Market at risk of running out of tech products

The domestic market is at the risk of running out of computers, smartphones and other import-dependent Information and Communication Technology products in the coming months as banks are refusing to open letters of credit (LCs).

Industry insiders say banks are not agreeing to open LCs against their import demands due to the dollar crisis, a volatile foreign exchange market and global recession.

With new products not coming in sufficient amounts, traders fear the existing stock will dry up by January if no steps are taken to resolve the situation.

Market already down

After wreaking havoc in other import-dependent sectors the LC-opening crisis, being driven by the strong dollar, has now come for the technology product market. Banks are refusing to open LCs as per the importers demand leading to a fall in product supply and ultimately draining out the existing stock.

“Tech products are mostly dependent on imports, which is on the decline for over the last three months as banks are reluctant on opening LCs worth more than $20,000-25,000, that too by rationing system,” said Subrata Sarkar, president of Bangladesh Computer Samity (BCS), told The Business Post.

He said, “The technology products that are still in the market are from our previous purchases and are not sufficient to cover the market demand.

“There is a shortage of these products in the market. The market has already become slow. We are failing to support market needs with new imports.

“The computers and laptops which we currently have will go for the next month, that too for usual low sales in November and December.”

Come January and there will be a severe crisis in the market, he warned.

Cost increase

Traders said the product crisis has not become starkly visible as supply has not completely stopped. Few products are coming against LCs opened two to three months earlier. But these will soon come to an end as importers already have to spend extra for new imports following a hike in product prices in the international market recently. 

“Our import costs are getting higher, because of the increasing dollar price,” said Subrata.

On top of it, importers are forced to open multiple LCs for importing products. Meaning they have to pay more for shipping and have to give commission to banks over and over again. The suppliers are not being helpful as well. 

In the meantime, Subrata said, “Manufacturers are not giving us any benefits, rather they are pressuring us by suspecting our LCs.

He added that suppliers are becoming reluctant to supply products as their distribution agreements are not being fulfilled. “We are demanding that the existing 15 per cent VAT be withdrawn at least for a certain period. If the central provides a circular to that end, prioritising LC opening for IT products import, we will be able to do business more smoothly” Subrata added.

SM Arifuzzaman, business development manager at  Ryans Computers, a company that sells computer and technology products, said the imports against  LCs opened two to three months ago are now coming to the country, that is why the crisis is still not visible that much.

“But the prices of those gadgets are very high. If this goes on, there may be a shortage of laptops, computers and other electronic products in the market after a month,” he said.

Price up, sales and production down

The shortage of products and costly imports has already led to a price hike in the domestic market.

Niju Khan went to BCS Computer City in Agargaon of the capital to buy a laptop recently. The same device was purchased by her brother a few months ago.

When she went to buy it, she was informed by the seller that the gadget’s price went up by Tk 4,000 in the past months.

”One of my brothers bought the same laptop a few months ago at Tk 48,500. Now the price is Tk 55,500,” she said.

Amid the already decreasing consumer purchasing power, a price hike has further slowed down sales.

Traders at the BCS Computer City said sales have dropped 10-15 per cent in the last four months.

Md Sajeeb, a salesperson of Rio International, a mobile phone retailer in the capital’s Bashundhara City Shopping Mall, said sales dropped by almost 30-35 per cent in the last few months.

On the other hand, Mohammed Mesbah Uddin, joint secretary of Bangladesh Mobile Phone Importers Association (BMPIA), said, “Mobile phone prices, in general, have gone up by 10-15 per cent. In some cases, it has gone over more.”

“The prices of the phones assembled in Bangladesh have increased since we have to import most of the necessary parts at a higher cost nowadays. We have no other way but to raise the prices,” he added.

Mesbah, who is also the chief marketing officer of Fair Group, the distributor and manufacturer of Samsung in Bangladesh, said import costs have increased by 20-25% in six months due to the dollar crisis. 

“The price of raw materials has increased by more than 40%. As a result, we have been forced to increase the price of handsets”, he said.

Edison Group, which owns Symphony brand, saw a 25 per cent slump in sales in the last six months.

Md Zakaria Shahid, managing director of the manufacturer, warns the slump will continue further.

Bangladesh has seen a surge in local handset production in recent years, aided by the government’s huge tax benefits unveiled in the fiscal year of 2017-18.

However, lower sales volume in recent months is forcing manufacturers to cut production.

According to the latest data of the Bangladesh Telecommunication Regulatory Commission (BTRC), mobile phone manufacturing and assembling fell 1.25 per cent to 21.99 lakh in October compared to September.

About 1.56 crore units of mobile phones were manufactured in the first five months of 2022. But in the five months to October, the number stood at 1.23 crore, a 21 per cent drop from the preceding five months.

Amid the sharp fall in foreign currency reserves caused by the escalated import payments, the government has moved to limit the purchases of non-essential and luxury items.

“Due to policies aimed at safeguarding reserves, the LC opening has become difficult and time-consuming. This is disrupting raw materials imports and subsequently lowering the production,” said Edison MD Sahid.