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The information and communication technology (ICT) sector has emerged as a promising engine of export growth in Pakistan, generating $2 billion worth of exports in the first eight months of the current fiscal year, a 15% increase compared to the same period last year. This remarkable performance has positioned the ICT sector as the second-largest source of exports after the textile industry. However, as a technology-intensive sector, IT firms in Pakistan heavily rely on imports of IT goods, making easier access to these products ever more critical for their growth and competitiveness.
A recent study by the Information Technology and Innovation Fund (ITIF) suggests that several developing countries, including Pakistan, could significantly benefit from signing the Information Technology Agreement (ITA) and allowing duty-free imports of the proposed expanded list of ITA products. The study estimates that Pakistan’s GDP could increase by 2% over the next 10 years if it provides duty-free access to the expanded list of products, which includes semiconductors, smart appliances, robots, energy-efficient storage systems, and smart medical instruments. These ICT products are often referred to as “super capital” because they not only contribute to infrastructure development but also help improve productivity levels across various industries.
Despite the potential benefits, Pakistan has yet to sign the ITA, unlike its neighbors Afghanistan, China, India, and Vietnam. The current tariff rates on IT product imports in Pakistan are significantly higher than those applied by East Asian countries. For instance, the average tariff rate on consumer goods imports into Pakistan exceeds 10%, while similar imports into China face an average tariff of less than 5%. This disparity puts Pakistani exporters at a disadvantage, as they face lower tariff rates on their exports to their destinations compared to their counterparts in China and India.
The complex web of government interventions, including import licensing requirements, internal taxation of imports, import tariffs, and trade payment measures, creates a less conducive business environment for IT firms in Pakistan. In contrast, non-tariff measures (NTMs) on IT product imports are relatively non-existent in Pakistan compared to East Asian countries.
To propel the growth of ICT services exports and drive the country into the digital age, it is essential for the Pakistani government to rethink its policies on IT product imports. By reducing tariffs, streamlining import procedures, and fostering a more business-friendly environment, Pakistan can unlock the full potential of its ICT sector and position itself as a global player in the digital economy.