Smartphones to Close Digital Divide in Pakistan

[Riaz Haq]

Mobile broadband (3G/4G) subscriptions in Pakistan crossed 34 million in September 2016, according to Pakistan Telecommunication Authority.  This figure includes 3.5 million subscriptions of higher bandwidth 4G/LTE offered by China Mobile Pakistan (CMPak aka Zong) and Warid.

Pakistan Telecommunications Authority (PTA) is forecasting the number of smartphones in the country to reach 40 million by the end of the year 2016, according to Daily Times.

Lenovo Smartphone Launch in Pakistan

More and more these smartphones are now becoming affordable and accessible to the urban poor and the rural populations of the country. This is helping close the digital divide.

Beginning in October 2016,  Pakistani government will give away five million smartphones to farmers in the country in an effort to improve knowledge of modern farming techniques, according to the BBC. Large numbers of farmers in countries such as India and Kenya have also recently experimented with smartphone technology.

In addition, the Benazir Income Support Program (BISP) has announced plans to give away 30,000 smartphones with 3G subscriptions funded by Universal Service Fund (USF) to low income Pakistanis on BISP.  Each smartphone will have Rs. 250 balance per month. It is intended to enhance digital and financial inclusion, according to a report in Pakistan Observer.

The objective of giving away smartphones is to help increase farmers' productivity.  Digital access is is expected to reduce poverty in rural and semi-urban areas of Pakistan by supporting micro and small enterprises. Market access to the products of marginalized segments will improve their welfare and at the same time boost the national economy.

Lack of financial inclusion and the growing digital divide are known impediments to progress of the low-income and poor segments of the population. Any effort by the government to remove such impediments will help Pakistan's economy by making more people more productive.

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[Riaz Haq]

Smartphone imports and digital Pakistan

https://www.brecorder.com/2020/01/13/561268/smartphone-imports-and-...


While the contours of the government's Digital Pakistan Initiative aren't exactly known despite much fanfare about the initiative, it appears that the government is going about its digital drive in a rather haphazard manner. Last week, the Federal Board of Revenue issued a clarification that “Sales Tax and Income Tax at import stage has been drastically reduced in case of smartphones of Rs15000 or below".

It is a good idea to bring down the imported price-tag for budget smartphones. It is, however, unclear as to how much reduction has taken place under the two tax heads. The FBR is typically averse to reducing any tax, but in this case it appears that the higher tax receipts accompanying the exploding mobile phone imports this fiscal have given the tax-body some room to accommodate industry stakeholders.

As per the Pakistan Bureau of Statistics, mobile-phone imports (HS Code: 8517.1219) had reached $498 million in the Jul-Nov period – a growth of 64 percent year-on-year, or in absolute terms, an additional import of more than $100 million! At this pace, full-year imports will reach close to $1.2 billion. That would be an additional $500 million spent on handset imports compared to what was sent abroad in FY19.

In recent years, Pakistan has been importing, on average, about 11 million mobile phones every year. That is a good enough market for import-substitution to take place. In the ongoing fiscal, this quantum may end up exceeding that average. Regulatory crackdown on smuggled phones as well as withdrawal of duty-free import of phones under baggage rules are going to reflect most of the actual imports in official data.

If smartphones are indeed the pivot around which the country's digital economy and its digital society are to develop over time, the government's digital drive may have to contend with two competing priorities. On one hand, the cost of imported smartphones has to be brought down to a level where it becomes more affordable for low-income customer segments. On the other hand, the price for a viable local smartphone manufacturing will have to be paid through import-related protections to interested parties.

Assuming there is a billion-dollar local market for a couple of viable smartphone manufacturing entities to grow business in Pakistan, the onus is on the industrial policy czars to start capitalizing, sooner rather than later, on this potential industrialization opportunity by offering both fiscal and non-fiscal incentives. In that context, whatever became of the much-awaited “Mobile Device Manufacturing Policy" that was to be released by the Ministry of Industries?

[Riaz Haq]

Cut in import duty: FBR shatters MoI&P’s mobile handset-making policy dream

https://www.brecorder.com/2020/01/07/559644/cut-in-import-duty-fbr-...

