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Grey Products; a Serious Threat to Pakistani Mobile Market

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Pile of smart phones

ICT sector is the only industry of Pakistan that is flourishing despite all hurdles. Pakistan has witnessed massive surge in mobile industry over the past few years, especially after 3G/4G auction the mobile industry has become even more promising. With the rapid growth in cellular market, many international companies including HTC, Samsung, OPPP and Apple have started operating in the country and wide range of communication gadgets are also gaining ground like smartphones, tablets, phablets, wearable tech etc.

Unfortunately with these developments in the market growth, parallel import or grey market of cell phones has also stimulated. Parallel import or Grey product is defined as; “A non-counterfeit product imported from another country without the permission of the intellectual property owner”. Grey products are cheaper than as compared to the regular products because they are non-tax and non-duty paid. Price is main factor for many customers and price-reduction act as a major pull for customers for buying grey products. Due to corruption and lack of a proper mechanism the low priced grey products are flooding the market.

Parallel import or Grey product is defined as; “A non-counterfeit product imported from another country without the permission of the intellectual property owner”.

Although the reduced price is an important factor, but customers do not realize or probably ignore knowingly that with price, their reliability is also compromised. These products do not come with any official warranty or genuine service contract so customers have no legal grounds to claim any damage. The sellers of grey products often replace genuine part with fake ones or sell replica products that bring bad name to all manufactures and affect the businesses of official distributors.

These grey channel imports are not only detrimental for the consumers and the distributors but is also causing major loss to the national exchequer. Thousands of cell enter the market every month through grey channels, escaping the taxation system. In a time when our economy is already in need of a major boost, these illegal activities are further hurting the country. Therefore it is the pressing need of time to take decisions to curb parallel imports of cell phones. The government has been making some efforts to control grey market, these efforts were mainly driven by the heightened security threats, terrorist activities and extortionist threats conducted through the use of unregistered cellphones. But now government, especially PTA is working actively to support and facilitate all stakeholders in the industry.

Although the reduced price is an important factor, but customers do not realize or probably ignore knowingly that with price, their reliability is also compromised.

Damages of grey products have increased over the time as now replica phones are also openly available on online shopping stores. Apart from retailer’s stores, now customers have access to low budget replica smartphones on their right click whereby decreasing the standards of original gadgets. These China made smartphones are a serious threat to the present local and international mobile brands in Pakistan. PTA needs to increase its leeway of action from retail outlets to online stores as well for the complete eradication of grey products from the market.

A recent initiative taken by the PTA is to make public aware about the grey channel products and its risks for the customers and the economy as well. For this purpose PTA has started a media campaign which highlights the grey market issues and urging public to safeguard the consumer rights. Previously, PTA’s started the type approval process which is meant to control parallel imports and official distributors. Its type approval is the mechanism by which particular equipment is approved for general sale and is suitable to connect with a specific public telecommunication network. The process is implemented to make sure that the equipment conforms to defined standards and requirements. Type approval serves the purpose of registering and approving the mobile devices that are going to be in market after the approval. Other than all this, it’s most important purpose is to maintain consumer rights of the quality and safety of the equipment.

The sellers of grey products often replace genuine part with fake ones or sell replica products that bring bad name to all manufactures and affect the businesses of official distributors.

ICT sector is the backbone of our economy right now therefore it is very important to take required measures to let it flourish even further. There are still many things that can be done to overcome parallel imports of cellphones. Accumulative taxes are currently over 15% besides fixed customs duty. This prevents availability of low cost phones to the consumers so they turn toward grey market products instead of buying from authorized dealers. Some distributors are also using grey channels to import cellular products and evading taxes. If the government revisits its taxation and give some relaxation to the distributors, the prices of products will automatically lower down hence discouraging grey channel products. Government can also introduce mechanism such as Universal Equipment Identity Register (EIR) that can accurately record data regarding import and commercialization of devices in Pakistan, automatically putting a stop towards smuggled goods and preventing financial frauds by providing accurate information of actual subscribers.

These grey channel imports are not only detrimental for the consumers and the distributors but is also causing major loss to the national exchequer.

Importance of government laws and regulations in order to control grey channels is an established fact but there is no denying the fact that consumers also play a major role in it. If the demand of low priced grey products is condensed, the supply will automatically decrease as well. Therefore, like government it is the responsibility of the consumers to discourage parallel imported products and buy PTA approved products from authorized dealers only. This will not only save them from any fraud and damage but will also help in preserving the national exchequer. We need to understand that if global companies pull out their businesses from the country due to unfair practices, it will not only affect us on individual level but on national level as well.

. Previously, PTA’s started the type approval process which is meant to control parallel imports and official distributors. Its type approval is the mechanism by which particular equipment is approved for general sale and is suitable to connect with a specific public telecommunication network.

Smart devices are quickly becoming the necessity of current techno-age and it is important to ensure that only high quality and safe are sold in the market. This is only possible when a proper mechanism is followed and all the products are imported through legalized way. Many international brands have already started their operations in the country, in 2014 tech giants like Lenovo, Apple and Oppo entered Pakistan market and reportedly big names like Xiaomi and MicroMax are also planning their launch in the country. Therefore, it is now imperative to crush grey market and create opportunities for industry.

Mobile Phone Distributors in Pakistan