Mobile Phone Plants May Shut Down in Pakistan

The mobile industry is facing the reduction of raw material inventory and operations at major mobile phone assembly are at the verge of discontinuing as the letters of credit (LCs) for import of completely knocked down (CKD) units are not being opened due to the shortage of dollars Since May 20.

The State Bank of Pakistan tweeted to clarify that it had not stopped import payments and commercial banks had enough dollar liquidity to make the payments. Import payments of around $4.7 billion have been carried out through the inter-bank market during the current month so far. There is growing apprehension among businessmen and manufacturers regarding ongoing crisis due to LC restrictions supposedly caused by the scarcity of dollar in the market.

“Banks are not opening LCs for mobile phone CKD units due to shortage of dollars since May 20,” told Tecno Pack Electronics CEO Aamir Allawala. He further added that the jobs of 50,000 people are at stake in present situation as industries have used all the raw material and 80% of industry is closed unfortunately. ICT expert Pervaiz Iftikhar also said that as a result of all this, the supply of locally manufactured low cost mobile phones will stop and consequently those who cannot afford costly imported phones which have high taxes and duties on them, won’t be able to buy phones.

“It is an emerging industry of nearly two years,” SI Global CEO Noman Ahmed Said commented. “Failure to open LCs for CKD import may have a negative impact on jobs as well as foreign investment.” Manufacturing companies like Samsung, ITEL and Techno have declared cutbacks and auto producing organizations like Proton, Toyota and KIA are likewise selecting a comparable move. Said also added that this will cause joblessness of 50,000 people at time when inflation is already causing a lot of trouble for people to maintain lifestyle and run their homes.

Kapeel Kumar, startup funding specialist said that the government must maintain a balance instead of completely shutting down an industry which will highly affect the economy causing unemployment and uncertainty in the market. “The SBP may take other measures as substitute.” AHL Head of Research Tahir Abbas was confident that the public authority was attempting to focus on imports in view of need, as imports had declined to 1.3 times as compared with 2.3 times four months prior.

However, things can become better with the revival of IMF programme, $2.4 billion loan from China along with the expected Suku launch by the government which will likely support the country’s foreign exchange reserve. “Some companies are in talks with the government, asking it to allow LCs for import of low-end feature phones and smart phones to save jobs,” Said revealed.

Read Also: Over One Million Nokia Feature Phones Produced in Pakistan

Technology sector is performing well in Pakistan but recent development can affect it badly. Otherwise this sector can generate not only revenue but foreign exchange, which can help the economy in balance of payments but things can get worse if IMF loan gets more delayed causing many industries to shut down along with mobile industry.