We need a sustainable, business-friendly duty and tariff structure

Md. Shahidullah, Managing Director, Metrocem Group

Monday, 25 February 2019

The following are the excerpts from the interview of Md. Shahidullah, Managing Director, Metrocem Group, in an interview with The Financial Express:
1. Would you please describe the state of the construction sector in the country as it is right now?
Answer: The construction sector has a greater potential than any other sector in terms of employment and export related earnings to reduce poverty and make a contribution to the national economy.
Along with its potentiality, the sector is also experiencing new challenges which can be the future determinants of its sustainability. Consumption of cement and steel, the two major ingredients for the construction industry, has seen record a dramatic growth in Bangladesh right now, riding on large infrastructure projects and increasing demand for the materials across the country.
Positive macroeconomic fundamentals, including the impressive economic growth, government infrastructure projects including Padma Bridge, 22 coal-based power plants including Matarbari Power Plant, Rooppur Nuclear Power Plant and Payra Port, flyovers, development of special economic zones, housing construction both in urban and rural areas, led by remittance inflow, and setting up of new industries in the construction material manufacturing sector. The above is the main scenario of the state of construction of our country.
With regard to the cement and steel industry, Bangladesh is one of the few countries that have performed extremely well when the global cement and steel industry is going through a slowdown.
The steel industry witnessed a major growth especially during the last 10 years. The country relies on local manufacturing to meet the demand for cement and steel, as local producers have developed the capacity of producing high quality cement and steel products. Bangladesh is one of Asia's emerging cement and steel markets and has a growing need for raw materials and technologies.
The whole industry is undergoing a huge change as local manufacturers are replacing old technologies with new ones to ratchet up production. Some companies have doubled or tripled their production capacity to cater to the rising local demand.
Metrocem Cement and other competitive cement brands are carrying out massive expansion in its building material manufacturing units to meet the growing demand for quality construction products.
Apart from the ongoing infrastructure developments such as Padma Bridge and Payra Port, the government needs to carry on its development works across the country to retain the present economic growth. The private sector is also vibrant now in the backdrop of a stable political atmosphere and a favourable business environment. Many individual entrepreneurs are setting up new industrial units.
We have the opportunity of reaping the benefits of our demographic dividend at least for the next 20 to 25 years. So the construction industry will obviously grow, as Bangladesh is on its way to completing its unfinished development works.
The country has an installed production capacity of 60 million MT of cement a year while the utilised production capacity is 32 million MT of cement per annum. The country is capable enough to meet the local requirements of steel and cement.
2. Do you think, after the last general election held on December 30, 2018, the prevailing political stability will leave a positive impact on the sector in 2019? Please elaborate.
Answer: I think, after the last general election held on December 30, 2018, the prevailing political stability will leave a positive impact on the construction sector in 2019. Because, the political party that is elected in December 30, 2018 emphasised on infrastructure base development.
Apart from the ongoing infrastructure developments such as Padma Bridge, Metrorail, Flyover, Power Plant, Four Lane Development of Highways, Payra Port etc. government needs to carry on its development works across the country to retain the present economic growth.
The private sector is also vibrant now in the backdrop of a stable political atmosphere and a favourable business environment.
Planning, security, political unrest, strike and corruption are the main obstacles that can hamper this sector. Political instability is one the main reasons that has made the construction industry suffer along with some of the other industries in Bangladesh.
3. What are the challenges you face in the business right now?
Answer: Along with the business where I am related to, potentiality the sector is also experiencing new challenges which can be the future determinants of its sustainability. The construction business is not just about the cement-steel-auto bricks manufacture and marketing, it is about the international market as well.
Challenges are not many but acute in nature, firstly new commercial gas connections have been totally stopped and current supply of gas is insufficient with which we cannot run our gas generator. Secondly for cement, steel, bricks or any other building materials production, uninterrupted power supply is a must but still power supply in industrial area is not uninterrupted.
Thirdly the raw material price of cement and steel is varying rapidly, fluctuation of dollar rate hamper LC opening.
A fixed axle load of Dhaka-Chattogram Highway, shortage of waterways connectivity, navigability of waterways, no regular capital dredging of riverways are some other hindrances.
Beside, this sector also faces a lot of challenges like unskilled workers, improper infrastructure, insufficient bank loans associated with high rate of interest, high tax rate, intricate social compliance, political crisis, market and product diversification, lack of new investment, poor backward and forward linkage etc.
In order to overcome these challenges, we need to take number collaborative and coordinated steps to be taken from major stakeholders to reach the ultimate goal of achieving the top position in the cement and construction market.
We need a one-stop place to have solution for utility connections without a huge lead time. This will lead to faster economic growth, stimulate entrepreneurs for expansion and benefit the country as a whole.
4. What is the state of the use of latest technology like prefabricated steel in the sector?
Answer: Prefabrication is not anything new to the construction industry. Construction has seen a big boost in prefab (or modular) construction, and the trend continues into 2019 as technologies continue to make it an even better option.
Prefabricated steel is becoming popular in Bangladesh, particularly while constructing factory premises or corporate houses. This is not getting popularity in building houses/apartments.
