Good policy pays off : Low tax benefits mobile set makers

The government's tax benefits have brought in around Tk2,000 crore in new investments to the mobile handset manufacturing and assembling sector, helping the country save foreign currency and create much needed employment.

Now 10 companies are assembling phones and local conglomerate Walton has been manufacturing them since the government offered tax benefits in the fiscal year 2017-18. Few others, including Nokia, are in the pipeline to begin assembling handsets here.

Together, these companies now meet half of the country's demand for mobile phones.

Walton has gone one step further by announcing recently that it is going to export mobile handsets to the US market. Korean giant Samsung said it would not need to import any of its smartphones from next month as the factory will expand its production capacity by then. 

Rezwanul Haque, former secretary of the Bangladesh Mobile Phone Manufacturing Association, told The Business Standard that almost all governments worldwide provide policy support to help industries flourish. 

Although late, the Bangladeshi government has done the same, he said.

"If the tax benefits continue, we can export our products after meeting local demand," he noted.  

Currently, there is a 57 percent tax on the import of smartphones, and 32 percent on basic and feature phones. On the other hand, tax on locally-assembled and manufactured handsets is 18 percent and 13 percent respectively.

The government first introduced a tax policy for local phone assemblers in the 2017-18 fiscal year. It was revised down in the 2018-19 and 2019-20 budgets.

According to the Bangladesh Telecommunications and Regulatory Commission, 11 companies have gotten registration to start manufacturing and assembling phones since the policy was changed.  

Director of the commission Lt Col Sufi Mohammad Moinuddin said Bangladesh used to import 3 crore handsets per year. Now more than 1.5 crore sets are being assembled and produced locally.  

"So, the entire market – worth around Tk12,000 crore – was import-based. The government has provided tax incentives to encourage local manufacturing and assembly of phones," he added.

If the average value addition is 30 percent, it means Bangladesh is saving nearly Tk4,000 crore from import payments, another BTRC official said.

In 2018, global electronics giant Samsung opened its phone assembly plant in the country. It was established at the Fair Electronics factory in Narsingdi and is capable of assembling 95 percent of the company's smartphones sold in the country. 

The company is also planning to export mobile phones in the future after increasing the capacity of its factory. 

Many other companies have followed Samsung. The most notable of those are Oppo, Vivo, Lava, Ok, 5 Star and Winstar. 

Additionally, companies that were already in the market – such as Symphony and Walton – before the policy changes were introduced, have increased their capacities. 

Walton, the top local handset manufacturer in terms of capacity and investment, established the first handset manufacturing plant in the country by investing Tk1,000 crore in 2017. 

Now, the company is able to produce around six lakh feature phones and one lakh smartphones every month. 

Around 4,000 engineers and technicians are currently working at the factory, and production will increase, said Walton officials. 

Uday Hakim, executive director of the company, told The Business Standard that Walton is the first and only mobile phone manufacturer in the country. 

"Many others have joined the race but they are basically assemblers. A manufacturer has to invest amid huge risk. Walton took the risk by taking local employment generation into account," he explained. 

Walton's value addition is 35 to 40 percent as it makes battery, charger, casing and some other parts.

After Walton, Symphony is in the second place. Its officials said the company can assemble around three lakh handsets per month and will cross the five-lakh-mark shortly.

Symphony invested a total of Tk80 crore in two phases to set up its Gazipur assembly plant – and another Tk100 crore for a manufacturing plant in the same area. 

Next comes Techno. It has been assembling the handsets of China-based manufacturer Transsion Holdings. 

The company has invested over Tk30 crore in Bangladesh and can assemble around five lakh handsets per month. 

Its officials said the company plans to move to manufacturing in the future by increasing its factory capacity.

Rezwanul Haque, CEO of Transsion Bangladesh Limited, said the company started assembling phones in December last year. 

Global player Samsung invested over Tk500 crore to set up its Narsingdi plant – aiming to assemble 25 lakh smartphones annually. 

"We can assemble all the devices at our plant and from March, we will not need to import any Samsung phones," said Ruhul Alam Al Mahbub, managing director of Fair Electronics, local assembler of Samsung handsets in Bangladesh.

It will be the largest technology-based industrial plant in the country, he added.

In July last year, Vivo inaugurated a new assembly plant in Narayanganj's Rupganj upazila. It is the company's fifth assembly plant in the country where at least one million smartphones are assembled annually. 

Moreover, Vivo is all set to establish its first assembly plant in Bangladesh with full foreign direct investment. 

In November last year, Oppo launched its assembly plant in Gazipur under the name Benli Electronic Enterprise Co Limited. It aims to assemble 10 lakh smartphones every year.  

The same month, the company hit the market with its "Made in Bangladesh" line of smartphones. 

Global brand Nokia will start production at its Gazipur assembly plant in April this year. The plant was set up at a cost of Tk10 crore and will produce around 18 lakh phones per year.  

Union Group is the local partner of Nokia. A senior official of the conglomerate said, "The construction of our Gazipur plant is almost finished. We will assemble both feature phones and smartphones there." 

Al Amin Brothers (5 Star) and Anira International Limited (Winstar) are currently assembling various types of phones. Grameen Distributors Ltd (Lava) and OK Mobile Ltd have received initial approval from the telecom regulator to set up assembly plants. 

Three more companies are also in the process of seeking approval from the regulator.