Industry collapse is imminent as banks have been refusing to open Letters of Credit for various products. From oil to telecom, red flags were raised regarding supply chain disruption and import difficulties. What was once a threat is now a reality, as almost all of the country’s mobile phone assembly units have shut down. About 20,000 employees are now on furlough and if production does not continue soon, will be out of jobs at a time when unemployment makes life unlivable.
Three of the mobile phone units were run by foreign entities and had been on the brink of being shut down. Raw materials, sourced from China, South Korea, and Vietnam, have almost run out and the industry requires $170 million every month for regular operation. This is not sustainable for operations with a 35.37 percent inflation rate from last year and low foreign currency available. The telecom sector has also expressed these concerns as most technology equipment suppliers need imported items.
Industries need maintenance and expansion to progress and it is unfortunate that Pakistan’s reputation as a mobile phone manufacturer has been severely impacted by this news. PTA taxes and incentives were introduced by the Government to set up the industry and the LC issue can undo all this effort.
Consumers were already being hurt by increased mobile phone prices, even for locally manufactured sets. Sales will plummet further and while a solution is difficult, opening LCs for selected industries must be considered. As mentioned, a similar pattern is being seen with the Oil industry and letters have been written by the Oil and Gas Regulatory Authority (Ogra) indicating difficulties functioning. LCs must be established on a timely basis as a fuel shortage, in addition to this current crisis, will be even more disastrous than at present. The Government must use this situation to address the compromised supply chain across different industries and act proactively.