Local manufacturers seek govt support to overcome unemployment and save foreign exchange by enhanced penetration of “made in Pakistan” computers

For local assembly to flourish, raw material and inputs have to be zero-rated at all stages; SVP FPCCI IT Standing Committee Khushnood Aftab

Karachi, December 18: Local manufacturers of computers seek state patronage starting with the relax tax regime to overcome unemployment and save foreign exchange by increasing the penetration of  “made in Pakistan computers” which is still less than 3  percent at present in Pakistan, lowest in South Asia.

For local assembly to flourish, raw material and inputs have to be zero-rated at all stages of the product life- cycle from the import stage to sales stage because the tax regime on IT products has had a retrogressive impact on the entire industry, Khushnood Aftab, Board of Advisor for Intel (Asia Pacific and Japan), Senior Vice Chairman FPCCI Standing Committee on IT, Business Process stressed adding special incentives have to be considered for raw material distributors who bring in microprocessors, chipsets into the country as well as those local assemblers who source these components to enable manufacturing.

Less than desirable government support has resulted in high levels of uncertainty in the business climate, diminished expected returns on investment due to high costs, and lack of long-term financing. Inefficient flows of goods and services, Low levels of PC assembly have resulted in sub- optimal availability of specialized ways of transportation and logistics. This impacts local manufacturers’ competitiveness compared to their global counterparts thereby diminishing potential of IT exports, he said.

Khushnood Aftab is also CEO of Viper Technology, one of the very few local brands in Pakistan that deliver solutions in the technology arena has also honored with Technology Award by CIO in the category of “Pioneers in the local industry in Pakistan.

He sees huge benefit of enhanced local manufacturing  of computers including creation of jobs, development of higher level of skills, development of new technologies, innovation in industry, transfer of knowledge, economic development, opportunity for government to document, saving of foreign exchange, lesser reliance on foreign countries, wide-spread utilization of IT due to affordability of locally assembled products , respectability of products “Made in Pakistan” due to government support, and increase in Foreign Direct Investment.

Aftab said that GST at import stage, incorrect treatment of PCT codes for microprocessors, adhoc assessment, and valuation at customs results in high input costs. “Imported PC products have grown at the expense of local assemblers as they are manufactured in countries which provide cheap labor and subsidies for local products. On the contrary, local distributors and assemblers face constant harassment due to issues with assessment and valuation of imports”, he added.

“Due to reduction in the total number of PC assemblers in the country, overall productivity in IT market is low. Many assemblers have ceased to exist and the adverse business environment has resulted in innovators to become traders”, he lamented.

More than 95% of the IT products in the country are foreign branded imported PCs. The worst part is, local assemblers are paying 17% GST on raw material whereas fully assembled foreign branded machines exempted from GST discouraging local assemblers. “While this deprives the government of valuable revenue, it makes the local assembly of PC products unattractive. Furthermore, due to lack of affordability, the market is now flooded with PCs which are more than 3 years old. These products are harmful for environment and consumers, have high running cost due to energy sapping power consumption, are incompatible with most software and deprive the consumers of real value,” he argued.

Khushnood Aftab said that before 2005, a number of local assemblers emerged on the scene to enrich the PC industry in Pakistan. This created a healthy environment for the assembly, manufacturing, testing, supply, repair and maintenance of IT products in Pakistan. Local assemblers enjoyed GST & duty exemptions and the industry witnessed double-digit growth rates. Technology providers who resold the locally assembled products were also expanding to IT services to meet the growing demand of the industry. Furthermore, local assembly was able to save valuable foreign exchange; reduce dependency on imported goods and create employment opportunities for enterprising youth and innovators, he told.

Unfortunately the tax exemptions were withdrawn in 2005 and the industry has been afflicted with structural problems ever since. Pakistan is well positioned to utilize the manufacturing sector to accelerate creation of opportunities such as local & international investment, research & development, creation of employment and availability of affordable products, he observed.

CEO Viper Technology calls for preferential treatment for local brands as currently a number of government institutions specific “foreign brands only” in their tenders. “This discriminatory practice has hurt local assemblers. It is therefore expected that the Government will provide more weightage to goods assembled in Pakistan”, he added.

 “Encourage local assemblers to invest in assembly lines, the government should provide tax exemption for 5-years so that they are better able to manage and plan their investments,” Aftab said demanding complete ban on used PCs and IT scrap.

Government must set milestones and announce IT Vision 2020 so that IT is leveraged as the greater accelerator of economic growth by setting aggressive goals to increate automation in industry and increasing PC penetration in households across Pakistan.

He sees huge growth potential as more than 200,000 schools and 2.5 million small businesses running without PCs. The IT penetration despite huge investment has not exceeded beyond 50 percent, he concluded.