Business Supplement Issue-24

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2 Sunday, August 6, 2017 DT Special Bangladesh’s bicycle industry needs to curb reliance on imported parts • Ibrahim Hossain Ovi Bangladesh’s bicycle industry, an emerging export sector, needs new investment to locally manufacture parts instead of importing as it has huge potentials in the global market, said industry insiders. As of 2016, Bangladesh has occupied 11% market share of bicycle in the European Union countries being the third largest exporter. In the last fiscal year, Bangladesh earned nearly Tk700 crore exporting bicycle, especially to the EU market. The industry people and analysts said the country has the capacity to earn Tk1,000 crore from bicycle export. Over 50% of demand of parts, sometimes 70%, are now locally met while the country can be completely reliant on local parts through increasing investment. It will help Bangladesh tap the global market potentials, said analysts. In translating the dream into a reality, the government should pave the way to new investment removing hurdles including cumbersome registration process and higher import duty on raw materials, they said. “Bangladesh cannot produce all the parts needed for manufacturing a complete bicycle. It has to import parts and raw materials to produce parts,” Bangladesh Bi-Cycle Merchants Assembling and Importers Association President Mizanur Rahman Babul told the Dhaka Tribune. “In becoming self-reliant in parts, a large volume of investment is a prerequisite, what Bangladesh did not see due to bureaucratic difficulties and corruption,” he said. Meghna Group is one of the country’s major assemblers of bi-cycle. It bi-cycle unit director (operation) Supol Chandra Saha, however, said it is not possible to produce 100% parts locally but “most can be done.” “It depends on the type of bicycle and in some cases the country produces over 60% of bicycle parts,” he added. AB Mirza Azizul Islam, former finance adviser to a caretaker government, said in keeping the export growth momentum, the country needs to expand the market beyond the EU. He said the government should facilitate foreign investment, especially in manufacturing higher bi-cycle parts. “Also, an investment-friendly atmosphere for local investors must be ensured.” Local Market In recent years, the use of bicycles in the country has seen 35%-40% Bangladesh ranks third in terms of bicycle export to the European Union countries holding 11% global market share In grabbing more market shares, what the bicycle industry needs currently is policy support and infrastructure. Tax holiday on new investment can be attractive for new investors growth and the demand rose to about 500,000 units. “The use of bicycles is increasing rapidly here in Bangladesh because of traffic congestion in the capital city and increased consciousness about healthy lifestyle,” Mahmud Khan, one of the admins of Bdcyclists, a group of cyclists in Bangladesh. The Facebook-based group has over 99,036 members who organise different programmes to encourage people about cycling. Although most of the bicycles used by the cyclists are imported, Meghna Group is leading in local supplies, said Mahmud Khan. He said the local brands maintain international standard “but what’s needed is building users’ confidence in local products. “They will also have to focus on designs both for local and international markets.” Export potentials Despite negative growth in the last fiscal year, there is a huge export opportunity for Bangladesh’s bicycle industry. Cycling is being popular across the globe as an Eco-friendly transport. While health-conscious people are taking bicycles as a mean of their daily exercise in the busy life. According to a Persistence Market Research (PMR) report, the global market for bicycles is anticipated to expand by 37.5% over the period 2016-<strong>24</strong>. The global market size is expected to reach at $62bn by 20<strong>24</strong>. The Asia Pacific region is anticipated to be the most lucrative market for bicycles over the forecast period while e-bikes will be the leading segment of the market. According to Export Promotion Bureau (EPB) of Bangladesh, in the fiscal year 2016-17, Bangladesh earned $82.46m exporting bicycles to 26 countries. The figure is 16.83% less compared to $99.15m in 2016. United Kingdom imported bicycle of $40.22m, the highest, while Germany imported bicycle of $17.17m followed by Denmark $6.71m, India $5.47m and Belgium $4.97m. The sector people have blamed the devaluation of euro and fall of production capacity for the slowdown. According to a World Bank report (Bangladesh: Diagnostic Trade Integration Study 2013), Bangladesh’s labour costs in the production of bicycles are quite low across the manufacturing stages. It acts as an advantage for manufacturers to remain price-competitive edge in export market. “In grabbing more market Courtesy shares, what the bicycle industry needs currently is policy support and infrastructure. Tax holiday on new investment can be attractive for new investors,” said AHM Ferduos, General Manager of Alita BD Limited, a manufacturer of bicycles in the Chittagong Export Processing Zone. “Bangladesh has good prospects in bicycle exports. The port congestion and delaying delivery of parts in air shipment are big barriers of the sector. The problems need be addressed as soon as possible,” he added. Talking on negative growth in the last fiscal year, the sector people blamed the prolonged winter in the European countries while devaluation of pound against US dollars was another reason. What Bangladesh produces and exports Besides complete bicycles, the country also exports accessories such frames, forks, spoke, nipple, mudguard, hubs, spanners, axel, saddle, handle, carrier, bicycle pipe, rim strip, head tube, frame pipe, bicycle tyre and tubes, wheels, pedal, grips, wheels and all sort of plastic components of bicycle. •
