GoP Prepares Incentives Package for Promotion of the IT Sector

The government has prepared an incentives package for promotion of the information technology sector, envisaging increasing IT sector exports from the current around $1 billion to $10 billion by 2023, it is learnt.

Information technology is emerging as a vital organ of the national economy and government is paying a great deal of heed to promote IT sector, maintained in official documents. The incentives package includes various measures and is being designed after a thorough analysis of other important IT destinations of the region like the Philippines, China, Bangladesh and India.

GoP Prepares Incentives Package for Promotion of the IT Sector

Secretary Ministry of Information Technology and Telecommunication (MoITT) Shoaib Ahmad Siddiqui told this scribe that government is focused on increasing IT sector exports to $10 billion as soon as possible. All the stakeholders are on board and the target is very much achievable, Siddiqui added.

He also confirmed the incentives package while saying that the government wants to facilitate this sector which has huge potential to increase the country’s exports manifold.

He was confident that the package will overcome the challenges faced by the information technology and telecom sector in comparison to the competing & regional economies. Incentive package tackles issues like high taxation on IT/ITeS companies, lack of quality physical infrastructure and limited domestic opportunities, sources added.

Prime Minister chaired a high-level meeting recently regarding promotion of growth of IT/telecom sector and resultantly some decisions/directions are currently being implemented. The State Bank of Pakistan (SBP) was directed to increase the limit for remittances for freelancers and the same has been increased to $25000. Further SBP has agreed to facilitate bank accounts opening for freelancers and ensure all kind of support in this regard.

A summary to Prime Minister is under process to encourage Pakistani products and to give preference to Pakistani software products by all ministries/divisions which would help in the growth of IT business. Special Technology Zones will be developed in the country to promote IT/ITeS growth. In this regard, Public Sector Development Programm (PSDP) proposal of Rs 6.5 billion has been submitted to the Planning Commission by MoITT.

The MoITT has submitted a proposal to the PM Office for resolving issues related to double taxation of IT companies. This initiative will help in removing impediments in IT business growth as well. A summary to Prime Minister is under process to declare Islamabad as Knowledge City. This initiative will promote the international branding of Islamabad as an attraction for investment by foreign IT companies.

Further, the government has already taken steps/initiates which include; (i) government has exempted IT/ITeS from income tax on export till June 2025; (ii) Pakistan Software Export Board (PSEB) registered IT start-ups are exempted from income tax, withholding tax and minimum tax for three years and tax holiday for venture capital funds till 2024; (iii) for promotion of IT sector and to attract global investors, foreign ownership up to 100 per cent of IT/lTeS have been allowed and no embargo has been put in place for repatriation of profit earned by such foreign investors; (iv) government through PSEB is facilitating local companies in promotion of IT services by way of marketing, subsidization etc.

The state functionaries in consulates and embassies have been interacted to accord special focus for promotion of IT exports; (v) PSEB has focused to bring the local companies to subscribe to global best practices like ISO Certification CMMI. Such drives not only contribute in the capacity building but also reinstate/reaffirm the trust of overseas firms as well.

The government had announced some incentives in the budget 2019-20 due to which the country’s IT/ITeS export remittances have surged to $550.503 million at a growth rate of 24.71 per cent during the first six months of the fiscal year 2019-20 (July-December) compared to $441.435 million during the same period of last year.

The number of PSEB registered IT & ITes companies have raised to 2163 as of 30th December 2019 compared to 1873 valid registrations as of December 2018 at a growth rate of 15.5 per cent.

The government has launched the first-ever e-Commerce policy aimed at paving the way for inclusive trade and economic development. The policy aims to pave the way for holistic growth of e-Commerce in the country by creating an enabling environment in which enterprises have equal opportunity to grow steadily.

Global e-Commerce has been growing exponentially since the last two decades and recorded sales growth of 13 per cent in 2017 with estimated sales of $29 trillion. e-Commerce can help developing country entrepreneurs to overcome the usual trade channels and reach a global market since internet-based enterprises can be operated at very small scale. Studies show that Micro Small and Medium Enterprises (MSMEs), that use e-Commerce platforms, are around five times more likely to export than those in the traditional economy.

Moreover, it has been estimated that the costs associated with geographic distance drop, by as much as two-thirds, for exporters who use digital trading platforms. This implies potentially substantial gains for small and medium-sized enterprises, as well as female-headed enterprises, which are now able to ‘go global’ much more easily than was possible in the past.

e-Commerce in Pakistan is at a nascent stage with modest internet retail sales. However, it is an emerging sector with a noticeable surge in recent past in online vendors, local e-Commerce platforms and online payment facilities introduced by banks and facilitated/ enabled by cellular companies through their nationwide networks.

The policy covers and provides guidelines on key components for promotion of e-Commerce including the regulatory environment, financial inclusion and digitization through payment infrastructure, empowering youth and SMEs, consumer protection, taxation, ICT infrastructure, logistics and engagement in multilateral negotiations.

The government, however, is yet to induce international payment gateway like PayPal to come to Pakistan due to lack of legal cover as well as money laundering fear. However, the government is working to engage a foreign payment provider to establish Pakistan’s own international payment gateway which will be pre-integrated with Paypal, Visa, MasterCard, and Alipay.

 

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