The goal of Smart Bangladesh will be challenged If the tax holiday facility in the IT sector is removed

The trade organization for the country's software and information technology service sector is the Bangladesh Association of Software and Information Services (BASIS). The election of the organization's executive committee is set to be held from May 8 to May 26, 2024. Views Bangladesh's Editor Rased Mehedi has discussed the upcoming election with IT Entrepreneur Niaz Morshed Elite, also the Executive Director of Nagad Limited. Below is a full description of the conversation.

Rashed Mehedi: What issue is being prioritized in the upcoming BASIS election regarding the challenges in the IT sector?
Niaz Morshed Elit: First of all, this year's Basis election is very interesting compared to other times. Because there has never been a three-panel setup before. It has always been two panels. This time, there are three full panels. Instead of eight directors, there are 24 competitors this time. There are total 11 posts and 33 candidates.
Another reason why this year's BASIS election is highly discussed is that the tax holiday or tax incentive currently available for businesses in the information technology sector is ending after June. If the tax incentive is lifted, the investment and operational expenses of those in the software industry who are contributing to this sector and those involved in other ways will increase. For this reason, my panel and I believe it is necessary to have tax incentives in the information technology sector until 2041. Honourable Prime Minister Sheikh Hasina has announced the Smart Bangladesh Vision-2041. Without proper development in the information technology sector, building a Smart Bangladesh is not possible. Therefore, to facilitate the construction of Smart Bangladesh, it is necessary to have tax incentives until 2041. Because "if information technology companies are not given tax holiday opportunities until 2041, achieving the goal of Smart Bangladesh will face challenges."
We must remember that the work in the field of information technology is knowledge-based. Here, profit is not made month by month as in business. In many cases, income from one job has to sustain the entire year. Again, just producing software is not enough; regular maintenance and updates also need to be done. In most contracts, the matter of annual maintenance and updates is included. Bills also come on an annual basis. But companies have to manage their expenses including salaries and wages on a monthly basis. In this situation, if the tax holiday opportunity is withdrawn, all types of companies in the information technology sector, big and small, will face major challenges. Whoever is elected in this year's BASIS election, their biggest challenge will be to ensure the continuation of the tax incentive until 2041. That's why from our 'Team Smart,' this challenge is being given top priority.

Rased Mehedi: Can you elaborate a little more on the importance of continuing the tax holiday until 2041?
Niaz Morshed Elite: In fact, the type of investment in the IT sector is also a little different. Most of the big investors of our country do not have a proper idea about the IT sector business. As a result, they don't even want to invest. Basically, the type of investment made in the IT sector is called 'Angel investment'. This means, one has a good idea, and an investor is taking risks and investing on that idea. As a result, the risk in business is increasing. Without investing in new ideas, achieving significant business success in this field is not possible. Therefore, investors have to take significant risks from the outset.
Again, since there is no visible product in the software industry sector, there is no profit figure on a monthly basis or there is uncertainty about the return of the investment money in a short period of time, that is why the banks do not want to give loans to the business of the information technology sector, especially to the software companies.
Even if you start a garment business, you can show space and get a loan from the bank. But what will you show in the IT industry? Even if it were like that, I have money and you have ideas, I will invest in your IT project, even then our IT sector would not progress. Those who have money in our country do not understand the IT sector. They want to invest in businesses where they will get profit every month. And those who understand the IT sector, those young entrepreneurs, do not have money. That's the big challenge. Yet Bangladesh's IT sector has come a long way step by step today. It's all thanks to the efforts of young entrepreneurs. So our second challenge is how to arrange loans for entrepreneurs in the IT sector. Agreements have been made with many banks, but no bank has agreed to give a loan so far. Policy for getting loans in this industry has not yet been formulated. As a result, the development of this industry is not happening. Entrepreneurs in this sector mainly finance from family or friends. Many are selling land and property. This is a big challenge for this sector. If the tax holiday benefits are lifted, that challenge will increase further. Companies will face an existential crisis.

Rased Mehedi: BASIS has been working for a long time, so why has the matter of bank loans been stalled until now?
Niaz Morshed Elite: In Bangladesh, the banking sector has not expanded loans according to the growth of different sectors. For instance, if you want to start a garment business, you can get a loan. If you want to do any industry, you can get a loan by mortgaging your property. If you need money to buy a ship for breaking, to import rice and lentils, you can get a loan. Even if you want ten taka, you will get two. But if you want to start a new business, you won't get a loan. Suppose you want to manufacture microchips, you have a factory, you have a shed, you want money for a bank loan, the bank won't give it to you. Because it's a new industry, it's risky for the bank. This brings up another important issue for discussion. In our country, the heads of credit in the banks, how much do they understand about the business in the IT sector? There is no research on investment in this sector in the banking sector. The research on creating a new market is not available to the banks. As a result, banks do not want to give loans for the development of new industries. They give loans where the income is visible, meaning they pour oil on oil.

Niaz Morshed Elite

Rased Mehedi: If we talk about neighboring countries like India or even if we talk about Sri Lanka, in terms of their engagement in the international software industry, how much market share have Bangladeshi entrepreneurs secured? If we talk about potential engagement in the global market, what has been the role of BASIS so far?
Niaz Morshed Elite: There are two issues here. Firstly, in the IT sector, it's not just about core software anymore. Core software started around twenty to twenty-five years ago, but now the market is not limited to core software alone. Alongside core software, outsourcing, application software, service providers, digital platforms, etc., have emerged. Now, apart from core software, there are numerous new markets that have been created. This calls for the formulation of comprehensive policies.

We no longer cry out for core software, as we now need to create markets beyond core software. Not everyone involved in outsourcing is a member of BASIS. People in remote areas are doing outsourcing individually, earning dollars, so they don't need BASIS, nor do they need any staff. Why should they become members of BASIS by spending ten thousand taka? Are there any incentives for them to join BASIS? The truth is, we need to address the challenges of various sub-sectors that have emerged within the IT sector separately. Each sector has its own set of problems. Those involved in outsourcing face one type of problem, while those developing games face another. The challenges are different for those engaged in digital marketing and for those working on core software. Therefore, solving these problems cannot be done with a blanket approach. Each problem needs to be identified separately for effective solutions.
Secondly, there is a lack of skilled manpower in this sector. To enhance the sectoral workforce, it is essential to introduce some specialized courses in collaboration with the country's universities. Industry-specific guidelines need to be developed. Separate courses need to be initiated in universities for outsourcing and game development. In this regard, universities can partner with BASIS. The most important thing is that we lack the necessary information and resources for both the global and local markets in the IT sector. In a way, we are all working in a vacuum. Therefore, it is necessary to work with universities to create data banks related to trends in the IT sector. This will make it easier to increase engagement in the global market.

Rased Mehedi: Do you think there is a significant responsibility in creating opportunities to work in partnership with universities under BASIS's new leadership?
Niaz Morshed Elite: Absolutely. For the IT sector, we need to initiate the necessary courses at universities. There is an institution under BASIS called BITM. Its task will be to provide support to individuals until they are employed after completing courses at universities. If we don't solve these problems from the root, we won't succeed in that way.

Rased Mehedi: BASIS represents those who develop or deal with software primarily. However, recently, we have seen many individuals who are not directly involved in this business but have become influential after joining this organization. As a result, what kind of impact has this had on the organization's activities?
Niaz Morshed Elite: Yes, there are many such individuals who are not involved in business activities related to information technology but have gained recognition by joining an organization here. Identifying them will also fall within the responsibility of future leadership.

Rased Mehedi: Thank you.
Niaz Morshed Elite: Thank you too.