What’s holding back toys from becoming Bangladesh’s next big export?

Toys worldwide have undergone constant experimentation and evolution, and Bangladesh is no exception.

Bangladesh's toy industry largely serves domestic demand as an import-substitute sector valued at approximately Tk7,000 crore, with Tk4,000 crore supplied locally and the rest imported. Yet the global toy export market was $102.8 billion in 2023 and is projected to reach $150 billion by 2032.

Against this backdrop, Bangladesh's toy exports stood at only $54.43 million in FY2024–25 — less than 0.2% of the global market, even when including exports from industries located in Export Processing Zones (EPZs).

The toy industry is highly labor-intensive and aligns well with Bangladesh's economic structure. It has strong potential both as an export diversification sector and as an import-substitute industry capable of saving foreign exchange.

China remains the global leader, exporting nearly $40 billion worth of toys annually. However, rising labor costs in China create an opportunity for Bangladesh to expand its footprint, supported by growing domestic demand and increasing global consumption driven by higher disposable incomes and rising demand for sustainable and educational toys.

Bangladesh can leverage its competitive advantages—skilled and low-cost labor, similar to the Ready-Made Garment (RMG) sector—while creating new opportunities for women's economic participation. Additionally, geopolitical shifts, including US–China trade tensions, have encouraged supply chain diversification, opening doors for new entrants. If Bangladesh addresses key structural challenges, it could attract substantial investment and boost exports.

Over 100 toy manufacturers currently operate in Bangladesh, including around 12 large firms with strong export prospects. A few companies export regularly, and their growth trajectories are promising. Several industries in Economic Zones are exporting to developed markets such as the EU, Japan, and the US, generating employment and fostering technological development. However, meaningful technology transfer from EPZs to the Domestic Tariff Area (DTA) has yet to take place.

Bangladesh exports toys to 47 countries, including Australia, the EU, the US, Japan, India, and Vietnam. However, domestic producers rely heavily on imported raw materials. Without bonded warehouse facilities, non-bonded manufacturers struggle to remain competitive. Essential tools such as die punches, molds, and wood components (batal) are also mostly imported from China. The Tool Institute of BITAC has recently begun producing various types of dies; however, its capacity remains too limited to meet demand.

One leading manufacturer, which began operations in 2008 with only Tk90,000 producing simple "jhunjhunis," now produces a wide range of toys—cars, motorcycles, airplanes, toy pistols, fishing games, and guitars—and employs around 2,000 workers. The main raw material is PP granules, purchased from local suppliers or imported from China. With the expansion of production, imports of key components such as gearboxes, circuits, motors, and screws have also increased.

Manufacturers claim that locally produced toys maintain higher quality standards than many imported Chinese toys due to better-quality plastics and materials. However, molds and molding machines imported from China increase production costs. Skilled technical support is needed to improve mold finishing. Despite numerous challenges, toy manufacturers are expanding into new export markets, including Italy, Sri Lanka, Saudi Arabia, and Indonesia.

Exporting firms report using nearly 500 molds and more than 56 molding machines, most of which are imported. Investment in this sector is growing, driven by domestic demand and the labor-intensive nature of production. The industry is environmentally friendly, with many products and components being recyclable. DOE certification and renewal processes are manageable, and the sector requires minimal gas consumption. Labor availability is strong, and many roles allow women to work from home. However, the need for training and professional development remains substantial.

Bangladesh exports toys to 47 countries, including Australia, the EU, the US, Japan, India, and Vietnam. However, domestic producers rely significantly on imported raw materials. Without bonded warehouse facilities, non-bonded manufacturers struggle to remain competitive. Essential tools such as die punches, molds, and wood components (batal) are also mostly imported from China.

Most domestic manufacturers produce non-branded toys and lack established brands. HS code issues related to components complicate imports. Constraints include shortages of skilled and trained manpower, even though less-skilled labor is available; inadequate laboratory facilities; and difficulties in obtaining design approvals, which create challenges for manufacturers. Chemical inputs are fully imported, and CAD/CAM training remains insufficient. Frequent technological changes hinder customization due to limited R&D and institutional support. Weak enforcement of intellectual property rights leads to frequent design copying, harming genuine producers.

Compliance with international standards is a major challenge. Export markets such as the EU, US, and Japan require certifications including CE/EN71, CPSIA, and others. Limited local testing capacity forces firms to rely on foreign laboratories, increasing costs and lead times. For example, Intertek can provide physical and mechanical testing, but chemical migration tests (EN 71-3) must be conducted abroad. Different countries have varying mandatory testing requirements (e.g., Brazil's Inmetro based on Mercosur NM 300:2002, ASTM F963 in the US), further raising the compliance burden.

The sector also needs affordable working capital, matching grants for product development, and support to diversify into high-tech or STEAM-based toys. Traditional toys, such as dolls and teddy bears, face competition from digital games, reducing demand. Furthermore, GSP benefits in the EU and Japan will diminish after LDC graduation, and the US GSP program has remained suspended since 2013 due to labor rights concerns.

Additional challenges include inadequate warehousing, high costs due to the inability to import raw materials in bulk, limited presence of international toy buyers in Bangladesh, and heavy taxation on key inputs. For example, printed paper or paperboard labels of all kinds (stickers, HS 4821) face a total tax incidence of more than 89%; sound signaling equipment is taxed at 37.25%, and electrical conductors can be taxed up to 90%. The high tax burden on intermediate raw materials increases production costs. A detailed analysis of tax policies for the sector is needed if it is to realize its export potential.

Manufacturers argue that taxes on intermediate raw materials should not exceed 10% and that VAT-compliant industries should receive tax rebates. They also advocate for the extension of bonded warehouse facilities.

The global toy industry presents major growth opportunities. Soft/plush toys had global exports of $11.76 billion in 2023 and have strong links with the RMG sector. Since Bangladesh has a solid footing in RMG, this segment of toys offers significant potential for exploration. Wooden toys accounted for $27.47 billion in exports in 2023 and are projected to reach $40.64 billion by 2031, while STEAM toys are expected to exceed $10 billion by 2030. The toy sector is also undergoing various transitions, and supporting institutions should provide the necessary assistance to industrial entrepreneurs.

Given the significant potential across plastic, metal, wooden, and AI-enabled toys, Bangladesh urgently needs a Comprehensive National Toy Policy. This policy should include bonded warehouse facilities similar to those in the RMG sector, grant associations the authority to issue Utilisation Declarations (UD), and harmonize export entitlements across sectors.

Testing laboratories must be strengthened, and tool-and-die facilities expanded. A dedicated Tool and Technology Institute—modeled on BITAC—should be established in every division to support mold and die manufacturing across the country. Enhanced collaboration between Economic Zones and non-EZ areas is essential for effective technology transfer. Trained manpower developed in the export processing zones could serve as a source of knowledge transfer. Finally, toy clusters should be established to expand Bangladesh's toy and games market to at least $1 billion by 2030.

The sector has already demonstrated its resilience in meeting domestic demand and serving the export market. With the right policy and institutional support, adequate testing infrastructure and laboratory facilities, and proper financing, the sector can advance toward export diversification.

Sketch: TBS

Ferdaus Ara Begum is the CEO at BUILD, a public private dialogue platform which works for private sector development.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.