The Ministry of Information Technology and Telecommunications (MoITT) has released the consultation draft of the National Freelancing Facilitation Policy 2021.
Significance of Freelancing Sector for Economy
The report outlines that the Information Technology (IT) and Information Technology enabled Services (ITeS) sector has tremendous potential and is expected to reach its set target of $5 billion in IT & ITeS export remittances within the next three years.
The IT & ITeS export remittances surged to $1.23 billion during FY 2019-20, including $150 million earned by freelancers. Whereas, in the first seven months of the current FY 2020-21 (July 2020 – January 2021), freelancers’ export remittances increased to $219 million, and are expected to cross $350 million by the end of FY 2020-21.
Pakistan’s Freelancing Landscape
It is estimated that, at present, around 100,000 ‘active’ freelancers (who at least make $100 a month) are working from Pakistan and are earning valuable foreign exchange for the country.
The new National Freelancing Policy will enable freelancers to work within a supportive framework duly aligned with enhancing the demand generation and supply of IT & IT enabled Services to international markets.
The policy objectives detail that on average, freelancers in the US earn $21,000 per annum, while the same for Pakistan approximately stands at $3,500 per annum per active freelancer per year.
Objectives of the New Policy and Strategy Implementation
The new policy aims at building the number of active freelancers in Pakistan to 1 million and increasing the average earning rate to $5,000 per annum. It will potentially add $5 billion of export remittance inflows in Pakistan every year.
The strategy implementation processes include the PSEB organizing inbound and outbound delegations, IT exhibitions/meetups, roadshows, etc. in collaboration and facilitation with other governing bodies like the Ministry of Commerce, the Ministry of Interior, and the TDAP. This will be promoted by incentivizing freelancers for their participation at seminars, global exhibitions, trade fairs, and expos, allowing them to showcase their portfolios and creating partnerships enabling them to increase their revenues.
Multiple freelance marketplaces will be promoted to be operated from Pakistan to compete against the international freelancing platforms, ensuring competition that will reduce platform fees and provide multiple channels of revenue for Pakistani freelancers. This will also provide strategic security to this sector by lowering the dependence on foreign-owned freelancing platforms.
Digital banking channels will also be provided to freelancers for opening bank accounts, enabling e-payments and access to other financial instruments, increasing export remittances, simplifying outward remittances for purchasing services/software/ tools/digital platforms, etc.
The PSEB will provide low-cost registration and renewal at Rs. 1,000 and Rs. 3,500 respectively per annum, and will facilitate the ease-of-doing-business through tax incentives and other subsidies offered by the government.
The PSEB and relevant government bodies will provide special visa facilitation to freelancers with a record of a minimum of three years of IT & ITeS export remittances exceeding the $5,000 per annum through formal banking channels.
The PSEB and relevant governmental and private sector organizations will collaborate to provide subsidized health and life insurance to PSEB-registered freelancers through existing and future initiatives. Collateral-free loans will also be provided to PSEB-registered freelancers through existing and future initiatives.
The PSEB, in collaboration with relevant government and private sector organizations, will also work on enabling the linkages of PSEB-registered freelancers with local and foreign investors.
In collaboration with the Securities and Exchange Commission of Pakistan (SECP), the PSEB will attempt to simplify the process of registering a Single Member Company and offer a fee discount to the PSEB-registered freelancers.
In partnership with other public and private sector organizations, the PSEB will launch new training and technology certifications initiatives for the local freelancers. It will create partnerships with multinational technology companies (Tech MNCs) to subsidize the course materials and certifications, making such material available to local freelancers.
Appropriate legislation will also be made for foreign remittances. For this purpose, the PSEB, in collaboration with the State Bank of Pakistan (SBP), will work to streamline inward foreign exchange remittances from freelancing activity using freelancing defined codes by the SBP that are subject to income tax exemptions.
Other relevant legislation will also be made for financial inclusion, local escrow, intellectual property and data protection, women empowerment, facilitation for the differently-abled community, and for the empowerment of remote and under-served areas.
Fiscal and Non-Fiscal Incentives Offered by the New Policy
The policy says that it is necessary to realign the government strategies to attract a reasonable chunk of the global spending on outsourcing and freelancing services in Pakistan. For this, freelancers will be offered fiscal and non-fiscal incentives like income tax holiday, incentivized registration fee packages, free and subsidized trainings and certifications, subsidized office spaces, collateral-free loans up to Rs. 10 million, access to home loans, and health and life insurance, etc.
The non-fiscal incentives include help desks, centralized VPNs, visa facilitation, and IP whitelisting for VoIP traffic.
The policy has been drafted by the MoITT through its departments (the PSEB, Ignite, and the IT Wing of MoITT) in consultation with the National Freelancing Policy Committee comprising the representatives of the SECP, the SBP, the FBR, and the Ministry of Commerce.
Input from a working group of prominent freelancers was also sought for the preparation of this draft.