Saving plastic industries from their predicament
Thursday, 27 September 2007
Mir Hossain Zafar
APART from meeting domestic demand for all kinds of plastics products, the flourishing plastic industry is also found helping notably the value-addition of the readymade garments (RMG) industries. The RMG industries are presently the backbone of the country's economy with some 76 per cent of the country's total export earnings coming from this sector alone. These industries are found adding value to their export products by 20 per cent on average using various locally made plastics products and accessories such as specialised polybags, clips, clippers, etc. But according to reports, 100 plastic industries have closed during the last two and a half months and another 100 such industries are about to meet the same fate fairly soon.
The main reason for the unhappy development appears to be a decision made in the current year's budget that imported raw materials of plastic industries under bonded facility must bear a seal in their packets indicating that the same have been imported for specific use under the bond facility and ought not to be put on sale for any other purpose. The decision was encouraged because of the fact that a part of these bonded products are sold in the black market for unapproved uses, the government is thus deprived of revenues and the purpose of allowing bond facility to the industry gets defeated in the process. But the decision may have been short-sighted in view of the fact that the large number of plastic industries which have cropped up are found largely using up the raw materials imported under the bonded facility in their production processes. This is done for maximising their production in view of the demand for their products in the local as well as foreign markets. There is surely a small amount of misuse of the imported raw materials but a decision to counter it at the cost of closing down hundreds of industries, job losses for its workers and decreasing value-addition in the pivotal sector, is hardly worthwhile.
The plastic industries are closing down because they are finding it impossible to get foreign suppliers to supply them raw materials after fulfilling the new labeling requirements in Bangladesh. The reputed and principal foreign suppliers of these raw materials are in force. For them, to bring about changes in their existing machines only for meeting the partial demand of Bangladesh markets at great costs, is not feasible.
Thus, the local plastic industries are not getting suppliers who would supply them after satisfying the new labeling rules. Plastic industries which have old stocks of raw materials are somehow managing production although these would shut down inevitably after running out of supplies. Others have closed down completely while more are about to stop operation for the same reasons. Already, the value addition in RMG industries is getting adversely affected from non-availability of locally produced plastic accessory products and the need to import them. Prices of other kinds of plastic products for household consumers are rising and their scarcities are visible in the market. The situation merits a fast review by the relevant official authorities. The government would be acting only pragmatically by withdrawing the need for labeling the packets of raw materials by taking a hard look at the bigger negative picture that has emerged from the decision. In the longer run, new measures can be thought of and introduced that would attain the objectives without creating disruption and economic losses on such a large scale.
APART from meeting domestic demand for all kinds of plastics products, the flourishing plastic industry is also found helping notably the value-addition of the readymade garments (RMG) industries. The RMG industries are presently the backbone of the country's economy with some 76 per cent of the country's total export earnings coming from this sector alone. These industries are found adding value to their export products by 20 per cent on average using various locally made plastics products and accessories such as specialised polybags, clips, clippers, etc. But according to reports, 100 plastic industries have closed during the last two and a half months and another 100 such industries are about to meet the same fate fairly soon.
The main reason for the unhappy development appears to be a decision made in the current year's budget that imported raw materials of plastic industries under bonded facility must bear a seal in their packets indicating that the same have been imported for specific use under the bond facility and ought not to be put on sale for any other purpose. The decision was encouraged because of the fact that a part of these bonded products are sold in the black market for unapproved uses, the government is thus deprived of revenues and the purpose of allowing bond facility to the industry gets defeated in the process. But the decision may have been short-sighted in view of the fact that the large number of plastic industries which have cropped up are found largely using up the raw materials imported under the bonded facility in their production processes. This is done for maximising their production in view of the demand for their products in the local as well as foreign markets. There is surely a small amount of misuse of the imported raw materials but a decision to counter it at the cost of closing down hundreds of industries, job losses for its workers and decreasing value-addition in the pivotal sector, is hardly worthwhile.
The plastic industries are closing down because they are finding it impossible to get foreign suppliers to supply them raw materials after fulfilling the new labeling requirements in Bangladesh. The reputed and principal foreign suppliers of these raw materials are in force. For them, to bring about changes in their existing machines only for meeting the partial demand of Bangladesh markets at great costs, is not feasible.
Thus, the local plastic industries are not getting suppliers who would supply them after satisfying the new labeling rules. Plastic industries which have old stocks of raw materials are somehow managing production although these would shut down inevitably after running out of supplies. Others have closed down completely while more are about to stop operation for the same reasons. Already, the value addition in RMG industries is getting adversely affected from non-availability of locally produced plastic accessory products and the need to import them. Prices of other kinds of plastic products for household consumers are rising and their scarcities are visible in the market. The situation merits a fast review by the relevant official authorities. The government would be acting only pragmatically by withdrawing the need for labeling the packets of raw materials by taking a hard look at the bigger negative picture that has emerged from the decision. In the longer run, new measures can be thought of and introduced that would attain the objectives without creating disruption and economic losses on such a large scale.