Burgeoning plastic industry holds immense potentials
Sunday, 23 March 2008
Shahiduzzaman Khan
With the simplification of raw materials import process, the country can make the export earnings of plastic products double by 2010. Due to inadequate supply of raw materials, Bangladesh is now missing a chance to raise its foreign currency earnings every year by exporting the plastic products that have a significant demand in the overseas markets.
The country is considered as one of the leading suppliers of film plastic products to many countries of the world. Such factories are ISO certified and the earnings can double by 2010 with the export of film plastic products alone. Currently, the plastic products are being exported as accessories of various export items like garments, tea, jute and finished goods.
With its 2,000 factories, the country is capable of producing world class plastic products that have a global market of US$500 billion. The export of plastic products has been rising every year. The products worth Tk 14.43 billion were exported during the last fiscal, which was Tk 6.66 billion in the previous year.
Unfortunately, inadequate supply of raw materials has become a major obstacle to the export of the plastic products. Recently, a statutory regulatory order (SRO) applicable for plastic units that supply packaging materials only to export industries has made duty-free import of raw materials for plastic products uncertain as global suppliers decline to comply with the strict regulation.
Industry leaders say hardly any letters of credit have been opened for importing plastic raw materials since July 1 last year when the order made it mandatory to mark the bags containing raw materials as 'Imported under bond, not for sale' in red, using punching method. Otherwise, the raw materials entitled to bonded warehouse facilities cannot be unloaded from ships, says the order issued by the National Board of Revenue (NBR).
The SRO is aimed at checking leak of plastic raw materials imported for export-oriented industries to the local market, but it is impossible to use punching method to write on such thin bags. Local indenters failed to persuade the global suppliers to make separate arrangement for Bangladesh. That is why the import of plastic raw materials has almost come to a halt.
In defining five items, the SRO made two mistakes - one by mentioning 'linear density polyethylene' which is said to be a non-existent item and the other by using a wrong harmonised system code for 'high density polyethylene'. Local businesses say such measure will severely affect the export-oriented garment and pharmaceutical industries when the current stock of raw materials at plastic industries would finish within a very short time.
BASF, the world's largest chemical company with a $66 billion annual turnover, conveyed to the president of Bangladesh Plastic Goods Manufacturers and Exporters' Association (BPGMEA) that its was not possible for BASF to punch the special marking on the bags as the company used a uniform international export packaging for supplies to 170 countries. Bangladesh imports less than 0.1 million tonnes of raw plastic using the bonded warehouse facility. The quantity is about one-tenth of such materials imported by India.
Meanwhile, the government has planned to set up exclusive industrial estate for plastic industries, country's one of the promising sectors. The proposed industrial estate, expected in suitable places near Dhaka, will provide land and infrastructure facilities to manufacturers of plastic goods, both for local and export markets. The state-run Bangladesh Small and Cottage Industries Corporation had sent the project concept paper to the Planning Commission. Private sector leaders have welcomed the government initiative to develop separate estates for plastic goods and assembling industries. If implemented, such estate will certainly encourage entrepreneurs of plastic goods manufacturing sector.
Upgrading of lifestyle has been widening the market for plastic products. Plastic goods have already a good market abroad and establishment of the separate estate will further encourage entrepreneurs to set up more sophisticated high-end industries. Bangladesh is capable of producing world class plastic products to capture a sizeable portion of the $500 billion global plastic market. If the quality of products is ensured and the cost of production cut, Bangladesh plastic sector can earn a billion dollar every year and reduce import of many other products.
Some indiscriminate policies like mandatory bank guarantee provision have created serious setback to the export of plastic products. Currently, plastics are being exported from Bangladesh as accessories of various export items like garments, tea, jute etc. and finished goods. Plastic packaging material for export-oriented readymade garments, jute, tea leather, fish and the packaging for all other export items are now being manufactured by the local plastic industries.
The main problems with the country's plastic industry are higher production costs driven by high import duty and mandatory bank guarantee provision in case of import of raw materials. For exporters of plastic goods, the government has set a provision for 25 per cent bank guarantee on consignment basis in case of import of raw materials which has raised the cost of production and also cash crises.
It is thus necessary that the government should withdraw bank guarantee provision and consider the plastic industry as a 'thrust sector' providing all facilities to exporters in line with its policy. In order to boost export of plastic products, the government must cut the production and shipment costs.
For its tremendous growth and inevitability, plastics sector has already been recognised as a major sector worldwide like textile and steel. The growth of plastic industry and the export of plastic items from the Asian countries have increased by more than 10 per cent each year on an average for the last 10 years. Currently, per capita yearly consumption of plastic products in Bangladesh is only 1.5 kg while in the USA, it is 165 kg and in China 4.0 kg. This is because the developed nations are enjoying the advantages of plastic technology at a rate much higher than those of under developed ones. Bangladesh, China and Malaysia are among others, taking advantages and earning the lion's share of US plastic market. As China has recently come under the US criticism for dumping products, a window of opportunity has opened up for Bangladesh to export its products to the US.
Plastic industry is growing rapidly and contributing a lot to the national economy but the government's attitude to this promising sector is not positive, according to the manufacturers. Businessmen involved in it have not been able to improve goodwill of the sector and also failed to inform the policymakers of the positive sides of the industry as their attitude is negative about this sector.
The industry is also facing difficulties due to image crises driven by ban on polythene bags. But the fact is -- plastics are the most eco-friendly materials, and the most misunderstood too. Unfortunately, propagation of half-backed information and ill-founded concepts against plastics tend to malign the sincere efforts of the plastic industry.
The government has so far did not take any action against such ill-founded propaganda for reasons unknown to many observers. It is thus expected that the authorities would take up the matter in right earnest in order to stop false propaganda against a industry, which is eco-friendly and considered a promising thrust sector.
