G-Five requested Pakistan Telecommunication Authority (PTA) for a Non-Objection Certificate (NOC) for setting up manufacturing units in Pakistan.
MoIT’s Efforts to Bring Mobile Phone Manufacturers in Pakistan
The Ministry of Information Technology (MoIT) is consulting with international telephone manufacturing companies for establishment of local manufacturing / assembling units in Pakistan through Public Private Partnership (PPP) or otherwise.
Local manufacturing can increase employment rate and empower communities which would return investors’ confidence in the country and also help bring valuable Foreign Direct Investment (FDI).
The Current State of Pakistan’s FDI and Telecoms Sector
Presently FDI and telecom sector contribution is reducing based on inflexibility and inconsistency of the government’s policies, high cost of business, law and order and the energy crisis.
Telecom contribution to the national exchequer, revenues and investment showed substantial decrease during 2014-15 as compared to the preceding year. Telecom contribution to exchequer reduced 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
In order to support and facilitate local manufacturing, MoIT after consultation with the relevant stakeholders has come up with a special package for manufacturing cellular mobile phones in Pakistan and was approved as a part of Finance Bill 2015-16.
This package brought M/s Haier to set up assembly line for smart phones in Pakistan. Presently, 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 noting the MoIT’s decision to float Expression of Interest (EOI) for manufacture of mobiles and smart meters under the reviving plan of Telephone Industry of Pakistan (TIP). Which has not been functioning due to its downfall of its income from Rs700 million to Rs 20 million recently. IT is a State Owned Enterprise (SOP) now in losses with an average drain annually of Rs 500 million for salary support and it currently is on the privatization plans of the Federal government.
It was termed as a dead organization by a few Chinese companies and considered inaccessible taking into note its performance and location. But after the starting of the China-Pakistan Economic Corridor (CPEC), chances for development was visible as the route will be through the area. Companies are considering to review the project on Public Private Partnership (PPP) model. TIP has considerable land holdings of 432 kanal and infrastructure in addition to skilled manpower, which can be assets for investors here.