Once fully dependent on imports for electronic and related-products like refrigerators, TVs, and air conditioners, Bangladesh has made a breakthrough in this sector over the last decade.
With consistent policy support, the country has seen a large-scale investment, leading to the growth of a competitive local electric and electronic industry.
Domestic manufacturers are now competing with global brands like Samsung and LG.
Government's tax exemptions played a crucial role in this growth, it was learnt.
The electronic and electrical equipment industry in Bangladesh mostly produces consumer items such as mobile phones, home appliances like refrigerators, air conditioners, televisions, electronic fans, radios, DVDs and CD players, ovens, blenders, etc.
According to Bangladesh Investment Development Authority (BIDA), the local electronic and electrical equipment market is expected to surpass the $12-billion mark by 2025 with the consumer electronics market expected to cross $ 10 billion by 2030.
According to the BIDA, the industry is expected to grow at a rate of 15 per cent per annum and reach around $ 12 billion by 2025.
The size of the consumer electronics and electric market was estimated to be around $ 2.4 billion in 2020 and it is expected to reach $ 10 billion by 2030.
The most popular consumer electronic and electrical products are cell-phone or mobile phone sets, followed by refrigerators, televisions and air conditioners.
The electronics sector expanded rapidly, fostering backward linkage industries and building a strong economic ecosystem around high-tech manufacturing, according to the industry insiders.
Products such as refrigerators or freezers and air conditioners have become more affordable for general consumers, while import substitution has also helped save foreign currencies.
As a result, once import-dependent industry has turned into a production-driven and export-oriented one.
Products labelled as "Made in Bangladesh" -- including ACs, fridges, TVs, and other home appliances -- are now exported to over 65 countries, it has been learnt.
However, a recent government decision to increase VAT and corporate taxes raised serious concerns among the industry operators.
Since 2021, electronic product manufacturers had been enjoying a 2.0 per cent Advance Income Tax (AIT) on imported machinery and a reduced 10 per cent corporate tax rate -- a benefit scheduled to remain in place until 2032. That policy has now been reversed. Taxes have been increased across the board, doubling corporate tax rates and increasing costs at the import stage.
Industry operators have criticised the government's policy change, referring it to the phrase "pulling away the ladder after asking someone to climb the tree."
They expressed the fears that such a hike in taxes would drive up prices further, even as consumers' real incomes were falling due to inflation.
Manufacturers are already facing challenges from rising costs of raw materials, the past appreciation of the dollar value against the local currency, higher interest rates on bank loans, and increased energy prices.
According to them, the new tax burden will make locally-made products less competitive and force businesses back toward importing finished goods.
An industry leader said that about 97 per cent of electronic products were being made at present in Bangladesh while only 3.0 per cent of such products were imported.
If tax policies make local production financially less competitive, businesses may return to imports, he said.
Around 200,000 people are directly employed in this sector and 700,000 others indirectly are involved, it has been learnt.
An estimated Tk 300 billion to Tk 400 billion has been invested in the industry in Bangladesh.
The growing burden of tax and operational costs is threatening the survival of local manufacturers -- with their export ambitions becoming harder to achieve.
Another top industry executive warned that shrinking purchasing power of consumers and increased production costs would affect both sales and employment in the country.
"Tax hikes will raise prices and contract the market. The entire electronic ecosystem -- from manufacturing to export -- is under threat," said a leading industry operator preferring anonymity.
According to industry people, reduced cash incentives coupled with tougher export conditions may make it difficult for local producers to stay in the race both in local and global markets.
The government must strike a balance -- not all IMF recommendations should be followed blindly, according to them.
Lack of research-based policy decisions is harming the industry, they said, adding that production-based industries are supported around the world, instead of putting any extra burden on them.
The local electrical and electronic sector would not be able to attract fresh investment, unless the government's policy goes in the positive direction, they said.
Since 2009, the government had supported the electronic product industry by offering reduced corporate taxes, AIT exemptions, and VAT waivers.
An official order of 2021 allowed companies making fridges, motorcycles, air conditioners, and compressors to pay just 10 per cent corporate tax until 2032.
Such facility has now been revoked, they mentioned.
Talking to the FE, industry insiders also said at present there remained instability in the market because of various challenges.
One of the main reasons for the situation can be attributed to inflationary pressure and the increase in foreign exchange rates, they mentioned.
Especially, the increase in the value of the dollar raised the import costs considerably, which had a direct impact on various industrial sectors as well as local electronics and electrical equipment industry, they said.
A wide range of raw materials and components are imported for making refrigerators, but due to the high value of the dollar, their import costs have gone up much higher, they added.
Speaking to the FE, a senior executive of Walton Hi-Tech Industries PLC, Bangladesh's leading refrigerator brand, said Walton, exported nearly 100,000 units to over 50 countries in FY 2024.
The company aims to export over 500,000 units by 2026, focusing on eco-friendly refrigerants like R600a and R290 to reduce harmful emissions, he added.
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