Pakistan’s Mobile Manufacturing Policy Has Failed Amid High Taxes, Says New Report

A new policy report released by the Prime Institute has raised serious concerns over Pakistan’s telecom taxation framework and the effectiveness of the country’s Mobile Device Manufacturing Policy (MDMP), warning that high taxes and tariffs are widening the digital divide and slowing technological progress.

The report, titled “Taxing Connectivity: How Taxes and Tariffs Deepen Pakistan’s Digital Divide,” argues that Pakistan’s current fiscal and regulatory structure is making smartphones and broadband services increasingly unaffordable for ordinary citizens while also hampering the country’s broader digital modernization efforts and future 5G expansion.

Authored by Zartasha Inayat and Dr. Ali Salman, the study states that although telecom network coverage is now available across much of Pakistan, millions of citizens remain disconnected due to affordability issues caused by multiple layers of taxation on devices and telecom services.

According to the report, effective taxes on higher-end smartphones now exceed 50%, a level researchers say has encouraged gray-market activity while weakening revenue efficiency and discouraging legal device purchases.

Report Questions the Success of Mobile Manufacturing Policy

The report also offers a critical assessment of Pakistan’s Mobile Device Manufacturing Policy 2020, which was introduced to promote local smartphone assembly and reduce dependence on imports.

While the policy successfully shifted the market from imported finished phones toward Completely Knocked Down (CKD) and Semi-Knocked Down (SKD) assembly models, the report argues that it has failed to achieve several of its key long-term objectives.

Researchers claim domestic assembly operations continue to involve limited local value addition, with the majority of components still being imported from abroad.

The report further states that local assembly has not resulted in meaningful price reductions for Pakistani consumers, despite years of policy protection and incentives provided to assemblers.

It also argues that the policy has delivered limited foreign exchange savings for the national economy, although it acknowledges that local mobile manufacturing plants have generated more than 60,000 jobs in Pakistan since 2021.

High Taxes Blamed for Widening Digital Divide

The report warns that smartphones and broadband connectivity should now be viewed as essential economic infrastructure rather than luxury consumer products.

According to the authors, excessive taxation on connectivity tools is undermining economic productivity, digital inclusion, education access, entrepreneurship, and innovation opportunities for Pakistan’s rapidly growing young population.

The study urges policymakers to reduce taxes on smartphones and telecom services to improve accessibility for lower-income households and narrow the country’s digital usage gap.

Researchers also recommended eliminating sudden tax increases, referred to in the report as “tax cliffs,” which they say distort consumer behavior and create market instability.

The report further calls for replacing unconditional policy protections for local assemblers with performance-based incentives tied to actual localization, technological development, and export performance.

The authors concluded that Pakistan risks falling further behind in the global digital economy if connectivity continues to be treated primarily as a short-term revenue-generation tool rather than a long-term development priority.

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