Internet Entreprenuership Science & Technology

Computer industry indicates decline in Pakistan

ISLAMABAD: Computer industry has assumed unprecedented importance in the global economic arena and it is regarded as the fourth pillar of economy while in Pakistan, Personal Computer density in Pakistan is 1.5 that shown downward trend in the country.

According to a report, Personal Computer density in Pakistan is 1.5, which compares unfavorably with other countries of Asia-Pacific Region. Despite the fact that the importance of the industry has always been acknowledged at official level and the government has also expressed strong resolve to take steps for the promotion of the industry but the ground realities are depicting the picture otherwise.

Private sector is contributing as the main driver for growth in this industry from last so many years but that alone is not enough to compete with these countries and what need to be done is to enhance computer-density-density as the computer density co-relates to several other parameters of development. It is necessary to take steps to improve the PC penetration and thereby bridge the digital divide.

A recent report is quite alarming in regard with Pakistan’s PC/Server market as it shows that the market has experienced a slowdown in 2007 with its annual growth rate declining to 9.6% from the 16.4% recorded during the previous year. The latest data in this regard released by Springboard Research, a leading innovator in the IT market industry says that Pakistan registered 629,836 unit shipments of PCs and servers in 2007. For the last reported period, Q4 2007, the market grew 11% YTY with 148,613 PC and server unit shipments.

While we make comparison with the growth of IT and computer industry in the other countries of the region, a serious question arises that why we are not at par with them when the private sector is striving hard to promote this vital sector of the economy and government has also declared the promotion of the sector as one of its top most priority. To answer this question we need to have a comparative look at the state of affairs and the actual role and incentives provided by concerned governments to their IT industry. Turkey has exempted its Computer industry from GST, import duty and corporate income tax while allowed personal income tax for 10 years. Vietnam has given the industry exemption of GST and import duty besides 4 years exemption of corporate income tax and relaxation in personal income tax ranging from 3 to 35 per cent. Thailand and Malaysia have also offered similar sort of incentives to their industry which is being translated into steady growth of this sector in above mention countries.

Despite the poor computer density in Pakistan, the private sector has made huge efforts to streamline the sector which is a backbone of the national economy as well all other sectors of the economy. As a result of this hard work Pakistan has achieved a certain level of success over the years but the sudden slowdown has created a panic in the market which needs to be addressed any further delay and government ought to come forward and rescue this ailing sector and to reinitiate the progress and growth of the sector.

The Competitiveness Support Fund (CSF), a partner institute of the World Economic Forum (WEF) in Pakistan has recently issued “WEF Global Information Technology Report 2007-2008”, which ranks Pakistan 89th out of 127 countries in terms of nation’s preparedness to effectively promote business, improve investment climate and develop infrastructure. Pakistan was ranked as 84 on previous year and report shows five-point decline just in one year. The report also suggested that a coherent government vision on information and communication technologies, coupled with an early focus on education are keys to spur network readiness and to lay the foundations for sustainable growth. The contents of the report ought to be an eye-opener for the decision makers especially in regard with policies related to IT and computer industry.

While revisiting to the report of Springboard Research, we find some interesting comments regarding computer industry of Pakistan. The reports says that Pakistan’s IT market is in between a “growth” and “decline” stage, where the country’s political stability will play a major role in overall market performance. The report also says that before the imposition of the 15% GST in June 2006, Pakistan’s PC/Server market was a “diamond in the rough”, but since then, a downward trend in the IT market has been noticed. The government’s recent decision to not withdraw or reduce the GST has weakened the growing IT market in the country, as well as decreased the confidence of the private investor.

The reports and data available suggest that the introduction of the 15% Sales Tax in the financial year 2006-07 increased the price of computers which increased the cost of doing business. The average price of PC reported by local assemblers and retailers increased up to 20%. This is one of the factors which have negatively impacted the growth of the IT sector as evident by export figures for the first six months of the financial year 2007-08. If the value of exports for the first six months is extrapolated to the full year it would be 149.37 Million, which is a growth of 28.7% over the previous year. This is well below the growth registered in previous years.

Though, the previous governments could not comprehend the affects of slowdown of computer industry in Pakistan, its heartening that the Economic Coordination Committee (ECC) of the Cabinet considered the Ministry of Information Technology Summary sent in February last recommends that certain relief steps ought to be taken to save the computer industry of the country. Its worth to mention here that in the IT policy approved by the Cabinet in the year 2000 was comprised upon various incentives to promote the IT Sector of the country.

Initially these steps mad a positive impact on the domestic growth as well as IT exports, but the derailing and reversing of the policy has resulted as huge damage for the industry as well as the interests computer literate community in the country, which needs to be strengthen instead of discouragement. The computer industry is still optimistic that sanity will finally prevail at decision-making level and Pakistan will again on the path of growth and progress of this vital sector.

About the author

Rubab Saleem

Rubab Saleem is Editor of Pakistan Times

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  • Its a good article on Pakistan IT Industry. 15% GST should be abolished immediately for the growth of IT industry in Pakistna