Economic Report :
Despite the availability of import substitutes and massive employment opportunities, the reverse policy adoption in the domestic cosmetics industry needs to be explained.
Instead of policy support, additional duties and supplementary VAT have been imposed on the cosmetics industry, said industry stakeholders.
The Association of Skin Care and Beauty Products Manufacturers and Exporters of Bangladesh (ASBMEB) recently submitted a letter to the NBR in this regard giving exemptions on certain matters that may lead the growth of this industry.
Entrepreneurs says that imposed vat-tax are main hindrances of this sector to create a level playing field.
Meanwhile, realizing the importance of the cosmetics industry, the Bangladesh Trade and Tariff Commission under the Ministry of Commerce has strongly recommended 4 points in the policy formulation of this industry.
But for mysterious reasons, the policy of assistance needs to be adopted.
That recommendation needs to be taken into consideration. Policy support is being given to this sector with great importance in different countries.
The opposite policy in this promising sector in Bangladesh has given birth to many questions.
Those concerned said that the role of any group at the policy-making level is mysterious and anti-indigenous industry.
Due to which the local investment is faced with strong unequal competition and risk, the sector stakeholders think. According to them, the anti-industrialization attitude of some quarters is contrary to the priority policy of the present government to achieve job creation and economic growth.
Working member of the trade organization Association of Skin Care and Beauty Products Manufacturers and Exporters Bangladesh (ASBMEB) Monir Hossain said more than hundred thousand of people are currently employed in this sector.
“Only the lack of government policy support has held back the size and scope of the industry.
Foreign exchange is saved when domestic industries are developed as import substitutes. In addition to employment, foreign exchange can be earned through exports. Protection of local investment should therefore be at the top of the policymaking priority list,” he said.
The Tariff Commission in its recommendation has stated that a local manufacturer has to pay a supplementary duty of 10% on the unit value of each piece. As a result, the impact of additional duty on local producers is very high.
Because the supplementary duty livable value of locally produced goods is much higher than the dutiable value of imported goods. As the consumer market is one for all, the investment of local producers in a competitive market system is threatened.
‘Existing comprehensive duties and VAT in the cosmetics market of about 3 billion dollars will cause discrimination for local entrepreneurs. Because the annual average growth rate of this industry is 12 and a half percent.
Therefore, policy support is essential to attract investment in domestic industries,’ Professor Syed Ahsanul Alam Parvez, Chairman of National Bureau of Economic Research (NBER) told The New Nation.
The annual market of cosmetics and skin care products in Bangladesh is over Tk 21,000 crores. Although this sector is a potential sector of the country, the products of domestic companies are facing a lot of challenges due to the influx of imported foreign products.
Although various initiatives have been taken by the government to popularize these domestic products, the imposition of supplementary VAT and additional duties can be said to be one of the obstacles in this sector.
At present, the list of goods subject to VAT and comprehensive duty at the local production stage includes lip care, eye care, hand, nail or foot care, powders, scented bath salts and related toiletries including other bath products.
There is no doubt that the domestic market will expand further if the import duty of raw materials for cosmetics and skin care products is reduced.
Because almost 90 percent of these raw materials have to be imported from abroad at high prices.
If the government takes appropriate steps to reduce the duty of raw materials required for the production of domestic products, increase the duty on the import of foreign products, stop illegal products coming to the market, stop fake products, etc., the production of the cosmetics industry sector in Bangladesh will increase.
According to research firms like Light Castle Partners and Allied Market Research, the estimated market size of the skincare or personal care industry in Bangladesh was $1.23 billion in 2020. They expect its size to reach 2.12 billion by 2027. The report also states that the industry will grow at a rate of 8.5 percent from 2021 to 2027.