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TECH-FRIENDLY’ BUDGET- AN OUTCOME OF COMBINED EFFORT

If the phrase ‘Digital Bangladesh’ refers to a scenario where a Dhaka rickshaw-puller with $5 daily income maintains communication to his family in village through a mobile phone that he owns-then Bangladesh has already become ‘Digital’.

But if the meaning of the phrase reflects a picture in which a significant part of the country’s population integrates all the facilities that the technological innovations across the world have bestowed as well as a sizable portion of the country’s export earning comes from the Information and communication technology (ICT) sector-then Bangladesh still has a long way to go.

When Finance Minister AMA Muhit in June 1 talked about Digital Bangladesh in his budget speech on several occasions, he didn’t try to draw a rosy picture; rather he presented facts and promises closer to realities.

He however made sure that the dream of Digital Bangladesh-one of the main election manifesto of Sheikh Hasina led government-is well on course to be materialized by increasing budgetary allocation for ICT sector by 218% in 2017-18 fiscal.

This year a total of Tk 3,974 crore is allocated for the ICT sector while in the last year, the amount was Tk 1,819 crore.

Much of this allocation would be spent on building ICT infrastructures like IT parks with which the IT and IT enables Service (ITES) could be facilitated.

What the Finance Minister said in budget..

“We have already planned to set up 12 IT parks at the district headquarters of Gopalganj, Mymensingh, Jamalpur, Rangpur and Barisal, Keraniganj in Dhaka, Comilla Sadar (South), Chittagong Port, Ramu in Cox’s Bazaar, Singra in Natore, Companyganj in Sylhet, and the KUET Campus in Khulna.”

“Apart from this, we have also taken initiatives to set up seven IT training and incubation centres at different locations across the country, as well as to expand the installation of high speed fiber optical cable connectivity up to the union level,” said Muhit.

Muhit said that the government, over the years, has systematically moved forward to work on the expansion of ICT education. He said that ‘Sheikh Russel Digital Lab and Multimedia Classroom’ has been established in 23,331 secondary schools and 15,000 primary schools across the country.

About digitalization of the government services, he said that the e-Filing system has already been introduced in 20 ministries/divisions including the Prime Minister’s Office, 64 deputy commissioner’s offices and seven divisional commissioner’s offices.

Apart from this, around 18,500 government offices throughout the country have been brought under a single network. The existing capacity of the submarine cable has been increased to 200 gbps from 44 gbps. As of April 2017, the number of mobile telephone and internet subscribers has increased to around 13.31 crore and 7 crore respectively.

“Wth the expansion of ICT in private sectors, we are encouraging automation and e-GP processes in different areas of public sector as well.

Innovative ideas are being implemented in government offices in delivering various services through ICT.

“We have taken a project titled “Digitizing Implementation Monitoring and Public Procurement” for the expansion of e-GP and increasing the capacity of public procurement management.”

He said that under this project taken in collaboration with World Bank, e-GP system will be expanded to 23 large government organizations. As a result, we hope, 80 percent of public procurement tenders will be covered by e-GP.

“Complementary analogue initiatives are required for reaping the full benefits of digital dividends. For this purpose, the government has undertaken initiatives to establish ICT related institutional framework and implement policy reforms.”

He said that Bangladesh ranks 3rd in South Asia in Digital Adaptation index. “I firmly believe that Bangladesh‟s integration with ICT will shortly contribute to achieving high growth.”

A combined effort-said the ICT State Minister

Post budget press conference is usually manned by faces with inquisitive and to some extent ‘disapproved’ looks. The people at the podium also anticipated some discomforting and unforgiving queries from them.

The one that was held on Friday morning at Software Technology Park in Karwanbazaar surprisingly had none of those. It was indeed unique in many aspects.

First of all, it was held in a roundtable rather than having the relevant people at podium to throw question at. The organizer-Information and Communication Technology (ICT) Division of the government had incorporated all the relevant stakeholders from the private sectors as partners, not as opponents who would have grilled them with questions and demands.

