Localisation Hurdles

Under normal circumstances, finding out that mobile imports have reduced in the country by 73 percent in the past 10 months, would be good news. At $473 million from July 2022-April 2023, this is a significant drop off from the $1809.219 million in the same period the year before. At face value, one would think that this is a spillover from the previous government’s localisation policy, but sadly this is not the case.
In real terms, many economic experts have dubbed the localisation policy an abject failure. The idea was a good one—Pakistan imports a lot of technology, and smartphones have been at the forefront of the import numbers. A vast majority of the Pakistanis that are online, are only connected to the internet through these phones. Thus, it made sense to try and produce cell phones at home so that the import bill is reduced, Pakistanis continue to move towards the digital economy and we find a means to increase our exports through one policy. At least this was the plan in theory.
Its execution, however, left a lot to be desired. The abject failure of the Engineering Development Board (EDB) and the Ministry of Industries to make sure that the manufacturers stuck to the localisation plan is the most major reason for the failure of this policy. We have seen the same thing happen in the automobile industry. The government gave large tax breaks and exemptions to the manufacturers to incentivise localisation. The producers in turn used these breaks to make large profits but did not hold up their end of the deal of looking to manufacture parts locally. What this requires is an import of machinery and technology transfer, alongside training and skill creation. The mobile industry invested in none of this, and instead looked to make a quick buck. This is why another industry is lying stagnant because of the lack of foreign exchange and import restrictions. Both the government and private businesses need to do better.

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