Importers Demand Withdrawal of ‘Cruel’ Policy on Smartphone Industry

The Mobile Phone Importers and Manufacturers Association (MPIMA), in a letter to Finance Minister Miftah Ismail, has demanded the cancelation of 100 percent cash margin and prior permission from the central bank on import LCs (letters of credit). They also asked to increase the R&D allowance to 8-10 percent and issue SRO for New Duty Drawback Scheme on local mobile phone manufacturing.

In this letter, it is stated that the Government of Pakistan recently made amendments to its Import Policy to curb the pressure on the forex reserves of the Country. These amendments, in their present form, have a detrimental effect on the Mobile Device Manufacturing Industry.

According to the MPIMA, establishing a letter of credit on a 100 percent cash margin blocks companies’ capital. The government should cancel the 100 percent cash margin, and banks may be allowed to carry out transactions as per the normal procedure, the letter read.

According to the letter, the State Bank of Pakistan (SBP) has directed the authorized dealers to seek prior permission from the Foreign Exchange Operations Department in a circular on 20 May 2022 to control the outflow of US dollars. The mobile manufacturing industry is new and will be forced to shut down or cut its operations significantly. The Association has asked the government to abolish the prior permission from SBP may on the mobile manufacturing companies to ensure their smooth functioning.

The letter further addressed that R&D allowance should be at par with international competitors, e.g., India (9- 10 percent), Vietnam (10 percent), and China (12 percent). According to the Industry, this allowance is only admissible to the companies exporting the mobile devices, it neutralizes the impact on the exchequer in value addition and job creation, etc.

The MPIMA has suggested that the R&D allowance should be increased from 3 percent to 8-10 percent. The Association reckons that an R&D allowance of 10 percent will be comparable to Vietnam, India, and other countries, and it will be most feasible for the export of mobile phones.

This letter demands that SRO for New Duty Drawback Scheme (DLTL) should be issued as soon as possible. DLTL was approved by the Economic Coordination Committee (ECC) of the previous government’s federal Cabinet on 20 March 2022 and ratified by it on 2 April 2022. Reportedly, 5 percent drawback was agreed under the said scheme.

It is stated that Mobile Phone Importers & Manufacturers Association (MPIMA) is a representative body of around 80 percent of the key players from the Mobile Phone Importers & Manufacturers of the Country. MPIMA and its members have a significant role in the development of the Mobile Phone and Allied Product Sector of Pakistan, which includes the preparation and implementation of the Device Identification, Registration and Blocking System (DIRBS) and the formulation of Pakistan’s first Mobile Device Manufacturing Policy.

All major players of the industry, including but not limited to Xiaomi, Infinix, Oppo, Vivo, Techno, iTel, Alcatel, Maxfone, VGOTel & QMobile, have deposed their confidence in MPIMA as their representative forum before relevant authorities on the matters affecting the interests of the industry.

Stakeholders of the Mobile phone industry stated that the members of MPIMA have an export target of $2.5 billion in 2023-24 and $5 billion in 2024-25. To achieve this target, the Association suggests issues like 100 percent cash margins, Duty Drawback Schemes, and R&D allowances need to be settled.

The letter also stated that the self-claimed unregistered Association i.e. Pakistan Mobile Phone Manufacturers Association (PMPMA) has presented a few suggestions on the aforesaid issues. PMPMA only represents less than 20 percent of the manufacturers of the country who are mainly producing entry-level 2G/3G mobile phones, which are of value less than $100. Hence, they have zero potential for export. All members, being major stakeholders of the industry, have strongly rejected and disassociated themselves from the suggestions of PMPMA.