The sense of unison and harmony were evident from the very onset. It had to be. This one ministry had been having such roundtables and discussions with stakeholders for the past six months to realize their demands in the 2017-18 budget.

As a result, under the leadership of Junaid Ahmed Palak, the youngest member of the cabinet, the ICT division has been successfully able to bag a lot of facilities for the tech industry stakeholders.

“I would call this budget a big success for the IT industry,” Palak said at the press conference. None of the stakeholders present seemed to disapprove his claim.

Terming this budget ‘tech-friendly’, the State Minister for ICT Division said that the allocation of Tk 3,974 for his ministry which made a significant jump from last fiscal’s revised budget of Tk 1,819 is good enough to represent government’s honest intention of taking the ICT sector into a fast lane.

“But that’s not all. The highest portion of this year’s budget was allocated for Education and Technology sector. The word technology is being attached with education because the government wants to incorporate technology in every part of our educational system.”

Palak said that prior to this budget, they had a plan and that plan was chalked out through consulting with all the stakeholders including Bangladesh Association of Software and Information Services (BASIS), Bangladesh Computer Samity (BCS), Bangladesh Association of Call Center and Outsourcing (BACCO), e-commerce Association of Bangladesh (ECAB) and Venture Capital Association of Bangladesh.

“We have learned about your demands and with those we sat with Finance Ministry, National Board of Revenue (NBR) and Bangladesh Bank (BB). Our ICT advisor Sajeeb Wazed Joy actively persuades them all to grind out every possible positive outcome.”

The outcome has indeed become quite positive for the IT industry. While VAT regime tightened its grip virtually on every sector, the local software industry gets exemption from VAT.

“This VAT has been exempted up until June 2019 to flourish the tech industry and to create a competitive local software industry in Bangladesh,” said Palak.

He said that the government made sure that the local companies can get edge over the foreign ones in doing business. The disbursement of GoB fund for the local software companies has also made easy through this budget.

“Also we realize that venture capital is an integral part of tech startup culture. That’s why the government has exempted VAT for venture capital firms.”

The State Minister said that time has come for Bangladesh to step into the hardware manufacturing business. For doing so, the government has reduced VAT on 94 types IT machineries and parts needed for manufacturing mobile phone, computer, laptop and tab from 25% to flat 1%. For three machineries and machine parts, the rate is reduced to 10% from 25%.

The stakeholders seem to agree

Lauding the budget, Ali Ashfaq, President of Bangladesh Computer Samity (BCS) said, the incentives that have been provided in the budget for IT industry is unprecedented. “For consecutive years, we have asked for reducing VAT and import duty on IT machineries. Finally, it has been implemented.”

Rajib Ahmed, President of e-commerce association of Bangladesh asked for a block allocation of Tk 100 crore from the budget for the development of the e-commerce sector. He also asked for Tk 12 crore for research and development of e-commerce sector.

“This budget is obviously tech-friendly budget but the imposition of 35% corporate tax would hurt a lot of small e-commerce company. The government needs to understand that multinational e-commerce companies like Daraaz and a small local e-commerce company cannot be burdened with the same 35% corporate tax. I am urging the government to exempt the local e-commerce company from this large corporate tax.”

Wahid Reza Sharif, President of BACCO said that 15% flat VAT would hurt the Business Process Outsourcing (BPO) sector as it is a service oriented sector. “Previously, we needed to pay 4.5% VAT here; a 15% VAT would make our business unsustainable.”

Shawkat Hossain, Secretary General of Venture Capitalists Association of Bangladesh said that the exemption of VAT on venture capital firm will be a big booster for them. “But as it is an industry in its nascent stage, I urge the government to exempt us from the high corporate tax of 35%. The mutual find industry in the country got such exemption for over 23 years.”

Jabbar said that the best part about the budget is that it removes all sort of taxes on local software while imposing taxes on foreign software. “I believe this initiative of the government will give impetus to a lot of local software developers,” he said.

He said, while the government has implemented most of the demands from the ICT sector, it has yet to take any measures in implementing a cash incentive for the ICT sector. “Cash incentive would have immensely benefitted the growth of the sector,” he said.

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