Once the smartphone markets of Bangladesh were flooded with ‘Made in China', 'Made in Korea' or 'Made in Vietnam' brands of phone set. Later, 'Made in Bangladesh' brand was included in the list as almost all international smartphone manufacturing factories established in the country in last five years with the policy support of the government. The companies have been manufacturing around 95 percent smartphone sets of the total demand.

But the sector has been facing a new crisis due to the illegal phone sets’ market or gray market. The concerned persons said that the companies have been forced to reduce production up to 40 percent due to the dominance of the gray market.

Entrepreneurs said the markets of illegal handsets have recently increased in the country as the registration of mobile handsets did not come into effect properly. After the pilot launch of the NEIR (National Equipment Identity Registrar) project from July 1, 2021, the size of the gray market in the country came down to below 5 percent. But the market has risen to 40 percent recently as the rule was later relaxed.

Nearly Tk 6,000 crore is going through illegal channels, said people related to the mobile sector.

They said 3-3.5 crore mobile phone sets are sold annually in the country. The number will be even higher if the legally imported and native manufactured sets are added with it.

Although the country is almost self-sufficient in the production of mobile handsets, the industry is under threat due to illegal phones. Despite the ongoing dollar crisis, around Tk 6000 crore are going away due to illegal phones. Therefore, the entrepreneurs demanded total ban on illegal phone business to save dollars.

Bangladesh Telecommunication Regulatory Commission (BTRC) has said about 35 percent of the mobile handsets sold in the country every year are entering the market through tax evasion. As a result, the government is losing Tk 1,000 crores of revenue.

Ground reality

Brand-new, official, unofficial, old - all phone sets are being sold in the capital's shopping malls. Both legal (channel product) and illegal (non-channel or gray product) phone sets are available in the country's markets. Many buyers are interested in buying non-channel products due to lower prices.

While visiting Motalib Plaza, one of the prominent shopping malls for selling mobile phones, a few famous brands of smart phones were seen in the shelves. The staffs of the sales centre said the model should be selected first and then it will be brought from the godown.

Imran Hossain, sales representative of Rain Electronics, said that they have A13 models of Samsung brand with 4 GB RAM and 64 GB storage. He agreed to sell it at Tk15,000 although official price is Tk19,000.

"The people who travel to different countries of the world bring the sets. We buy these phones which have no warranty,” he said.

The sales officials said a set of 9 Pro model of Realme brand is sold there at Tk 24,000 although official price is Tk 28,000.

Sabuj Mia, a customer at Motalib Plaza, said, “I came here to buy a phone at a low price. Why should I buy a phone from the showroom? I can get it at Tk 2,000-4,000 less?”

14 factories in the country

The government started encouraging to setup factories in the country from the 2017-18 budget. In that budget, 44 parts of mobile phones were given major duty exemption. Import duties on 41 items were reduced to 1 percent, which was 5 to 25 percent earlier. In contrast, the duty on imported mobile phones increased from 5 percent to 10 percent. As a result, the cost of imported mobiles increased, and locally manufactured sets decreased.

Entrepreneurs said Walton, Samsung, Xiaomi, Nokia, Oppo, Vivo, Transition (Techno and Itel) Symphony, Lava, Realme, Fivestar, and Unstar have set up phone factories in the country with large investment.

They said that the country has Tk 5,000 crore mobile phone market and hundreds of thousands people have been directly or indirectly employed in this sector.

Entrepreneurs’ opinion

General Secretary of Bangladesh Mobile Phone Importers Association (BMPIA) Zakaria Shaheed said "The gray market dropped below 5 percent after the government started handset registration. Now, the gray market is growing at an alarming rate and it raised to 40 percent as the registration process become ineffective.

Mentioning that legitimate phone markets are facing challenges due to the closure of NEIR project and those have been forced to reduce production by about 30 percent because of dollar crisis.

Rizwanul Haque, CEO of Techno, Itel and Infinix mobile phone manufacturer Transhan Transsion Bangladesh Limited, said, "About 40 percent of mobile phones are coming to the country illegally. Out of the Tk 15,000 crore mobile phone market in the country, the illegal mobile phone market is around Tk 6000 crore. Illegal mobile phones have put this sector in crisis once again.

The production of Xiaomi smartphones started in the country on October 21, 2021, after establishing a factory in Gazipur. This massive initiative is financed through foreign direct investment.

Ziauddin Chowdhury, country manager of Xiaomi Bangladesh, said “The industry is going through a critical period due to the dollar crisis and sluggish demand. Due to the dollar crisis, businessmen of all sectors are under challenges. In this situation, foreign companies are facing more challenges than others as they have to deal with certain banks.”

Mentioning that the Bangladesh market is very promising for Xiaomi, he said they are now in the phase of expanding investment in the country.

He also said the brand has recently started manufacturing printed circuit board assembly (PCBA) locally in Bangladesh.

Ruhul Alam Al Mahbub, president of BMPI, an organisation of mobile phone importers and manufacturers, said, "If the illegal entry of handsets to the Bangladeshi market does not stop, none of the companies that have factories in the country will be able to survive.”

Urging the authorities to take effective measures to stop the sale of illegal handsets, he said if this situation continues, it will also create a big risk for cyber security in Bangladesh.

What the authorities say

An official of BTRC spectrum department said illegal import of phone, theft and fake handsets can be prevented by making registration process effective.  It will also help ensure customer’s safety and prevent loss of the government revenue.

Posts and Telecommunications Minister Mustafa Jabbar said, "We must have to take concerted efforts to stop the import of illegal phones. Customs and BGB will be more vigilant to check the import of illegal mobile sets.

Saying that the National Board of Revenue (NBR) can play an important role, he said they conducted drives at different times and will take more steps in this regard.