Large domestic market with growing middle-income class
Sustained economic growth over the last decade has enhanced consumer’s purchasing
power and affordability leading to a growing demand for consumer durable
products in the domestic market. Rising income coupled with urbanization,
further electrification in rural areas, improved access to credit, is expected
to drive the demand for such consumer durable products in the future and boost
the need for LE goods.
The manufacturing sector has been growing at a CAGR of 13.7% since 2011 increasing
the need for capital machinery, parts and associated service for repair and
maintenance. Expansion of assembly industries coupled with steady growth of
export-oriented industries is expected to accelerate the growth of the Light
Bangladesh has comparative advantage over other Asian countries and China by
offering abundant and low-cost workforce to its manufacturing industries. Each year,
one million people joins the workforce with majority of the population under the age
Bangladesh has duty and quota-free access to 52 countries (Generalized System of
Preferences: GSP) covering the EU, United Kingdom, Japan, Canada, Russia and
Australia, etc. This facility enhances the export competitiveness of goods produced
The Light Engineering sector as a whole is designated as a high priority sector in
the current National Industry Policy (2016) and as a special development sector in
the Export Policy 2018-2022 and is therefore eligible for receiving favorable
incentives and facilities
Incentives related to Light Engineering Sector
- Reduced corporate income tax for 5 to 10 years depending on
location for newly established industries engaged in production of
automation and robotics design or manufacturing including components of
automobile, bicycles, electronics, boiler, compressors, electrical
transformer, LED TV, mobile-phone, textile machinery etc.
- 10-year exemption of corporate income tax for newly established
industries engaged in manufacturing of Parts and components produced by
light engineering industries, Agricultural machineries, washing machine,
blender, microwave, electronic sewing machine, induction cooker, kitchen
hood, knives, Institutes providing technical/vocational training to
engineering skills development. The tax exemption is effective from July 1,
2021 till June 30, 2030
- Import duty exemption on capital machineries
- Reduced import duties on brass wire and copper plate as inputs
for mold fabrication
- Reduced import duties on raw materials, tools and equipment
used for Light Engineering.
- 50% of tax exemption for income derived from export
- No VAT imposition on export goods.
- 15% cash incentive on export value of light engineering goods
including accumulator battery.
Foreign investors can play a vital role in establishing essential engineering
services for parts fabrication including stamping/ pressing, casting/ forging,
machining, surface/ heat treatment, sintering, fabrication of molds/ dies and jigs/
fixtures, plastic injection molding/ extruding/ packaging, rubber molding/
extruding, industrial sealing etc. Foreign investment involving technology transfer
to local potential providers, preferably through joint-venture are welcome.
The market size of agricultural machineries stood at USD 1.2 billion in 2019
(according to Bangladesh Agricultural University) with potential to grow further.
Declining workforce in agriculture has amplified the need for further mechanization.
At present, local manufacturers are only meeting 20% of total demand for
agricultural machinery, thus providing potential opportunity for import
Local textile industry has been relying on imported machinery (for weaving, ginning,
spinning) of USD one billion every year on average, indicating huge opportunities
for import substitution. With the steady development of local textile industry, the
demand for spare-parts for textile (and jute) machinery has been on the rise as
well, indicating greater investment opportunity for spare-parts.
Bicycle is the largest export item from the Bangladeshi LE sector, amounting to USD
84 million in 2019-20 and rising to around USD 131 million in 2020-21. At least
seven local manufacturers export nearly 900,000 units of bicycles annually. The size
of domestic bicycle market is estimated at USD 141 million in 2019 where some 1.5
million bikes are sold annually with a projected CAGR of 30% according to the
bicycle industry association. In 2019, Bangladesh was the fourth largest non-EU
exporter of bicycles to EU (Eurostat). Global bicycle market is expected to grow at
a CAGR of 7% and reach USD 75.5 billion by 2028 from around USD 54.4 billion in 2020
(according to Grandview Research).
The motorcycle market has seen phenomenal growth since 2014 with an annual growth
rate of 30 percent from 2014 to 2019 and over 400,000 motorcycles registered in
2019. Over 95% of motorcycles sold in Bangladesh are either assembled or
manufactured in the country. While a motorcycle contains around 1,500 parts, very
few of those are locally sourced. Motorcycle assemblers have generally shown their
intent to locally source as many parts as possible to minimize manufacturing cost
and delivery time. Foreign parts manufacturers are welcome to realize the potential
and be part of the motorcycle supply-chain in Bangladesh. In addition, a large
portion of bicycle and automotive parts are also still being imported, indicating a
huge potential for localized production.
Booming electronics market in Bangladesh and the development of electronics assembly
industries are expected to boost the demand for electronic parts and components and
provides potential investment opportunities. At present, renowned local and
multinational electronic companies are locally assembling their brands of TV,
refrigerator, mobile phone and other home appliances. Bangladesh also produces and
exports transformers, transistors and semi-conductor devices on a small scale. There
is ample space for expanding local production for the growing domestic and export
market and foreign investors are most welcome to meet the demand of these markets
with higher quality products.
Driven by the automobile industry, the local battery market has been witnessing a
significant growth rate of over 20% annually since 2013, reaching a current market
size of around USD one billion. The rapid expansion of electric three-wheelers,
which consumes 60% of the battery market, has opened up huge opportunities for
battery manufacturers in the country. Moreover, the size of global battery market is
projected to surpass USD 300 billion in 2027 driven by the development of
lithium-ion battery which is expected to grow at a CAGR of 13% till 2027. Favorable
polices and incentives make Bangladesh an attractive destination for battery
manufacturing to cater to the growing domestic and global markets.