ICT and Export Diversification

Hiren Pandit

Bangladesh is expected to earn a 5-billion-dollar export income from the IT sector by 2025. At least one lakh people are expected to be employed in the IT device manufacturing industry in the country. A roadmap of $5 billion in export earnings from the IT sector by 2025 has been set. In the information technology sector, a plan has been made to increase the export earnings of digital devices made in the country from about one billion dollars at present to 5 billion dollars by 2025. At the same time, the domestic market for ICT products and IT-enabled services is also expected to reach $5 billion.

The government believes that digital devices and IT products like mobile phones, computers and laptops will play a major role in capturing the potential market of 10 billion dollars in the information technology sector in the country and abroad within the next four years. As a part of this, the Information and Communication Technology (ICT) Division has taken a ‘Made in Bangladesh’ roadmap for expanding the scope of setting up digital device manufacturing industries in the country and branding local products in international markets.

If this roadmap is properly implemented, employment of at least one lakh people will be ensured in the IT device manufacturing industry in the country. Laptops and mobile phones will be exported abroad to meet the domestic demand of about 200 million dollars prepared by the ICT Division. The hope of the ICT Division is that if the ‘Made in Bangladesh’ action plan is implemented, Bangladesh will become one of the centers of ICT and IoT (Internet of Things) product manufacturing. It will also help implement the government’s Digital Access for All agenda.

The growing demand for digital devices and consumer gadgets by the country’s emerging middle class and affluent class has created a conducive environment for Bangladesh’s entry into the international hi-tech industry. The roadmap recommends prioritizing the use of locally produced ICT products in government procurement. For this purpose, initiatives have been taken to increase the awareness of officials of government agencies involved in procurement. Besides, efforts are being made to set up hubs in Singapore, Dubai, England, or any other country to facilitate the export of products produced in the country.

In the new roadmap, importance has been laid on various issues including the creation of skilled manpower, improvement of product quality, quality assurance, assessment of global demand, increase of image of Bangladeshi products worldwide, protection of intellectual property, and increase of research.

In addition to the ICT Division of the government, the Ministry of Commerce, Ministry of Foreign Affairs, Ministry of Planning, Department of Posts and Telecommunications, Ministry of Industry, Ministry of Education as well as various ministries including Bangladesh Computer Council, Bangladesh Hi-Tech Park Authority (BHTPA), Bangladesh Economic Zone Authority (BEZA), Bangladesh Investment Development Authority (BIDA), Bangladesh Export Processing Zone Authority (BEPZA), Export Promotion Bureau (EPB), BSTI, BITAK, Skill Development Authority and University Grants Commission are working together. In order to make the roadmap a success, various non-governmental organizations as well as various organizations of entrepreneurs will have important responsibilities.

According to the International Data Cooperation (IDC), Bangladesh imported 3.4 million mobile phones in 2017, which was worth $1.18 billion. In 2018, the company estimated the laptop market of this country at 300 million dollars. Bangladesh Hi-Tech Park Authority (BHTPA) was established to take advantage of this potential domestic market. A series of incentives are being offered for this.

BHTPA announces income tax concessions for IT park founders and investors. Besides, additional duty exemptions including exemption from import and regulatory duty will be given to the manufacture of ATM kiosks, and CCTV cameras in the country. Besides, investors will also get a duty exemption on the import of capital machinery and construction materials. The new roadmap has been prepared to accelerate the ‘Made in Bangladesh’ initiative by utilizing these benefits.

Moreover, the availability of labor force in a relatively competitive 7-level structure, local market demand and the supportive framework of government policies are considered to be important influencers in making Bangladesh an attractive market for digital device manufacturing.

Citing the examples of those who have already successfully set up production lines in Bangladesh – Walton, Samsung, Oppo, and Data Soft, the department says that these initiatives have highlighted the possibility of further development in the local device manufacturing industry in the future. However, the Information and Communication Technology Division has also identified some obstacles to the implementation of the roadmap, among which the aspect of high capital expenditure in Bangladesh has been placed at the top. Besides, lack of skills, weak industry support ecosystem, problems of quality assurance and international certification of locally manufactured products, lack of useful regulations to prioritize local products in government procurement, lack of public awareness about local products and lack of financial incentives for digital device manufacturers are identified as major issues. Strategic Aspects: The Roadmap has been formulated with emphasis on four strategic themes.

These include capacity building at the local level in the public and private sectors, awareness creation and branding, research and development, and policy support. Under this, there are some action plans in the short term to be implemented by 2023, medium term to be implemented by 2028 and long term to be implemented by 2031. In the short term, the domestic and international markets of technology products will be analyzed and strategies for demand assessment, capacity development, and marketing will be formulated.

At this time, testing labs will be set up to ensure the quality of IT products under the initiative of the universities. Ministry of Commerce will take initiatives to increase exports through bilateral and multilateral international agreements. Hubs will be set up in Singapore, Dubai, England, or any other country to export products abroad. With the help of the ICT department, the universities will develop five lakh skilled workers for the ICT sector in the country during this period. Skill Development Authority will develop international standard training modules and syllabus.

