Plastic industry holds immense potentials
Sunday, 23 November 2008
Shahiduzzaman Khan
PLASTIC goods manufacturers recently called upon the government to cut import duties on plastic intermediate products from 25 per cent to 15 per cent. They also urged the government to increase import duty on some finished plastic products from the existing five per cent as a measure to protect the Tk 20-billion-strong plastic industry of the country. Intermediate products are mainly non-formed plastic which is turned into products such as clothes hangers, labels and furniture.
In FY 2005-2006, the plastic industry exported products worth Tk 14.43 billion. This included Tk 3.81 billion worth of direct exports and Tk 10.62 billion of indirect exports. For example, plastic products, such as buttons or hangers, were included in garment sales. Although local businessmen are doing very well in the plastic sector, they still have to import the intermediate products and then add value to them, but the government imposed a 25 per cent import duty on intermediate products when import duty on some finished plastic products was only five per cent. This is the reason why local products are failing to compete with imported plastic products in the domestic market. The plastic industry is now the third or fourth largest export earner for the country if both direct and indirect exports are counted.
In fact, proper government support could double or triple the sector's growth. The growth of a country's plastic industry normally shadows that of other industries as most sectors such as telecom, automobile, light engineering, textile and garments and food require plastic and plastic accessories or plastic packaging. The export of plastic products is three times higher than the import of plastic materials using the bonded facility.
There are huge opportunities to raise the country's plastic goods exports. Multinational super chain stores - Wal-Mart, Jecy Penny and Tom Hill - have used only 10 per cent of saleable commodities like readymade garments but the demand for saleable plastic products is more than readymade garment, which is 14 per cent of the total saleable commodities of super chain stores. If the country's plastic goods exporters could take this opportunity to export their goods to the US based multinational super chain stores, it would boost the country's plastic industries. Plastic is being used in various forms - as shopping bags, in food packaging, for exporting fish to international markets while it is being used in the country's jute and textile industries. The quality of Bangladeshi plastic goods is better than that of China and India.
Bangladesh will have to take the opportunity of the ongoing global economic turmoil as the US consumers might turn from the expensive products from China, India and European Union to the low-cost but quality products from the developing countries. Bangladeshi plastic goods are exported to 23 countries in North America, Europe, Asia and the pacific and Middle East. The country exports plastic goods also to India, Sri Lanka and Nepal. The major plastic goods markets are Poland, China, the UK, Belgium, France, Germany, the USA, Canada, Spain, Australia, Japan, Malaysia, the UAE, Hong Kong, Bahrain, Italy, New Zealand, Netherlands etc.
Plastic industries in the country have been flourishing in recent years. Apart from meeting domestic demand for all kinds of plastics products and helping import substitution, this industry is also found helping notably the value-addition of the readymade garments (RMG) industries. The RMG industries are found adding value to their export products by about 25 per cent on an average using various locally made plastics products and accessories such as specialised polybags, clips, clippers, etc.
Yet lack of policy supports, inadequate port facilities and an unwanted image problems driven by misleading propaganda are the main hindrances to the growth of a potential plastic sector in the country. The country is capable of producing world class plastic products to capture a sizeable portion of the 500 billion dollars 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. Encouraged by bond facilities in 1992, Bangladesh plastic sector now stands on a sound footing with more than 25,000 factories all over the country. More than 0.3 million skilled and unskilled manpower are employed in this sector.
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, par capita yearly consumption of plastic product 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 recently has come under the US criticism for dumping products, a window of opportunity has opened up for Bangladesh to export its products to the US. However, the plastic sector is facing difficulties also 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.
Meanwhile, the government has taken up a scheme to set up exclusive industrial estates for plastic and automobile industries. The proposed industrial estates, expected in suitable places near Dhaka, will provide land and infrastructure facilities to manufacturers of plastic goods -- both for local and export markets. Private sector leaders have welcomed the government initiative to develop separate estate for plastic goods. Plastic industry is nevertheless, a vital SME sector, which is expected to be benefited from a separate industrial estate. Plastic goods have already a good market abroad and establishment of such a separate estate will further encourage entrepreneurs to set up more sophisticated high-end industries.
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. Out of 3,000 plastic industries in Bangladesh, 80 per cent are located in the old part of Dhaka. Of the total units, 30 are engaged in direct export, 300 in indirect export and rests serve the domestic market of Tk 8.0 billion.
The plastic products include tooth brush, ball point pen body, overhead tank, shopping bag, garbage bag, garbage bin, crockeries, plastic furniture, toys, garment accessories, household items, sanitary fittings, spare parts of textile and jute mills and packaging items. The high duty on raw materials is pushing the price of locally manufactured plastic goods higher. As such, the products are struggling to compete with the cheap Chinese and Indian imports. Potential exporters are also failing to provide plastic products like polybag and hanger, which are used by the garment industry, in a competitive price.
Various uses of plastic products are being tested around the world. Of late, experts have witnessed that blending plastic waste with bitumen in laying tarmac could enhance road durability, drastically reduce maintenance costs, and save the country Tk 15.08 billion in maintenance cost a year. Less cracks and potholes will develop on roads and recycling of plastic waste can reduce the amount of hazardous non-biodegradable materials in the environment.
