Computer manufacturers seek govt concessions
KARACHI – Local manufacturers of computers seek state patronage, starting with a relaxed tax regime to overcome unemployment and save foreign exchange by increasing the penetration of ‘Made in Pakistan computers’ which is still less than three percent in Pakistan, and lowest in South Asia.
For the 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 the sales stage because the tax regime on IT products has had a retrogressive impact on the entire industry, said Khushnood Aftab, adding that special incentives had to be considered for raw material distributors who bring in microprocessors, chipsets into the country as well as those local assemblers who sourced 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, who is also the CEO of Viper Technology, one of the very few local brands in Pakistan that deliver solutions in the technology arena, has also been conferred 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, widespread utilisation of IT due to affordability of locally assembled products, respectability of ‘Made in Pakistan’ products due to government support, and increase in Foreign Direct Investment.
Aftab said that GST at import stage, incorrect treatment of PCT codes for microprocessors, ad-hoc assessment, and valuation at customs resulted in high input costs. “Imported PC products have grown at the expense of local assemblers as they are manufactured in countries which provide cheap labour 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 percent 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.
Aftab further said that before 2005, a number of local assemblers had emerged on the scene to enrich the PC industry in Pakistan. “This created a healthy environment for the assembling, manufacturing, testing, supply, repair and maintenance of IT products in Pakistan,” he said, and added, “The 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.”
“Pakistan is well positioned to utilise 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.
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.