Limitations on Mobile Part Imports Can Cost Billions of Dollars to the Export Sector

The meeting of the Economic Coordination Committee (ECC) took place recently to decide which item will be put off the import ban list. The ECC repealed the import ban on a number of luxury items, however, the ban on the import of CBUs (completely built units) for mobile phones and the automotive industry still remains intact. Furthermore, it is pertinent to mention here that the State Bank of Pakistan is giving very small approvals for the import of CKDs (completely knocked down), and the local mobile manufacturing assemblies are shutting down.

Between May 20 and July 19, the imports of prohibited items decreased by approximately 70 percent, from $399.4 million to $123.9 million, as a result of the restriction. However, the mobile phone exports were also adding a good amount to the national exchequer with the hefty exports. The State Bank of Pakistan has only allowed 40% volume of the normal range for exporting CKDs for mobile manufacturing, according to a source. This is not sufficient as it would incur significant losses to the manufacturing industry. It isn’t a good sign for the Pakistani mobile industry, and it would have serious ramifications for our local tech industry. Some of the ramifications in this regard are listed below. But before that, we want to clarify the difference between the automotive and local mobile industry with respect to the bans.

Unlike Automobile Industry, Mobile Industry is Export Oriented:

Many individuals are linking the ban on imports of CBUs and the limitation on CKDs for the mobile industry with the automotive industry.  However, it is pertinent to mention here that the automotive industry isn’t an export-oriented sector. On the other hand, the local mobile assemblies are export-oriented and have contributed billions of dollars to the national exchequer in 2021.

Ramifications With Respect to limitations on the import of Mobile Phone Parts:

Decline in Mobile Phone export and revenue:

We can say that 2021 was probably the best year for the Pakistani mobile industry as we exported more mobile phones than we imported.  Furthermore, as per a report, in January of this year, around 80% of the mobile phones sold were made in Pakistan. However, the incumbent government’s ban on CKD (Completely knocked down), and SKD (semi-knocked down) amid dwindling foreign reserves has put constraints on local mobile manufacturing. It would lead to a significant decline in our mobile phone exports and overall revenue generated by the sector. Furthermore, it could completely destroy the newly set up mobile manufacturing industry which isn’t good for our country.

Low Sale of Mobile phones:

As the manufacturing of mobile phones hit a pause in the country and imports of CBUs are banned, the sales of mobile phones would obviously plummet in the country. It will have a negative effect on mobile distributors and retailers. Because of the low sales, these businesses would have to be shut down and our local wholesale market won’t be able to sustain itself.

Lagging Behind in Global Competition:

As we all know, most of the major smartphone brands release devices globally. So we won’t be able to catch up and will lag behind in the global competition. For example, if Apple or Samsung releases a certain phone globally and it reaches Pakistan after months then all the updates regarding the phone and promotions would already be available worldwide. So when we get the phones, they won’t be the latest, and the rest of the world would be moving towards the successor of the same phone.

Effects on the tech Media Publishers:

The pause in the local mobile manufacturing and ban on CBU mobiles would have a pretty negative effect on the media publishers as well.  It is already evident from the current situation. The tech media publishers include social media (Youtube, Facebook users, etc) publishers, websites, and other similar channels. The business runs when a new product (such as a smartphone) is launched and brands reach such platforms for promotions (advertisements, PRs, reviews) and pay them in return according to the impressions they would get. Therefore, when no new or very few devices will be launched then the media publishers won’t be able to earn and the business would run at a loss.

High unemployment rate:

Thousands of Pakistani citizens were employed by the local mobile manufacturing assemblies for the production of mobile phones. On the grim side, if such measures from the government of Pakistan continue, all the factories would ultimately shut down and thousands of employees would lose their jobs. Then they will have no choice except to return to brick-and-mortar jobs. It would further add to the misery of people.

Loss in Tax Collection:

The tax collection from mobile phone registration will also plummet because of the import ban on CBUs and limitations on the import of mobile parts. Therefore, the tax collection from FBR would be seriously affected, and ultimately its contribution to the national exchequer.

Conclusion:

Pakistan’s IT sector and mobile phone exports were on a positive trajectory for the last two years. However, the current measures from the government of Pakistan are negatively affecting it and can lead to a complete collapse. Our neighbor India has a staggering IT export of over $220 Billion. The government of Pakistan should follow its model and make friendly policies for the local mobile industry.

Check out? PTA confirms 14 Million mobile phones manufactured locally during Jan-Jun