New definition of CKD to discourage bike manufacturing locally
Motorcycle makers have alleged that the new description of completely knocked-straight down (CKD) pieces for two-wheelers will discourage local development and impede the industry's development.
"Local and foreign traders won't be enthusiastic about this sector as all of the required components to generate a two-wheeler can now come to be imported," explained Abdul Matlub Ahmad, chairman of Nitol-Niloy Group, which manufactures India's Hero motorbikes found in Bangladesh.
The National Panel of Income (NBR) issued a statutory regulatory order (SRO) on January 28, changing this is of CKDs to add gearbox and speedometer.
Now, local assemblers can import engines with the gearbox and speedometer instead of having to purchase them separately.
Officials of the NBR and related ministries said the SRO would be helpful for local assemblers as all finished components can now be imported. However, several industry persons say that it could discourage fresh investments.
"This is because just the distributors of international makes which want to market motorcycles in the neighborhood market without building any investment will reap the benefits of this SRO," Ahmad said.
According to the NBR circular, there is absolutely no requirement to manufacture any component locally.
"So, local vendors won't require to develop their capacities and the sector won't thrive," Ahmad said.
The federal government formulated the Motorbike Industry Development Policy 2018 to facilitate native production and diversify the country's apparel-dominated export basket.
The federal government aims to boost the sector's contribution to the gross domestic product from the prevailing 0.5 per cent to 2.5 % and increase the industry's capacity, which is basically predicated on the assembly of imported components.
On condition of anonymity, the official of a motorcycle supplier told The Daily Superstar that the brand new definition of CKD actually contradicts the policy since it would discourage local making.
Previously, assemblers weren't allowed to import virtually any painted parts of a two-wheeler, so that it is mandatory to manufacture certain pieces locally.
"But this bar offers since been lifted which will only gain the assemblers," Ahmad explained.
The NBR circular will also reduce the revenue produced from the motorbike segment, he added.
Subrata Ranjan Das, executive director of ACI Motors, said that the government decided to change the definition to lessen the complexity of customs duty imposition.
The SRO will not discriminate against local suppliers as the custom duty is 92 % for CKDs, although it is 38 % for local producers, he said.
"This duty gap is reasonable. So, the switch will not hamper local manufacturers."
The policy aims to produce 5 lakh motorcycles a year by 2021 locally and twice that by 2027.
Once the insurance policy was formulated, Honda, Bajaj, Yamaha, Hero, and TVS started making motorcycles in Bangladesh, combining foreign and area investors.
Native manufacturers such as Runner, New Grameen, and Roadmaster are also wanting to improve their technology and are likely to export bikes to Nepal, Bhutan and other countries.
Coverage support from the federal government helped significantly scale back the import of motorcycle components, saving forex and boosting forex reserves.
However, a high official of a worldwide motorcycle giant, that includes a manufacturing plant in Bangladesh, said the new SRO would harm the industry's potential.
According to government officials, the SRO should boost motorcycle sales as it slashed the supplementary duty in two-wheeler pieces by 25 per cent to 20 per cent.
Sales dropped 11 % year-on-yr to 4.7 lakh devices in 2020 from practically 5.30 lakh units, info from the Bangladesh Motorcycle Assemblers and Manufacturers Association demonstrated.
A good senior NBR official said this is of CKD bikes had been revised predicated on the tips from the sectors ministry.
"The new explanation will be good for companies to look at modern technologies," he added.
The official of the industries ministry said it suggested the switch in the definition so that assemblers can import sophisticated components.
