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The rumor has it that the government is considering imposing GST on computer
software, either in the coming budget or sometimes later. In all probability, the rumor
is true because, governments in general and the governments in this part of the
world in particular, are renowned for actions at cross purposes to each other. We
have seen new business entities being created in the same public sectors where
privatization drive was in full swing. When there was talk of promoting cellular
telephony, duties were being imposed on handsets. The measures to promote
investors’ confidence are neutralized by the reversal of policies and procedures in
the middle of projects. When steps are being taken to promote broadband, GST is
imposed on computer hardware. One can go on and on but there is not enough
space here to recount the acts and counteracts of the government. And of course
one wouldn’t want to try the patience of the readers.
Against this background, the news sent shivers down the spines of concerned
people that government was considering promoting IT exports. Indeed a Federal
Task Force on Information & Communication Technology was constituted under the
chairmanship of an eminent and thorough professional in the person of Salim
Ghauri. It was tasked to suggest ways and means to gear up Pakistan IT exports.
The IT people however, sat with fingers crossed, anticipating the inevitable counter
move to thwart the efforts of the Federal Task Force on ICT. It seems that the counter
move is coming with indecent haste. The Task Force has not yet finalized its
recommendations, and the tax authorities are already moving in to ensure that the
recommendations are stillborn.
The IT exports of Pakistan are hovering over half a billion dollars. To get some
bearing of the global market, the ICT exports of tiny Israel in 2008 totaled US$12
billion. In the same period, the IT-BPO exports of India to US alone stood at US$ 28.4
billion. Of course it is totally out of context to mention here that Chinese software
exports in the first 4 months of 2009 reached US$4.93 billion.
The volume of internally used software in Pakistan is a meager fraction of our paltry
IT exports. The revenue department would not gain much by imposing GST on the
use of software. But the damage to the industry would be colossal. It is
incomprehensible what the government aims to gain, other than choking the industry
and countering its own efforts of promoting the usage of genuine software.
It is pertinent to mention here the evaluation of Indian and Chinese policies in a
study conducted by International Finance Corporation (IFC), the private lending arm
of the World Bank. The report says that India’s policies for the software sector and
China’s promotion of special economic zones (SEZs) for the manufacturing sector
suggest that well-designed and sector-specific government policies can overcome
weaknesses in investment climate and allow developing countries to compete
globally in new fields. The study found that India and China pursued policies to
alleviate key bottlenecks such as access to power for manufacturing and broadband
access for software companies, enabling new globally competitive industries to
develop in spite of deficiencies in the national investment climate.
Those policies did not aim to pick winners by supporting specific companies, said
the study, which covered more than 300 software and hardware companies in India
and China. These governments did not directly subsidize firms or offer protection
against imports. Instead, they offered tax concessions that lowered costs and
reduced government interference in their businesses. China’s high-tech
manufacturing industry has achieved global competitiveness, as did India’s software
and biotechnology industries. The study also finds that China’s software industry,
although less well known than India’s, is set to expand its share of the world market.
Similarly, China’s prowess in exports rests largely on the successful use of special
economic zones to provide a good business climate, a strategy India is now
emulating, and which promises to improve India’s status as a manufacturing base,
according to the study.
People in this country have stopped expecting vision, prudence and sadly, even
common sense from the leadership. For, what vision could be expected of a regime
which disbands the National Commission on Biotechnology as being useless, and
does not find the ICT sector as worth having a minister for more than a year? Still, it
should not be too much of an effort for the government just to look around and see
what is happening in the immediate neighborhood and why.
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2009
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