Julian Gorman, Asia-Pacific Manager of Global System for Mobile Association (GSMA)
Julian Gorman, Head of the Asia-Pacific Division of Global System for Mobile Association (GSMA), talks about the post-pandemic economic recovery in Bangladesh, the current state of the mobile communications industry in the country and future technological advancements in lessons in an exclusive setting. interview with the Dhaka Tribune‘s Bilkis Irani
Can you elaborate the main recommendations for Bangladesh according to the latest GSMA tax report?
One of the most strategic policy instruments that Bangladesh can use to accelerate economic recovery and bridge the digital divide to reduce the tax burden on the mobile telecommunications sector.
In Bangladesh, this tax burden is considerably higher than the average for the Asia-Pacific region.
The main recommendations are first to reduce the minimum turnover tax and the corporate tax in the mobile sector to bring it into line with the rest of the economy. The minimum turnover tax should be reduced to 0.5% from the current 2%. This would increase GDP by $ 476 million with an annual tax revenue gain of $ 47 million after five years.
Reducing the current corporate tax rate by 5% for non-public and public mobile operators would add an additional $ 131 million to GDP, while increasing tax revenue by $ 14 million per year after five years.
Second, we recommend that the tax assessment mechanism be streamlined.
Finally, the country should reduce sector taxes on mobile consumers to improve accessibility.
What is the impact of the tax regime on the sector and future investments?
The high tax burden on mobile operators has a negative impact and limits the investment capacity of the sector as it seeks to build digital infrastructure. As a capital-intensive sector, this is a significant obstacle for the future development of mobile connectivity.
Instead, a favorable fiscal framework is needed to facilitate the attraction of the investments needed to realize Bangladesh’s digital agenda.
Compared to global and regional scenarios, to what extent is Bangladesh’s tax system conducive to growth?
The mobile sector is subject to a high tax burden, accounting for 44% of the sector’s revenues. It is the third highest in the world and is well above the Asia-Pacific average of 24%.
Almost half of every Tk100 of mobile network operators’ revenue goes to the government in the form of taxes and regulatory fees. This is explained by a high level of sectoral taxes – 25% of revenues – and in particular by sectoral taxes on the revenues and profits of operators. For example, the corporate tax rate applicable to the mobile phone industry is about double the average corporate rate of 21.55% in Asia.
Reforming the taxation of the mobile sector by aligning it at the global and regional levels would lead to increased adoption and use of mobile connectivity.
How can Bangladesh improve its tax structure for mobile operators?
The reduction of taxes specific to the mobile telephony sector would establish a more favorable fiscal framework and would have these positive effects. Removing the SIM tax from Tk200 would speed up connectivity for the 46% of Bangladeshis currently offline.
According to mobile operators, spectrum prices are very high in Bangladesh. What can the country do to make spectrum more affordable?
Bangladesh lags behind its regional peers when it comes to spectrum scores. Closing the coverage gap and responding to increasing data traffic will require affordable and sufficient technologically neutral amounts of spectrum for operators in the low bands (below 1 GHz), mid bands (e.g. 3.3 -4.2 GHz), as well as high bands (mm waves).
In addition, streamlining the prices of backhaul links, affordable pricing for medium-band 5G spectrum in the near future, unified licensing, and technology neutrality are some of the policy areas that need to be looked at closely. Most importantly, open, transparent and multi-stakeholder consultations are essential to promote reliable and resilient connectivity for all citizens.
How can Bangladesh improve its regulatory environment to support the growth of the telecommunications industry?
Mobile phone operators are not allowed to build an infrastructure that supports their networks, for example fiber backhaul. This fragmentation of the licensing regime – there are 23 different types of licenses – not only creates and propagates inefficiencies that increase the cost to the end consumer, but also affects the quality of service.
We encourage the government to migrate to a unified licensing framework, especially in preparation for the launch of 5G, where the integration of the communications network is important to take full advantage of the technology. In addition, a whole-of-government approach to policymaking will ensure better coordination of digital transformation initiatives in the public sector, complemented by private sector investment and innovation.
In your opinion, has 4G been a success in South Asia?
In Northeast Asian countries like Japan and South Korea, 4G is widely accepted, but the situation in South Asia is mixed.
The adoption of 4G has accelerated in India with the introduction of low cost plans and handsets. As a result, 63% of connections in 2020 were 4G. In Pakistan, this figure is 35%.
But in Bangladesh, only 28% of mobile connections were 4G while over 95% of the population has 4G coverage. In many developing countries in Asia, Internet access is exclusively via mobile phone. Governments need to do much more in collaboration with the mobile industry to increase digital inclusion.
Much of the Bangladeshi population still uses multifunction phones. What can be done to get people to switch to better handsets and reap the benefits of 4G?
The affordability of 4G smartphones is a major barrier to wider adoption of 4G. The Bangladeshi government has been encouraging local production since 2017. Despite the strong shift to local manufacturing, a 4G smartphone costs around four times as much as a 2G multifunction phone. The government can help narrow this gap through policies targeted at the production and import of 4G handsets and can also encourage greater availability of financing for the purchase of 4G handsets.
Do you think Bangladesh is ready for 5G?
4G technology is expected to continue to play a prominent role for the foreseeable future, but, with concerted action, there is no reason that Bangladesh cannot be ready for 5G by 2023.
The country needs a flexible and forward-looking regulatory base capable of supporting 5G. This includes a unified one-stop-shop licensing regime, ecosystem readiness, affordable 5G devices, tax rationalization, a spectrum roadmap coupled with close collaboration between government and the mobile industry to ensure that 4G penetration is at least 70% before it. launches 5G.
Should telecom operators start offering Fintech features on their networks?
We have seen a rapid and deep adoption of mobile money in Africa and Pakistan, where regulations allow telecom operators to offer mobile financial services directly or through their subsidiaries. However, regulatory barriers in Bangladesh prevent mobile operators from offering these services.
A different set of regulatory hurdles prevent operators from leveraging their customer data to deliver value-added fintech services. Regulations should evolve to allow a range of actors, including mobile operators or their subsidiaries, to offer financial services.
Why is the GSMA moving forward with Mobile World Congress 2021 amid the pandemic?
Covid-19 is our biggest challenge to date. But our experience gives us a solid foundation from which to build our plan. This foundation means that the Mobile World Congress 2021 (MWC21) in Barcelona can move forward safely, in person, with an online digital component for those who cannot attend.
MWC21 Barcelona follows on from MWC Shanghai 2021, which took place in February this year and drew around 25,000 physical and virtual participants from 114 countries and territories. The event included improved Covid precautions and the lessons learned contributed to our planning for MWC21. With the support of our partners, exhibitors, board of directors and local businesses, each has contributed to creating a safe environment while respecting safety measures.
How do you think telecommunications and digital technologies will accelerate economic recovery in the post-COVID-19 era?
In the short term, mobile technology will enable essential services such as e-learning, telehealth, contact tracing to identify infection hot spots, and working from home.
Beyond the pandemic, the mobile industry will be the platform that powers a truly digital society. The government must adopt a strategic vision and enable the industry which will be crucial for the implementation of the 2041 perspective plan, to achieve the 17 United Nations Sustainable Development Goals (SDGs) and to recover economically in the aftermath of the pandemic.