Bangladesh works on new policy to woo car makers

In a major policy shift, the Bangladesh government that traditionally discourages people to buy cars with high taxation now plans to make four-wheelers in the country.

Commerce Minister Tipu Munshi on Friday said they would draft a policy in the next six months.

“We are working with the Bangladesh Investment Development Authority. They have drafted something, we’ll see that in the next 15 days,” he said while opening the second edition of Indo-Bangla Automotive Show on Friday at International Convention City Bashundhara.

BIDA Executive Chairman Kazi M Aminul Islam on the sidelines of the show told bdnews24.com that they are working on the policy.

More than 35 Indian component manufacturers, tyre manufacturers, oil and lube companies and organisations like International Centre for Automotive Technology (ICAT) are showing their strength at the show.

An Indian delegation, including senior industry leaders, will meet the government officials of Bangladesh as part of the four-day event.

JOINT VENTURE

The commerce minister said they will prefer to have “joint ventures so that we can export to the countries where we enjoy duty-free market access after supplying to our own local market”.

“I think we can have incentives on that also. It’s a good idea for manufacturers to come here and start manufacture here,” he said.

“I am optimistic because the government is very much business friendly,” Munshi, a businessman turned politician.

“The prime minister has instructed me to do whatever possible to increase foreign investments in Bangladesh.”

“If we can manufacture parts in our country, then it will really help us make that kind of vehicles in Bangladesh.”

He also encouraged tyre makers to come to Bangladesh.

INDIA’S AUTOMOBILE STRENGTH

India is the sixth largest producer of automobiles in the world with an average annual production of 24 million vehicles. Bangladesh is India's fifth largest automotive market.

With economic growth of over 7 percent, greater disposable incomes, and improving road infrastructure, the demand for automobiles in Bangladesh has increased.

The automotive sector accounted for 7.1 percent of India’s GDP in 2015-16.  India is also exporting more than 3.5 million vehicles annually, and Indian companies are increasingly gaining acceptance on a global scale.

Already, a number of Indian companies have set up operations in Bangladesh.

Tata Motors’ joint venture with the Nitol-Niloy Group has an assembly plant in Jessore. Hero MotoCorp is setting up a two-wheeler plant in Jessore. Ashok Leyland and Ifad Auto have assembly plants at Dhamrai.

According to the former president of the apex business body, FBCCI, Abdul Matlub Ahmad, even 30 years ago 95 percent of the commercial vehicles in Bangladesh were from Japan and London.

Now 90 percent of commercial vehicles come from India, said Ahmad, who owns Nitol-Niloy Group, the biggest importer of the commercial vehicles in Bangladesh.

But Japan still dominates in the private car market.

Organisers say this expo is to help Bangladesh learn from the India's growth story.

CHANGING POLICIES

BIDA Chairman Islam said the driver of development is mobility and the consequences of development are also mobility. “So the automobile industry is very important.”

“We have seen a lot of investments in two-wheelers due to our friendly policy. If we can make good policy, three-wheelers and four-wheelers industry will also develop.”

But for that, he said, the supporting parts and the service industry have to be developed. “We had a discussion with the Japanese companies and they were saying that if we cannot have parts or other necessary components in our country, then it will be difficult to import all.”

“So it’s a cluster of things and we will float the initial discussion and give the policy suggestions shortly. I hope we will be able to see the production of four-wheelers shortly.”

Islam said the high taxation on car imports was a well-thought-out policy. “Time to time we can update. Our production will be for local and export markets.

“We have to make it affordable. In the last ECNEC meeting, we have planned to expand all roads to four lanes. There is scope to increase roads infrastructure and manufacturing as well. We have to make the right policy.”