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OP-ED: Can Bangladesh reclaim digital leadership in South Asia?

  • Published at 04:12 pm June 22nd, 2021
Mobile towers
File photo: Two telecommunication towers located in outskirts of Dhaka Syed Zakir Hossain/Dhaka Tribune

Will Bangladesh realize its Digital Bangladesh vision for citizens who thrive as Digital Bangladeshis?

In 2009, Bangladesh demonstrated true regional leadership in unveiling its vision of a digital society when it launched “Digital Bangladesh.” 

Much progress has been made towards this vision but amid the advances of the government and businesses, citizen progress has not kept pace. 

Although the 4G network covers 95% of the population, only 28% of connections made over 4G. 

Bangladesh needs to accelerate the rate of 4G adoption if it is to keep pace with other countries in reaping the benefits of digitalization.

What ails the mobile industry, the digital engine of the economy and society?

Telecom is a capital-intensive industry and returns need to be globally competitive to attract capital to invest in network and services. 

Statistics in the 8th FYP clearly show a declining trend in FDI in the telecom sector. In 2015, telecom attracted $255 million in FDI; in 2019, that declined to $208 million. 

In the same years, telecom’s share of FDI declined from 11.4% to 7.2%.

To prepare the ground for the 8thFYP target of at least 6% direct contribution from digital infrastructure and services to the GDP in 2041, the GSMA recommends that the government take a holistic view of mobile sector taxation rates, fragmented licencing regime and high spectrum prices.

How does the proposed 2021-22 Budget contribute to Digital Bangladesh?

On June 3, Finance Minister AHM Mustafa Kamal placed the proposed Fiscal 2021-22 Budget in Parliament which has proposed to cut corporate income tax rates for both listed and non-listed companies by 2.5 percentage points (pp). 

However, the mobile industry did not receive similar consideration. 

Bangladesh’s mobile sector tax burden accounts for 44% of sector revenue. 

This is the third highest in the world and 20pp higher than the Asia Pacific average (24%).

Rebalancing its tax framework can help to attract the required investment, facilitate adoption and usage by citizens and achieve its long-term digital objectives.

Three reforms in mobile sector-specific taxation could accelerate Bangladesh’s transformation to a digital economy:

  • Reducing the minimum turnover tax and corporate tax for the mobile sector to align it with the rest of the economy. If the minimum turnover tax is reduced to 0.5% from the current 2%, it could increase GDP by $476 million with an annual gain in tax revenue of $47 million after 5 years. Likewise, reducing the current corporate tax rate by 5pp for non-public and public mobile operators may add an additional $131 million to GDP, while increasing tax revenue by $14 million annually after 5 years. 
  • Streamlining the tax assessment mechanism, especially with respect to the Alternate Dispute Resolution (ADR) mechanism, and aligning more closely with IFRS, could increase investor confidence.
  • Reducing sector-specific taxes on mobile consumers to enhance affordability.As an example, removing the SIM tax (BDT 200) could accelerate the digital inclusion of the 46% of Bangladeshis who are unconnected.

These proposals were submitted by the industry and we hope that they will be considered and adopted. 

Other South-Asian countries are reforming their tax framework to propel digital inclusion. 

In its recently proposed Budget for FY 2021-22, the Pakistan government has adopted a series of tax reforms to accelerate digital development: reducing federal excise duty on services by 1pp; simplifying and reducing taxes collected by mobile operators; and streamlining assessment processes. 

The government has granted relief that make services more affordable particularly to poor consumers by retrospectively abolishing the SIM tax of PKR 250 and reducing the withholding tax from 12.5% to 10% with a further reduction to 8% next year. 

Adopting similar policies would allow Bangladesh to keep step with countries who are competing for investment dollars.

What else can Bangladesh do to ensure that its mobile networks and services are best in class to reclaim its regional leadership?

Along with taxation reform, Bangladesh needs to take additional steps to increase digital inclusion by improving policies and modernizing regulations. 

Licensing reform: Bangladesh’s current licensing regime includes a separate licence for each service like mobile, ISP, national and international long distance calling, VSAT services, etc. with mobile operators prohibited by regulation from acquiring many of these licences. This licencing regime creates artificial layers, each of which adds inefficiencies and costs. Further, Bangladesh does not allow mobile operators to do backward integration, preventing them from laying their own fibre, building their own towers, etc. A forward-leaning unified licencing regime which permits a mobile operator to offer a bouquet of services,flexibly permits backward integration and accommodates future evolution of technology will allow operators to facilitate digital inclusion for years to come.

Spectrum: Sufficient and predictable availability of affordable spectrum will allow mobile networks to reach even more Bangladeshis with a better quality of service. Spectrum price for future allocation should be based on operators’ ability to not only finance access to spectrum but also to deploy infrastructure. Spectrum should be eligible for voluntary sharing and secondary trading to allow for efficient utilization.

Affordable 4G smartphones: Although the government incentives for local production of handsets have been successful in significantly reducing imports, the majority of handsets produced locally are still 2G feature phones. The government will need to work with mobile operators, handset vendors and lenders to incentivize greater production and uptake of 4G smartphones.

Is there still time for Bangladesh to reclaim its leadership position?

In a post pandemic world, Industry 4.0 – otherwise known as the fourth industrial revolution – will help economies recover and become more resilient to future shocks. 

And technology, supported by mobile networks, will be at the core of Bangladesh’s industrial development as it works to launch the fourth industrial revolution.

A forward-leaning policy framework, a level playing field, and a predictable investment climate are required to reposition Bangladesh as a digital leader in South Asia. 

But authorities must act together, creating the business environment necessary to realize these goals. 

A whole-of-government (WGA) approach will ensure better coordination of digital transformation initiatives across the public sector, complemented by private sector investment and innovation. 

By removing barriers caused by siloed efforts from different ministries, Bangladesh could more efficiently harness the capabilities of its mobile networks.

By overtaking India in per capita GDP, Bangladesh has shown that the country has the energy and capacity to be a leader in South Asia. 

However, this bright spot may become an anomaly unless Bangladesh urgently reviews its approach towards the mobile industry which will be even more central to its post-pandemic society. 

A coordinated approach, in consultation with the mobile industry and other stakeholders, is key to placing the citizen at the centre of the next phase of digitalization.

This year, as the country celebrates the 50th anniversary of its independence, we urge Bangladesh to reclaim its digital leadership in South Asia, ensuring progress for all its citizens.

But the question remains, can Bangladesh realize its digital vision, and commit to the Digital Bangladeshi? 


The author is head of the Asia Pacific region of GSM Association (GSMA), an industry organization that represents the interests of mobile network operators worldwide

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