The information and communication technology (ICT) sector in Pakistan has shown resilience and growth, outpacing the national GDP growth for the most part, according to data compiled by Data Darbar. However, there has been a visible slowdown since the third quarter of 2022, aligning with the macro trend, with the sector’s GDP declining sequentially during three quarters.
Despite this slowdown, software and computer services remain the hottest sectors for investors, reflected in their higher price-to-earnings multiples compared to peers. As of the end of 2023, the sector traded at a P/E of 15.45, well above other industries.
Also Read: Punjab Government Exempts IT Sector from ‘Anti-Smog’ Lockdown Order
Venture capital remains a crucial source of funding for growth-oriented companies in the tech sector, as public listings have been lackluster in recent years. Since 2019, only $222 million has been raised through initial public offerings on the Pakistan Stock Exchange, while venture capital has deployed funds worth $858 million during the same period.
ICT exports have been a significant driver of Pakistan’s tech sector, with exports increasing at an impressive 10-year compound annual growth rate (CAGR) of 19.3 percent since 2014. However, there has been a noticeable slowdown in export growth over the last two years.
Additionally, deposits held in banks by Information & Communication companies have surpassed Rs. 100 billion for the first time in 2023, indicating healthy growth in the sector. However, there hasn’t been a proportionate increase in banking credit issued to tech companies, highlighting a gap in financing options.
Corporate activity in the tech sector remains robust, with thousands of new IT company registrations every year. Despite this, foreign direct investment (FDI) in the sector has been relatively low, with only $42 million attracted in 2023 and $517.3 million over a longer horizon.
Talent availability is crucial for the sector’s growth, and it has emerged as a major source of employment in urban centers. As of 2023, there are approximately 600,000 people employed in the Information & Communication sector, with efforts needed to expand capacity through formal and vocational training to meet growing demand.
