
Resources
Ministry of Information Technology & Telecommunication