There is a strong positive relationship between economic growth and foreign direct investment (FDI). Foreign investments facilitate transfer of advanced technology and technical know-how, bring up-to-date managerial knowledge and skills with it and generate direct and indirect employment. Larger inflow of foreign investment ensures a sustainable growth in the economy.
Mobile telecommunication sector has emerged as one of the success stories at home and abroad. The telecom industry is capital-intensive. It is one of the largest sectors which have attracted the highest volume of FDI into the country. In 2013-2014, total FDI of Bangladesh has been US$1,730.63 million, of which FDI in telecom sector has been US$525.29 million, which is 30.35 per cent of the total FDI.
Back in 2001, contribution of FDI by the telecom sector in Bangladesh was only 0.9 per cent. Within a decade in 2010, the ratio of FDI contribution increased to 60.4 per cent. In 2013 alone, the industry invested over Tk 114.30 billion for procuring spectrum and rolling out of 3G network. Over the last 20 years, the Mobile Network Operators (MNOs) have invested more than Tk 720 billion for huge infrastructure development all over the country and has created more than 1.6 million jobs. Contribution of MNOs to national GDP is around 3 per cent.
CONNECTING THE UNCONNECTED: Bangladesh has seen mobile penetration growth that has exceeded all expectations. It is one bright example of how a technology can change the total lifestyle of a human society. The MNOs have been relentlessly busy in line with the government’s vision to connect the unconnected at grassroots level and thereby provide valuable support to the economic development of the country.
Recently, mobile telecommunication has emerged as the most preferred method of connectivity. Back in 1998, there were only 400,000 telecom subscribers in Bangladesh and tele-penetration was below 4 per cent. At the end of 2013, the number of mobile subscribers stood at over 113.78 million and tele-penetration reached around 67 per cent. This growth has been propelled by enthusiastic efforts made by the MNOs to spread the networks to every nook and corner of the country, especially in rural areas with an objective to connect the unconnected grassroots people.
ACTING AS A CHANGE-MAKER: The growth of mobile telecom industry has not only helped in developing a vital infrastructure of the country but also has played an important role in shaping social behaviour. At present, a mobile phone is not just a tool for basic conversation; it is also a service device for all types of services like health, education, agriculture, mobile money for unbanked banking, commerce and businesses, citizen services, disaster responses or even a FM radio. It is changing the socio- economic condition and overall lifestyle of millions by creating employment and uplifting the living standard.
In April 2013, the number of mobile subscribers in Bangladesh exceeded the 100 million mark. In terms of number of mobile subscribers, only 14 countries in the world have engraved their names into the 100 Million Club. Presently, Bangladesh holds the 12th position in the 100 Million Club, ahead of the Philippines at 13th and Mexico in the 14th position.
Having seen significant growth over recent years, the global mobile industry is dominated by the Asia Pacific in terms of both unique subscribers and connections. The region is set to remain the second fastest growing market for the telecom industry over the period up to 2020, during which time it will add over 750 million new subscribers.
MNOS ARE ECONOMIC ENABLERS: Creating value chain and enhancing productivity are two major contributions of the mobile telecom ecosystem. MNOs in Bangladesh are investing significantly to build, operate and maintain their networks which create noteworthy forward and backward linkage.
Mobile services stimulate activities in the wider economy boosting the GDP. It provides sustainable employment opportunities to millions and improves productivity of employees and businesses. Mobile telecommunication has many other economic and social benefits e.g. mobile money is one of the emerging services creating impact on the lives of the common people.
Tax paid by the MNOs is among the highest in the service industry which has helped the government to boost national revenue. MNOs have been contributing significantly to the national exchequer in the form of revenue sharing, VAT and other taxes.
Tax revenue is generated in numerous ways. A large proportion of the value-addition ‘retained’ by the mobile operators is used to pay taxes such as VAT, import duty, handset royalty and supplementary duty. Wage income accruing to employees is subject to income tax. Value-addition flowing to other sectors also generates tax revenue. According to a Bangladesh Bank report, the telecom sector contributed up to 8 per cent of the national revenue in 2008. In the whole, presently the government earns about 10 per cent revenue from the mobile telecommunication sector.
