Destination of Choice
Presentations
8 Reasons
Government Incentives
Infrastructure overview
Investment Policy
Trade Policy

DESTINATION OF CHOICE

Greg Hinkley, CEO Mentor Graphics with Prime Minister during his visit to Pakistan

"Destination Next" Presentation

Media Presentation

Why Pakistan?

• An IT workforce of 133,000 with good English language and people skills growing at a phenomenal rate of almost 20,000 a year.
• A hundred and ten ISO-certified IT companies, with over 25 undergoing CMMI rating.
• A reliable digital telecommunications infrastructure with backup and reliable energy and transport networks.
• An ambitious program of world-class IT Parks, with a rental rate of approx. US$1 per sq ft /month.
• A prosperous economy that offers lucrative domestic opportunities and is attracting increasing amounts of international investment.
• A steadily improving risk rating and a tightening environment for intellectual property protection.
• A streamlined government regulatory process of one of the most attractive incentive programs anywhere, which includes tax exemptions, 100% foreign equity and earnings repatriation.
• International leaders such as BearingPoint, NCR Teradata, Mentor Graphics and ZTE have chosen to locate their development and consultancy center in Pakistan.
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• Information Technology Parks with low rent, fiber optic connectivity, libraries and conference rooms
• Provision of funds for software companies to get ISO-9000 and CMM-level certifications
• Foreign investors allowed 100% ownership of equity in "IT/ITeS companies" Details
• Tax exemption for IT companies till 2016  Details
• 100% repatriation of profits allowed to IT companies  Details
• Seven years' tax holiday for Venture Capital funds
• The rate of depreciation on computer equipment is 30%
• The State Bank of Pakistan (SBP) has allowed the opening of Internet Merchant Accounts by banks
• Instant, reliable and high-speed connectivity available
• Over 85% of telecommunications infrastructure is on fiber optic cables
• Internet access is available in over 1862 cities/towns across Pakistan
• Pakistan is the first country in this region to establish DWDM telecommunications infrastructure
• Several cellular companies are using digital transmission (GSM and TDMA)
• The cost of 2 Mbps connection has been lowered to US$ 1000/month
• Redundant backup connectivity is available through PTCL for call centers.
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INFRASTRUCTURE OVERVIEW

Pakistan has a well-developed communications infrastructure, and a high degree of computer literacy, coupled with innovations in software development. Its improved service delivery mechanisms, and a growing appreciation of international quality standards, serve to emphasize Pakistan's suitability as a destination of choice for global companies seeking to offshore their business activities.

Pakistan offers state-of-the-art technology and infrastructure for establishing a world-class ICT setup. Its telecom infrastructure is 100% digital, and provides a robust backbone for providing mission-critical services, such as call centers, ISPs, software houses, voice and video conferences. The fiber optic infrastructure, initially laid during the early 1990s, now accounts for well over 85% of the backbone that supports international and national data exchange. More than 40 Pakistani cities are currently interconnected through fiber optic exchanges, and there are nearly 2950 digital exchanges. Tele-density is steadily increasing, and the Wireless Local Loop (WLL) sector is now open to private sector investment. Broadband licenses are open to ISPs since 2004. Pakistan offers the most competitive bandwidth charges in the whole Asia Pacific region. A dedicated E1 circuit is currently available at the cost of US$ 2000 only. Pakistan is using 1700 MB of bandwidth for Internet traffic, which is 2.42 times greater than the bandwidth used in 2005.

The following statistical indicators depict reliable and vibrant growth in Pakistan’s ICT infrastructure:

• A total of 12 LDI licenses have been awarded to various companies. PTCL earned a record profit of Rs. 74 billion during 2004-2005 from this transaction.
• Cellular penetration has reached 15.5 million, achieving a growth rate of 156% in one year; it is expected to grow more than double next year.
• Total lines installed are 5.5 million fixed and 17.3 million mobile subscribers. This has resulted in an enhanced tele-density of 13.7%, which is 3% more than India’s.
• In 2004, the number of Internet subscribers in Pakistan was 2 million; this has now increased to nearly 10 million. Over 1900 cities and towns are currently connected to the Internet.
• 132 ISP licenses have been awarded to ISPs, out of which 70 are operational, and a broadband policy has been announced for ISPs in Pakistan.
• 279,320 wirelesses PCOs are earning a marginal profit in Pakistan.
• 17 companies have been awarded WLL licenses. There are presently 267,363 WLL subscribers in Pakistan.

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• All economic sectors open to foreign direct investment.
• Equal opportunities for local and foreign investors.
• 100% foreign equity allowed.
• No Government sanction required.
• Attractive tax/tariff incentives package.
• Remittance of royalty, technical & franchise fee, capital, profits, and dividends allowed.

• Foreign Private Investment (Promotion & Protection) Act, 1976.
• Protection of Economic Reforms Act, 1992
• Foreign Currency Accounts (Protection) Ordinance, 2001
• Tax exemption for IT companies till 2016 (the Government of Pakistan has given tax exemption on income from export of computer software and related services)

TRADE POLICY

Pakistan has had a period of stability and continuity for almost seven years since the present government assumed office in October 1999, at the outset of which a clear vision for Pakistan’s future had been outlined. The economic reform agenda figured most prominently in this vision, since this was a necessary prerequisite for improving the lot of Pakistan’s most needy, especially through accelerated economic development. In this regard, the government has taken many bold and visionary decisions, and by doing so, has ensured a bright future for all Pakistanis.

In 2005, the Ministry of Commerce focused on trying to maximize the level of the country’s exports, resulting in exports for the fiscal year 2005-06 amounting to a total of $16.468 billion. This represents an increase of US$ 2.1 billion or 14.44% over last year’s level of US$ 14.391 billion. This increase is slightly more than the growth achieved last year, i.e. of US$ 2 billion. It is also noteworthy that despite the challenges faced during the year, the export growth rate of 14.44% this year is substantially more than the world merchandise export growth rate of 13% in 2005.

The statistics relating to trade in services, while being reflected in the country’s balance of payments figures, are not fully disaggregated. As a result, while it is possible to discern the exports and imports in some service sectors, it is not possible to do the same in others because they are reflected in too broad a category. This situation makes it difficult for the Government to plan rigorously for the benefit of this sector. It has therefore been decided that the State Bank of Pakistan will immediately start the process of fully disaggregating the services trade figures from the balance of payments statistics, so that by the end of the fiscal year 2006-2007, there is more clarity. Nevertheless, given the current level of disaggregation, it is clearly evident that in a ten-month period i.e. July 2005 to April 2006, the export of services in only three service sectors i.e. construction services, computer-related services and other business services, Pakistan’s exports reached around US$ 392 million. This is a reasonable achievement in view of the fact that over the last year the country was working in a very difficult environment.

The continued stability in Pakistan’s fiscal position has helped to increase exports considerably over the last six years, with exports having risen by almost 100%. New policies under trade diplomacy have been initiated, which has helped to improve Pakistan’s market access internationally. When economies grow rapidly like Pakistan’s has grown, certain challenges are faced, and Pakistan’s has been inflation. Future challenges lie in striking the right balance between economic policies to achieve exports growth, control inflation and narrow the trade gap. In addition to that, the country needs to especially focus on human resource development, infrastructure, reducing the cost of doing business, and giving the country’s exporters a level playing field relative to their competitors.

Increase the country’s exports requires a comprehensive effort involving many Government divisions. The sector-oriented vision required for industrial, agriculture and services areas will be a significant exercise for the country in order to be able to make use of future opportunities which will be available to it.

For further details please visit http://www.commerce.gov.pk/Tradepolicy.asp