Consistent policy support needed to nurture automobile industry
Policy support, tax benefits, and incentives are needed to help develop the country's automobile industry, according to experts and entrepreneurs.
"Bangladesh has strong potential to establish its own automobile industry but to do so, it needs policy support, tax benefits and incentives to grow," said Ito Naoki, Japan's ambassador to Bangladesh.
"When we talk about export diversification, the automobile, light engineering and agriculture-based sectors could play a vital role," he added.
Naoki made these comments while addressing a webinar styled, "Automobile Industry Development: Present Situation & Future Prospects", organised by the Dhaka Chamber of Commerce and Industry (DCCI).
The ambassador also informed that Japan's Mitsubishi Motors has shown interest to invest in Bangladesh in the form of a completely knock-down (CKD) plant.
Having reached an agreement in this regard last month, Mitsubishi and Bangladesh's Ministry of Industries will now sign a memorandum of understanding to conduct a joint feasibility study on the investment.
If approved, the investment will lead to technology transfer and employment opportunities for Bangladesh, he added.
Industries Minister Nurul Majid Mahmud Humayun urged investors from both home and abroad to set up automobile spare parts and tool manufacturing plants in the country's economic zones.
"Increased purchasing power is motivating people to procure personal vehicles, raising the demand for cars," he said.
In order to cater to the growing demand, a number of automobile manufacturers have shown interest in setting up local manufacturing facilities.
"We have analysed the industry to see their current state and what the future holds for them. Besides, we are drafting an automobile policy for the future development of this industry," Humayun added.
While moderating the webinar, DCCI President Rizwan Rahman said that the government should implement a supportive tariff policy for at least five to ten years in order to boost the local automobile assembly and manufacturing industry.
Bangladesh's automobile industry is dominated by reconditioned and new car imports mostly from Japan, China, India, the EU, and the US.
Considering the growing market demand, local and foreign investors are now showing interests in the industry.
The automobile market has been growing by 15 per cent to 20 percent annually.
Similarly, the spare parts market has grown by about 12 per cent each year as well, Rahman said.
The DCCI president also urged for a separate economic zone for automobile manufacturers and to allow joint ventures in parts manufacturing in order to develop local experts.
Taskeen Ahmed, deputy managing director of IFAD Group, said the launch of Padma Bridge will boost the demand for commercial vehicles.
Around Tk 8,000 crore has been invested in the local motorcycle industry, which accounts for about 0.5 per cent of the country's gross domestic product.
Reconditioned cars make up about 50 per cent of the entire local car market while 45 per cent of the remainder are used cars and only 5 per cent are brand new.
Ahmed also said the commercial vehicle market is currently worth around $1 billion and its growth will only continue in the future.
In the light engineering sector, the market size of the auto-parts industry is about Tk 1,400 crore with an annual growth rate of 12 per cent, he added.
John D Dunham, economic and Indo-Pacific Affairs Unit chief of the US Embassy in Dhaka, said since Bangladesh will soon graduate into a developing country, the government needs to formulate ideal policies on tax and investment.
"Bangladesh's prosperity is important to the US," Dunham added.
Md Touhiduzzaman, managing director of Pragati Industries, said his company wants to locally manufacture vehicles.
Touhiduzzaman also emphasized on the need to expand the local spare parts manufacturing.
Matiur Rahman, chairman and managing director of the Uttara Group of Companies, said long-term policy support and incentives would foster the industry's growth.
"This is a promising sector which has the opportunity to attract private sector investment," Rahman added.
Abdul Haque, president of the Bangladesh Reconditioned Vehicle Importers and Dealers Association, said the taxation policy should be industry-friendly as the industry needs consistent policy support.
Hayakawa Yuho, chief representative of the Japan International Cooperation Agency Bangladesh, said appropriate industrial policies are needed to protect and nurture the local automobile industry.
He also said the government may think of providing investment incentives to private sector investors from both home and abroad.
Yuho went on to suggest that the automobile policy should be carefully formulated and implemented since the industry's situation changes every day.
The webinar was also addressed by NKA Mobin, senior vice president of the DCCI, and Syed Imtiaz Ahmed, president of Canada's Signal Stream Inc.
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