A Chinese delegation expressed its commitment to set up a smartphone manufacturing plant in Pakistan before Finance Minister Ishaq Dar assured the investors of reduced income tax rates as a neatly-folded package of incentives.
The delegation said the plant would be set up on a fast-track basis as Pakistan begins to move forward in the telecom sector after acquiring next-generation 3G and 4G services.
In response, the government on Friday assured the Chinese mobile manufacturing companies that its upcoming production plants of smart-phones for next-generation services will qualify for reduced income tax rates announced in the new budget as part of incentives to lure foreign investors.
Chinese Mobile Companies Association Secretary General Lou Peide, who was the head of the delegation, informed that the group comprises prominent Chinese companies in the smartphone manufacturing sector. He said the delegation is in Pakistan to share Chinese experience and expertise as Pakistan’s domestic market presents a huge opportunity for the manufacturing of smartphones capable of 3G/4G technology.
Piede mentioned that with a population of nearly 200 million and a high growth rate of the mobile industry, there is a huge requirement for local manufacturing units in the country.
He informed that Chinese companies own almost 80% of the global market and produce smartphones that cost between $22 to $600, highlighting the impact of Chinese companies in the global mobile phone market.
The auction of next-generation contributed significantly to the national exchequer and Pakistan earned over $1 billion from the auction of these licences. Two licences of next-generation technology remain unsold.
As against the present corporate income tax rate of 33 percent, the Foreign Direct Investment (FDI) in manufacturing, construction and housing will be subject to 20 percent corporate income tax.
Assisted by the Minister of State for Science and Technology and other officials, Dar briefed the Chinese investors on the latest economic indicators and performance of the economy during the last year. He also discussed the proposed budget which provides special incentives for foreign investment in Pakistan.
Dar said that FDI in the Information Technology sector will enjoy a special corporate tax rate for the next five years if they complete their projects in a three-year time period till June 30, 2017. The finance minister assured the group of investors that their concrete proposal prepared in consultation with the ministry of IT and the Board of Investment (BOI) will be considered seriously to develop local mobile manufacturing units in Pakistan.
He further assured the delegation of Chinese investors that the government will provide incentives for local manufacturing of smartphones and other IT related solutions during the next three years.
Dar concluded commenting that as Pakistan has an educated and skilled young labour force, the country can and should be used as an export base to the whole region.
Published in The Express Tribune, June 7th, 2014.