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Dhaka Tribune

Internet and smart devices got more expensive in 2022

Pandemic-induced disruptions to supply chains, soaring US dollar and energy prices and the Russia-Ukraine war, as well as the imposition of new taxes this year on broadband, smartphones, laptops and digital services have brought in digital entrepreneur and consumer suffering

Update : 29 Dec 2022, 08:01 PM

Several factors - local and global have caused the cost of electronic devices including laptops and phones as well as the internet to shoot up. 

Pandemic-induced disruptions to supply chains, soaring US dollar and energy prices and the Russia-Ukraine war, as well as the imposition of new taxes this year on broadband, smartphones, laptops and digital services have brought in digital entrepreneur and consumer suffering. 

The National Board of Revenue (NBR) has imposed a 15% VAT on laptop imports, a 10% advance income tax on broadband internet service and a 5% VAT on mobile phone sales.

“I was supposed to get a laptop or a desktop this year in exchange for good grades in my SSC result. Although I was able to keep up with my part of the bargain, my family could not afford to buy me one as they said the price of the devices increased so much that it is now twice our initial budget,” said Farhan, who is about to start his college degree and is aspiring to become an IT professional.

Entrepreneurs in the IT sector also felt the blow.

“As our IT business has been booming and demands growing, we had to resort to hiring more employees to keep up. It also meant that we needed to buy more electronic and smart devices. But the cost of laptops almost doubled compared to what it was a year earlier. It has been one of the biggest burdens amongst many others,” Pavel Sharif, the owner of a growing IT service exporting company told Dhaka Tribune.

According to Sharif, the company was able to buy laptops within Tk35,000-45,000 even a year ago. However, the same device now costs around Tk55,000-75,000.

Industry insiders pointed out that rising costs of the US dollar, increases in freight costs and disruptions to global microchip supplies had caused laptop prices to increase by around 10-15% in Bangladesh even before the budget of the current fiscal year. 

Following the new budget, the new 15% VAT at the import stage and the concessional facility to bring in raw materials have further increased the price of laptops. Prior to that, manufacturers paid only 1% on import duty with a similar rate being applicable for raw materials of other devices including printers, toners and notebooks. 

Currently, overall government duties on laptop import stand at 31% to 32%, according to industry insiders. 

“NBR introduced the new import regulations that received a lukewarm response from corporate bodies and individuals as it increases the overall cost of ownership of the products,” Lenovo's General Manager of Consumer, Commercial and Tablets for Bangladesh, Sri Lanka, Nepal, Bhutan and Maldives Naveen Kejriwal told Dhaka Tribune in an exclusive interview. 

“As a well-known corporation in Bangladesh, Lenovo is constantly aiming to make smarter devices and technology accessible to everyone. Thereby assisting in inching towards a more ‘Innovative Bangladesh,' which can be impacted by the overall complexities in the tax structure that needs to be redressed through reforms,” Kejriwal also said. 

On the other hand, the 5% value-added tax (VAT) exemption benefit has been withdrawn at every stage of the mobile phone business (from marketer to retailer) in the current budget. It increased prices of the other category of smart devices, landing a blow to the country's smartphone penetration as well as its manufacturers.

“It should be noted that there are three to four levels of distribution channels for mobile phone businesses up to customers. So, the new VAT is applicable for these stages before the handset reaches the consumers, leading the price to increase to a great extent,” Ziauddin Chowdhury, country manager of Xiaomi Bangladesh said earlier in an interview following the budget. 

“Apart from this, the price of smartphones has already increased by over 20% in the market like other various products. It is largely due to the upward trend of product prices in the world market amid global economic uncertainty,” said Chowdhury. 

Since 13-14 companies have already invested significant amounts of money in manufacturing mobile phones in the country, the handset manufacturers have expressed feeling discouraged by the withdrawal of the VAT exemption benefit

On the other hand, smartphone production in the country declined with rising costs of the device as well as inflation.

Mobile phone manufacturers in Bangladesh have seen their sales continue to decline in October, causing manufacturing and assembling of devices to fall by 1.25% when compared to a month earlier. 

The number of mobile phones manufactured and assembled stood at around 2.2 million in October, according to data from the Bangladesh Telecommunication Regulatory Commission (BTRC). The figure was 2.27 million in September.

Industry insiders said that lower sales volume in recent months caused by the rising dollar prices and soaring inflation have pushed people to cut down on expenses, impacting their purchasing power and forcing manufacturers to cut production.

The total production of handsets more than halved in ten months — from 4.45 million units in January to 2.2 million units in October, BTRC data showed.

“During the first half of the year, smartphone prices have increased twice. In May, the price increased by 8-10% for the dollar price, while in June, the price was again increased for the inclusion of stage VAT,” Co-founder and CEO of Pickaboo.com Morin Talukder said.

“We see the demand for smartphones has dropped by 35-40% in the last two or three months with sales declining significantly even with Eid, as sales during the festive season were not satisfactory - despite huge discounts and EMIs being offered for purchases,” the Pickaboo top-brass also said.

Industry insiders also pointed out that disruption in the opening of letters of credit (LCs) for raw materials, coupled with foreign currency reserve conditions have had adverse impacts on the sector. 

Seeking anonymity, an official of one of the country's top mobile phone manufacturers said that due to policies aimed at safeguarding reserves, the LC opening has become difficult and time-consuming, causing disruptions in production.

Meanwhile, the cost of the internet has also gone up as the NBR has imposed a 10% AIT on broadband internet.

With individual and corporate users opting to reduce their bills amid ongoing inflation, the growth of broadband internet users in the country has come to a standstill, between the months of June to August.

In February 2020, there were only 5.7 million broadband customers in Bangladesh, which rose to around 10 million in December of the same year, as people started to rely on the internet for work, communication, study as well as entertainment, especially during the pandemic.

However, this growth seems to have slowed down at the beginning of 2022.

During the three-month period till August this year, the number of broadband connections remained unchanged at 11.1 million.

This means that the growing demand for internet connections that peaked due to the lockdown and the restriction of movement caused by the advent of the pandemic has hit a flat line.

According to Md Emdadul Hoque, president of the Internet Service Providers Association of Bangladesh (ISPAB), the demand for new connections from offices and businesses has almost stalled, as many people have already been connected to broadband internet in the last two and a half years.

“People have been compelled to spend less on the internet with the cost of living going up due to rising inflation”, Hoque said. 

Regarding why the growth has slowed down, Syed Almas Kabir, the former president of Basis and current president of BMCCI said: “Because we are not developing local content, the online delivery of government services is still very limited, and in many cases, require manual intervention as the processes are not fully online.”

“The EdTech scenario is yet to take off. Although OTT services are gaining ground, the regulations that are being drafted are discouraging new content and new investments. Most importantly, the transmission cost of broadband is still quite high, which results in higher cost of last mile bandwidth, he added.” 

“Moreover, the NTTNs recently have decided to close down many of their PoPs throughout the country (limiting to only one PoP in one thana) to reduce operating costs making the reach of broadband internet even more difficult and costly to the remote users. This will affect the growth of digital commerce and IT freelancing,” he added.

A staggering three-fourths of households in Bangladesh think they do not need access to the internet as the required data and devices are still too expensive for them, according to a survey by the Bangladesh Bureau of Statistics (BBS).

About 48.2% of households think internet services are too expensive, a preliminary report on the "Survey on ICT Use and Access by Individuals and Households 2022" showed.

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