According to a report issued by Pakistan Telecommunication Authority (PTA), the teledensity in Pakistan till November 2009 was observed 62.9%. The statistics show that the growth in the telecommunication sector is making a notable contribution in the country's economy. The current Gross Domestic Product (GDP) of Pakistan is worth US$168 billion and 0.27 % of the world’s economy1. The telecom sector’s share in the GDP growth on an average is about 2 % 2 that means the growth of telecommunication industry promises of the constant economic development.

There are many mobile phone manufacturing companies and telecommunication service providers operating nationwide. Nokia, Samsung, LG, Motorola are amongst some of the multinational cellular phone manufacturing companies that are leading in the local market as well. They have made numerous investments in multiple aspects in Pakistan’s telecommunication sector.

The Foreign Direct Investment (FDI) in Pakistan was declined by 31.2 % in the year 2008-2009. The Foreign Direct Investment in the telecommunication sector in this year is declined by 43.3% and reached to US$ 815 million. If we examine the track record of the foreign investments in the sector, we would come to know that there was a continuous decline in numbers as the overall FDI fell from US$ 5,410 million in the year 2007-2008 to US$ 3,720 million in 2008-20093. This unremitting decline in the foreign investment particularly in the telecom sector has given rise to some serious concerns for the economists of the country.

Amongst various factors responsible for the constant decline in the foreign investments of the country, a mounting trend of Chinese knockoffs of the branded phones could be a cause of deteriorated situation. As these Chinese knockoffs offer somewhat similar appearances as that of original branded phones in cheapest price, people are more fascinated in keeping a Chinese copy of high-end phone with them. The availability of China mobile phones in cheap prices is a consequence of an organized smuggling which is supported by the various local bodies.

If we look at the bigger picture of ‘Smuggling Mafia’ of mobile phones that is involved in the whole activity, we would come across with some more interesting faces of crime. The old smuggled mobile phones are being sold at the prices equal to that of new ones in the market. According to the sources the old mobile phones are being sold to the innocent customers openly in various electronics market in the city. The casing and keypad of such phones are changed and the phone battery is replaced by a china battery after proper servicing in such a way that a common person can not be able to distinguish the old phone among different mobile phones. There is software available to change the talk timer of the phone to ‘zero’ in order to remove every possible clue of the crime.

The illegal smuggling of mobile phones is not only threatening for the law enforcement bodies but also imposing a great challenge for the country’s economy as this attempt is discouraging the legal import of the original mobile phones.

Furthermore cheap Chinese cell phones may be a great hurdle for the law enforcement agencies as these phones facilitate the criminals and terrorists because they lack an identification number to trace calls. International Mobile Equipment Identity (IMEI) number is a unique code that is allotted to every mobile device which is used to trace or block the device as and when required. On the other hand, more than 100 Chinese mobile phones possess a same IMEI number and blocking of one such device may result in the blockage of several mobile phones at the same time. That means it is impossible to trace or block the mobile phone.

As Pakistan is one of the most targeted and vulnerable regions for the terrorist and criminal activities it is extremely important to ensure all the measures to minimize the security risks and threats. Chinese counterfeit phones could be a safe haven for criminals as the calls made by these phones can not be traced.

According to the statistics, approximately 50-80 cell phones on an average are snatched or stolen every day in Karachi. Due to the same IMEI number of several China mobile phones, the theft or snatched mobile phones can not be blocked by CPLC and PTA. Thus, China mobile phones pose a great threat to the security and law enforcement system.

The Chinese knockoffs may offer the similar appearance that of the branded phones but several questions are being raised on the quality and reliability of the cell phones. People may find these cell phones affordable for their pockets but they start complaining about the phone’s performance just after a few months of their purchase. The few repeatedly complaints regarding the Chinese phones are about the weak battery, low standard camera, poor sound quality and internet connectivity. As no legal industry standards are followed while manufacturing fake Chinese mobile phones, these mobile phones pose a serious health threat. They give off excessive radiation and their low-grade batteries can explode anytime.

People face extreme inconvenience at the time of warranty claim of the China phones. Fake mobile phones do not carry authentic warranty. If the fake phone’s hardware malfunctions, there’s no other choice but to dispose off the phone because the parts are not available in the market.

In one aspect when the business of Chinese mobile phones does not make any healthy contribution to the country’s economy, on the other hand their business in disturbing foreign investments. According to a report issued by PTA, the share of telecom sector in total tax revenue is 6-7% per annum. During the year 2008-2009, the sector continued to contribute handsome amount in national kitty through various taxes and regulatory charges. Telecom sector’s contribution to national exchequer rose to Rs. 112 billion in 2008-2009 compared to Rs. 111 billion in the year 2007-2008.

If we analyze the tax contribution made by the China mobile business, it is surprising to know that there is no proper procedure being followed to ensure the payment of sales tax on single Chinese mobile phone’s sale. The facts point out that the Chinese mobile phone business is not making any significant contribution to the economy. On contrary the legal import of the branded mobile phones facilitates the economy and their expanding business in making a distinctive contribution in increasing the country’s GDP.

Due to their adverse affects on the economic development, our neighboring country India has already banned the sale of Chinese phones. The government of Pakistan particularly the concerned authorities like PTA and CPLC should take a serious notice to ban the sale of Chinese mobile phones in the country. The unremitting decline in the foreign investments in telecom sector is an alarming economic indicator for the country’s economy. This is a high time when the government and non government bodies should endeavor to eliminate the factors being responsible for the demise of economy.