Cellphone manufacturers say layoffs in offing as industry running low on raw material

The Pakistan Mobile Phone Manufacturers Association (PMPMA), the representative body of 26 manufacturers, has said that the industry is running out of raw material as letters of credit (LC) for mobile phone CKD kits are not being opened due to the country's low foreign exchange reserves.

This development, it said, could result in massive layoffs.

In a letter addressed to Finance Minister Miftah Ismail on Friday, the association said the State Bank of Pakistan (SBP) has advised commercial banks to take its prior approval before opening any LCs for mobile phone CKD kits under HS Code 8517.1211.

The HS Code refers to cellular mobile phones in CKD/SKD condition and customs duty is 0%, if imported by local assemblers/manufacturers duly certified by Pakistan Telecommunication Authority (PTA) subject to quota determination by the Input Output Co-efficient Organization (IOCO).

"For the last two weeks, the SBP, due to foreign exchange constraints, has not permitted opening of any LCs for mobile phone CKD kits. As a result, the local industry is running out of raw material," the letter added.

Aamir Allawala, PMPMA's Senior Vice Chairman, urged the "SBP to immediately allow establishment of LCs" for the import of these items below $100, arguing that in terms of import value, this category (<$ 100) only requires 30% of total foreign exchange consumed by the industry.

In the letter, a copy of which is available with Business Recorder, the PMPMA said that for category above $100, the decision can be made by the SBP later subject to foreign exchange constraints.

"This strategy will ensure that 70% of the production facilities will continue to function and 35,000 jobs can be saved. Hence, this will minimise hardship and unemployment," it added.

“The mobile phone industry fully understands the very difficult economic conditions inherited by the new government and is willing to support through attracting foreign investment, creating jobs and targeting exports of mobile phones,” he said.

Allawala, however, added that his companies – Transsion Tecno Electronics and Tecno Pack – would also be reducing its contracted workforce by 1,800 people in case the LC issue persists.

“We cannot pay a monthly payroll of Rs50 million. We are being forced to send our workers home temporarily since our CKD stock is about to end,” Allawala said.

There are a total of 31 cellphone assemblers in the country, catering to 92% of the local demand. The rest is met by imports.

Allawala said that almost all manufacturers will face depletion of their stocks and would start downsizing.