Pakistan To Smartphone-makers: Come For The Low Tax, Stay To Create Your Replacements

Pakistan has proposed that foreign smartphone-makers entering the country will have to help it build a domestic smartphone industry.

Draft regulations [PDF]released this week by telecoms regulator the Pakistan Telecommunication Authority (PTA) would require all phonemakers to obtain a special 10-year licence before they can begin operating factories in the country.

Under the licence, phonemakers will be allowed to start as assemblers of components but will be required to use more made-in-Pakistan parts over time. The proposed scheme calls for just packing materials to be made in Pakistan during a manufacturer's first year of operations, and even then only two percent of it. By year two manufacturers will have made-in-Pakistan quotas for 10 per cent of their batteries and motherboards, plus eight per cent of their displays and plastic housings.

The licence also mandates that phonemakers teach locals operators how to build their kit within three years of beginning their operations. This includes "complete transfer" of chipset design, as well as the design and manufacturing of motherboards, displays, and associated accessories, such as power cables and hands-free devices.

The regulations aim "to promote local manufacturing and assembly, and to discourage smuggling of mobile handsets," the PTA said in a statement. Smuggling is considerable problem in Pakistan due to the country's high import duties on mobile handsets. Some estimate the number of smuggled phones in the country range as high as 40 to 60 per cent.

Pakistan has ambitious plans to build up its local smartphone industry. It has pitched itself as having “the most relaxed tax structure in the world” to draw multinationals to set up factories in the country.

But the country faces competition from China, India and Vietnam, the three nations that today make the vast majority of the world's mobile phones.

So far, no big name companies have built factories in Pakistan, but Samsung is considering opening an assembly plant, according to the country's Minister for Industries and Production, Hammad Azhar. ®