Mobile Phone Collection Units may be Closed

Exhaustion of raw materials for the industry due to restrictions on the opening of letters of credit

Karachi: Operations at major mobile phone assembly plants are about to come to a halt as letters of credit (LCs) to import CKD units have not been opened due to dollar shortages since May 20 and the industry faces depletion of raw material stocks.

The State Bank of Pakistan (SBP) clarified through its tweet that it has not stopped import payments and that commercial banks have enough liquidity in dollars to make the payments.

The concern is growing among manufacturers and entrepreneurs over the crisis over LC restrictions, which are supposedly caused by the scarcity of dollars in the market.

“Banks are not opening letters of credit for mobile CKD units due to lack of dollars since May 20,” Amer Al-Alawala, CEO of Tecno Pack Electronics, told The Express Tribune.

“Now the industry has used up all of its raw materials and unfortunately 80% of the industry has shut down,” he said. “The jobs of the nearly 50,000 people who work in the industry are at risk.”

As a result, ICT expert Parviz Iftikhar said: “The supply of low-cost, locally made mobile phones will stop.” Therefore, only those who can afford expensive imported phones, paying high tariffs and taxes, will be able to buy cell phones.

“We have to say goodbye to our dream of becoming a mobile phone exporter,” he said.

“It’s been an emerging industry for almost two years,” said Numan Ahmed Saeed, CEO of SI Global. “The failure to open CKD import letters of credit may have a negative impact on jobs and foreign investment.”

“The government needs to maintain a balance rather than an immediate reduction of any industry, SBP can take other measures as an alternative,” said Kapil Kumar, a specialist in start-up financing.

AHL research chief Taher Abbas expected the government to try to prioritize imports based on need, as imports fell to 1.3 times compared to 2.3 times four months ago.

However, the situation will improve with the revival of the IMF program, the renewal of loans by China worth 2.4 billion dollars along with the expected launch of Sukuk by the government, which will support the country’s foreign exchange reserves.

Saeed revealed that “some companies are in talks with the government, asking them to allow letters of credit to import low-quality mobile phones and smartphones to create jobs.”

If supported, this sector can generate not only income but also foreign exchange, which can support the country and help close the gap in the balance of payments.

“Tough times call for desperate action,” said Mostafa Mustanser, head of research at Taurus Securities. We have very limited options in the current scenario.“The government must take firm steps to get IMF approval quickly.”

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