A meeting of the Economic Coordination Committee (ECC) was held recently to determine what items will be taken off the list of prohibited imports. The ECC removed the import bans on several luxury items but the ban on imports of CBUs (completely constructed devices) that are used for the manufacture of mobile phones as well as the automotive industry is in place. It is also important to point out this: the State Bank of Pakistan is providing very limited approvals for exports of CKDs (completely destroyed) as well as the local mobile manufacturing units are closing.
Between May 20 between May 20 and July 19, imports of prohibited goods dropped by about 70 between $399.4 Million to $123.9 million because of the restrictions. But, mobile phone exports were increasing the size of the country’s budget with the huge exports. According to the State Bank of Pakistan has just allowed 40% of the normal range of exporting CKDs to mobile manufacturing, according to an official source. This isn’t enough since it will result in substantial loss to the manufacturing sector. This isn’t a great indicator of the Pakistani mobile industry and could have significant implications for our local technology industry. The implications related to this are discussed below. However, before we do this, we’d like to define the distinction between the local and automotive mobile industries in relation to bans.
Contrary to Automobile Industry, Mobile Industry is focused on exports:
Many people are linking the import ban for CBUs as well as the restrictions on CKDs to the mobile industry to the automotive industry. It is important to point out that the automotive industry is not an export-oriented industry. However, the local mobile assembly industry is export-oriented and will contribute millions of dollars into the nation’s budget by 2021.
Modifications with respect to Import Limitations of mobile Phone parts:
A decline in Mobile Phone exports and revenue
We can conclude that 2021 was the most successful year for this sector. Pakistani mobile industry, as the export of mobiles was higher than imports. In addition, according to an analysis, in the month of January approximately 80% of smartphones sold produced in Pakistan. However, the government’s prohibition of CKD (Completely destroyed) as well as SKD (semi-knocked down) in the face of dwindling foreign reserves has placed restrictions on the local manufacturing of mobile phones. It could lead to the loss of significant amounts in mobile phone exports as well as the overall revenues generated by the sector. In addition, it could end the recently established manufacturing of mobile phones, which isn’t a good thing for the country.
Low Sales of Mobile Phones:
The production of mobile phones comes to an halt in the country, and the import of CBUs are banned, phone sales would surely drop across the nation. This will negatively impact the mobile retailers and distributors. Because of the decline in sales, these businesses will be forced to close and our local wholesale market wouldn’t be able to maintain itself.
In the Global Market, We’re Not Far Enough:
We all know that the majority of major smartphone companies release their products globally. Therefore, we will not be able to catch up and fall behind in global race. If, for instance, Apple or Samsung announces a particular phone worldwide and it gets to Pakistan after a period of time, then all updates related to the phone as well as promotions would already be accessible across the globe. Therefore, when we receive these phones it wouldn’t be the most recent, but the majority of the world is looking towards the successor to the phone.
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Technology’s effects on Media Publishers:
The suspension of local mobile manufacturing process and the banning CBU mobiles will result in a very negative impact on media publishers and the media publishers. This is evident from the current state of affairs. The tech media publishers are Facebook, Twitter and other social media (Youtube, Facebook users, and so on) websites, publishers as well as other channels similar to them. The business operates when a new device (such as smartphone) is launched , and companies use these platforms to promote their products (advertisements or PRs, reviews, etc.)) and pay them in proportion to the number of impressions they will receive. If the new or very limited devices are released, media publishers wouldn’t be earning and their business will run in losing money.
High rates of unemployment:
Many thousands of Pakistani citizens worked for local assembly of mobile manufacturers to produce mobile phones. The worst part is that should these measures by the administration of Pakistan persist, all factories would eventually shut down and thousands of employees will have their job sacked. They will then be forced returning to brick-and-mortar work. This will only add to the miseries of the people.
Loss in Tax Collection
Tax collection from the registration of mobile phones will decrease due to the ban on imports for CBUs and restrictions on the importation of mobile components. So, tax collections from FBR could be severely affected, and eventually their contribution to the exchequer of our nation.
Conclusion:
The Pakistani IT industry and exports of mobile phones were in a good direction over the past two years. But the latest actions of the administration of Pakistan affect it negatively and could lead to an absolute decline. Our neighbour India is home to an astonishing IT export of more than $220 billion. Pakistan‘s government Pakistan should adopt its example and create friendly policies for the local mobile sector.
