The price of smartphones in Bangladesh is significantly higher than in neighboring countries like India and Pakistan, leading to an increase in illegal imports and a slower adoption of smartphones in the country.
For instance, a popular smartphone model costs BDT 243,000 in Bangladesh, whereas the same model is priced at BDT 170,000 in India and BDT 164,000 in Pakistan. This means consumers in Bangladesh pay BDT 73,000 more than their Indian counterparts and BDT 79,000 more than those in Pakistan. Interestingly, the same phone, when brought in illegally, is available at nearly BDT 100,000.
This price disparity is not limited to a single brand or model; rather, it affects almost all smartphone brands. The high cost of smartphones in Bangladesh is a direct result of steep import duties, manufacturing costs, and retail taxes. These high prices have two major consequences: a surge in smuggling activities to bypass taxes and a significant lag in smartphone penetration compared to neighboring countries.
The Role of High Taxes
Local manufacturers attribute the inflated prices to high tariffs on imported components, production costs, and retail distribution expenses. On the other hand, importers claim that bringing a smartphone into Bangladesh legally requires paying nearly 59% in taxes. This heavy tax burden gives local manufacturers the leverage to maintain high prices, as they are protected from foreign competition.
Experts suggest that increasing smartphone usage in Bangladesh could bring significant economic and governance benefits. They urge the government to reconsider its tax policies in the upcoming 2025-26 fiscal budget to make smartphones more affordable. A review of tax structures, incentives for local manufacturers, and adjustments in taxation on locally produced phones could help reduce the price gap with neighboring countries and curb illegal imports, ultimately boosting government revenue.
High Taxation and Illegal Imports
Currently, smartphone imports in Bangladesh are subject to a 25% import duty, 15% VAT, 5% advance income tax (AIT), 3% regulatory duty (RD), and 5% advance tax (AT), bringing the total tax burden to 59%. This results in a flourishing black market where illegally imported smartphones, known as “grey market” phones, account for nearly 40% of the total market share. In January alone, only 850 smartphones were legally imported into Bangladesh, indicating the extent of illegal imports.
The “Official” vs. “Unofficial” Market
Retail stores across Dhaka reveal a noticeable difference in smartphone pricing between “official” and “unofficial” sources. The same phone that costs BDT 57,000 at a brand’s authorized store is available for just BDT 32,000 in nearby non-authorized shops. These unauthorized phones, often referred to as “luggage party” imports, are smuggled into the country without paying taxes.
Consumers are drawn to these cheaper options, as they receive similar warranties and assurances from unofficial sellers. Given the significant price difference, most buyers opt for the unofficial market, further decreasing legal sales.
The Impact on Smartphone Adoption
Despite significant growth, Bangladesh still lags behind India, Pakistan, Kenya, Nigeria, and Senegal in smartphone penetration. According to the Bangladesh Bureau of Statistics (BBS), while 70% of households own smartphones, individual usage remains low. The Global System for Mobile Communications Association (GSMA) reports that smartphone ownership in Bangladesh is 41% in urban areas and 26% in rural regions. In contrast, smartphone ownership in India stands at 52% in urban areas and 40% in rural areas, while in Pakistan, the figures are 46% and 36%, respectively.
Calls for Tax Reforms
Industry experts argue that reducing import taxes and component tariffs would lower smartphone prices and encourage higher adoption rates. The Mobile Phone Industry Owners Association of Bangladesh (MIOB) suggests that the government set a clear target to increase smartphone penetration by reducing taxes, similar to policies in India, where tax rates are capped at 18%, and Pakistan, where they do not exceed 25%.
As Bangladesh continues its push for digital transformation, ensuring affordable access to smartphones will be critical in bridging the digital divide, promoting financial inclusion, and boosting economic growth. Policymakers must balance protecting local industries with making smartphones more accessible to the general public, ensuring a fair and competitive market.