Rejuvenating digital commerce
Pakistan’s goods exports have continued to cross the $ 2 billion per month mark since October 2020. However, the star product in the overall export basket, which includes services, is information technology services. and communication (ICT).
According to statistics released by the Pakistan Bureau of Statistics (PBS), ICT service exports increased 11.14% month-over-month in February 2021. They increased 41.43% over the past eight years. first months (July-February) of financial year 21 during the same period of the last financial year. With exports of $ 1.3 billion between July 2020 and February 2021, it surpassed all other sectors of the service industry. Pakistan’s ICT exports are expected to be around $ 2 billion by the end of this fiscal year.
Even though the imports of services in the first eight months of FY21 decreased by 15.82% compared to the same period of the previous fiscal year, the exports of services maintained their level with a slight decrease of 0 , 17%.
According to data taken from the International Trade Center (ITC), Ireland was the largest exporter of ICT services, followed by India, the United States and China in 2019. All of the aforementioned countries reported more than $ 50 billion in export sales.
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In contrast, Pakistan reported exports of $ 1.2 billion in 2019 for ICT services. According to a statement issued by the World Trade Organization (WTO) in January 2021, titled “Recovery in trade in services not yet in sight”, world trade in services was 24% below its sliding value. annual in the third quarter of 2020.
It ranks Pakistan’s service exports as the fastest growing in the world with 17% year-on-year in November 2020, with the flow being propelled by IT service exports.
Travel and transportation were the most affected sectors. However, IT services saw a 9% gain in exports, as demand for cloud computing and virtual meeting applications and software increased. The increase in Pakistan’s ICT service exports is in line with the global trend. Covid-19 has provided this sector with the opportunity to become a significant contributor to export revenues.
More importantly, there are significant spillovers into other complementary sectors that can benefit from a boost from a rapidly developing ICT sector.
The growth of the ICT sector accompanies the growing demand for related goods and services, including, but not limited to, office machinery, computer hardware, telecommunications equipment as well as Internet and e-commerce services. According to statistics released by the PBS, imports of office machinery, including computer hardware, increased 15.38% in the first nine months of FY21 compared to the declared value in the same period of the previous fiscal year.
Imports of telecommunications equipment increased 43.76%, driven by imports of mobile phones. With 98 million 3G / 4G subscribers in March 2021, Pakistan offers plenty of opportunities for investors targeting IT related sectors.
While these figures do not directly suggest the growth of the ICT sector in Pakistan, as several other factors are likely to be involved in their growing demand, they do suggest that increasing investment in ICT-related and digital goods may help. to support the development of ICTs. service sector.
Digital Business Survey
The Sustainable Development Policy Institute (SDPI) recently conducted a survey of digital businesses in Pakistan to assess the impact of Covid-19 on their performance.
The majority of companies reported positive revenue growth over the period, while several companies switched from domestic to foreign sources for their revenue.
However, it is important to note that the major challenges are finding new business, receiving payments from abroad, poor internet connectivity, and online banking channel options. Traditional businesses with physical retail outlets are forced to embrace digital channels in order to continue to operate. It is imperative to create an environment conducive to such a change.
In order to ensure a more viable and sustainable growth ICT sector, it is essential that the policy and regulatory framework impacting the digital sector adopted by Pakistan supports its development.
The Global Trade Alert (GTA) website provides a public, independent, comprehensive and searchable registry of regulations and policy tools that impact the flow of cross-border digital commerce. The most active policy areas around the world between January 1, 2020 and mid-May 2021 were data governance, content and intellectual property, as well as registration and licensing.
Pakistan has taken steps for registration and licensing, content regulations and intellectual property. The first includes the introduction of blocking mechanisms in accordance with the 2020 illegal online content removal and blocking rules and the second includes the restriction of certain services and the requirement for content monitoring.
It is likely that the rampant use of rules to restrict access to information will be rather detrimental to the development of the ICT sector in Pakistan. The government must ensure transparency in the process of blocking and removing content and ensuring that the mechanism behind the process is accountable.
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The European Center for International Political Economy (ECIPE) ranks Pakistan 12th out of the 64 most restrictive countries on its Digital Trade Restrictiveness Index (DTRI).
This index takes into account tax restrictions, establishment restrictions, data restrictions and trade restrictions.
However, it is interesting to note that Pakistan has one of the least restrictive conditions for attracting foreign investment in the digital sector, which ranks higher than Hong Kong. Foreign ownership is strongly encouraged. Essentially, the growth of ICT service exports during the pandemic era not only provided much needed foreign exchange, but also confirmed the great potential of this sector in terms of income and growth.
Since the increase in demand for information technology goods and services is likely to continue after the pandemic, it is imperative to ensure that this sector continues to grow.
The writer holds a doctorate in international economics
Posted in The Express Tribune, May 24e, 2021.