Till 2012, MNOs contributed more than Tk 400 billion to the government exchequer. Contribution of the mobile sector to the national economy has been 3.1 per cent of the GDP in fiscal year 2012-2013. This GDP contribution was highest among other Asian countries. It is 0.8 per cent in India, Indonesia and Pakistan, while 1 per cent in Sri Lanka and 1.8 per cent in Malaysia and Thailand.
CREATING OPPORTUNITIES: Increased mobile connectivity makes telecommunication services accessible to the people from all parts of the country and contributes to the national economic growth by increasing business productivity, creating opportunities and empowering the people. According to a study, each 10 per cent increase in mobile penetration increases gross domestic product (GDP) by 0.8 per cent-1.2 per cent (source: Deloitte, 2012).
Contribution of mobile services to employment comprises four components. Firstly, there is the ‘direct’ employment of the industry or workers directly employed by the players in the value chain. Secondly, there is the ‘support’ employment, which is created by the outsourced work of and taxes that the government subsequently spends on employment generating activities. Thirdly, there is the ‘indirect’ category, which covers other costs as well profit generated, which is subsequently spent on employment generating activities. Finally, there is the ‘induced employment’ category, which refers to jobs created as employees and other beneficiaries spend their earnings, thereby creating extra employment. So far MNOs have created over 1.6 million direct and indirect jobs.
In the year 2013, the telecom sector in Bangladesh was full of events, of which two were very significant. One is crossing the 100 million active subscribers’ base. Another important event is auction of the Third Generation (3G) technology and prompt launching of the high-speed internet service commonly known as the Mobile Broadband (MBB). Considering the reach of mobile internet and the availability of online banking and FM radios, Bangladesh is currently one of the fastest growing markets in the world in terms of communication outreach.
SPIRIT OF DIGITAL BANGLADESH: With introduction of 3G services, the decade has moved from voice to data era. Mobile phone today is an internet device. With the advent of 3G technology mobile phone data users are on the rise. New and innovative data products are being offered to the mobile customers to enrich their lives.
More than 96 per cent of the country’s 36 million internet subscribers are being benefited from mobile internet access. In social context, MNOs have given banking facility to the unbanked, provided cell/SIM broadcasting and alert services which have enriched their lifestyles and has helped bridge the digital divide. MNOs are relentless in taking part, facilitating, contributing to and upholding of the spirit of Digital Bangladesh vision.
Over the years, mobile operators have invested to build the networks to ensure data and broadband connectivity. Educational information including results and admission, citizen services from the government e.g. birth registration and many more activities can be done electronically. This is now a lifeline of our livelihood and economic development. Mobile telecom is the only single sector that has changed the life-styles of cross-section of people in the society and the economy.
CHALLENGES AND FUTURE PROSPECTS: Despite all economic and social contributions, the telecom sector is over-burdened with sector-specific taxes which are not industry-friendly and prevents customers from taking mobile services, discourages consumer usage and makes investment in the networks and services difficult.
Mobile operators in Bangladesh are overburdened with one of the highest tax rates in Asia. The National Telecommunication Policy (NTP) was introduced by the government back in 1998. Since then, time has moved far and technology has progressed fast, market and users has evolved so that a new telecom policy incorporating the vision of ‘Digital Bangladesh by 2021′ has become important. The industry players expect that a revised national telecom policy and a national telecom roadmap will incorporate provisions so that broadband and data can propel the new economy, as these are the new growth frontiers.
National broadband plans are an increasing focus across the Asia Pacific region, as business leaders and policy-makers alike recognise the advantages of broadband connectivity in delivering both social and economic benefits. Due to lack of fixed line infrastructure in many parts of the region mobile is already the main means of accessing the internet in many of the countries.
As Bangladesh lacks a well-built fixed network, wireless technology would be the most efficient way to grow broadband, especially the mobile broadband which is an enabler of Digital Bangladesh. If well-considered roadmap and sustainable taxation are put in place, regulatory environment is made conducive and technology neutrality can be ensured, a Digital Bangladesh can positively be achieved.
The first part of the article was published on September 13, the second part on September 14 and the third part on September 14. email@example.com