Md Joynal Abdin
The Financial Express on August 04, 2011
Electrical industry is one of the most important business sectors of Bangladesh. It has been identified as a “booster sector” in the SME Policy Strategy – 2005 and a “thrust sector” in the National Industrial Policy – 2010. Currently, this sector in producing export substitute products worth about Tk 150 billion against the local demand of Tk 200 billion per year. There are about 2500 electrical enterprises producing 75 types of electrical products in Bangladesh.
There were a few electrical companies in Bangladesh before independence in 1971 these were Sun Shine Cable Industry, Ever Shine Cable Industry, Facto Industries Limited, Gazi Ware Limited and General Electric Company etc. From 1972 to ’78 some courageous entrepreneurs came forward to invest in the electrical industry of Bangladesh. Eastern Cables, Shihan Cables, Uzzal Plastic Industries, Shamol Electric Industries, General Electrical Industries, Tritorit Industries, MEP and Comrade Backlight Industries Limited are some of the well known names.
During 1978-86 this sector attracted about 1000 more investors. Currently, there are about 2500 companies producing electrical goods. Electrical sector of Bangladesh can be divided into sub-sectors based on the type of products. Such as electric fan, electric cables, light fittings, backlight, electric motor, generator and transformer, and electricity distribution equipments sub-sectors.
This sector can be divided into two major sub-sectors based on the uses of the products. These are industrial products sub-sector and household product sub-sector. Industrial products are electric cables, distribution board, large and medium transformer, switch gear, sub-station equipment, electric arc wielding machine, enamelled ware, insulator, industrial fan, heat and speed control system, magnetic contactor, Porcelain bright connector, different connecting equipment, main switch, electric iron and shouldering iron etc.
Household products produced by the Bangladesh electrical sector are ceiling fans, table fans, exhaust fans, tube lights, filament bulbs, light fittings, table lamps, other lamps, distribution boards, electric metres, switches, plugs, water heaters, florescent light ballasts, lights and fan controllers, torch lights, refrigerators, lift equipment, extension cords, and energy saving lamps etc.
In the last few years the country’s electrical industry sector has posted a double digit growth rate and it has a very potential export market throughout the world. Bangladesh is mainly producing electrical products of HS chapter – 84, 85, 90 and 94. Global market for these products is growing.
Major importers of electrical products are USA, Canada, Germany, Australia, Mexico, Italy, Denmark, Hongkong, France and Finland. Major exporters of these products are China, USA, Germany, Japan, Singapore, South Korea, Taipei, Mexico, Netherlands and Malaysia.
Electrical items are very sensitive products. A small trouble in one may cause massive damage of wealth and even human life. So everybody wants to be ensured that the products they are using are of quality. As a result electrical products need different mandatory certifications before export. For example, EU countries need ‘CE’ mark, Japan wants ‘Diamond PSE Cat. A & B’, China requires ‘CCC’ and India needs ‘ISI’ marking.
From the last six years’ statistics we observe that Bangladesh electrical sector is growing at about 38 to 42 per cent annually. The demand for electrical products is not only increasing in the local market but also globally. In 2009 electrical items production rate increased by 22 per cent in Europe, 21 per cent in North America, 14.5 per cent in Japan, 24.3 per cent in China, 13.1 per cent in Asia Pacific and 5.1 per cent in rest of the world . Bangladesh is importing a large portion of electrical products to meet its additional demand.
Currently, 47 per cent of the total population of Bangladesh is linked with the national grid of electricity. Per capita rate of electricity generation is 220 KW which is much lower than any other developing countries of the world. In such an environment local demand for electrical products is about Tk 200 billion.
This demand for electrical products will go up with the economic development and increase of electricity supply. The government announced a roadmap of electricity generation to add another 1650 MW by the end of 2011, 4995 MW by end of 2013, 9364 MW by the end of 2015 in the national grid. The government is also planning to be self sufficient in electricity and supply power to 100 per cent population of the country by end of 2017. If this was implemented in time then the local demand for electrical products will grow up geometrically to Tk 600 billion. On the other hand export of electrical products is also growing. Bangladesh is enjoying duty free and quota free market access in EU, Australia, Canada and other developed countries. So export prospect of this sector is better than any non-LDC competitors. Finally, we can say that there are enormous growth potentials of Bangladeshi electrical sector in the coming days.
The problems of the electrical industry can be divided into two categories:
Under invoicing during import of finished electrical products, lack of advanced technical knowledge, absence of IP protection mechanism, lack of infrastructure to enter into the export market, and quality flexibilities on poor quality imported products.
The absence of an electrical testing laboratory and research centre, absence of product development and design centre, lack of skill manpower and sector specific training centre, low productivity, insufficiency of bank loan, insufficiency of electricity supply.
At this stage we recommend few actions for implementation by the government and stakeholders concerned. Short-term recommendations to be implemented within one year, mid-term by one to three years, and long-term within five years.
Short-term recommendations are providing tax holidays to new SMEs of electrical sector; restructuring and justifying import duties on raw materials and finished goods of this sector; simplification of the process and procedures of VAT credit taking by the SME entrepreneurs, and active actions to stop under invoicing.
Mid-term recommendations are ensuring electricity supply during production period or providing incentives for load shedding; ensuring quota for local products in public procurement; providing cooperative facility for marketing/export of electrical products, and active action to ensure quality of imported products.
Long-term recommendations are establishing electrical testing lab and research centre; establishing electrical training and design centre; imposing IP law to protect innovators; ensuring qualitative raw materials; facilitating export of electrical products via EPB; increasing use of ICT and e-commerce, and providing collateral-free loan to the electrical degree holders, who want to be entrepreneurs.
In fine, we expect that the government will play its role of a facilitator for creating and maintaining a business-friendly environment for the sake of industrialisation of the country.