Home appliance sector seizes an opportunity


LAHOR:

Although it has hit the economy and put a handful of industries on the verge of shutting down, the Covid-19 pandemic has also offered opportunities for domestic businesses to fill the void created by the disruption of the supply chain. global.

Pakistan’s home appliance industry is taking advantage of the situation and is working to speed up the localization of components that were previously imported.

The tracking process is gaining momentum after soaring shipping costs following the Covid-19 outbreak. According to industry stakeholders, shipping costs from China have increased nine-fold.

“If an electronics company in Pakistan paid $ 5 million in shipping costs before the Covid-19 outbreak, it now has to pay $ 45 million,” said Farooq Naseem, president of the Pakistan Electronics Manufacturers Association. (Pema).

In an interview with The Express Tribune, Naseem said component tracking has become viable following a sharp increase in shipping costs from China.

Large electronics companies have turned this challenge into an opportunity and have come up with a large-scale localization plan.

Naseem added that apart from raw materials, his company only orders a few components from overseas and strives to use as many local components as possible.

The president of the association cherished the fact that the electronics and home appliance industry was booming right now as a large part of the population adopted lifestyles in line with modern urban models.

“Refrigerators, air conditioners, smart or LED TVs, washing machines and microwave ovens are now part of almost every urban household,” he said.

Citing data, the president of Pema said that Pakistan annually produces 2 million refrigerators, 1 million televisions, 1 million air conditioners, 350,000 water dispensers, 500,000 ovens and more than 2 million washing machines. .

The official added that the massive influx of contraband goods had previously hampered the growth in production of home appliances and electronics.

“The industry has been hit hard due to smuggling in the Afghan transit trade,” he said. “For this reason, some famous global electronics companies have left Pakistan. “

For 10 years, stakeholders have been asking the government to rationalize tax policies according to the realities on the ground.

Lamenting that the government has failed to curb smuggling, he noted that until the structure is made competitive, legitimate businesses cannot thrive.

Naseem pointed out that the segment has progressed over the past three to four years under the post-Afghan transit trade scenario. In addition, the conditions imposed by the Financial Action Task Force (FATF) made illegal transactions difficult, which bodes well for the industry.

He thanked the former chairman of the Federal Board of Revenue, Shabbar Zaidi, for placing electronic products in Schedule Three of the Sales Tax Act, which led to the display of product prices on boxes and discouraged smuggling.

“Second, it has proven to be a vital source of increased tax revenue for the government,” he said.

To further streamline things for the industry, a lot of work needs to be done. The trade in household appliances, excluding cell phones, contributes 350 billion rupees to the public treasury annually.

Citing that the size of the formal sector had swelled to 80-90%, he expressed concern that the government might reverse some recently introduced reforms.

“We demand policy coherence because the industry cannot afford loopholes in the system,” he stressed. “The government should increase transparency to allow industries to thrive. “

He recommended that the government take concrete measures to fight tax evasion in the markets and promote the use of formal channels. “The culture of paying taxes must be promoted and smuggling must be classified as anti-state activity.”

Posted in The Express Tribune, December 30e, 2021.

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