Pakistan
Pakistan is rapidly emerging as a leading sourcing nation, and currently ranks eighth among top outsourcing countries in 2010. It is becoming a key destination for software development and information technology services, such as medical transcription and call centers.
Pakistan’s strengths lie in its English speaking workforce; complete repatriation of foreign companies' profit; equity ownership; and tax exemption on software until the year 2016. The most popular BPO sub-sectors in Pakistan are call centers, particularly in the areas of accountancy, medical transcription, animation development, and data entry.
Companies that have invested within the borders include Google, GE, Citi Group, and Bank of America. High-end IT services are also growing, with IBM, Microsoft, and Cisco expanding their operations in the country as well.
In the past, the government has spent nearly USD $70 million in order to promote Pakistan's software industry. To do this, PSEB (Pakistan Software Export Board) has constructed IT parks and leases 750,000 square feet to IT companies. The government hopes to increase the IT sector to USD $11 billion by the end of 2011, achieving more is less than a decade than what other countries in the technology scene have achieved in 15-20 years. Pakistan has also started developing start-ups for domain expertise, idea content and intellectual property for graduates who plan to start companies in IT. Another trend is the industry's shift from the "volume driven low-margin voice-based business” into higher values, such as functional BPO.
Country overview
Pakistan has a population of more than 187 million, with 95% of it Muslims. This makes it the sixth most populated country in the world and the second biggest Muslim population after Indonesia. It has more than sixty languages spoken, with Urdu as the national language and English as the official language used in legal contracts, government, and official business. Pakistan is striving for changes to propel economic and political growth, although these aims are constantly overshadowed by tensions between its secular and Islamic factions.
While most of Pakistan underdeveloped and living in poverty, with lasting internal political conflict, Islamabad has focused on economic spending. Pakistan’s reputation has discouraged foreign investment, but it is working to change this while it shifts its economy from agriculture-based to one that is service based.
Pakistan is working to strengthen its position as a dominant player in the outsourcing industry, valuing the importance of common trends such as domain expertise, idea content, and intellectual property management. There are also numerous web2.0 start-ups being developed. Pakistan is focusing on investing more on its human resources and education; two of its most ambitious projects aim to invest in higher education strengthening its IT industry. Recently, companies like telecom provider of UAE Etisalat and another leading companies in the Middle East have invested billions of dollars in Pakistan.
Source: CIA Factbook, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Cost competitiveness
A recent report by Gartner published that one of the main reasons why Pakistan is developing rapidly is because of good infrastructure and lower cost of salaries. They reported that "the salaries of IT professionals in Pakistan are approximately 30% lower than those in India, while telecommunication costs are also low as compared to any other offshore locations, which make Pakistan an attractive outsourcing destination.”
Employee compensation
Employee compensation is a large factor to consider in any outsourcing work. Most projects comprise of numerous junior resources with some senior and project management. Software Engineers or Web Developers with one to four year experience earn about 11 percent of US resources, averaging USD $6,500. Senior Software Engineers are about 13 percent of comparable resources in the US, with salaries of USD $12,500 annually.
IT project managers with 10-20 years experience range from USD $14,800 to 25,600, averaging 18 percent of their US counterparts. Salaries for senior BPO resources offer comparable savings, although junior resources are more affordable at just 10 percent of US wages.
Taxes
Corporate taxes are one of the primary expenses in an outsourcing operation, although they can dramatically change across different countries. Pakistan corporate tax rate is 35 percent, higher than China (25%), Egypt (20%), and even India (34%).
Source: PayScale, SourcingLine, February 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: KPMG, October 2009
Source: KPMG, October 2009
Source: Doing Business (World Bank), 2010
Resources and skills
Pakistan has a total workforce of nearly 56 million, with most of its IT companies concentrated on the areas of Karachi, Islamabad and Lahore. Pakistani IT executives trained in the US demand lower salaries compared to the IT managers of India. Unlike their Indian counterparts, most leave Pakistan for the US return to work in Pakistan. Compared to other countries, Pakistan has fewer holidays, which means greater staff availability for companies. It also has a more affordable talent pool with turnover rates below 20 percent. This is unlike the high turnover rates (approaching 100 percent) occurring some of India’s major outsourcing locales.
Pakistan employs 100,000 to 200,000 IT professionals with an estimated 15,000 engaged in export-oriented activities in software development and call centers. Pakistan’s volume of IT-service exports is very low, following Chile and Indonesia. Technological readiness, particularly its Internet access, is below average with just 10 percent of the population connected Broadband access in Pakistan is virtually zero.
Pakistan's English language skills are below average, with just 12 percent compared to the Philippines (48 percent) and Malaysia (33 percent). According to the OECD 2009 Global Education Digest, the adult literacy rate of Pakistan is 54 percent, putting Pakistan at the bottom of the list of the top 25 global sourcing nations. Pakistan spends just 2.6 percent of its GDP on education, unlike Israel and the United States that spend nearly 8 percent. Pakistan is taking steps to improve this problem through educational reforms, aiming for literacy rates of 86 percent by 2015 (current adult literacy is just 54 percent).
Source: CIA Factbook, 2009
Source: IMF, 2008
Source: IMF, 2008
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: International Telecommunications Union, 2009
Source: International Telecommunications Union, 2009
Business and economic environment
Economic competitiveness
Pakistan’s economic competitiveness, according to the World Economic Forum, scores low with a GCI index of 3.5, especially when compared to the US (5.4), China (4.8), and Egypt (4.0). Similarly, Pakistan's macroeconomic stability is also low. Its GCI score is 3.2 percent compared to China (4.8), Chile (4.7), and Thailand (4.9). According to the World Bank, Pakistan’s primary problem is maintaining its macroeconomic stability, which has always been difficult. The Bank is working with Pakistan’s government to improve its administration and service delivery, particularly in the areas of civil service reform and financial management recovery.
Infrastructure
Pakistan’s roads are average, ranking higher than India and the Philippines. Electric supply, scores just 2.2 compared to Israel (5.9), Egypt (5.9), the United States (6.2), and the Czech Republic (6.4).
Regulation
The overall ease of starting and operating a business in Pakistan is average, ranking 83 globally. It takes an average of 21 days to register a start-up business, and the hours required to prepare and file taxes are a grueling 560 hours per year.
Corruption
The public perception of Pakistan corruption is very high. It ranks second from last, with a score of 2.3 followed only by Russia (2.1).
Intellectual property protection
A study by the World Economic Forum ranks Pakistan below average in intellectual property right protection. It also ranks high in software piracy, with a rate of 86 percent compared to the US (20), Canada (32), and Israel (33).
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: International Telecommunications Union, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Transparency International, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: The Global Competitiveness Report, 2009
Source: BSE-IDC Global Software Piracy Study, 2009