Having no old base can turn into a blessing for the potential automobile industry in Bangladesh if it grabs the leapfrogging opportunity emerging amid the global shift for green cars, say experts and policymakers.
The sector is still stuck in the debate over brand new versus reconditioned fossil-fuel cars, while the future of automobiles is going completely green and combustion-only cars will go obsolete by the next decade, Salman F Rahman, prime minister's adviser for private industry and investment, said at a seminar on Wednesday.
"We do not have any baggage in relation to diesel or petrol cars. Developing infrastructure for a falling field is of no point and not a sustainable option," he said at the event organised by the Policy Research Institute (PRI).
Salman stressed the need for dropping the ongoing national plan to get some gasoline car plants through ensuring a much protected market for merely screw-driving assemblers.
"If we are to go for cars, we should go all in. If we do not act fast, we will miss the bus. Technology does not wait for anybody," said F Rahman adding that the government will give even free of cost land if any global brand comes here to make electric vehicles.
The adviser also said he has already talked with the German carmaker Volkswagen to set up an electrical car manufacturing unit in Bangladesh.
Dr Ahsan H Mansur, executive director of the policy think-tank, said, "Currently, we have almost nothing in the automobile industry. But, we have the potential to make the sector a good one for our economy because we can set up manufacturing plants with new technologies."
For instance, he said, despite having their own cotton, Pakistan could not do well in textile and garment compared to Bangladesh because the former was using old machinery in factories.
On the other hand, Bangladesh has no cotton of its own like Pakistan, but Bangladesh has been performing better because of the adoption of new technologies.
The seminar titled, "Car Market in Bangladesh-Challenges and Prospects" addressed the policy loopholes regarding Bangladesh's planned route to have a domestic car industry.
The PRI executive director in his keynote presentation said, "Studies must be more holistic. There is a need for a much deeper look into the matter before coming up with a policy paper."
The draft paper namely "Automobile Sector Development plan" initially expressed the government's plan to phase out imports of used cars, while a large portion of automobile professionals and experts believe that the lack of a competitive environment and too much protection will end up in screw driving of low quality vehicles and captivate local car users.
The PRI presentation, elaborating the automobile industry development case studies from India, Pakistan, Thailand, and Malaysia, said Thailand emerged as the most successful one among the developing nations because it ensured both its domestic and export market along with maximum value addition locally.
On the other hand, beginning in the 1950s, Pakistan is still assembling outdated models, mostly depending on low quality imported components.
Even a huge state subsidy failed to help survive the Malaysian national car brand, Proton, although the county tops the car ownership table in the region.
In Bangladesh, there are only three vehicles registered against every 1,000 people, which is 897 in Malaysia, 548 in Thailand, 129 in Myanmar, 99 in Philippines, 31 in Vietnam.
A company needs at least 1 lakh units to sell annually for a meaningful car plant's profitability, and without a local component manufacturing base, the automobile industry ends up being a mere assembler, like what is now in Pakistan.
Bangladesh needs to remove barriers in growing its car market having sales of less than 25,000 units annually.
Criticising extremely high duty and taxes on car imports – 128% to 827%, Salman F Rahman suggested tax officials to let the market grow and multiply revenue from the growth instead of keeping the market protected.
He also said the country cannot afford such protection once it leaves the Least Development Country Group in the coming years.
Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, moderated the discussion and said if $1 is spent in the car industry, it creates $3 value addition in the economy.
Dr Masrur M Reaz, chairman of Policy Exchange of Bangladesh, said the demand for electric cars in the world will increase to $1.2 trillion soon. So, the investment in the car industry should not only focus on domestic markets but also on foreign markets.
Abdul Haque, president of Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA), said the government should formulate the policy considering the national, regional and global realities.
Dr Muhammad Abdul Mazid, former chairman of the National Board of Revenue (NBR), said the car industry has the potential to grow a lot if the new investment is made targeting both local and export markets as well as the backward linkage industries.
Syed Golam Kibria, Member (Customs Policy and ICT) of the NBR said the duty on car imports might be reviewed in the next budget.
Anwarul Alam, joint secretary to the industries ministry, said the government will take opinions from different stakeholders before the policy formulation.
He said there will be an inter-ministerial meeting on the policy formulation of the car industry, he also said.
The recent most change in the draft automobile sector development policy is that the government dropped its earlier plan to gradually phase out reconditioned cars which are popularly believed to be a good value for money and also eco-friendly if imported from the Japan domestic market.