The Ministry of Foreign Affairs is working to formulate and implement an action plan to find out the attitude of other countries about Bangladesh and to move away from the negative attitude. The ICT Division will create a national portal with details of ICT products manufactured in the country. Moreover, at this time initiatives will be taken to increase the awareness of the officials concerned about the domestic products in government purchases. The National Board of Revenue will work to bring down various types of duties and taxes on digital devices and its backward linkage industry to a rational level.

The Ministry of Finance is arranging loans on easy terms for the manufacturers of ICT products. The Ministry of Commerce is looking after the incentives for the export of these products. The initiative to reduce imports as well as increase exports by increasing the production of ICT products is certainly commendable. However, unless there is a plan to increase value addition, such initiatives will not yield effective results. Most of the entrepreneurs of technology products are importing almost a hundred percent of the materials from abroad and are just adding them to the domestic factories.

As a result of this not being taxed as a finished product, the government is losing revenue. On the other hand, the factory is being run with only nominal employment as it is only additional work.’ Only 25 people are employed in the domestic factory of the Chinese mobile phone brand Xiaomi, which was launched a few days ago. But if 100% of materials are produced in the country, several thousand people would be needed. Despite the importance given to industrialization in our country, the issue of backward linkage has always been neglected.

If the raw materials and parts are not produced in the country, the value addition will not increase. There will be no employment. Providing tax exemptions and other opportunities to entrepreneurs of technology products as domestic industries, imposing a certain amount of value addition obligation.

The software development and solutions sector in the country has reached a stable position. Now we need to strengthen the hardware industry to keep up with the software industry. Although dozens of companies are currently manufacturing mobile phones in the country, very few companies are ready to manufacture laptops. The reality is that local factories will only add digital devices at the initial stage.

Emphasis should be placed on job creation and increasing value addition. This roadmap was very useful as there is still very little investment in setting up hi-tech parks. There is a lack of coordination among various ministries and departments of the government in providing support to the digital device industry. Investments will also increase if the new roadmap ensures coordination.

The ready-made garment sector or RMG sector is a successful model for Bangladesh’s exports but now is the time for other promising sectors like leather, textiles, pharmaceuticals, ICT and light engineering to come forward. Bangladesh has started formulating a long-term plan on how to increase the scope of its exports after its transition from the United Nations Least Developed Countries (LDCs). These related measures may include low-cost and easy access to finance, adequate policy support as well and financial and non-financial incentives for the non-apparel export sector to ensure equal treatment and skill development. Should we focus more on non-apparel sectors with good export potential?

Agencies concerned should implement domestic regulations that are WTO compliant as industry preparedness is critical. Also, the Bangladesh Standards and Testing Institute (BSTI) needs to be strengthened so that local products are subjected to international quality tests to ensure their accreditation.

The country’s legal capacity must also be enhanced as trade disputes may increase significantly during the LDC transition phase. Small and medium industries such as jute, agro-processing, leather products, footwear, pharmaceuticals, light engineering, ICT and other emerging sectors have to face all kinds of competition to compete in the international export market after graduation. Traditional industries as well as geographic diversification and service sectors.

We also need to facilitate more exports to countries in Latin America, Africa, Asia and the Middle East besides the EU and the US. Authorities should identify the benefits of signing free trade agreements or preferential trade agreements without considering only potential revenue gains. Bangladesh earns $1 billion from the jute sector, but considering global climate change and increasing international commitments for sustainable development, the industry could grow from $5 billion to $10 billion.

Jute is now used in a variety of products and has become the second most sought-after natural fiber in the world. So, we need to add value to this sector to be competitive after graduation. About 70 percent of Bangladesh’s total arable land is used for rice production, which employs about 45 percent of the country’s rural labor force. We need to increase technology adaptation, increase private sector research and innovation, adopt good agricultural practices, and develop the country’s post-harvest capacity and brand.

The local ICT sector earns about $1 billion a year but not everything is reported on time due to the lack of a digital wallet or a payment system like PayPal. We need to create a low-cost fund to ensure unconventional access to finance for the development of this sector. About 80 percent of the drugs exported from Bangladesh are off-patent. Bangladesh’s policymakers have been talking about export diversification for more than two decades.

This is also one of the actions of the recently concluded ‘Bangladesh Trade and Investment Summit’, which reiterated the importance of policy and legal reforms to harness untapped business potential at home and abroad. In fact, Bangladesh has been dependent on almost one sector for its export earnings over the years. No one knows when the 84 percent share of readymade garments in exports will come down with healthy growth in other industries and manufacturing components.

Leather and footwear, pharmaceuticals, ceramics, IT and software, jute products, light engineering products, additive manufacturing, handicrafts, frozen food, agro-based items, and several other sectors have been identified as sectors that can increase Bangladesh’s foreign exchange earnings. Ideas shared at seminars, workshops and conferences in Bangladesh are not usually tested by research projects in universities and government laboratories. Policymakers also appear more serious when dealing with issues and ideas during international conferences than when showing flexibility to local stakeholders’ demands to bring about real changes.

As a result, numerous policies lose the timeliness of implementation and adoption appeals. During this period, new problems arise and old ones also remain incomplete. The authorities then adopt new policies and initiatives understandably to draw political dividends, only to forget the records remembered by businessmen. The concept of a special economic zone is an attractive one and Bangladesh authorities have created as many as 100 to use them as a game-changer for the economy to attract investment. However, the related companies do not consider the necessary facilities and environment for making investment decisions.

The writer is a columnist and researcher

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