Will mobile phone prices really fall despite lower duties?

Traders hiked mobile phone prices across the Bangladeshi market at the very start of the year. Depending on brand and model, the price of each handset increased by between Tk 500 and Tk 5,000.

However, mobile phone importers and retailers have now expressed hope that prices will come down following the government’s decision to reduce import duties. They claim prices could fall before the beginning of February.

In practice, however, many believe this so-called “price reduction” will merely mean rolling back part of the recent increase and returning to earlier price levels. As a result, consumers are unlikely to receive the real benefit of the duty cuts.

Until recently, two types of mobile phones were sold in the country, “official” and “unofficial”. Due to their lower prices, handsets imported outside the legal channel were far more popular among buyers.

Official distributors have long alleged that the unofficial market sells smuggled and refurbished phones, posing serious risks to legitimate businesses.

Against this backdrop, the interim government announced in October last year the launch of the National Equipment Identity Register (NEIR), aimed at eliminating the use of illegal and unregistered mobile phones.

However, following the announcement, unofficial traders first opposed the move and later launched protests demanding reforms. As a result, the government postponed the implementation of NEIR twice.

At the time, traders demanded a reduction in import duties so that unofficial sellers could also bring in handsets legally. They also warned that the introduction of NEIR would lead to higher mobile phone prices.

The government eventually rolled out NEIR from 1 January this year. On the same day, it also decided to reduce import duties on mobile phones.

Yet, paradoxically, official mobile phone prices were increased in the market that very day. Traders have attributed the hike to rising global prices of AI chipsets.

Speaking to Prothom Alo, Xiaomi Bangladesh country manager Ziauddin Chowdhury said, “The memory that we used to buy for US $10 now costs nearly $60. Prices have risen for all electronic products that use memory, including laptops. Prices went up in Nepal in December, in Indonesia in November, and in India in December. Bangladesh has seen the same increase for the same reasons.”

The National Board of Revenue (NBR) has reduced import duty on mobile phones from 25 per cent to 10 per cent. At the same time, duty on components imported by mobile phone assembly plants has been cut from 10 per cent to 5 per cent.

According to NBR calculations, the duty reduction should lower the price of imported mobile phones costing over Tk 30,000 by around Tk 5,500 per piece. For phones priced below Tk 30,000, the reduction could be about Tk 1,500.

On 14 January, at a discussion held at Karwan Bazar in the capital, Faiz Ahmad Taiyeb, special assistant to the chief adviser in charge of the Ministry of Posts, Telecommunications and Information Technology, said, “Since duties have been reduced, prices will definitely come down.”

Mobile phone importers are also saying prices will fall. They agree with NBR’s calculations for imported handsets. However, for phones assembled locally, they say prices may fall by only Tk 400 to Tk 500, depending on the model.

Saifuddin Tipu, executive director of Excel Technologies (Samsung brand) and a member of the Mobile Phone Industry Owners’ Association of Bangladesh (MIOB), told Prothom Alo, “Although a 5 per cent price reduction is being discussed for locally assembled phones, the complex duty structure on parts imported under STM or SKD methods means the actual impact will be only around 0.75 to 0.86 per cent.”

Asked when prices might begin to fall, Tipu said, “Those who import phones legally will receive this benefit when they clear new consignments. We expect price adjustments to take place towards the end of this month.”

An analysis of current price lists from legal mobile phone sellers shows that the price of the Xiaomi Redmi A5 (4GB RAM, 64GB ROM) rose by Tk 2,000 in January compared with December. The Redmi Note 14 Pro 4G (8GB RAM, 256GB ROM) saw a price increase of Tk 5,000.

The Vivo Y21D (8GB RAM, 128GB ROM) also rose by Tk 2,000. Samsung handsets have seen similar increases, with prices of at least two dozen models rising by between Tk 2,000 and Tk 5,000. Several other brands have also increased prices across multiple models.

The price reductions now being discussed by importers would essentially be cuts from these inflated prices. In other words, consumers are not receiving the genuine benefit that should have resulted from the duty reduction.

Commenting on this, Mahbubuddin Ahmed, president of the Bangladesh Mobile Phone Consumers Association, told Prothom Alo, “Whenever the government reduces duties on a product, traders take advantage of it. The same has happened with mobile phones. In this case, both the state and the public have been deceived.”

Fahim Mashroor, ICT entrepreneur and founder of Bdjobs, has argued that duties on mobile phone imports must be reduced further to expand digital inclusion.

Speaking to Prothom Alo, he said NEIR must remain in place, but import duties should be lowered even more.

“If the grey market disappears, competition in the market will decline. That will allow legal importers to gain some advantage,” he said.

“Until the government reduces duties further, consumers will not truly benefit from lower mobile phone prices,” he added.