Home ›› 14 Jun 2023 ›› News
The proposed budget for the 2023-24 fiscal year has put the local bicycle manufacturers and assemblers in dismay, instead of providing the much-needed policy support to the country’s potential bicycle industry.
Bicycle exporters said the government effort in the proposed budget to provide policy support to local manufacturers went in vain as it does not include the necessary HS code in the customs tariff. Moreover, due to the increased tax, VAT, and tax on the import of bicycle accessories, the price of locally assembled bicycles might increase by 10-15 per cent.
According to data from Export Promotion Bureau (EPB), bicycle exports in the first 11 months of the current fiscal year (FY23) declined by 16.90 per cent compared to the corresponding period of FY22.
EPB data showed that two-wheelers worth $156.57 million were exported during the first 11 months of FY22 and it came down to $130.11 during the corresponding period of the current fiscal year. This is the highest decline in bicycle exports since FY16.
The decline in exports downgraded Bangladesh from the third largest bicycle supplier to the European market to the fourth position, according to Eurostat, the statistical office of the European Union that publishes Europe-wide statistics and indicators.
There is no accurate data on the bicycle market in the country but unofficial sources said that Bangladesh produces 1.5 million bicycles every year, including the assembled ones, and most of those are exported. Europe is the largest market for Bangladesh.
At present, six companies are producing, or preparing to produce, bicycles in the country.
Manufacturers’ response
Presenting the proposed budget for FY24 before the Jatiya Sangsad on June 1, Finance Minister AHM Mustafa Kamal said: “Domestic entrepreneurs produce sprockets and free wheels as a backward linkage industry for the bicycle manufacturing industry. Therefore, to encourage the backward linkage, I propose to increase the customs duty from 10 per cent to 15 per cent on the import of freewheels and sprocket-wheels of bicycles.”
The government also created a new HS Code for sprockets and free wheels.
“But this is not what we demanded. The government initiative for the local bicycle manufacturers is really praiseworthy, but this needed to be technically in the right direction,” said Md Luthful Bari, chief operation officer of Meghna Group, the country’s biggest bicycle exporter.
“We demanded separate HS codes for the painted frame and fork of the bicycle. The bicycle parts importers, or local assemblers, are importing painted and unpainted frames under single HS code as there is no separate HS code for painted and unpainted frame and fork,” he explained.
The manufacturers also wanted tax exemption on the import of disk paint as they have to pay a huge 89.32 per cent tax for importing it. So, they wanted to replace the description of the HS Code to ‘Coating Material imported by industrial IRC holder VAT compliant cooking ware and bicycle manufacturers.’
EPB sent a letter to the Ministry of Commerce in this regard in late May.
“That demand was also ignored,” said Bari, who is also the secretary to the Bangladesh Bicycle and Parts Manufacturers’ and Exporters’ Association.
Higher taxes may create monopoly
Local bicycle assemblers and traders heavily criticised the government initiative to increase the import duty of bicycle accessories, arguing that increased duty will result in increased prices of assembled bicycles, pushing them out of the reach of the poor and middle-income people.
General Secretary of Bangladesh Bicycle Merchant Assembling and Importers Association Habibul Islam Jahid said, “Due to the newly increased import duty, the price of assembled bicycles will go up. As a result, the buyers would be discouraged as the poor and middle-income groups of people are the main buyers here.”
“This year, the government increased additional taxes imposed on some steel non-gear products and alloy non-gear products under almost nine HS codes,” he said.
A request to the National Board of Revenue has already been made to withdraw the additionally imposed taxes. Otherwise, many traders will not survive and it will pave the way to market monopoly,” he apprehended.
