Global Rice News

Uncertainty in Pakistan’s Economy Raises Concerns for Business and Investors

Following the delay in the formation of a new government in Pakistan, uncertainty about the economy has increased. The volatility in the KSE-100 index of Pakistan Stock Exchange (PSX) and the slowdown in internet services are adding to concerns and eroding business and investor confidence. The new government must prioritize stabilizing the economy and reducing political uncertainty to regain lost confidence.

Challenges for the Information and Communication Technology (ICT) Sector

The export of ICT services has played a crucial role in boosting Pakistan’s overall exports in recent years. However, internet blockages and disruptions in the IT infrastructure pose challenges for the sector and can impact the entire economy. Export of ICT services has outperformed the export of goods, with a 9% year-on-year increase in the first six months of FY24 compared to a 5% growth in the latter.

Exports of computer services from Pakistan have seen a significant increase of over 300% in the last seven years, reaching $2.1 billion in 2022. In comparison, semi-milled rice, considered an important export item, had an export value of $1.7 billion in the same year.

Pakistan’s computer services exports now rival those of Malaysia and Norway. However, Ireland and India remain the top exporters in this sector, with exports valued at $204 billion and $96 billion, respectively. This highlights the potential of the ICT sector.

The Freelancing Industry as a Major Export Contributor

Pakistan’s freelancing industry is a significant contributor to the export of ICT services. Pakistan ranks as the third-largest contributor to the global freelance industry, behind India and Bangladesh. Approximately 0.5 million freelancers are present in Pakistan, with about 40% engaged in software development and technology. These freelancers generate an average hourly rate of $28 globally and contributed $400 million to Pakistan’s economy.

While freelancing offers opportunities for individuals to earn foreign exchange, there are challenges associated with it. The lack of infrastructure, internet service disruptions, and the need to adapt to evolving technological developments add to the challenges for freelancers. The government provides tax incentives to encourage more participation in freelancing.

However, it is important to ensure that freelancing does not replace full-time employment in established IT firms, as it may lead to short-term engagements and lower tax generation for the government. A balanced approach is needed to prioritize long-term benefits and dollar revenues for the economy.

Promoting Digitalization and Improving Government Functions

Promoting digitalization of the economy can improve the functioning of the government and enhance trade-related functions. The Pakistan Single Window initiative is an example of how paperless cross-border trade procedures can reduce documentation costs and time involved in international trading activities. This not only increases export activities but also improves productivity for international traders.

A combination of skilled workers and access to technology can boost productivity across various sectors of the economy. Developing the capacity and capabilities of the ICT sector will generate greater export revenue and improve the quality of government infrastructure and functions.

Ensuring Better Infrastructure and Uninterrupted Services

Uninterrupted services and better infrastructure are essential for the growth of the ICT sector and to overcome challenges faced by stakeholders. Facilitating the sector by providing improved infrastructure and uninterrupted services will contribute to its growth and success.

In conclusion, stabilizing the economy, reducing political uncertainty, and addressing challenges faced by the ICT sector are crucial for Pakistan’s growth and attracting business and investor confidence. The development of the ICT sector is key to generating export revenue and enhancing productivity across various sectors of the economy.

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