With cellphones becoming Nepal’s third largest import, the telecommunications regulator plans to allow companies to assemble or refurbish devices nationwide to create jobs.
There is massive consolidation and fierce competition in the telecommunications sector, and companies may venture into the cell phone assembly sector, the Nepal Telecommunications Authority said.
According to the Customs Department, Nepal imported 7 million cell phones worth Rs 36.90 billion in the last fiscal year 2020-21 ended in mid-July. Imports in the previous fiscal year 2019-2020 totaled 4.36 million units valued at 18.17 billion rupees.
The country also bought moving parts worth 2.79 billion rupees during the same period.
“That’s a lot of imports,” said Dinesh Shrestha, industry vice president of the Federation of Nepalese Chambers of Commerce and Industry. “The assembly of telephones is viable if they can be exported. Government policy will be crucial in encouraging investors.
Smartphone developer Samsung Electronics has invested $ 17.3 billion in factories in Vietnam.
Shrestha said this could be the first step towards industrialization. “Obviously, the government has an important role to play in making national products competitive on the international market”,
But constantly changing governments and unpredictable policies are a challenge, he says. Stable government policy is key to convincing investors to set up mobile assembly units in the country, according to insiders.
The Nepal Telecommunications Authority has prepared an advisory report on the prospects for assembling and refurbishing mobile phones in Nepal with a long-term regulatory framework.
According to the study report, a widening gap between exports and imports, the depletion of valuable foreign exchange reserves and the accumulation of electronic waste are crucial enough to explore the possibility of establishing assembly plants and renovation centers in Nepal.
“Creating a mobile industry can make Nepal economically strong and generate jobs,” the report says.
Most phones sold in Nepal are imported from China and India, followed by Vietnam.
In January 2020, the authority had formed a working committee made up of representatives of government agencies and the private sector to study and explore the possibility of establishing handset assembly factories in Nepal.
According to the report, establishing a factory would require a complete infrastructure that meets the standards set by original equipment manufacturers such as Samsung, Apple, Oppo and other brands.
The company would also need full support with the supply of parts, tools and technology needed to produce original quality phones. These phones would be identical to the original product with warranty and support.
“The phones will be sold in national and international markets with the label ‘Made in Nepal’. Appropriate strategic policies are needed to help attract foreign investors, ”the report says.
The report also highlighted the challenges of establishing cellphone assembly factories in the country. The size of the Nepalese market is relatively very small, and since assembly plants require a large investment, domestic sales alone will not be enough to make the business economically viable.
Given the huge economic benefits, Nepal needs an export-oriented policy, according to the report.
The development of assembly centers in Vietnam and more recently in India is the result of government initiatives.
Unlike the assembly of handsets, refurbishment has become almost essential, according to the report. Even without government initiatives, the market for refurbished handsets will thrive, but its scale will be very limited and unregulated.
Such a market will face challenges in gaining the trust of customers, and growth will be limited. An unregulated and informal market also means the government will run out of revenue, according to the report.
The report indicates that with the current growth rate of imports of mobile devices, electronic waste or electronic waste will become an issue that requires special attention. Nepal has a solid waste regulation and management law of 2018, but it does not contain any specific provision for e-waste management.
According to data from the Nepal Cell Phone Importers Association, there are around 3,500 repair shops across the country.
In addition to the standard repair, these stores usually also sell used and refurbished phones. It is estimated that 25,000 to 30,000 of these devices are sold in the market each year. According to reports, this market is completely informal without any kind of accounting, according to the report.
Figures from the association show that there are around 2,000 mobile repair centers, each employing an average of two people. About 500 people are employed by national and regional concessionaires. The total figure for technical employment is around 4,500.
According to the Nepalese Association of Mobile Distributors, there are currently 10,700 people employed in marketing and sales. Including also the 3,700 entrepreneurs, the total number of jobs in the sector amounts to 18,900.
Based on informal sales data of 35,000 to 40,000 used mobile phones per year, the refurbished phone market is estimated to be less than 1% of the total, compared to 10-20% in other countries.
The report says favorable trade deals with other countries, sustainable tax systems and government incentives would support the establishment of assembly factories in the country.
When it comes to the refurbished phone industry, the government can play a bigger role because after investing in a refurbished phone, the consumer will expect a certain quality of appearance, performance and battery that cannot be achieved. achieved only through reconditioned industry standardization with minimum requirements for installations, testing and certification.
“It can take a legal form such as a directive, a working procedure and a regulation of the authority,” the report said.
The report indicates that it might be good to create a Telecommunications Manufacturing Fund to provide venture capital to local manufacturers in the form of equity and soft loans to support pre- and post-market product development and marketing. brand creation.
Hempal Shrestha, an IT and legal specialist with 20 years of industry experience, said cellphone assembly in the country would be possible because the country was also assembling other electronic equipment.
“In the initial phase, we can target semi-premium brands produced in China or even Taiwan, because the big brands might not want to come here,” he said. “As students take online courses, assembling phones targeting these customers would also create demand. ”
The government needs to create an investment environment for potential investors, he said, adding that if the government provides subsidies on mobile phone equipment and parts, prices could be competitive.
The country can export cell phones assembled in Nepal if they benefit from tax exemptions like other products.
Shrestha said there would be no problem with human resources as people can be trained since the country has laws for technology transfer that can help invite investors. “Refurbishment is vital in the country as electronic waste accumulates,” he said.