PBS data show that mobile phone imports declined by 8.85% in July-August FY2026-27, to $274.13 million from $300.74 million in the same period last year. However, these numbers only reveal one side of the story. According to the Pakistan Single Window (PSW) trade information portal, the imports of Completely Knocked Down (CKD) and Semi-Knocked Down (SKD) kits under PCT code 8517.1310 totalled around $220.99 million during the first two months of the current fiscal year. These import figures point towards an important question: Whether Pakistan’s current mobile manufacturing policy was successful in reducing import dependence or has merely changed the nature of the imports?
The Mobile Device Manufacturing Policy (MDMP) 2020 was implemented to increase domestic production, boost investment, and gradually lower the reliance on imported mobile phones. The policy created a tariff differential between the CKD/SKD kits and Completely Built Units (CBUs), as well as tax concessions for local assemblers. The policy aimed to make domestic production economically viable while supporting localisation, technology transfer, and eventually shifting the market from imports to exports of mobile phones. The policy incentivised the establishment of local assembly; however, assembling imported kits cannot be viewed as developing domestic manufacturing skills. Therefore, the policy’s effectiveness should be viewed against the actual domestic value addition, not the number of smartphones assembled locally or the decline in the imports of the CBUs.
The tax structure applied to smartphones under this policy also needs to be reviewed. High customs duties and other taxes, along with preferential treatment for the imported kits, provide an incentive to assemble locally. However, on the other hand, it has increased the tax burden on the imports of CBUs significantly. PRIME’s Taxing Connectivity Report reveals that the effective tax burden on a $ 700-worth imported device is 50.26%. Such high taxes raise the cost of formal imports of CBUs and create an incentive for tax evasion and smuggling. The report further reveals that even after the preferential tax treatment, the mobile manufacturing policy could only achieve 10% against the set target of 49% localisation by June-2023 and was not able result in any significant foreign exchange savings, as the local industry continues to rely on imported kits. This raises a concern about whether the continuous tariff protection has promoted domestic manufacturing or simply sustained the import-dependent domestic assembly operations.
Although the current mobile device policy was able to attract meaningful investment and generate employment opportunities through protectionist policies, the continued dependence on imported CKD/SKD kits continues to constrain domestic value addition and limits foreign exchange savings. The proposed Mobile and Electronic Devices Manufacturing Policy 2026-2033 provides an opportunity to address these issues. The incentives attached to localisation should be linked to measurable localisation, technology transfer and export performance, instead of continued protection. Additionally, there is a need to rationalise the taxes on CBU handsets to weaken the incentives driving the informal trade. The success of Pakistan’s mobile manufacturing policy should be reviewed by domestic value addition, export competitiveness and a lower reliance on imported components.
Good to have this discussion to explore pros and cons of our mob manufacturing policy.
In my view, keeping taxes on high end mobile phones so high, we are not necessarily raising revenue to support poorer consumers. In practice, such taxes can encourage people to keep two phones as they just keep the other nontax paid mob for internet use and another for local calls. We end up spending twice the foreign exchange.
Secondly, it is difficult to justify different tax treatment simply on the basis of who uses a particular product. We would not, for example, argue that MacBooks should face higher taxes than Chromebooks simply because the former are more likely to be used by relatively well off consumers.
Third, high protection makes the domestic market more profitable than exports. As a result, firms have little incentive to compete internationally. This is one reason Pakistan has not developed significant mobile phone exports, while countries such as India have increasingly built their industries around export markets.
Fourth, according to GSMA, Pakistan is among the countries with the highest taxes on mobile phones. Such high taxes inevitably make mobile connectivity more expensive, particularly for lower income consumers, who are the least able to absorb the additional cost.
Finally, much of the benefit of this policy accrues to a relatively small number of assemblers and, in many cases, their foreign partners, while consumers pay higher prices. It is estimated that through differential in taxes between components and end products, they have profited by over Rs300 billion in 5 years.
The objective should therefore be to promote genuine localization and internationally competitive production, rather than simply protecting domestic assembly. If the outcome is expensive phones for consumers, little or no exports, and higher profits for a small number of producers, it is worth reconsidering whether the policy is achieving its intended purpose.
The Article appears to lack something. I try to explain by my comments to some specific parts of the article:
" PRIME’s Taxing Connectivity Report reveals that the effective tax burden on a $ 700-worth imported device is 50.26%. Such high taxes raise the cost of formal imports of CBUs and create an incentive for tax evasion and smuggling."
If the tax burden on the high-end devices is high, don't we want to tax the rich and give relief to the poor?
And in this particuar case such high taxes do not create an incentive for tax evasion and smuggling, rather they create incentive for local assembly/manufacture - which is the aim of the policy, and which actually happened. In any case smuggled devices cannot be connected to the Pakistani networks becuase of PTA's DIRBS system, which effectively rules out smuggling.
"The report further reveals that even after the preferential tax treatment, the mobile manufacturing policy could only achieve 10% against the set target of 49% localisation by June-2023 and was not able result in any significant foreign exchange savings..."
Although the achieved localisation should have been higher than 10%, but has PRIME checked if it is at all possible to achieve a 49% localisation in a country where there is Zero chip manufacturing? Also: what is the percent localisation achieved in even more advanced countries such as India?
As for no "significant foreign exchange savings": In the absence of real figures, the statement is rather unfair.
"... the continued dependence on imported CKD/SKD kits continues to constrain domestic value addition and limits foreign exchange savings."
Before saying it "limits foreign exchange savings", we should first ascertain facts as to what would have been the country's foreign exchange spend if all the mobile phones being consumed in the country were imported CBU - that too under lower duties/taxes.
The success of Pakistan’s current mobile manufacturing policy should be measured in terms of (a) jobs created, and (b) precious dollars saved - both are desperately needed by today's Pakistan. PRIME needs to conduct a proper study to establish these two facts first.