Fed. Cabinet Approves the First Ever Mobile Device Manufacturing Policy

The first-ever Mobile Device Manufacturing Policy, pursuant to a summary moved by Ministry of Industries and Production was approved by Federal Cabinet in its meeting that held on 2nd June 2020. Engineering Development Board (EDB), a techno-economic arm of Ministry of Industries and Production (MoIP) were involved in policy preparation through extensive consultation with relevant public and private sector stakeholders.

On 21st May 2020, the Economic Coordination Committee (ECC) in its meeting approved the Mobile Device Manufacturing Policy which was further endorsed by the Federal Cabinet.

Fed. Cabinet Approves the First Ever Mobile Device Manufacturing Policy

Minister for Industries and Production-Mr. Muhammad Hammad Azhar also acknowledged the support from the Ministry of Commerce, Ministry of IT & Telecom, Pakistan Telecommunication Authority, Ministry of Planning, Federal Board of Revenue (FBR) and consideration of ECC.

Due to the successful implementation of Device Identification, Registration and Blocking System (DIRBS), that eliminated smuggling of mobile phones, the market carries a potential of over 40 million handsets.

The aim of the policy is to encourage the local assemblers who will open the job opportunities to local engineers, skilled and semi-skilled educated youth. Pakistan is well poised to capitalize on the competitive human resource advantage to attract investment in the sector from across the globe. The policy aims at localization/indigenization of the parts of the mobile phone in a phased manner.

The main features of the policy are given below:

1. Removal of Regulatory Duty for CKD/SKD manufacturing by PTA approved manufactures under Input/Output Co-Efficient Organization (IOCO) approved import authorization.
2. Removal of Fixed Income Tax on CKD/SKD manufacturing of mobile devices up to USD 350 category.
3. Increase in Fixed Income Tax on USD 351 -500 USD category by Rs 2000 and > USD 500 by Rs 6300 on CKD/SKD manufacturing only.
4. Removal of Fixed Sales Tax on CKD/SKD manufacturing of mobile devices.
5. PTA shall allow activation of handsets manufactured in the country under import authorization of inputs by IOCO in CKD/SKD kit (8517.1211) and not under HS Code 8517.7000 i.e. parts. This will eliminate misdeclaration in parts category at the import stage. Activation of CBUs imported through notified routes after payment of all levied duties and taxes as fixed by government from time to time shall continue till further amendment.
6. In up to USD 30 category, words “except smartphones” to be inserted for CBU imports under 8517.1219 to avoid misdeclaration.
7. R&D allowance of 3% to be given to local manufacturers for exports of mobile phones.
8. Locally assembled /manufactured phones to be exempted from 4% of withholding tax on domestic sales.
9. Government to commit maintaining tariff differential between CBU and CKD/SKD till the expiry of the policy.
10. Local industry to ensure localization of parts and components as per roadmap included in draft policy.
11. EDB to act as Secretariat of Mobile Phone Manufacturing Policy and ensure the development of allied parts, components and devices.

A total of 16 local companies are manufacturing mobile devices in the country out of which most of the companies are manufacturing feature phones i.e. 2G. The companies are now shifting to manufacturing smartphones as technology is shifting towards 4G/5G. The local manufacturers have shown satisfaction on approval of mobile phone policy and are of the considered opinion that investment in this sector will start pouring in.

The Policy ensures that local manufacturing of allied parts and components such as Bluetooth, hands free, mobile accessories etc. will attract intelligent interventions at par with international best practices.