Enhancing the Competitiveness of Pakistan’s Services Exports – Other Business Services

This report titled “Enhancing the Competitiveness of Pakistan’s Services Exports – Other Business Services” is the second in the series on services exports by the Pakistan Business Council (PBC).  This report focuses on Classification 10 “Other business services” and its sub-section Classification 10.2.1.2: “Accounting, Auditing, Bookkeeping, and Tax Consulting Services”.

The Other Business Services Sector

As demand for professionals is increasing, the other business services sector has expanded at a healthy rate. The sector had the highest global exports in services exports ($1,292.8 billion in 2020), along with the fourth-highest growth rate. The sector comprises of three sub-sectors: Classification 10.1 “Research and Development (R&D)”, Classification 10.2 “Professional and Management Consulting”, and Classification 10.3 “Technical, Trade-related, and other Business Services”. In 2020, the USA and the UK dominated the world’s export markets for these services, with market shares of 14.2% and 9.9%, respectively. On the import side, Ireland and the USA lead in global imports of other business services, with market shares of 11.4% and 9.0%, respectively.

In Pakistan’s case, the export value of other business services amounted to $1.4 billion while imports were worth $2.4 billion in FY21, making this the second-largest export and import services sector for Pakistan.

The Global Accounting Services Sector

Accounting services include accounting and bookkeeping (measuring and recording the financial flows and positions of an enterprise), auditing (verifying and attesting/certifying the accuracy of the financial position and results of the enterprise, for internal or external purposes), and tax preparation, amongst other services. The Big Four – Deloitte, PwC, Ernst & Young, and KPMG – dominate the accounting arena globally, with revenues of $50.0 billion, $45.1 billion, $40.0 billion, and $32.1 billion in 2021, respectively.

The accounting process is becoming more and more automated. New dimensions have been developed in the area of fin-tech, algorithms, analytics and assurance. Emerging trends in the industry include cloud-based accounting, blockchain technology, artificial intelligence, advisory services, and so on.

Pakistan’s Accounting Services Sector

Pakistan’s exports under this classification increased sharply between FY15 & FY18, before declining slightly till FY20, it then reached an all-time high of $41.4 million in FY21. Meanwhile, imports of such services have remained low throughout, amounting to around $0.7 million in FY21.

There are a number of professional accountancy organizations in Pakistan such as ICAP, ICMAP, PIPFA, ACCA, and CIMA. More details on these organizations can be seen in Chapter 5. ICAP has been assigned the responsibility of developing and adopting accounting standards in Pakistan by the SECP.

Main Findings

Digitalization in the accounting arena: Pakistan’s progress in this area has been relatively slow and the country needs to keep the emerging trends in mind and to invest in new technologies to become globally competitive. Cloud-based accounting, software, blockchain technology, communication technology, and artificial intelligence are areas where Pakistan needs to catch up. Moreover, the lack of a virtual portal or platform for the services and accounting sector poses a challenge for Pakistan. Foreign markets are unaware of qualified professionals in Pakistan and the services that they can provide which limits the export of such services.

Continual professional development: The technical knowledge of a fresh accounting professional in Pakistan is excellent and in line with international demand. However, these fresh talents mostly struggle in areas of critical thinking, negotiation skills, presentation skills, and communication skills.

Lack of marketing of services: Pakistan needs to work on its branding and marketing as a country to create awareness and to market the availability of the talent present in the country. One restriction in this area is that Chartered Accountants are not allowed to market themselves.

Costly compliance requirements: Working on licensed products such as Microsoft office, cloud servers (Amazon, Oracle), putting firewalls, and anti-viruses in place are some compliance requirements that foreign buyers expect adherence to. While large firms do not face any issue in these areas, medium & small-scale firms might find adhering to such requirements costly.

Lack of credit insurance and payment gateways: This translates into reluctance on the part of service providers to export their services. There is also a general lack of trust in digital transactions.

Unsupportive infrastructure: Stable, uninterrupted, high-speed and affordable internet connections and power supplies, along with a proper workspace set up with computers or laptops are a few of the most vital things needed to provide services abroad.

Main Recommendations

Pakistan needs to create awareness of the latest global trends: The Pakistani services providers need to be made aware of emerging trends, this will be the first step towards digitization. More webinars and seminars will help increase awareness.

Inculcate and integrate emerging accounting trends:  Emerging accounting trends such as Robotics Accounting in educational examinations, as well as, in professional trainings need to be integrated in the curriculum. There is also a need for a network of education providers to help talent progress alongside technical exams, and a network of employers who not only train this talent, but also provide continuous professional development.

Career counselling sessions in schools: To increase awareness regarding the profession and future opportunities that might become available, local professional accounting bodies need to interact frequently amongst themselves to devise strategies for promoting the profession of accountancy in Pakistan. New ideas and making use of appropriate technology needs to be discussed and implemented in the country.

Financial support to small and medium-sized accounting firms: Since accounting and auditing software is expensive, some type of handholding is required for the firms in the SME sector.

Digital promotion platforms need to be used: To market and promote Pakistan as the preferred destination for such accounting services, email marketing can be used to target potential clients. Foreign Trade Officers based in current and potential markets should make a joint effort to increase awareness about Pakistan’s high quality accounting services. Pakistan can arrange conferences, outsourcing expos, exhibitions, and meet ups with international clients to create awareness. Services knowledge platforms need to be established in the country to fill gaps in knowledge.

Technology parks for provision of such services are vital: Where the required infrastructure is present, technology parks should accommodate firms which cater to accounting services, this is especially important for start-ups who might not be able to initially pay the high cost of renting real estate.

Domestic regulations need to be redrafted & regulatory bodies strengthened: Gaps in domestic regulations should be addressed by a gradual adoption and effective implementation of basic internationally recognized regulatory principles such as the OECD good regulatory practices. Further, there is a need to improve capacity in the regulatory bodies which oversee the sector.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 94) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

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