Crisis looms over Pakistan’s IT industry due to govt neglect

ISLAMABAD: Pakistan’s IT industry is grappling with a host of challenges, even as the government continues to tout its progress.

Officials claims suggest that over 3,500 IT companies – across large, medium, and small-scale business models – are currently operating in the country, offering IT services, software development, sales, and upgrades.

While these statistics suggest a promising trajectory – one that the ruling authorities have long claimed has the potential to earn $25 billion – experts warn that the IT industry is facing a supply-side crisis that threatens its long-term growth.

Experts state that the demand for IT services has surged overwhelmingly, making it impossible for the providers to meet it. Pakistan needs 100,000 IT graduates each year, but only about 25,000 graduates are emerging from educational institutions.

Internet restrictions hamper growth

Additionally, internet restrictions have further complicated the industry’s expansion. According to the 2023 Internet Freedom Report by the non-governmental organization, Freedom House, which works on human rights, democracy, and political freedom issues worldwide, the internet is not free in Pakistan.

Freedom House conducted an annual review of internet freedom across 70 countries, scoring nations based on access issues, censorship, and the exploitation of user rights. Pakistan scored 26 out of 100. While India has partial internet freedom, countries like Canada scored 88 out of 100, positioning them as nations where the internet is free.

The State Bank’s report suggests that Pakistan’s private sector in IT is striving for better results on its own, but the public sector is marked by neglect and, to some extent, insecurity. A prime example of this is the statement made by the CEO of the National Information Technology Board.

According to the State Bank’s report, IT exports increased by 24% in the fiscal year 2023-24, rising from $2.59 billion to $3.2 billion compared to the previous year.

The report notes that in June of the previous year, IT exports reached a record $300 million, which was 33% higher compared to the same period in 2024. The growth in IT exports is largely due to an increase in the demand for Pakistani IT services from the Gulf Cooperation Council (GCC) countries, particularly Saudi Arabia.

This growth is largely attributed to global political and economic conditions and the policies of the Pakistani government, which directly impact the working environment and financial matters for IT companies and freelancers.

Meanwhile, Prime Minister’s “URAAN Pakistan” program has been launched, aiming to increase Pakistan’s IT exports to $60 billion by 2047. However, looking at the current government’s officials in charge of the IT sector, it seems they are not displaying the level of seriousness needed for such an ambitious goal.

Govt officials remain unresponsive

Pakistan’s IT industry records 13% growth in exports

When the Hum Investigates Team reached out to the current Federal Minister for IT, Shaza Fatima, and other senior officials from the Ministry of IT for their views on the development of the IT industry, shockingly, none of the officials responded.

The government’s approach suggests that the focus of responsible officials within government institutions is more on producing IT experts than promoting IT products. However, simply producing experts won’t bring the kind of benefits that can be gained by developing internationally competitive IT products in the local industry.

The Hum Investigates Team found that there are a total of seven institutions under the Ministry of Information Technology, three of which still do not have complete boards. Among these institutions, the most significant is the Pakistan Software Export Board, which still lacks a complete board. Similarly, the Universal Service Funds and National Technology Funds (Ignite) also lack fully formed boards. The Ministry of Science and Technology’s eleven sub-departments also do not have completed boards.

There has been a lack of attention to the use of IT technology at the local level and digitalization within government institutions. While the federal government introduced the e-office system to promote a paperless environment in government offices, the latest data reveals that only three out of 40 federal institutions have fully adopted this system, and five ministries have not yet started working on this project. Similarly, the Federal Board of Revenue has made attempts at digitizing the tax collection process. To this end, software solutions are being provided through the Pakistan Revenue Automation Private Limited (PRAL).

Unlike in other developing countries, the government’s support for the IT sector here is not what it should be because there is complete silence from the Ministry of IT regarding Research and Development (R&D).

The agreements have not only paved the way for foreign investment in Pakistan’s IT companies and startups but have also led to joint projects, training programs, and innovation centers, as well as improvements in fiber-optic networks, data centers, and cloud computing digital infrastructure.

In the future, there will also be increased cooperation between the two countries in e-governance, smart infrastructure, e-health, e-education, and emerging technologies like Artificial Intelligence, robotics, cloud computing, e-gaming, and blockchain. The State Bank of Pakistan’s steps to increase IT exports have also played an important role in this. Measures like increasing the permissible limit of foreign currency holdings in special foreign currency accounts for exporters from 35% to 50% and the stability of the rupee have contributed significantly.

Over the past five years, Pakistan’s IT sector’s exports have nearly doubled. However, the figures from the past few years show that the growth rate of the sector is not consistent. This is mainly due to global political and economic conditions, as well as the policies of successive Pakistani governments, which directly affect the working environment and financial matters of IT companies and freelancers.

IT industry cannot function without VPNs: PTA chairman

If the fundamental issues facing Pakistan’s IT industry are resolved, there are opportunities to increase IT exports to $15 to $20 billion annually in a short period. For this, the government needs to ensure uninterrupted high-speed internet and remove barriers to access to various social media platforms. The recent disruptions in internet services faced by IT companies and freelancers in Pakistan have been disappointing.

Financial mismanagement

Meanwhile, the Auditor General has raised serious audit observations regarding fraud, deceit, embezzlement, corruption, irregularities, and failure to present records in the accounts of the Ministry of Science and Technology, amounting to Rs. 8.27 billion. The Auditor General presented these observations in the annual report for the 2023-2024 audit year, covering the financial year 2022-23.

According to the report, the total amount related to fraud, embezzlement, and corruption cases is Rs. 11.85 billion. Irregularities of Rs. 42.42 billion were noted in commercial banking account management, Rs. 837.73 million in collections, Rs. 748.37 million in failure to present records, Rs. 245.57 million in employee-related irregularities at the Ministry of Science and Technology, Rs. 11.79 million in procurement irregularities, and Rs. 1 billion in other irregularities.

The Auditor General noted that the Ministry of Science and Technology obtained additional grants without careful cash forecasting. The audit pointed out that the Ministry of Science and Technology had allocated the rent of its building, the Ministry of Science and Technology Complex, to the Ministry of Planning, Development, and Special Initiatives at a rate of Rs. 768,490 per month with a 10% annual increase. However, the Ministry of Science and Technology did not collect this rent for six consecutive years, from August 1, 2016, to July 31, 2022, amounting to Rs. 71.15 million.

Disconnecting the Future!!

The lease agreement expired on July 31, 2019, and the Ministry of Science and Technology did not sign a new lease agreement. According to the audit report, the failure to collect the rent was due to negligence by the Ministry of Science and Technology’s administration, and the Ministry of Planning illegally occupied the building without a lease agreement. The Auditor General has recommended the collection of the outstanding rent.

The Auditor General’s report also revealed that the Ministry of Science and Technology did not collect Rs. 20.89 million from five organizations located in the Ministry of Science and Technology Complex.

Mujahid Hussain and Abobakar Khan also contributed to the story.