In a letter to Finance Minister Miftah Ismail, the Mobile Phone Importers and Manufacturers Association (MPIMA) has asked the cancellation of the 100 percent cash margin and prior approval from the central bank on import LCs (letters of credit).
They also requested that the R&D allocation be increased to 8-10% and that an SRO be issued for a New Duty Drawback Scheme on local mobile phone production.
According to this letter, the Pakistani government has made changes to its import policy in order to relieve strain on the country’s FX reserves. In their current form, these revisions are harmful to the mobile device manufacturing industry.
The MPIMA claims that obtaining a letter of credit with a 100% cash margin locks up a company’s capital. The government should eliminate the 100 percent cash margin, and banks should be able to conduct transactions as usual, according to the letter.
In a circular dated 20 May 2022, the State Bank of Pakistan (SBP) urged authorised dealers to seek prior authorization from the Foreign Exchange Operations Department to prevent the outflow of US dollars, according to the letter.
Because the mobile manufacturing business is so new, it will be compelled to shut down or drastically reduce its activities. To ensure the seamless operation of mobile manufacturing enterprises, the Association has asked the government to remove the requirement for prior authorization from SBP.
The letter went on to say that the R&D allowance should be on pace with international competitors, such as India (9- 10%), Vietnam (10%), and China (10%). (12 percent).
According to the industry, this exemption is only available to enterprises who export mobile devices, and it offsets the exchequer’s impact in terms of value addition and job creation, among other things.
According to the MPIMA, the R&D grant should be increased from 3% to 8-10%. According to the Association, a 10% R&D allocation would be equivalent to Vietnam, India, and other nations, and would be most practical for mobile phone exports.
The SRO for the New Duty Drawback Scheme (DLTL) should be issued as soon as feasible, according to this letter. The previous government’s federal Cabinet’s Economic Coordination Committee (ECC) adopted DLTL on March 20, 2022, and ratified it on April 2, 2022. According to reports, the strategy had a 5% drawback.
According to reports, the Mobile Phone Importers & Manufacturers Association (MPIMA) is a representative organisation of around 80% of the country’s major mobile phone importers and manufacturers.
MPIMA and its members have played a key role in Pakistan’s development of the mobile phone and related product sector, including the development and implementation of the Device Identification, Registration, and Blocking System (DIRBS) and the formulation of Pakistan’s first Mobile Device Manufacturing Policy.
All of the industry’s major players, including Xiaomi, Infinix, Oppo, Vivo, Techno, iTel, Alcatel, Maxfone, VGOTel, and QMobile, have pledged their support for MPIMA as their representative forum before relevant authorities on issues affecting the industry’s interests.
MPIMA members have an export objective of $2.5 billion in 2023-24 and $5 billion in 2024-25, according to stakeholders in the mobile phone sector. To meet this goal, the Association recommends that concerns such as 100% cash margins, Duty Drawback Schemes, and R&D allowances be resolved.
The letter further indicated that the Pakistan Mobile Phone Manufacturers Association (PMPMA), a self-proclaimed unregistered organisation, had made a few suggestions on the aforementioned issues.
PMPMA represents less than 20% of the country’s manufacturers, who primarily produce low-cost 2G/3G mobile phones with a retail value of less than $100. As a result, they have no export potential. All members, as important stakeholders in the sector, have flatly rejected and distanced themselves from PMPMA’s recommendations.