The government has issued the country's first-ever automobile policy for the next ten years with a bunch of fiscal and other incentives, aiming to launch 'Made in Bangladesh' brand worldwide.
With a vision to build Bangladesh as a regional hub of automobile industry by 2030, the Ministry of Industries (MoI) issued the Automobile Industry Development Policy 2021 on Tuesday.
It issued a gazette in this regard. The draft policy was approved by the cabinet on June 14.
According to the policy, the buyers of locally assembled or manufactured vehicles would get a certain amount of income tax rebate on the prices of 'Made in Bangladesh' automobiles.
The government would provide 15 per cent cash incentives against export of locally manufactured or assembled vehicles.
Foreign investors of local spare-parts manufacturing industries would be able to repatriate their full dividends as per the policy.
For ensuring local value addition, the policy prescribed a progressive production rate for the Original Equipment Manufacturers - to be eligible for cash incentives.
Manufacturers or assemblers of three-wheeler, passenger vehicle, LCV/MUV, bus and truck have to follow the year-wise production rate up to ten years.
The government made three categories for allowing investment in automobile sector under the incentive package.
The categories are - green-field investment, brown-field investment, and automobile spare-parts manufacturers under green-field investment.
New and first-of-its-kind investment on establishment of automobile manufacturing industry in Bangladesh would be considered as green-field investment.
Automobile assembling or manufacturing industries under operation or resuming operation after closure would be considered as brown-field investors.
The MoI would recommend tax incentives to the National Board of Revenue (NBR) for a certain period to facilitate CKD (completely knocked down) level-1 factories.
The category-1 or green-field investors would get 100 per cent tax exemption for one time to import capital machinery and other spare-parts.
Total tax incidence was lowered for the vehicles on the basis of their categories.
The policy also encouraged manufacturing energy-efficient vehicles by offering 10-year tax holiday, waiving loan interest, giving incentives for purchase and scrapping, waiving road tax, and reducing registration fees for a certain period.
Talking to the FE, president of Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA) Abdul Huq welcomed such initiatives to facilitate local manufacturing industry.
But he suggested being cautious to refrain from building 'screw driver industry' through incentives.
He said principles of market economy and choice of customers should be considered on priority basis.
"Already there is an established car market here. Feasibility of investment in the sector should also be scrutinised," he added.
Earlier, the association leaders alleged that the new automobile policy would develop an assembling industry rather than a manufacturing one.
Sheikh Faezul Amin, additional secretary of the MoI, acknowledged that initially the car assembling industry would grow by focusing on CKD cars for the first five to ten years.
The backward linkage industry for automobile should be developed first to ensure smooth supply chain and gain confidence.
Later, the manufacturing industry would develop gradually, he added.