Digital Bangladesh and budgetary provisions

Dhaka,  Sun,  23 July 2017
Published : 11 Jun 2017, 19:27:19
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Digital Bangladesh and budgetary provisions

Matiul Islam Nowshad
The vision of Digital Bangladesh truly captures the aspiration of the nation to be in league with the global movement of improving lives capitalising the technological revolution in motion. Encouragingly, there is consensus on what should be the vehicle through which this vision is delivered. The choice is unanimous, it's Internet.

According to Bangladesh Telecommunication Regulatory Commission (BTRC), the country has 63.12 million mobile internet users until February, 2017. This makes up 95 per cent of the country's internet users. This simple mathematics proves beyond any doubt that the mobile telecommunication sector is by far playing the lead role in the implementation of the Digital Bangladesh vision. 

Thanks to the government's enabling stance, the industry kept investing in the country's future and took mobile phone connection to 128.59 million by February 2017, according to BTRC. This takes the mobile-penetration to 79.3 per cent. Although according to a study titled "Economic Impact: Bangladesh Mobile Industry - GSMA" published in 2017 by GSMA, the global association of mobile phone operators using GSM technology, Bangladesh has a mobile penetration rate of 54 per cent considering the multiple SIM users. 

This means that 46 per cent of our population are yet to get access to mobile phone which is the key to accessing the Internet. Unfortunately, despite the enabling atmosphere, their socio-economic profile still doesn't allow them to get hold of mobile phone connection. 

Presently, the main barrier to connect the 46 per cent of the unconnected population is SIM tax. Set at 100 taka per SIM connection, it is draining the industry's resources and making it harder to reach out to them. Imposition of VAT on SIM tax proposed in the 2017-18 budget by the Finance Minister, will further deteriorate the situation.  

Let's look at the level of contribution of the industry to the national exchequer. According to the GSMA report, 47 taka out of every 100 taka revenue earned by the industry goes to the government. This makes up for 10 per cent of the entire revenue collection of the government. Therefore, it is clear that the industry plays a key role in the socio-economic development of the country.

In this context, it is pertinent to mention that the prevailing 100-taka SIM tax is a deterrent to increasing mobile penetration at the desired level. There may be counter arguments on the ground of government's revenue shortfall. Statistics, however, make the point clear that reducing the SIM-tax rate over the past years has seen a remarkable growth of the industry with increased contribution to the GDP. According to the GSMA report, in 2011 when SIM tax was set at 600 taka, industry's contribution to the gross domestic product (GDP) was 3.2 per cent; in 2013 when it was brought down to 300 taka, the industry's GDP contribution rose up to 4.9 per cent and in 2015 when the SIM tax was brought down to 100 taka, industry contributed 6.2 per cent of the GDP. These figures clearly put all worries of revenue shortfall to rest.

The government has rightly decided to engage the private sector to deliver the vision of Digital Bangladesh. However, the sector's ability to do so depends on the amount of profit it generates. Unfortunately, given the current scenario, prospects are not so conducive for the industry in this regard. Out of five mobile phone operators only one is making profit, one is in virtual lock-down and the rest are struggling to make a profit. 

Given the dire financial states of the operators, the corporate tax rate of 45 per cent is like the last straw on the camel's back. Compounded with this, the proposed hike in import duty on mobile handsets will only delay the prospect of creating a viable market for 4G business in the country. This will witness continued loss in the coming years.

It's worth noting that a large number of our 3G BTSs can't even earn enough revenue to offset the operational cost necessary to keep the site running.

Going back to the spirit of creating Digital Bangladesh, it would be congenial to provide special duty waiver for capital machinery that will be imported for 4G to connect the rural market. The government could also consider giving the sector a tax holiday for a few years on the revenue earned from the 4G BTSs located in the rural areas. 

A BTS, located in a rural area, is not merely a tower; it is the means to connect people and give them access to the rest of the world through the internet. The government would want to incentivise the telecom industry for taking 4G to the rural areas which otherwise doesn't have a business case. 

The telecom sector is perhaps the best example of partnership between the public and the private sectors when it comes to unleashing socio-economic growth of the country. It's a relationship that grew over a period of 20 long years. We have had enough time to realise that it is in the best interest of the country to have a strong mobile telecom industry, resourceful enough to shoulder the burden of implementing the vision of Bangladesh alongside the government. The existing tax regime and the spirit of the proposed one unfortunately fails to take this into cognisance.

The author is Chief Corporate and People Officer of Robi Axiata Limited.

nowshad@robi.com.bd

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