CKD system could boost light engineering sector

Sourcing of components from local market by the automobile assembling sector might spur growth of the light engineering industry through adding to the products' more domestic value, sources said.
As per the existing rules, with the complete knocked down (CKD) system in force, there is no provision for use of the locally manufactured components in the assembling industry.
According to sources close to the sector, currently the assembly plants import all the components. But if they can source them locally then it would help in the growth of the light engineering industry.
In 1997, the government expressed its willingness to support the growing automobile sector, and enacted a rule that said under CKD system the importers would get low-duty facilities.
But at that time the country was yet to make any considerable progress in manufacturing local assembly-related components. Consequently, it was not under the focus of the government.
Against the backdrop of the remarkable development in the light engineering industry, local orders for the components are highly expected. On the basis of an anticipated rise in demand, a strong base for the products would be created, sources noted.
Abdur Razzak, president of Bangladesh Engineering Industry Owners Association, said the old rule relating to CKD components should be changed, and there should be a new provision for using the local components.
He said, "A few days back we had a programme with the commerce minister. We have informed him about the problem."
He said the minister had realised the need for change in the existing rule based on CKD and "assured us of bringing changes to it which would help in the growth of the light engineering industry".
CKD is a method under which all components of a vehicle are imported in fully split forms instead of a completely built unit (CBU).
If the vehicles are imported on CKD basis and they are assembled here increasingly, it will create more employment opportunities and add to the local value, a section of people in the higher authorities observed.
The government is aware of this. They appear to feel that local employment opportunities will be created by allowing more CKD products instead of the CBU ones. But the vital point is nobody is saying anything regarding the use of local components, some industry insiders said.
Hafizur Rahman, vice president of Bangladesh Automobile Manufacturers Association (BAMA) said the existing rule on CKD should be changed.
He said when the government formulated the rule on CKD, there was no strong base of the local light engineering industry.
But currently, a good number of world standard spares and other components are being manufactured locally, and if there are demands for automobile components a lot of investment would take place in the industry.
He said the commerce minister is positive about the change in the CKD law.
If the changes occur, it would allow the assemblers to source components from the local market by paying VAT and taxes.
According to sources, currently the automobile importers are paying a lower duty on CKD-based imports compared to the imports in the CBU form.
An assembler said if they can procure domestically a portion of the components that are being used in the automobile assembling industry, a vast amount of investment would pour into the local light engineering sector.