G-Five has shown interest in the country’s market and has requested Pakistan Telecommunication Authority (PTA) for a Non-Objection Certificate (NOC) to establish manufacturing units in Pakistan.
MoIT’s Efforts to Bring Mobile Phone Manufacturers in Pakistan
For its part, the Ministry of Information Technology (MoIT) is engaged with international telephone manufacturing companies to establish local manufacturing/assembling units in Pakistan through Public Private Partnership (PPP) or otherwise.
Local smart phone manufacturing can empower communities and increase employment rate as well. Such efforts would restore investors’ confidence in the country and also help bring valuable Foreign Direct Investment (FDI).
The Current State of Pakistan’s FDI and Telecoms Sector
Currently FDI and contribution from telecom sector is on the decline side due to rigid and inconsistent government policies, high cost of doing business, law and order situations, and the ongoing energy crisis.
Telecom contribution to the national exchequer, revenues and investment registered significant decline during 2014-15 as compared to the preceding year. Telecom contribution to exchequer declined from Rs 243.3 billion in 2013-14 to Rs 126.3 billion in 2014-15.
During this period GST collection declined from Rs 60.1 billion to Rs 45.8 billion, PTA deposits declined from Rs 104.6 billion to Rs 7 billion while activation tax remained zero.
Telecom revenues declined from Rs 463.97 billion in 2013-14 to Rs 449.49 billion in 2014-15. Further telecom investment in the country declined from $1.8 billion in 2013-14 to $852 million.
MoIT Announces Incentives for Investors to Shore Up Local Economy
However, in order to support and facilitate local manufacturing, MoIT after consultation with the relevant stakeholders has launched a special incentive package for local manufacturing of cellular mobile phones in Pakistan which was approved as a part of Finance Bill 2015-16.
This package has attracted M/s Haier to set up assembly line for smart phones in Pakistan. Now M/s G-Five has also requested PTA for NOC to establish manufacturing units in Pakistan.
According to tax incentive package, given for cellular phone industry for manufacturing of mobile phones in the budget 2015-16:
- income tax exemption would be available for a period of five years,
- a 90 % depreciation allowance for plants, machinery and production line equipment used for manufacturing of mobile phones by the local manufacture of mobile phones duly certified by the PTA during the first year,
- customs duty and sales tax exemption on the import of plants, assembly line machinery and equipment.
It is worth mentioning here that the MoIT has decided to float Expression of Interest (EoI) for local manufacturing of mobile phones and smart meters under the revival and revitalization plan of Telephone Industry of Pakistan (TIP). TIP has become non-functional as its annual revenue has gone down drastically to about Rs 20 million from Rs 700 million in the recent past. TIP is a State Owned Enterprise (SOE) currently running in losses and draining an average of Rs 500 million annually for salary support. It currently is on the privatization agenda of the Federal government.
Earlier some Chinese companies had termed it a dead and inaccessible organization while considering its performance and location where it’s situated. However, after the launch of China-Pakistan Economic Corridor (CPEC) project, prospects for development are visible to investors as the route will be passing through the same area. The companies have shown interest to review the project on Public Private Partnership (PPP) model. TIP has adequate land holdings of 432 kanal and infrastructure besides skilled manpower, assets that can benefit investors here.