As of November  2019, there are more than 160 million smartphone users in Pakistan. With the increasing availability of 3G and 4G services in remote areas, the outlook of the smartphone industry, at least on paper, looks promising.

The rapid growth of smartphone users, however, has opened up a Pandora’s box of counterfeit smartphones in the market. These smartphones are not approved by the Pakistan Telecommunication Authority (PTA) due to non-payment of taxes.

Pakistan is one of the largest growing smartphone markets in the world. In November 2017, Google earmarked Pakistan amongst the next 4 countries to hit a billion smartphone users. With such a dynamically growing market, Pakistan has its fair share of counterfeit smartphone trade.

By the Numbers

The large influx of Chinese counterfeit mobile phones in the country has led to the government losing millions of dollars in tax revenue. In the fiscal year 2016-17, mobile phones worth $71 million were imported in Pakistan. What’s shocking here is that market source and experts estimate that nearly $10 million worth of phones imported were counterfeit.

The PTA announced in 2018 that all smartphones in Pakistan must register with the Device Identification Registration and Blocking System (DIRBS) by 25th January of 2019. Once the deadline ended, PTA started taking action from the 30th of April, aiming to block over 3 million illegal smartphones.

PTA aims to generate nearly $200 million in revenue per annum that it was losing the counterfeit smartphone trade. However, it’s worth noting that 3 million is the number of illegal smartphones that are being used in Pakistan. This does not reflect the total number of counterfeit smartphones in the country.

Since the implementation of DIRBS, imports declined by 3.1% in the first half of the fiscal year 2018-19 compared to the previous half, according to the Pakistan Bureau of Statistics. Overall, the total imports from July to December 2018 were just $655.296 million in contrast to $742.801 million from July to December 2017.

Why Do Pakistanis Buy Fake Smartphones?

Many factors come into play when buying a smartphone in Pakistan. According to a study in the Asian Journal of Empirical Research, the two main drivers of buying cheap smartphones, which in most cases are fake or not approved by FTA, are experience and price. Counterfeit smartphones with comparable features to branded ones are often available at a significantly lower price.

Mobile snatching in cities like Karachi is another factor why many people sought for cheap smartphones. In 2018, there were more mobile snatching incidents in the city compared to 2013, despite the fact that the overall security and safety conditions in the city improved.

Ultimately, a lack of awareness by the shopkeepers and consumers results in the trade and use of counterfeit phones. Both the buyers and sellers are not aware of the economic impact these counterfeit phones have not just locally but globally as well.

How Pakistan Is Tackling the Counterfeit Smartphone Industry

As a country with a rapidly growing smartphone market, Pakistan has taken steps to address the ever-increasing counterfeit phone trade and illegal trade in general. In fact, there have been a record number of seizures of smuggled goods (not just smartphones) in Pakistan in the fiscal year 2018-19.

One of the measures PTA introduced in 2018 to tackle counterfeit and non-registered smartphone problem in the country was to jail offenders involved in registration of fake smartphones for up to 7 years.

From January 2019, PTA has blocked over 17.4 million smartphones due to the nonpayment of taxes and has advised citizens to only purchase PTA-approved devices. In terms of users, Pakistan lost 161,000 mobile users in June 2019.

There have also been incidences where the PTA and Federal Bureau of Revenue (FBR) have charged smartphone users 15 times the price of their phones.

In one such instance, a person who bought a PKR 4,000 smartphone was billed an astronomical amount of PKR 50,000 in taxes. This is due to the fact that the counterfeit phone with a generic brand name was actually having an IMEI number of a Samsung Note 9. In this instance, PTA had the right to charge the consumer the said taxes.

Because PTA approved smartphones are identified by their IMEI, even if a consumer pays less than PKR 5,000 for a smartphone, they may end up paying PKR 50,000 or more in taxes.

Long Road Ahead

There is no doubt that the government is on the right track to address the growing issue of counterfeit smartphone trade in Pakistan. However, there is still much work to be done as Pakistan still has a long way to go in the fight against counterfeit mobile phones.

In August 2019, Pakistan Today reported that even after the PTA regulations, smuggled phones are still available in major mobile markets in cities like Lahore as well as online platforms like OLX. A major crackdown of mobile markets and raising awareness amongst consumers should be the next steps toward tackling the illegal trade.