LAHORE: The home appliances industry of Pakistan is embarking on some new avenues and is now working to localize the components which previously they were importing.
The localization process gets momentum after shipping costs sky rocketed post Covid-19 outbreak. As per industry stakeholders the shipping cost went nine times up from China.
“If any electronics company in Pakistan was paying $5 million before Covid-19 outbreak, its shipping cost has now reached to$45 million”, said Pakistan Electronics Manufacturers Association President Farooq Naseem.
In an interview with Express Tribune Naseem said that considering in this huge increase in shipping cost from China, the localization of components becomes viable. “All big electronic companies in Pakistan take this threat as an opportunity and made a large scale localization plan, now apart of raw materials, we are importing only few components and working hard to achieve maximum localization”, he added.
The electronics or home appliances sector in Pakistan is booming as more public is adopting their life styles on modern urban patterns. Refrigerators, air-conditioners, television or LED’s, washing machines, microwave ovens etc are now a part of nearly urban household.
As per PEMA president Pakistan currently is producing 2 million refrigerators, 1 million televisions, 1 million Ac’s, 3.5 lac water dispensers, 5 lac overs and over 2 million washing machines.
But this growing production of home appliances was previously dampened by the huge inflows of smuggled goods. This sector was badly hit from 90’s due to the menace of smuggling especially due to Afghan Transit Trade. Some renowned global electronic companies had left Pakistan due to this issue.
We were asking the governments from last 10 years to rationalize our tax policies based on ground realities. “Government cannot stop smuggling because it’s a collusion, the government machinery and staff promotes such practices, till governed brings competitiveness in its structure, formal companies cannot flourish”, Naseem added.
However, in past 3-4 years this change somehow has come and our markets, post Afghan Transit Trade scenario has built and formulization is now more appropriate, especially the factor of FATF has made under hand money transactions more difficult.
“Former Chairman Federal Board of Revenue Shabbar Zaidi made a good move by putting electronic products in schedule three of sales tax act. Now the price of the product has to be displayed on its box thereby discourage smuggling and a source of increase in sales tax revenues by the government”, he said.
Still a lot of work needs to be done to further streamline this industry in Pakistan. “Home appliances, excluding cell phones, contributes Rs350 billion to national exchequer annually, though formal sector is now 80-90% in Pakistan but we are worry that government can undo some reforms which they have made previously”, he said adding “we need a consistency in policy and the local industry now cannot afford another Afghan Transit trade, whatever government wants to do it should be transparent”.
Government should make concrete steps to counter tax evasion in markets, and implement all formalization channels. Tax paying culture should be promoted and smuggling should be considered as anti-state activity. Cash transactions should be discouraged and digital payments should become order of the day. “By implementing such reforms governed can increase its revenues at least by four times”, Naseem added.