THE mobile device manufacturing policy of 2020 is yielding good results — so far. The establishment of around 19 plants importing semi knocked-down kits for local assembly of low-end to mid-end mobile phones by Chinese and Korean companies in the last one year or so in the country reflects the success of the policy. Indeed, the generous tax incentives offered to the assemblers on the import of SKD kits is encouraging for investors. The introduction of the Mobile Device Identification, Registration, and Blocking System by the PTA to stop the smuggling of handsets has also played an important role in supporting capital investment in this sector by creating additional demand. The swelling cost of labour and the emerging power shortages in China, as well as the latter’s deteriorating trade ties with the US and the West, have convinced Chinese firms to test the waters in Pakistan in price segments of up to $200 per unit, which form almost 80pc of the total domestic market share.
As far as the policy’s benefits to the economy are concerned, the local assembly of devices has generated several thousand new jobs and is claimed by the assemblers to have reduced the nation’s mobile phone import bill by 15pc-20pc at a time when rapidly growing imports are putting additional pressure on the country’s balance of payments and wiping off the gains made in the last one year. For example, the trade adviser has revealed that the import of manufactured or completely built units has declined by 73pc year-over-year to $179m in the first five months of the ongoing fiscal. This drop has helped the government save $410m in foreign exchange. Likewise, the import of mobile phone SKD kits for local assembly has surged by 407pc to $674m from $133m last year, showing the growth in locally assembled units. Nevertheless, real benefits to the economy will not come unless the assemblers start investing in localisation of mobile phone components and exporting their products. The policy requires assemblers to ensure deletion of at least 50pc of their components by July 2023 but this means nothing unless these brands are compelled through policy tweaks to locally manufacture high-tech parts. That is not all. Consumers should also be passed on at least part of the price advantage the assemblers are getting in the shape of tax breaks. We don’t want another industry like the foreign carmakers making profits at the expense of the consumers.
Published in Dawn, December 9th, 2021