...................................................................
szkhan@the financialexpress-bd.com
PLASTIC goods manufacturers recently called upon the government to cut import duties on plastic intermediate products from 25 per cent to 15 per cent. They also urged the government to increase import duty on some finished plastic products from the existing five per cent as a measure to protect the Tk 20-billion-strong plastic industry of the country. Intermediate products are mainly non-formed plastic which is turned into products such as clothes hangers, labels and furniture.
In FY 2005-2006, the plastic industry exported products worth Tk 14.43 billion. This included Tk 3.81 billion worth of direct exports and Tk 10.62 billion of indirect exports. For example, plastic products, such as buttons or hangers, were included in garment sales. Although local businessmen are doing very well in the plastic sector, they still have to import the intermediate products and then add value to them, but the government imposed a 25 per cent import duty on intermediate products when import duty on some finished plastic products was only five per cent. This is the reason why local products are failing to compete with imported plastic products in the domestic market. The plastic industry is now the third or fourth largest export earner for the country if both direct and indirect exports are counted.
In fact, proper government support could double or triple the sector's growth. The growth of a country's plastic industry normally shadows that of other industries as most sectors such as telecom, automobile, light engineering, textile and garments and food require plastic and plastic accessories or plastic packaging. The export of plastic products is three times higher than the import of plastic materials using the bonded facility.
There are huge opportunities to raise the country's plastic goods exports. Multinational super chain stores - Wal-Mart, Jecy Penny and Tom Hill - have used only 10 per cent of saleable commodities like readymade garments but the demand for saleable plastic products is more than readymade garment, which is 14 per cent of the total saleable commodities of super chain stores. If the country's plastic goods exporters could take this opportunity to export their goods to the US based multinational super chain stores, it would boost the country's plastic industries. Plastic is being used in various forms - as shopping bags, in food packaging, for exporting fish to international markets while it is being used in the country's jute and textile industries. The quality of Bangladeshi plastic goods is better than that of China and India.
Bangladesh will have to take the opportunity of the ongoing global economic turmoil as the US consumers might turn from the expensive products from China, India and European Union to the low-cost but quality products from the developing countries. Bangladeshi plastic goods are exported to 23 countries in North America, Europe, Asia and the pacific and Middle East. The country exports plastic goods also to India, Sri Lanka and Nepal. The major plastic goods markets are Poland, China, the UK, Belgium, France, Germany, the USA, Canada, Spain, Australia, Japan, Malaysia, the UAE, Hong Kong, Bahrain, Italy, New Zealand, Netherlands etc.
Plastic industries in the country have been flourishing in recent years. Apart from meeting domestic demand for all kinds of plastics products and helping import substitution, this industry is also found helping notably the value-addition of the readymade garments (RMG) industries. The RMG industries are found adding value to their export products by about 25 per cent on an average using various locally made plastics products and accessories such as specialised polybags, clips, clippers, etc.
Yet lack of policy supports, inadequate port facilities and an unwanted image problems driven by misleading propaganda are the main hindrances to the growth of a potential plastic sector in the country. The country is capable of producing world class plastic products to capture a sizeable portion of the 500 billion dollars 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. Encouraged by bond facilities in 1992, Bangladesh plastic sector now stands on a sound footing with more than 25,000 factories all over the country. More than 0.3 million skilled and unskilled manpower are employed in this sector.
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, par capita yearly consumption of plastic product 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 recently has come under the US criticism for dumping products, a window of opportunity has opened up for Bangladesh to export its products to the US. However, the plastic sector is facing difficulties also 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.
Meanwhile, the government has taken up a scheme to set up exclusive industrial estates for plastic and automobile industries. The proposed industrial estates, expected in suitable places near Dhaka, will provide land and infrastructure facilities to manufacturers of plastic goods -- both for local and export markets. Private sector leaders have welcomed the government initiative to develop separate estate for plastic goods. Plastic industry is nevertheless, a vital SME sector, which is expected to be benefited from a separate industrial estate. Plastic goods have already a good market abroad and establishment of such a separate estate will further encourage entrepreneurs to set up more sophisticated high-end industries.
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. Out of 3,000 plastic industries in Bangladesh, 80 per cent are located in the old part of Dhaka. Of the total units, 30 are engaged in direct export, 300 in indirect export and rests serve the domestic market of Tk 8.0 billion.
The plastic products include tooth brush, ball point pen body, overhead tank, shopping bag, garbage bag, garbage bin, crockeries, plastic furniture, toys, garment accessories, household items, sanitary fittings, spare parts of textile and jute mills and packaging items. The high duty on raw materials is pushing the price of locally manufactured plastic goods higher. As such, the products are struggling to compete with the cheap Chinese and Indian imports. Potential exporters are also failing to provide plastic products like polybag and hanger, which are used by the garment industry, in a competitive price.
Various uses of plastic products are being tested around the world. Of late, experts have witnessed that blending plastic waste with bitumen in laying tarmac could enhance road durability, drastically reduce maintenance costs, and save the country Tk 15.08 billion in maintenance cost a year. Less cracks and potholes will develop on roads and recycling of plastic waste can reduce the amount of hazardous non-biodegradable materials in the environment.
...................................................................
szkhan@the financialexpress-bd.com