Overview of freelancing Industry of Pakistan

The freelancing industry of Pakistan has been flourishing since the last decade. Due to technology adoption, IT has also become a fast-growing industry. It is mainly due to the increased export of IT remittances which are composed of telecommunication, computers, and information technology services.

According to the official data of the Ministry of IT and Telecommunication, the remittance inflow was $396.243 million in 2020-21 and it stood at $397.328 million in the current year. This showed a slight growth of around 2.74 percent year-on-year basis. The export remittance in the case of IT services declined to $265 million in 2022 relative to $363 million in 2021 IT remittances have surged during the last six months of the fiscal year 2022-2023. It was reported that Pakistan received remittances in FY 2022-2023 of $1.33 billion and in FY 2023-2024 it increased to $3.223 billion. This represents a significant growth of 24 percent compared to the previous fiscal year. IT services consist of logo design, graphic design, web development, mobile app development, and Java developers, and the non-IT services roam around virtual assistantship, content writing, translation, sales, account, marketing, and customer services. In the global online market, Pakistan’s share is 12 percent and income-related statistics are not clear.

In Pakistan, more than 3 million people are working online. The number is increasing due to its time flexibility and work autonomy feature. The average hourly rate of workers is low compared to other regions of the world but they are highly skilled and proficient in their fields so European countries give more preference to Pakistani freelancers. To magnify the output of the IT sector, the governments has introduced various training programmes. The programmes initiated by the Punjab Information Technology Board (PITB) are PlanX, e-Rozgar, Herself, and Plan9.

According to the Freelancer Income Report 2020, the majority of citizens under the age of 35 are choosing to work as freelancers as compared to the global average. They prefer web and graphic design. Despite the existence of co-working spaces, freelancers in Pakistan find it more convenient to work from home. The report has collected data from 150 countries and it identified that female participation in freelancing was leaps and bounds ahead of the males and their earning is also more than that of males.

The average working hours of freelancers in Pakistan are 34 hours per week as compared to the world, where it was 36 hours per week. Due to the option of flexible working hours, females are participating more as compared to males. The task completed by Pakistani freelancers is equivalent to workers belonging to developed countries. Freelancing is an emerging field in Pakistan because of cheap labour, and foreign companies are opening their branches in Pakistan and the ratio of freelancers is more as compared to the rest of the world. The online platform workers in Pakistan are getting more salaries relative to other countries in the world according to the State of Global Hiring Report 2021. The salaries jacked up for online workers who are living in Mexico (57 percent), subsequently, in Canada (38 percent), Pakistan (27 percent), etc. After the pandemic (due to the massive layoff), freelancers are facing enormous challenges to get continuous work because of high competition.

Though the freelancing industry is booming persistently, the country could not obtain the full benefit, because it is facing various challenges such as it being difficult for freelancers to transfer money due to the unavailability of proper money transfer channels. PayPal is reluctant to enter Pakistan due to the strict regulatory framework. The State Bank of Pakistan (SBP) is mandating that Electronic Money Institutions hold at least PKR 200 million as initial/start-up capital to operate in Pakistan. It is misperceived that PayPal‟s reluctance to join hands with Pakistan is because of FATF, money laundering, and the exchange control regime. Rather, its major concerns are overly regulated EMI, poor e-knowledge base government and market, and an unfriendly business environment.

The insufficiency of infrastructure is increasing the gap to achieving a thriving industry. One of the main sources of boosting the freelancing industry is having high-speed internet with the minimum digital divide. The term digital divide does not only refer to the non-availability of the internet, however; it includes accessibility of technology that is different across the region. The unequal distribution of the Internet is augmenting disparities in terms of technology, education, labour, job opportunities, and so on. Instead of improving, Pakistan is still standing at the bottom quantile of the Inclusive Internet Index. The reasons for this lower position are the difficulties in the accessibility of the internet and devices. According to PSLM 2018-19 data, ownership of devices such as computers, laptops, or tablets is as low as 14 percent (household), of this 27  percent of households belong to an urban area and 7 percent from rural areas. Overall, internet accessibility is 14 percent, indicating the need to materialise universal access to the internet in Pakistan.

Taxation will also impact freelancing earnings. In 2022, the government imposed a tax on freelancers to vertically expand the tax but this decision was reversed. However, the tax policy is not conducive to self-employed or small start-up businesses. because they have to pay 35 percent tax for income above Rs 6 million. It will be beneficial for the start-ups to increase the withholding and capital gain tax exemptions from three to five years. The freelancing industry of Pakistan has the potential to provide employment to young people and the government has to take proactive steps to remove the loop holes preventing or retarding it.

According to the Pakistan Telecommunication Authority, there are 123 million homes/offices and 120 million 3G/4G broadband subscribers. Many modernised cities of Pakistan have 2G/3G internet connectivity, limiting inhabitants from actively participating in internet-enabled activities. To reduce digital disparities, the government has initiated Prime Minister Laptop Schemes. Since the conclusion of these programmes and a continuous increase in inflation and rupee devaluation, it has become difficult for lower-income strata to participate in freelancing. To overcome this challenge, the government has introduced Kistpay, Qistbazaar, and other schemes which allow people to buy now and pay later in easy instalments.

Having a good digital infrastructure as well as a sufficient supply of electricity is essential for freelancers. Pakistan is facing a severe energy crisis because of high fuel prices and mounting circular debt. The country faces an eight-to-10-hour power supply cut in summer every year. Due to power outages, freelancers are unable to bid for a project and it decreases the chance of submitting work on time, leading to a bad rating by the clients.

Taxation will also impact freelancing earnings. In 2022, the government imposed a tax on freelancers to vertically expand the tax but this decision was reversed. However, the tax policy is not conducive to self-employed or small start-up businesses. because they have to pay 35 percent tax for income above Rs 6 million. It will be beneficial for the start-ups to increase the withholding and capital gain tax exemptions from three to five years. The freelancing industry of Pakistan has the potential to provide employment to young people and the government has to take proactive steps to remove the loop holes preventing or retarding it.