Government Incentives and Policies Driving Bangladesh's LE Sector Growth and Export Expansion
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The Light Engineering Sector (LE) is regarded as the backbone of industrial development in Bangladesh, supplying essential capital machinery, spare parts, and accessories across various industries. With over 80,000 enterprises employing around one million people, the sector plays a crucial role in employment generation, import substitution, and value addition to the economy. With an approximate contribution of 3% (BIDA, June 2024) to the GDP, LES remains a high-potential industry with growing export opportunities amid rising global competition.
LE sector not only supports key industries such as textiles, agriculture, and shipbuilding but also contributes significantly to reducing dependency on imports by locally manufacturing industrial components and machinery. The domestic market size of the light engineering (LE) sector in Bangladesh was USD 8.2 billion in the fiscal year 2023–2024.
According to the Bangladesh Investment Development Authority (BIDA), the light engineering (LE) sector meets approximately 50% of the domestic demand for LE products. Globally, light engineering market is estimated to be approximately USD 8 trillion, presenting significant export opportunities for Bangladesh's light engineering (LE) products.
In 2022, Bangladesh exported a record USD 795.63 million worth of LE products, which, while a notable achievement, remains modest when compared to the total manufacturing exports of the country.
On average, annual exports from the LE sector exceed USD 500 million. Major export competitive products of Bangladesh’s light engineering sector include bicycles, industrial machineries, refrigerators, optical lenses, batteries (lead accumulator) and other industrial parts like compressor, transistor, diode etc.
Recognizing its strategic importance, the government has introduced a range of incentives to foster the growth and international competitiveness of the sector. These include tax exemptions, policy reforms, financial support, and capacity-building initiatives aimed at expanding Bangladesh’s industrial base and foreign trade.
The government has provided a 10-year corporate income tax exemption for newly established industries engaged in manufacturing specific products, effective from July 1, 2021, to June 30, 2030.
This includes light engineering components used in various industries, agricultural machinery, and household electronics such as washing machines, blenders, microwaves, and induction cookers. The incentives also extend to institutes offering technical and vocational training for engineering skills development, all aimed at boosting the light engineering (LE) sector.
To further support the sector, import duties on capital machinery have been exempted, and reduced duties are applied to brass wire, copper plates, raw materials, tools, and equipment utilized in LES manufacturing. Exporters benefit from a 50% tax exemption on export income, zero value-added tax (VAT) on export goods, and a 10% (FEPD Circular No. 12, Date: 30 June, 2024, Bangladesh Bank) cash incentive on the export value of light engineering products, including accumulator batteries.
Previously, the Light Engineering (LE) sector was revitalized and prioritized in Bangladesh's National Industry Policy of 2016. Due to its high export potential, the sector has been granted favorable incentives and facilities under the Export Policy 2021-24, designating it as a high-priority sector.
Additionally to support its development, the government formulated the Light Engineering Industry Development Policy in 2022, aiming to provide comprehensive assistance for the sector's growth.
It outlines an eleven step strategic action plan from 2022 to 2027, aiming to increase the sector's contribution to GDP by 40%. The policy focuses on key areas such as infrastructural development, modernization of technology, and the strengthening of both forward and backward linkages within the industry. It emphasizes human resource development through skill-building initiatives, expanding market access, and fostering research and development.
Morever, it encourages the establishment of industry clusters and the development of common facilities to improve efficiency. Currently, significant concentrations of LE production are found in Dhaka, Chattogram, Narayanganj, Bogura, Jessore, Gazipur, and Kishoreganj, with each area specializing in different components.
To decentralize and boost capacity, the government has decided to establish additional dedicated LE industrial parks in Narsingdi, Munshiganj, Mymensingh, and Madaripur. In addition, the policy prioritizes quality assurance, certification, simplification of VAT rules and enhanced access to finance, alongside the creation of a more favorable investment climate to boost the competitiveness of the Light Engineering sector.
Furthermore, various industry associations and ministries play a crucial role in supporting the growth and development of the Light Engineering (LE) sector in Bangladesh. The Bangladesh Industrial Technical Assistance Center (BITAC) and the Pilot Plant and Process Development Center (PP & PDC) provide essential technical support and research facilities for innovation and process development.
Likewise, training institutes such as those offered by the Engineering Industry Owners Association and various industry associations, including the Bangladesh Engineering Industry Owners Association (BEIOA), Automobiles Components & Accessories Manufacturers Association (ACAMA), Bicycle & Parts Manufacturer & Exporters' Association (BBPMEA), and the Electrical Merchandise Manufacturers Association (BEMMA), offer specialized training and advocacy. These bodies are instrumental in fostering capacity building, facilitating industry collaboration, and ensuring the LE sector's competitiveness both domestically and internationally.
As the country advances its economic diversification strategy, government-backed incentives are expected to drive further innovation, investment, and export expansion within the sector, positioning Bangladesh as a competitive player in the global light engineering market.
