Liberalization in Liberalization in CRS – The CRS – The Pakistani Pakistani

ExperienceExperience

Pakistan Software Export BoardPakistan Software Export Boardwww.pseb.org.pkwww.pseb.org.pk

Outline Outline

1.1. Pakistan’s Economic GrowthPakistan’s Economic Growth

2.2. The IT & Telecom SectorThe IT & Telecom Sector

3.3. Pakistan’s Commitment to GATSPakistan’s Commitment to GATS

4.4. Experience with LiberalizationExperience with Liberalization

Pakistan’s Pakistan’s Economic GrowthEconomic Growth

Pakistan – Some Pakistan – Some StatisticsStatistics

Population = 150 million +Population = 150 million + GDP = $96.1bn (2004); Growth = 8.4%GDP = $96.1bn (2004); Growth = 8.4% Industrial Growth (2004-05) = 15.6%Industrial Growth (2004-05) = 15.6% Total Exports = $14.4bn; Growth = 17%Total Exports = $14.4bn; Growth = 17% Imports = $20.62bn; Growth = 32%Imports = $20.62bn; Growth = 32% FDI (2004-05) = $1.67bn+; Growth = FDI (2004-05) = $1.67bn+; Growth =

61%61%

Leading Sectors for FDI- Last 2 Years Leading Sectors for FDI- Last 2 Years (2003-05)(2003-05)

Sector Million $ % age

Telecom 517.6 (2004-05)221.9 (2003-04)

34.0 (2004-05)23.4 (2003-04)

Financial Services 269.4 (2004-05)242.1 (2003-04)

17.7 (2004-05)25.5 (2003-04)

Oil & Gas 217.5 (2004-05)273.3 (2003-04)

14.3 (2004-05)28.8 (2003-04)

ALL HEAVILY DEPENDENT ON ITALL HEAVILY DEPENDENT ON IT

The IT & Telecom The IT & Telecom SectorSector

Pakistan’s IT and Pakistan’s IT and Telecom SectorTelecom Sector

Annual IT Market > $ 800 m with growth rate Annual IT Market > $ 800 m with growth rate = 30%= 30%

Increase in Software Exports > 40% (year on Increase in Software Exports > 40% (year on year) for last three years.year) for last three years.

By July 2005, total cellular subscribers By July 2005, total cellular subscribers reached 14.1 million showing a growth rate of reached 14.1 million showing a growth rate of 156% in one year.156% in one year.

Nearly 700 companies ICT Firms; about half Nearly 700 companies ICT Firms; about half are in CRS specificallyare in CRS specifically

Total employment = 95,000Total employment = 95,000 Annual IT graduates = 5,500+Annual IT graduates = 5,500+

Whom Do Pakistani Software Companies Sell To

Exports vs. Domestic

Export-Products 22.56%

Export-Services 38.52%

Domestic-Products 23.37%

Domestic-Services 16.53%

Public vs. Private Sectors

Public Sector (Govt.)— Domestic 8.51%

Public Sector (Govt.)— Foreign 5.90%

Private Sector – Domestic 30.79%

Private Sector – Foreign 54.77%

Main Incentives for IT & IT Main Incentives for IT & IT Enabled Services Industry (in Enabled Services Industry (in

place since 2000)place since 2000) Tax holiday on IT export earnings until 2016Tax holiday on IT export earnings until 2016 100% Foreign Ownership allowed100% Foreign Ownership allowed 100% repatriation of earnings allowed100% repatriation of earnings allowed 5% percent customs duty on import of IT 5% percent customs duty on import of IT

related machinery and equipment related machinery and equipment 33% annual depreciation of equipment allowed33% annual depreciation of equipment allowed Availability of Export RefinanceAvailability of Export Refinance Presence of technology parks - a one-stop shop Presence of technology parks - a one-stop shop

for all servicesfor all services

Exports of IT & ITeSExports of IT & ITeS

0

50

100

150

200

250

300

350

400

2001 2002 2003 2004 2005 2006*Fiscal Year from July to June

Major IT Companies In Major IT Companies In PakistanPakistan

IBMIBM MicrosoftMicrosoft OracleOracle NCRNCR SiemensSiemens NortelNortel NokiaNokia

ZTEZTE HuaweiHuawei MotorolaMotorola Bearing PointBearing Point CiscoCisco HyundaiHyundai EricssonEricsson HPHP

GATS & PakistanGATS & Pakistan

Pakistan’s GATS OfferPakistan’s GATS Offer

841841 842842 843843 844844

1-3 1-3 ●● 1-3 1-3 ●● 1-3 1-3 ●● 1-3 1-3 ●●

4 4 ◒◒ 4 4 ◒◒ 4 4 ◒◒ 4 4 ◒◒

● Full commitment ◒ Horizontal commitment

Experience with Experience with LiberalizationLiberalization

Support for Rapid Industrial GrowthSupport for Rapid Industrial Growth Public Sector AutomationPublic Sector Automation Possibility to export services to other Possibility to export services to other

countriescountriese.g. ZTE, Bearing Point, NCR, Oracle, e.g. ZTE, Bearing Point, NCR, Oracle, HalliburtonHalliburton

Increase in software exports > 40% in Increase in software exports > 40% in the last 3 yearsthe last 3 years

Increase in no. of firms registered 1300 Increase in no. of firms registered 1300 % since 1996% since 1996

Establishment of regional/international Establishment of regional/international service centersservice centers