The proposed national budget for the fiscal year (FY), 2015-16, has provided some lucrative benefits for the country's toy industry that the concerned quarters believe would give a boost to the sector in both manufacturing and marketing. The benefits, mostly by way of duty rebate and VAT exemption, are purported to facilitating toy manufacturing in meeting growing domestic demands as well as in accessing markets overseas, especially in the Asian region. From fiscal 2015-16, the toy-makers, under the new fiscal proposals, will thus be allowed to import inputs by paying customs duty at 5.0 per cent as against the current levels that range from 10 to 25 per cent. This is surely an incentive that will cut production costs significantly. However, to enjoy the benefit, businesses must obtain value added tax (VAT) registration and will be required to execute an undertaking to the effect that the imported inputs will be used for toy-making. In order to further ensure proper utilisation of imported materials, the VAT authorities will carry out inspections. Despite the overseeing mechanism, industry insiders have welcomed the budget proposal as a much-needed impetus for the country's not-so-vibrant toy sector.
The fact that a considerable reduction in production cost will have a multiplier effect on the sector should not be questioned. While this will make locally manufactured toys competitive against imported toys, a surge in exports is also very likely. Local manufacturers have hinted that the fiscal incentives would allow toy-makers to produce them at even half the cost of Chinese toys now dominating the domestic market. Although the domestic toy industry has been growing in recent years, it is far from attaining the capacity of feeding a mentionable portion of the domestic demand. More than 80 per cent of the local demand, as the available reports suggest, is met through imports. The country, such reports further indicate, currently spends around Tk 50.0 billion annually to import toys, parts and accessories, mainly from China.
Although the country's toy industry is growing, it is yet to be well-tuned to the quality assurance and diverse compliance needs that strictly regulate the toy-making regime globally. The size of the global toy market is estimated to be around US $84 billion. The market and product segments are vastly varied, besides the business-as-usual low, medium and high-end varities. In order to eke out even a very small niche in the global toy market, Bangladeshi toy-makers will be required to meticulously develop and adapt products in keeping with the choices and preferences of target markets while fulfilling quality and compliance norms.
As a starter, the Bangladeshi manufacturers should eye the domestic market in a vigorous way to claim a justifiably bigger share than now by outcompeting imported products in their preferred product segments. The drive should also be compounded by initiatives to target suitable markets, preferably regional ones, in a methodical manner. The task, though challenging, may not appear daunting, given the low wages in this labour-intensive industry. With the benefits that will now be available for the sector, it is time for the government to draw up a plan, in close collaboration with the toy manufacturers, for energising the sector with proactive programmes. Among others, the related measures should embrace steps for introducing the required technology for product development and product adaptation