With the simplification of raw materials import process, the country can make the export earnings of plastic products double by 2010. Due to inadequate supply of raw materials, Bangladesh is now missing a chance to raise its foreign currency earnings every year by exporting the plastic products that have a significant demand in the overseas markets.
The country is considered as one of the leading suppliers of film plastic products to many countries of the world. Such factories are ISO certified and the earnings can double by 2010 with the export of film plastic products alone. Currently, the plastic products are being exported as accessories of various export items like garments, tea, jute and finished goods.
With its 2,000 factories, the country is capable of producing world class plastic products that have a global market of US$500 billion. The export of plastic products has been rising every year. The products worth Tk 14.43 billion were exported during the last fiscal, which was Tk 6.66 billion in the previous year.
Unfortunately, inadequate supply of raw materials has become a major obstacle to the export of the plastic products. Recently, a statutory regulatory order (SRO) applicable for plastic units that supply packaging materials only to export industries has made duty-free import of raw materials for plastic products uncertain as global suppliers decline to comply with the strict regulation.
Industry leaders say hardly any letters of credit have been opened for importing plastic raw materials since July 1 last year when the order made it mandatory to mark the bags containing raw materials as 'Imported under bond, not for sale' in red, using punching method. Otherwise, the raw materials entitled to bonded warehouse facilities cannot be unloaded from ships, says the order issued by the National Board of Revenue (NBR).
The SRO is aimed at checking leak of plastic raw materials imported for export-oriented industries to the local market, but it is impossible to use punching method to write on such thin bags. Local indenters failed to persuade the global suppliers to make separate arrangement for Bangladesh. That is why the import of plastic raw materials has almost come to a halt.
In defining five items, the SRO made two mistakes - one by mentioning 'linear density polyethylene' which is said to be a non-existent item and the other by using a wrong harmonised system code for 'high density polyethylene'. Local businesses say such measure will severely affect the export-oriented garment and pharmaceutical industries when the current stock of raw materials at plastic industries would finish within a very short time.
BASF, the world's largest chemical company with a $66 billion annual turnover, conveyed to the president of Bangladesh Plastic Goods Manufacturers and Exporters' Association (BPGMEA) that its was not possible for BASF to punch the special marking on the bags as the company used a uniform international export packaging for supplies to 170 countries. Bangladesh imports less than 0.1 million tonnes of raw plastic using the bonded warehouse facility. The quantity is about one-tenth of such materials imported by India.
Meanwhile, the government has planned to set up exclusive industrial estate for plastic industries, country's one of the promising sectors. The proposed industrial estate, expected in suitable places near Dhaka, will provide land and infrastructure facilities to manufacturers of plastic goods, both for local and export markets. The state-run Bangladesh Small and Cottage Industries Corporation had sent the project concept paper to the Planning Commission. Private sector leaders have welcomed the government initiative to develop separate estates for plastic goods and assembling industries. If implemented, such estate will certainly encourage entrepreneurs of plastic goods manufacturing sector.
Upgrading of lifestyle has been widening the market for plastic products. Plastic goods have already a good market abroad and establishment of the separate estate will further encourage entrepreneurs to set up more sophisticated high-end industries. Bangladesh is capable of producing world class plastic products to capture a sizeable portion of the $500 billion global plastic market. If the quality of products is ensured and the cost of production cut, Bangladesh plastic sector can earn a billion dollar every year and reduce import of many other products.
Some indiscriminate policies like mandatory bank guarantee provision have created serious setback to the export of plastic products. Currently, plastics are being exported from Bangladesh as accessories of various export items like garments, tea, jute etc. and finished goods. Plastic packaging material for export-oriented readymade garments, jute, tea leather, fish and the packaging for all other export items are now being manufactured by the local plastic industries.
The main problems with the country's plastic industry are higher production costs driven by high import duty and mandatory bank guarantee provision in case of import of raw materials. For exporters of plastic goods, the government has set a provision for 25 per cent bank guarantee on consignment basis in case of import of raw materials which has raised the cost of production and also cash crises.
It is thus necessary that the government should withdraw bank guarantee provision and consider the plastic industry as a 'thrust sector' providing all facilities to exporters in line with its policy. In order to boost export of plastic products, the government must cut the production and shipment costs.
For its tremendous growth and inevitability, plastics sector has already been recognised as a major sector worldwide like textile and steel. The growth of plastic industry and the export of plastic items from the Asian countries have increased by more than 10 per cent each year on an average for the last 10 years. Currently, per capita yearly consumption of plastic products in Bangladesh is only 1.5 kg while in the USA, it is 165 kg and in China 4.0 kg. This is because the developed nations are enjoying the advantages of plastic technology at a rate much higher than those of under developed ones. Bangladesh, China and Malaysia are among others, taking advantages and earning the lion's share of US plastic market. As China has recently come under the US criticism for dumping products, a window of opportunity has opened up for Bangladesh to export its products to the US.
Plastic industry is growing rapidly and contributing a lot to the national economy but the government's attitude to this promising sector is not positive, according to the manufacturers. Businessmen involved in it have not been able to improve goodwill of the sector and also failed to inform the policymakers of the positive sides of the industry as their attitude is negative about this sector.
The industry is also facing difficulties due to image crises driven by ban on polythene bags. But the fact is -- plastics are the most eco-friendly materials, and the most misunderstood too. Unfortunately, propagation of half-backed information and ill-founded concepts against plastics tend to malign the sincere efforts of the plastic industry.
The government has so far did not take any action against such ill-founded propaganda for reasons unknown to many observers. It is thus expected that the authorities would take up the matter in right earnest in order to stop false propaganda against a industry, which is eco-friendly and considered a promising thrust sector.