Pakistan has, to date, largely missed out on the global information technologies and business process outsourcing (IT-BPO) opportunity.
The telecom sector in emerging markets—longhaul, backhaul and last mile—is essential to build the high-bandwidth connectivity which brings societies together and links them to the world.
As telecom penetration rises, there are huge gains in productivity and social benefit. And in emerging markets another plus is the foreign direct investment which drives network roll out, improves domestic business environments and supports healthy macro economics.
On the flip side telecoms equipment, both hardware for network infrastructure and the devices which connect to the network, is usually imported. Most of it from high-productivity, low-cost countries as electronics is the most globalized industrial sector. So telecoms growth can put pressure on national current accounts on the trade balance side.
This is why an IT outsourcing industry can be very important for a healthy ICT sector.
India is a good example because the government is focused on promoting industrial policies to balance trade in the electronics sector. The equipment it buys for IT and communications results in over $100 billion in IT-BPO services exports every year, generating three million well-paid jobs.
Indian IT outsourcing companies are the world leaders in IT-BPO. Tata Consulting Services (TCS), Infosys and Wipro are powerhouses in this growing market segment. Increasing labor and infrastructure costs in India, however, are leaving space for new players to emerge in this area.
The Philippines is now an important competitor to India, leveraging its skilled software developers and English-speaking labor force. But it is surprising that Pakistan has yet to build a noticeable presence in the IT-BPO services exports area. IT exports from Pakistan are only worth about $1.5 billion a year. This is a useful contribution to the economy, but still well below what could potentially be achieved.
An abundance of high-quality human resources in Pakistan can provide very competitive cost savings for international clients, as long as local entrepreneurs tap into this opportunity. Pakistan has a good supply of the IT-trained, English-speaking, certified professionals who are the key to a successful IT consulting business. But a significant chunk of Pakistan’s IT workforce, unfortunately, is unemployed.
Pakistan’s political and economic troubles and lack of an equity-investment industry have weakened its ability to compete in the IT-BPO niche. Negative news on Pakistan weakens its brand as a business destination. Raising capital for IT outsourcing investments has proven difficult. Local investors have not looked boldly into this market segment.
By encouraging investments in the IT-BPO opportunity, the administration of Prime Minister Nawaz Sharif would he helping the Pakistani economy to turn around. This is because the industry can bring badly-needed hard currency into the country via services exports. There is no time to waste: A lot can be done, even when considering the country’s current challenges.