Top

Impact of Rising Import Duties on Bangladesh’s Handset Market

The handset industry in Bangladesh has scaled rapidly over the last decade with 160.8 million total mobile subscribers at the end of May 2019. Bangladesh MNOs continue to register growth, riding high on rising digitization throughout the country. Grameenphone led the mobile subscriber market with 74.78 million users followed by Robi Axiata with 47.69 million customers in May.

During 2017-18, the Bangladesh government first offered some tax benefits to local assemblers and increased import duties. This was followed by further revisions to the import duty structure with the supplementary duty raised to 10 percent from 5 percent.

Local assemblers termed it a prudent decision that would help their industry to grow. Currently the total tax on imported handsets is 32 percent, which will rise to over 50 percent. In contrast, locally assembled handsets bear about 17 percent in taxes. For handsets fully manufactured in Bangladesh, the tax is just 5 percent. To obtain the tax benefit, five local and international brands have already started assembling mobile devices, catering to about 30 percent of the country’s annual demand for 35 million handsets. This will have an impact on the following areas:

  • Smartphone imports will be costlier

Currently the total tax on imported handsets is 32 percent – rising to over 50 percent. There are more than 90 million active internet connections in the country of which about 95 percent are accessing from a mobile phone. If smartphone costs increase, it will likely hinder the government’s digital Bangladesh vision.

  • Increase in Local manufacturing

The government is trying to promote local assembly of smartphones. A surge in demand for affordable smartphones has focused minds on the business opportunity in Bangladesh. At present five plants have launched, and they are assembling about 30 percent of the country’s total yearly demand. The tax on semi-knocked down (SKD) phones is about 17 percent. For completely knocked down (CKD) it is about 5 percent.

The target is to reduce import volumes and to cater to the local market, after which export opportunities will be explored. Local manufacturing and assembling of phones will further bolster replacement of feature phones by smartphones. Many of the locally manufactured and assembled phones are much cheaper compared to the imported models.

  • Boost illegal mobile imports

Not everyone is assembling locally and to get past the duty some brands will start importing illegally. This will have a negative impact on the industry. At present, illegal imports account for 15 to 20 percent of the market. While there has always been a notable presence of illegally imported handsets in the market, the trend has gathered pace in recent years. Such a high import duty ultimately increases the prices of legally imported phones while making the illegal shipments a more viable option. The resulting burden on the sector trickles down to the consumer, hampers growth and draws the country further away from the goals of Digital Bangladesh.

If the intent is to uplift and grow the sector and ensure that millions more Bangladeshi citizens can access digital services, then the tax proposals mentioned above need to be reconsidered and applied gradually. The manufacturing ecosystem is not robust. The poorest consumers, for whom mobile access could deliver the greatest benefits, are likely to be most negatively affected by these proposals. The increase in the minimum tax on turnover of mobile companies who were still not profitable will only add to their burden and discourage shareholders investing further in the market. The rise of local manufacturing and assembling of smartphones and subsequent availability of cheaper alternatives is reducing Bangladesh’s dependency on imports, but it will take some time as imports are the main source for meeting local demand.

Counterpoint research is a young and fast growing research firm covering analysis of the tech industry. Coverage areas are connected devices, digital consumer goods, software & applications and other adjacent topics. We provide syndicated research reports as well as tailored. Our seminars and workshops for companies and institutions are popular and available on demand. Consulting and customized work on the above topics is provided for high precision projects.

Term of Use and Privacy Policy

Counterpoint Technology Market Research Limited

Registration

In order to access Counterpoint Technology Market Research Limited (Company or We hereafter) Web sites, you may be asked to complete a registration form. You are required to provide contact information which is used to enhance the user experience and determine whether you are a paid subscriber or not.
Personal Information When you register on we ask you for personal information. We use this information to provide you with the best advice and highest-quality service as well as with offers that we think are relevant to you. We may also contact you regarding a Web site problem or other customer service-related issues. We do not sell, share or rent personal information about you collected on Company Web sites.

How to unsubscribe and Termination

You may request to terminate your account or unsubscribe to any email subscriptions or mailing lists at any time. In accessing and using this Website, User agrees to comply with all applicable laws and agrees not to take any action that would compromise the security or viability of this Website. The Company may terminate User’s access to this Website at any time for any reason. The terms hereunder regarding Accuracy of Information and Third Party Rights shall survive termination.

Website Content and Copyright

This Website is the property of Counterpoint and is protected by international copyright law and conventions. We grant users the right to access and use the Website, so long as such use is for internal information purposes, and User does not alter, copy, disseminate, redistribute or republish any content or feature of this Website. User acknowledges that access to and use of this Website is subject to these TERMS OF USE and any expanded access or use must be approved in writing by the Company.
– Passwords are for user’s individual use
– Passwords may not be shared with others
– Users may not store documents in shared folders.
– Users may not redistribute documents to non-users unless otherwise stated in their contract terms.

Changes or Updates to the Website

The Company reserves the right to change, update or discontinue any aspect of this Website at any time without notice. Your continued use of the Website after any such change constitutes your agreement to these TERMS OF USE, as modified.
Accuracy of Information: While the information contained on this Website has been obtained from sources believed to be reliable, We disclaims all warranties as to the accuracy, completeness or adequacy of such information. User assumes sole responsibility for the use it makes of this Website to achieve his/her intended results.

Third Party Links: This Website may contain links to other third party websites, which are provided as additional resources for the convenience of Users. We do not endorse, sponsor or accept any responsibility for these third party websites, User agrees to direct any concerns relating to these third party websites to the relevant website administrator.

Cookies and Tracking

We may monitor how you use our Web sites. It is used solely for purposes of enabling us to provide you with a personalized Web site experience.
This data may also be used in the aggregate, to identify appropriate product offerings and subscription plans.
Cookies may be set in order to identify you and determine your access privileges. Cookies are simply identifiers. You have the ability to delete cookie files from your hard disk drive.