ISLAMABAD: Pakistan’s nascent mobile phone industry shut down over two dozen production plants after running out of raw materials last week, leading to layoffs and shortage of cellphones in local market, as the government banned the import of several items due to a decline in the country’s foreign currency reserves.
According to Pakistan Mobile Phones Manufacturers Association, the monthly import bill of those running the production plants amounts to nearly $195 million and the industry has not been allowed to import raw materials since May 20.
Pakistan has been struggling to stave off a debt default by saving precious foreign exchange reserves that have fallen to $8.2 billion, barely enough to cover the import bill of just six to seven weeks.
The restriction on the import of raw materials has forced a complete closure of about 12 smartphone production units, while some of the 18 feature phone manufacturing plants have also suspended their operations.
“All plants are shut at the moment as we do not have the raw material,” Aamir Allawala, senior vice-chairman of the Pakistan Mobile Phone Manufacturers Association said.
Local cellphone assemblers cater to 92 percent of the country’s domestic demand. The rest is met through imports. According to industry sources, Pakistan has otherwise been manufacturing over 2.5 million smartphones per month.
Allawala said smartphone manufacturing was a labor-intensive industry and had employed over 50,000 skilled and unskilled workers.
“It is unfortunate that all these jobs are at stake now as the companies cannot afford the payroll in the absence of manufacturing,” he said.
He also informed the government was not allowing the opening of letters of credit (LCs) due to the shortage of dollars.
A Federal Board of Revenue (FBR) spokesperson Asad Tahir said his organization was busy with the budget and revenue issues, and would not be able to comment on the issue until next week.
“At the moment, we are stuck with budget and revenue related issues, so we’ll be able to get back on this next week,” he said in response to questions regarding the ban on the import of raw material for the mobile manufacturing industry.
Nadeem Ahsan, a joint-secretary for large enterprises development at the Ministry of Industries and Production, did not respond to questions despite repeated calls.
“The overall environment of the industry is demoralizing at the moment,” he said, adding the government allowed some $3 million worth of LCs last week, but that could not help revive production.
“Locally assembled mobile phones are short in the market and this is hurting the local economy besides the industry,” he continued.
Allawala said all smartphone manufacturing units imported raw materials from China, South Korea and Vietnam for 15 days, and that stock had finished now.
“We fear that six to eight plants of smartphones may not be able to resume operations,” he said, adding it was not easy for these units to restart operations due to numerous reasons.
A State Bank of Pakistan official, who spoke on condition of anonymity, said the central bank did not issue instructions to banks on whether or not to open LCs for smartphone manufacturers. “There are no such instructions to private banks from the central bank,” he said.