ECC demanded to promote Mobile Device Manufacturing in Pakistan

KARACHI: The Economic Coordination Committee (ECC) has been asked to remove the regulatory duty, fixed sales tax on manufacturing of mobile devices and impose ban on import of used mobile handset in new proposed Mobile Device Manufacturing Policy 2020.

On the export of locally manufactured mobile phones, the ECC has also recommended to give 3 per cent export allowance, Newztoday.com a local website said.

In a summary moved to ECC, Ministry of Industries and Production has recommended to remove Regulatory Duty for CKD/SKD manufacturing by PTA approved manufactures under existing Input/Output Co-Efficient Organisation (IOCO) approved quota and proposed tariff structure aiming to promote local manufacturing.

It further recommended to remove Fixed Income Tax on CKD/SKD manufacturing of mobile devices to $350 category. Industries ministry proposed further to increase in Fixed Income Tax on USD 351-500 USD category by Rs 2000 and $500 by Rs 6300 on CKD/SKD manufacturing. It proposed removal of Fixed Sales Tax on CKD/SKD manufacturing of mobile devices.

PTA activation may be restricted to locally manufactured handsets imported formally as CKD/SKD kit (8517.1211) under IOCO quota and not under HS Code 8517.7000 i.e. parts, industries ministry said adding that in up to USD 30 category, words “except smart phones” to be inserted for CBU imports under 8517.1219.

It said that import of used mobile phones should to be restricted for commercial use. It urged to ensure maintaining tariff differential between CBU and CKD/SKD and recommended the local industry to ensure localization of parts and components as per roadmap. It said that EDB will act as Secretariat of Mobile Phone Manufacturing Policy and ensure CKD/SKD and ensure development of allied parts, components and devices.

Ministry of Industries and Production (1&P) Division initiated Mobile Device Manufacturing Policy formulation through consultation with public and private sector in January 2019 by designating Engineering Development Board (EDB) as a Secretariat.

According to Pakistan Telecommunication Authority (PTA), mobile subscription had reached 164 million. Pakistan is seventh largest importer of mobile phones with market size of more than 40 million. The 2-G non android phones are being phased out gradually vis-à-vis growth in market share of 4G android phones. The local manufacturing of mobile phones remained suppressed due to imports through grey channels.

The introduction of Device identification, Registration and Blocking System (ORBS) by PTA curbed illegal imports of mobile phones and it was instrumental in security enhancement also. However, during year 2019 i.e. after introduction of DIRBS the imports exhibited an increase of 11 million units versus increase in local manufacturing to the tune of 7.64 million over the previous year.

The major reasons behind slow growth of mobile phones are absence of policy resulting in unpredictable manufacturing business environment, no correlation between local assembly and imports in Completely Knocked Down(CKD) Kits and insufficient tariff differential between local assembly and import of Completely Built Units (CBUs).

It is pertinent to mention that various countries including China, Vietnam, Indonesia, India and Bangladesh have promoted local manufacturing of mobile phones. China is the leading exporter of mobile phones having 49% market share. Vietnam is the second largest exporter in the world with Samsung having major investment in their market.

Recently, Bangladesh has started exporting the mobile phones to foreign markets including USA. Bangladesh has provided 22% tariff advantage to local assembly/manufacturing over CBUs.

The policy prepared by EDB/ 1&P Division has been prepared with objectives of technology acquisition and localization of mobile devices through local investment, Joint Ventures, Foreign Direct Investment etc, creation of 200,000 direct and indirect jobs. Price reduction for consumers, increase in digitization through supporting 4G/5G technologies development of efficient manufacturing eco-system, exports of competitively manufacturing handsets and achievement of security objectives.

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