Bangladesh exports LE goods worth less than USD half a billion annually on an average.
Light engineering (LE) sector makes significant contribution to the economy of Bangladesh through providing various industrial machinery and spare-parts, electrical equipment and parts, casting and molding products, agriculture, printing & packaging and construction equipment and a number of spare-parts for almost all categories of machinery and equipment. As of 2018, The total domestic market size was estimated to be USD 12 billion (according to PwC). While local production has been gradually increasing, they meet only 50% of the overall demand. Electrical goods such as switch, socket, fan meet 48% to 50% of total demand with the rest being met by imports according to Bangladesh Industry Technical Assistance Center (BITAC)
Despite being adversely hit by the COVID pandemic during 2019-20, export earnings in FY2020-21 grew by 67 percent YOY to reach USD 489 million. Bicycle accounts for almost one-fourth of total export with potential to grow further as the demand for eco-friendly means of transport increased, especially in the EU countries. Other than bicycle, Bangladesh exports electrical equipment such as lead accumulator, refrigerator, compressor, transistor, diode as well as optical lens.
Advantages of Bangladesh
Large domestic market with growing middle-income class
Sustained economic growth over the last decade has enhanced consumer’s purchasing power and affordability leading to a growing demand for consumer durable products in the domestic market. Rising income coupled with urbanization, further electrification in rural areas, improved access to credit, is expected to drive the demand for such consumer durable products in the future and boost the need for LE goods.
The manufacturing sector has been growing at a CAGR of 13.7% since 2011 increasing the need for capital machinery, parts and associated service for repair and maintenance. Expansion of assembly industries coupled with steady growth of export-oriented industries is expected to accelerate the growth of the Light Engineering sector.
Bangladesh has comparative advantage over other Asian countries and China by offering abundant and low-cost workforce to its manufacturing industries. Each year, one million people joins the workforce with majority of the population under the age of 27.
Bangladesh has duty and quota-free access to 52 countries (Generalized System of Preferences: GSP) covering the EU, United Kingdom, Japan, Canada, Russia and Australia, etc. This facility enhances the export competitiveness of goods produced in Bangladesh.
The Light Engineering sector as a whole is designated as a high priority sector in the current National Industry Policy (2016) and as a special development sector in the Export Policy 2018-2022 and is therefore eligible for receiving favorable incentives and facilities
Foreign investors can play a vital role in establishing essential engineering services for parts fabrication including stamping/ pressing, casting/ forging, machining, surface/ heat treatment, sintering, fabrication of molds/ dies and jigs/ fixtures, plastic injection molding/ extruding/ packaging, rubber molding/ extruding, industrial sealing etc. Foreign investment involving technology transfer to local potential providers, preferably through joint-venture are welcome.
The market size of agricultural machineries stood at USD 1.2 billion in 2019 (according to Bangladesh Agricultural University) with potential to grow further. Declining workforce in agriculture has amplified the need for further mechanization. At present, local manufacturers are only meeting 20% of total demand for agricultural machinery, thus providing potential opportunity for import substitution.
Local textile industry has been relying on imported machinery (for weaving, ginning, spinning) of USD one billion every year on average, indicating huge opportunities for import substitution. With the steady development of local textile industry, the demand for spare-parts for textile (and jute) machinery has been on the rise as well, indicating greater investment opportunity for spare-parts.
Bicycle is the largest export item from the Bangladeshi LE sector, amounting to USD 84 million in 2019-20 and rising to around USD 131 million in 2020-21. At least seven local manufacturers export nearly 900,000 units of bicycles annually. The size of domestic bicycle market is estimated at USD 141 million in 2019 where some 1.5 million bikes are sold annually with a projected CAGR of 30% according to the bicycle industry association. In 2019, Bangladesh was the fourth largest non-EU exporter of bicycles to EU (Eurostat). Global bicycle market is expected to grow at a CAGR of 7% and reach USD 75.5 billion by 2028 from around USD 54.4 billion in 2020 (according to Grandview Research).
The motorcycle market has seen phenomenal growth since 2014 with an annual growth rate of 30 percent from 2014 to 2019 and over 400,000 motorcycles registered in 2019. Over 95% of motorcycles sold in Bangladesh are either assembled or manufactured in the country. While a motorcycle contains around 1,500 parts, very few of those are locally sourced. Motorcycle assemblers have generally shown their intent to locally source as many parts as possible to minimize manufacturing cost and delivery time. Foreign parts manufacturers are welcome to realize the potential and be part of the motorcycle supply-chain in Bangladesh. In addition, a large portion of bicycle and automotive parts are also still being imported, indicating a huge potential for localized production.
Booming electronics market in Bangladesh and the development of electronics assembly industries are expected to boost the demand for electronic parts and components and provides potential investment opportunities. At present, renowned local and multinational electronic companies are locally assembling their brands of TV, refrigerator, mobile phone and other home appliances. Bangladesh also produces and exports transformers, transistors and semi-conductor devices on a small scale. There is ample space for expanding local production for the growing domestic and export market and foreign investors are most welcome to meet the demand of these markets with higher quality products.
Driven by the automobile industry, the local battery market has been witnessing a significant growth rate of over 20% annually since 2013, reaching a current market size of around USD one billion. The rapid expansion of electric three-wheelers, which consumes 60% of the battery market, has opened up huge opportunities for battery manufacturers in the country. Moreover, the size of global battery market is projected to surpass USD 300 billion in 2027 driven by the development of lithium-ion battery which is expected to grow at a CAGR of 13% till 2027. Favorable polices and incentives make Bangladesh an attractive destination for battery manufacturing to cater to the growing domestic and global markets.