100pc cash margin will lead to cellphone smuggling: importers

Published March 5, 2017
KARACHI: Phones are on display at the mobile market on Abdullah Haroon Road.—White Star
KARACHI: Phones are on display at the mobile market on Abdullah Haroon Road.—White Star

KARACHI: The State Bank of Pakistan’s decision of imposing 100 per cent cash margin on imports of mobile phones will encourage smuggling, cellphone importers said on Saturday, anticipating a tough business environment ahead.

M Saadul Hassan, Director Marketing, Samsung Pakistan said the new cash margin condition would depress government’s revenue and hurt consumers’ interest.

He said the measure would discourage formal import to match the local demand.

Pakistan’s mobile phone and electronics market has both been expanding and transforming as Pakistani consumers are shifting toward high end products with relative improvement in power supply, Mr Hassan said.

He said the government should evolve a policy to incentivise brands to establish local assembly lines in Pakistan.

“The government should provide incentive to regular importers and tie loose ends to control smuggling” he added.

Director, United Mobile, Ejaz Hassan importer of Alcatel smart phones and Voice devices, said the SBP’s decision has shocked genuine importers.

“Cellphone importers are already paying sales tax (fixed) between Rs 300-1,500 per unit followed by six per cent income tax, Rs 250 per unit as customs duty and one per cent provincial excise duty,” he informed.

Because of the above high levies, smuggling of mobiles has already grown by more than 100pc over the last one year, he claimed.

Now with new 100pc cash margin requirement, small importers cannot afford to block their money in LC margin and would resort to smuggling, he said.

It would hurt even importers who are taking shipments through open credits, he added.

Even shipments on credit cannot be cleared unless importers deposit 100pc cash to the concerned bank.

All importers have to submit and online “I-Form” which is the part of “WEBOC”, an FBR system for online GDs and I-Form and Customer clearance.

Commercial banks would not give approval on I-Form unless 100pc cash is deposited.

The SBP’s decision would create a big revenue gap to government in the shape for significant reduction in official import. Besides grey import pose a great security risk, Mr Ejaz said.

He said cellphone prices are expected to increase as cost of funds has to be added. He was of the view that the SBP took the decision keeping in mind low foreign exchange reserves but it would not serve the purpose.

“Grey players would start buying foreign currency from the open market and the rupee would further devalue and dollar rates would go up,” he said.

Import of mobile phones in July-January 2016-17 stood at $399 million as compared to $433m in same period last fiscal. Cellphone arrival in 2015-16 was $753m as compared to $723m in 2014-15, figures of Pakistan Bureau of Statistics stated.

Published in Dawn, March 5th, 2017

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