On October 27, 1996, SBP issued a Circular No. 2/FEP.1(51)Software-96 relating to the realization of earnings against export of software. This Circular is still enforced even today. One very disturbing aspect of this circular is that the exporter has to provide the agreement alongwith the name and address of the overseas buyers to SBP. Ordinarily, this would not be a problem, but in the software business, this is tantamount to committing hara-kiri. The competition for software development is intense and the remuneration is more often based on the nature of the order, the efforts involved in its process, the marketing strategies, and the ability of the exporter to negotiate an optimum price for the task.

The ramifications of these conditionalities of the Circular are major impediments in the upsurge in the export figures of software. First of all, any exporter can contact a small-time tout who would extract out the exporter’s agreement with the buyer from the SBP archives and then easily contact the overseas importer and offer the job order at a "better" rate. This has been witnessed in the export of other goods where genuine exporters have lost customers to those who have had access to invoices filed with the Customs authorities. All it costs are a measly few rupees for a Xerox of the invoice. Secondly, why would then anyone export from Pakistan when others can easily misuse the privileged information?

1. The name of the original overseas buyer is protected since the agreement and the monthly statement to SBP would mention the Dubai office as the overseas buyer.
2. The order, say of US$ one million, would be in the books of the Dubai office which in turn would send a order of, say, US$ 50,000 only to the Karachi software establishment. However, the Karachi unit would be doing all the development worth US$ one million since there is no mode available to determine the value of the order or prove the bona fide of the job.
3. This method would mean that the exporter would only receive $ 50,000 thru official channels and would get rupees at the official rate of, say Rs 54 per dollar. The rest of the US$ 950,000 would then be sent thru Hundi at the open market rate of over Rs 58. Thus, the exporter would get a tax-free profit (excluding expenses) of US$ 950,000 and that too at over Rs 4 per dollar premium.
4. Furthermore, there are students who have the ability to design websites for overseas buyers at a very nominal rate of a few hundred dollars and they do this on part time basis and send the developed web pages to the buyers on internet. How would they go about declaring this income when they are not registered nor do they have any infrastructure facilities, such as opening bank accounts, going frequently to the SBP, or being aware of the procedures involved in the required paperwork? Thus, they either have to resort to keeping their proceeds outside or getting them thru Havala.
5. The Sales Tax Collectorates have still not laid their eyes on the software houses. Sooner than later, they would find the ways and means to target this industry too and recover their pound of flesh. Why would any software exporter want to go thru this rigmarole too?

The Hon’ble S&T Minister is earnestly requested to convene a meeting with the Finance Minister, Commerce Minister, Governor of SBP, and the Chairman of EPB, and remove these conditionalities if the target of increasing software exports is to be a reality. These conditionalities, if required, should only be applicable for those who want export refinance from the SBP so that the interests of SBP are protected. At this moment in time, the genuine exporters who do not have the wherewithal to set up overseas offices are suffering due to this Circular. Of course, there would be a lot of talk about stimulating the country’s export base as it is every citizen’s national duty, etc., but one thing should be clear. There is a brain drain, there is an investment drain, and there is an education drain. The government has to provide an enabling environment with maximum transparency, minimum bureaucratic interference, substantial infrastructure facilities, a laissez- faire atmosphere where there are no state monopolies, and more importantly, credibility and trust before there is going to be any formidable software exports. The government should also trust, encourage, and support the young people who can make the difference between Pakistan being a powerful software exporter or a hobo on the information highway. Meantime, the computer whiz kids would either seek the H-2 visas, or look towards Germany or England, or yell "Dubai Chalo", because they know they are worth something and they can do wonders in their fields.

Sincerely: