Major mobile phone assembly plants are facing a halt because letters of credit (LCs), for the import of fully knocked down (CKD), units, aren’t being opened. The shortage of dollars has been causing delays since May 20, and the industry is experiencing a depletion in raw material inventories.
Through a tweet, the State Bank of Pakistan (SBP), clarified that it has not stopped import payments and that commercial banks have sufficient dollar liquidity to make these payments. In fact, the inter-bank marketplace has seen import payments totaling $4.7 billion in the current month.
Manufacturers and businessmen are increasingly worried about the crisis caused by LC restrictions. These restrictions were allegedly due to the shortage of dollars in the market.
According to Aamir Allawala, CEO of Tecno Pack Electronics, “Banks have stopped opening LCs for mobile phones CKD units because of a shortage in dollars since May 20,” The Express Tribune was told.
He stated that the industry had used up all of its raw materials and that 80% of the industry was closed. The industry is at risk of losing nearly 50,000 workers.”
Parvez Iftikhar, an ICT expert, stated that “the supply of locally produced low-cost mobile phones is going to stop.” Mobile phones will only be available to those who are able and willing to pay high taxes and duties in order to afford expensive imported phones.
He said, “We will have say goodbye to our dream to become an exporter mobile phones,”
Noman Ahmed Said, CEO of SI Global, stated that it is an emerging industry that has been around for nearly two years. Failure to open LCs for CKD Import may have a negative effect on both jobs and foreign investment.
Techno, ITEL, and Samsung have all announced layoffs, while KIA, Toyota, and Proton are making similar moves.
Said that it would make over 50,000 people unemployed at a time where the cost of living is rising due to high inflation.
Kapeel Kumar, a specialist in startup funding, stated that the government should maintain a balance rather than cutting down any industry immediately. This will lead to more damage to the economy and increase unemployment. He said that the SBP could take alternative measures.
Tahir Abbas, AHL Head for Research, was optimistic that the government would prioritize imports based upon necessity as imports have fallen to 1.3 times from 2.3 times four month ago.
The situation will improve with the IMF program’s revival, loan rollovers by China totaling $2.4 billion, and the anticipated Sukuk launch from the government. This will help to support the country’s foreign currency reserves.
Said disclosed that some companies have been in discussions with the government to ask it for LCs to import low-end feature phones as well as smart phones. This would help save jobs.
Although the technology sector is doing well, recent developments and challenges may slow down progress. This sector, if supported, can generate both revenue and foreign exchange that can be used to support the country as well as bridge the gap in balance payments.
Taurus Securities Head for Research Mustafa Mustansir stated that “desperate times call for desperate measures.” “We have very few options in the current situation. Things could get worse if IMF loans are delayed.
Mustansir stated, “It’s only because of this economic and political mess that many industries are on the verge of collapse, and not just in the mobile phone industry.”
He said that “Salaried workers are already struggling to make ends meets with low income.” “The government must take strong steps to secure the IMF’s approval quickly.”