Interview 3 Sunday, August 6, 2017 DT Bicycles can become the wheel of economic fortune Bangladesh plans to grab more of the global market share in bicycle exports with its quality products. The environmentally friendly two-wheeler has carved out a place among domestic and international cyclists, PRAN-RFL Group Marketing Director Chowdhury Kamruzzan told the Dhaka Tribune’s Ibrahim Hossain Ovi in an exclusive interview What are the challenges facing the bicycle industry? Bangladesh is fully reliant on the import of raw materials to produce parts necessary to manufacture bicycles, while spare parts are also imported. We can produce 60% of the parts required to make a complete bicycle. Currently, businessmen in the industry pay an average of 55% duty on such imports, which poses a big challenge to the emerging industry. Since the industry is new, a skilled workforce is required to produce quality products in larger volume. In the near future, Bangladesh will do better in exports as well as in expanding production capacity since Bangladesh is in better position in terms of ease of doing business. Only the cost of doing business is a little bit higher due to higher interest rates compared to other countries. If the government considers it positively, Bangladesh would take the lead in the global export market. Can local manufacturers meet local demands? Though Bangladesh imports bicycles and parts, our installed capacity is good enough to meet local demands. This is because of price factors. Most local users prefer traditional bicycles, not the fancy ones. Some choose cheaper imported bicycles. To provide bicycles at an affordable price for local users, the government should cut the import duty on raw materials as well as parts. What is PRAN-RFL Group’s future plan for the bicycle industry? We would like to promote the use of bicycles to the entire country, as it is an environmentally friendly means of transportation, and riding a bicycle is also great exercise. If the government emphasises the importance of cycling in the interest of keeping environment pollution at bay, urban residents will feel encouraged to use bicycles for their transportation. For this, road infrastructure needs to be developed, with the building of four-lane highways that will help cyclists move freely and safely. In the near future, Bangladesh will do better in exports as well as in expanding production capacity since Bangladesh is in better position in terms of ease of doing business Why are Bangladeshi bicycles popular in the European Union? The quality of bicycles produced in Bangladesh is better and they are also affordable. This is because of the cheap cost of labour and utility services compared to our competitors. The industry shifting away from China is also a great advantage for Bangladesh. There is an anti-dumping duty on China, and Bangladesh has taken the opportunity. In the coming days, the country could be able to lead bicycle exports as our production capacity is increasing gradually. Do you have a research and development wing to improve quality and meet demands of fashion-conscious users? Rangpur Metal Industries Ltd has been in the market for the last two years, and has witnessed a double-digit growth. They have a skilled workforce, who takes into consideration the customers’ demands. They work while keeping in mind what a customer would like and at what cost. Based on this, the team improves designs and the quality of bicycles depending on the trend. What should the government policy support be to boost exports? Since the cycle industry has enormous potential and can help government plans for product diversification to reduce dependency on single products, the government can lower import duties and provide cash incentives against export. Furthermore, a tax holiday for new investment may encourage the much-needed investment in the sector. This would help produce most of the required parts locally, reducing import dependency. Courtesy Why does Bangladesh Import bicycles? A small group of cyclists are fond of higher-end products, while most local consumers prefer traditional ones due to lower prices. Since there was a lower domestic demand for higher-end bicycles, production of high-end two-wheelers was not prioritised, and that is why exports are necessary to satisfy fashion-conscious local customers. But now, manufacturers are considering high-end bicycles as demand is on the rise. The purchasing capacity of potential buyers is growing in line with the country’s steady economic growth, and we are devising plan on how to get bicycles to rural areas at an affordable cost. Does Bangladesh make high-end bicycles? As I said, manufacturers are gradually turning to the production of higher-end products, as it would serve both local and international demands. In exports, manufacturers usually produce cycle as per the design of the buyers. However, now there are innovative designs to draw global buyers as well as locals as the market is gradually expanding. Bangladeshi manufacturers are able to make mid-range products. In producing higher-end bicycles, a lack of skilled workforce is a challenge while the demand for higher-end products is not very high in the local market. There are only a small number of cyclists that use them. We need a skilled workforce with some specific qualities. Currently, we are producing bicycles at prices ranging from Tk6,000 to Tk35,000. Expertise is building and we are working hard to develop workforce to meet the buyers’ demands. What is the export potential for Bangladesh? Bangladesh has already established a strong foothold in the European market, especially in the United Kingdom. This is because of our quality products and affordable price, as well as our strong commitment to delivering products on time. As people grow more health and environment consciousness, the use of bicycles will be on the rise. Why did exports fall this year? The European Union is the largest destination for Bangladeshi bicycles. The medium of transaction is the US dollar. The Euro has seen devaluation against the USD. As a result, earnings from the sector have dropped, but we are very hopeful about positive growth in the current fiscal year as the EU is recovering from its economic downturn. Do you think the current environment favours investment? There are some difficulties, but still we are trying to make good use of the positives that we have. In Bangladesh, the cost of land and other utility services is comparatively lower than other countries. We also have cheap cost of labour. The workforce is very flexible and can adapt to any new tasks, and if groomed they will become skilled within a shorter period. Despite having some difficulties, Bangladesh is a very suitable place for doing business. •
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Business Supplement Issue-24

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