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Cabinet approves first-ever mobile device manufacturing policy

National

June 3, 2020

ISLAMABAD: The Federal Cabinet on Tuesday approved the first ever mobile device manufacturing policy, pursuant to a summary moved by Ministry of Industries and Production.

The policy has been prepared by Engineering Development Board (EDB), a techno-economic arm of Ministry of Industries and Production (MoIP), through extensive consultation with relevant public and private sector stakeholders. The Economic Coordination Committee (ECC), in its previous meeting held on 21st May 2020, approved the mobile device manufacturing policy which has been further ratified in the said meeting of the Federal Cabinet.

Muhammad Hammad Azhar, Minister for Industries and Production congratulated his team in Ministry and also acknowledged the support from Ministry of Commerce, Ministry of IT & Telecom, Pakistan Telecommunication Authority, Ministry of Planning, Federal Board of Revenue (FBR) and consideration of ECC.

The market carries a potential of over 40 million handsets, which has become a practical possibility especially after the successful launch of Device Identification, Registration and Blocking System (DIRBS), that eliminated smuggling of mobile phones. The policy aims to incentivise local assemblers who will provide jobs to local engineers, skilled and semi-skilled educated youth. Pakistan is well poised to capitalise the competitive human resource advantage to attract investment in the sector from across the globe. Policy aims at localization/indigenization of the parts of mobile phone in a phased manner.

The salient features of the policy are as follows:

a. Removal of Regulatory Duty for CKD/SKD manufacturing by PTA approved manufactures under Input/Output Co-Efficient Organization (IOCO) approved import authorization.

b. Removal of Fixed Income Tax on CKD/SKD manufacturing of mobile devices up to USD 350 category.

c. Increase in Fixed Income Tax on USD 351 -500 USD category by Rs2000 and USD 500 by Rs6300 on CKD/SKD manufacturing only.

d. Removal of Fixed Sales Tax on CKD/SKD manufacturing of mobile devices.

e. PTA shall allow activation of handsets manufactured in the country under import authorization of inputs by IOCO in CKD/SKD kit (8517.1211) and not under HS Code 8517.7000 i.e. parts. This will eliminate misdeclaration in parts category at the import stage. Activation of CBUs imported through notified routes after payment of all levied duties and taxes as fixed by government from time to time shall continue till further amendment.

f. In up to USD 30 category, words “except smart phones” to be inserted for CBU imports under 8517.1219 to avoid misdeclaration.

g. R&D allowance of 3% to be given to local manufacturers for exports of mobile phones.

h. Locally assembled /manufactured phones to be exempted from 4% of withholding tax on domestic sales.

i. Government to commit maintaining tariff differential between CBU and CKD/SKD till the expiry of the policy.

j. Local industry to ensure localization of parts and components as per roadmap included in draft policy.

k. EDB to act as Secretariat of Mobile Phone Manufacturing Policy and ensure development of allied parts, components and devices.

A total of 16 local companies are manufacturing mobile devices in the country out of which most of the companies are manufacturing feature phones i.e. 2G. The companies are now shifting to manufacturing smart phones as technology is shifting towards 4G/5G.

The local manufacturers have shown satisfaction on approval of mobile phone policy and are of the considered opinion that investment in this sector will start pouring in.

The policy ensures that local manufacturing of allied parts and components such as bluetooth, hands free, mobile accessories etc. will attract intelligent interventions at par with international best practices.