The Federal Board of Revenue (FBR) is said to have shattered Ministry of Industries and Production's dream of domestic mobile handsets manufacturing policy by reducing duty on imported mobile phones without taking the stakeholders on board, well-informed sources in Ministry of Industries and Production told Business Recorder.

“This is still a mystery who moved the summary to reduce duty on imported mobile phones. None of the Ministry of IT & Telecom, Ministry of Commerce and Ministry of Industries Ministry is aware," the sources added.

Local mobile phone assemblers are of the view that with the decision, their facilities will be shut down and engineers and other young workers will lose their jobs. Pakistan will keep importing from China, Vietnam and Bangladesh, etc.

Mobile handset manufacturing industry is one of the top five industries worldwide having sales revenue of $522 billion approximately and sales of over six billion devices. China has been the global hub of handsets manufacturing since 2010 having exports of over $ 150 billion per year. Mobile handset production is moving out of China due to increasing labour cost in China and trade war with the USA.

Owing to significant size of population and continuous growth in mobile connectivity, Pakistan is world's seventh largest handset importer in the world. This makes Pakistan market as an attractive destination for global brands. But currently, the market is largely dependent on imports as local manufacturing regime remained unattractive over the years.

According to Pakistan Telecommunication Authority (PTA), Pakistan's total annual market size (2G /3G /4G) is estimated at 34 million units out of which 20 million are 2G and 14 million units are 3G & 4G collectively. It has been observed that 4G devices have seen a growth from 16 percent (Jan 2018) to 29 percent (Aug 2019) whereas 3G devices have witnessed a drop from 19 percent to 16 percent during the same period. In addition, 2G devices have witnessed drop from 64 percent (Jan 2018) to 57 percent (Aug 2019) whereas growth in 4G devices from 16 percent (Jan 2018) to 29 percent (Aug 2019) has been observed. The statistics reveal that local market is shifting gradually to the latest technology. Device Identification, Registration and Blocking System (DIRBS) project of PTA has been instrumental to control smuggling of mobile phone devices and has provided safeguard against the security hazards. International Mobile Equipment Identity (IMEI) registration requirement under DIRBS has resulted in growth of both; local manufacturing and imports through legal channels.

[Riaz Haq]

VEON Subsidiary Pushes Digital Inclusion in Pakistan

Tommy Clift | Reporter

https://www.sdxcentral.com/articles/news/veon-subsidiary-pushes-dig...

Mobilink Microfinance Bank (MMBL) launched a trio of initiatives to accelerate financial inclusion for farmers and female entrepreneurs in Pakistan. The move echoes another by its parent company VEON to promote digital access through its subsidiary Kyvistar.

The MMBL plans include an agriculture advisory service for Pakistani farmers, e-commerce services for female entrepreneurs, and 4G handsets. VEON CEO Kaan Terzioglu believes the initiatives will play a pivotal role in digitalizing the microfinance industry in Pakistan.


VEON noted in a statement that agriculture represents nearly 23% of Pakistan’s gross domestic product and employs approximately 37% of its workforce. Recent floods in the country destroyed 3.6 million acres of crops and killed 700,000 livestock, it added.

MMBL is partnering with Pakistan-based agricultural technology company BaKhabar Kissan to provide information and guidance on livestock management, weather monitoring, crop planting – including which are profitable, and boosting agricultural yields.

“We are aiming to build a digital infrastructure that will help further economic prosperity and financial empowerment among women business owners and small and medium-sized farmers in the country, two segments that have the potential to transform Pakistan’s economic future,” MMBL President and CEO Ghazanfar Azzam stated.

Their push to incentivize and advance female entrepreneurs comes with their collaboration with Pakistan e-commerce platforms Daraz and its flagship Women Inspirational Network (WIN) program. This is intend to promote a female-focused, “digital financial ecosystem” using their subscriber base – currently accounting for 53% of the 195 million cellular subscribers in Pakistan, according to VEON.

Women make up nearly half of the country’s population, but VEON notes “their financial inclusion figure stands at 7%.”

The new program will use the Digit 4G handsets to “drive participation in the digital economy among marginalized groups within the population.” The handsets will be discounted and targeted at female entrepreneurs, coming “pre-loaded with the digital banking application, MMBL DOST, which will enable customers to obtain quick financial assistance, pay bills, make money transfers, and use a vast array of digital banking services,” VEON explained.