In line with the rapid economic growth right now, short construction period and labour-saving were strongly required in the construction field.
Because of the investment purpose, the equipment was required to be started up as early as possible to gain its full benefit.
To correspond to the needs of both the construction market and the in-house equipment investment, the development of time-saving and labour-saving technologies for buildings and foundation structures was started.
5. How will you evaluate the backward linkage industries in the sector and do you think there exist opportunities still untapped?
Answer: As you know raw materials of cement such as clinker, slag, limestone, gypsum, fly ash etc. are being imported from different countries. In the same way we do not have any natural source of iron ore. We have to rely on import of scrap or billet, meeting 90 per cent of demand through import of scrap and only 10 per cent are being met locally.
In this context, Bangladesh should put more emphasis on setting up well established backward linkage industry to increase productivity to create new opportunities and to ensure that the existing opportunities are utilised.
We need a sustainable, business friendly duty and tariff structure implementation by the government which will strengthen backward linkage of the sector.
As you know a number of thermal power plant projects are running, we can have easy procurement of one raw material (fly ash) of cement which right now we are getting from Thailand and India.
Chittagong port is the most used port for us and we expect a faster handling time rather a long time at the port, though there are a number of ports which will be in operation very soon.
6. Construction is a big sector that can change the face of the country. How much are we ready for that in view of the global perspective?
Answer: Construction is a big sector that can change the face of the country. During the last three decades, big amounts (in the budget) have been spent by the government in the construction sector as it is considered a priority area for the development of the country. Since the 1990s, Bangladesh has made significant progress in the construction sector.
However, increase in population, internal migration and urbanisation have led to tremendous increase in the movement of people internally that the construction sector is still hard pressed to cope with.
In the last decade, the Bangabandhu Bridge was constructed on the Jamuna to connect the north of the country with mainland. This bridge has led to vastly increased movement of people and goods and has caused rural growth centres to come up on both sides of the bridge. The bridge is considered a salient achievement in the area of communication development across the country.
Construction development, in a planned manner, in keeping with the overall urban development plan, is extremely important for the country in order to ensure sustainable cities in the future; and, in order to implement the projects and programmes effectively, institutional and human capacity enhancement is essential. We are totally ready for that in view of the global perspective.
Bangladesh has to leap forward in providing the infrastructures required a result of the ongoing rapid growth of urbanisation.
To reduce road congestions in Dhaka city, the government plans to build infrastructures like elevated rail, underground rail, metro rail, and rapid bus transit keeping mass movement of people in mind.
It will also expand the roads and highways grid and build elevated expressways to increase connectivity and overcome traffic jams. In this regard, a commuter metro train service is planned to be built, running from the north to the south of the city.
The government is working to complete the much awaited Padma Bridge, which will connect the north and east with the southwest of the country. The recently-started construction of over-bridges, flyovers, roads and four-lane highways on an expeditious basis will address the current communication problems.
Our construction industry is not only ready for next five to 10 years' development of the country but also we are ready to serve Vision 2041 of the government.
7. The government plans to build villages like urban areas. That offers a great opportunity for businesses like yours. What is yours opinion?
Answer: Now the government believes in the development philosophy. Development means not only the development of the city, its means development of the rural and village areas as well.
Recently Prime Minister Sheikh Hasina declared thana-wise development programmes. So, the government is taking plan to build the villages like urban areas. Another positive side of the plan is that, it creates more opportunities for the business and industries, I think.
In the last 20 years, the accessibility to rural growth has improved tremendously in the country. Handsome budget outlays have been spent on improving the infrastructure, the road and other means of connections to rural growth as well as on developing the growth themselves as rural hubs for markets, offices, rural health clinics etc.
This involved building of small bridges, culverts and laying drainage pipes where necessary along the rural roads. A key achievement in the villages' development like urban has been the empowerment of rural women.
Implementation of the government's declaration of RCC roads at municipal areas is needed for the development of infrastructures and their proper maintenance in a planned way, in keeping with overall rural development plan. It is extremely important in order to support and help enhance the increasingly visible activism and enthusiasm for economic and social uplift in rural sectors and, hence, sustainable development in the country.
8. Please tell about how you got into business and founded yours business venture. What is the way forward?
Answer: I started my journey as a trading house of building materials 30 years back. Later my experience, endeavour and interest on construction materials made me manufacturer. I have established cement manufacturing plant in the year 2000, steel manufacturing plant in 2008 and eco-friendly auto bricks plant in the year 2012.
Now we are working to enter in the ceramics tiles industry and very soon will be able to meet customer demand by luxurious ceramics tiles.
9. What is your vision of the sector?
Answer: Bangladesh, having 45th largest GDP, is positioned as the one of the next 11 emerging country of the world. All will be done through development and building of infrastructure. Right now the world average cement consumption per capita is 500kg whereas in Bangladesh it is only 185kg. The per capita cement consumption in neighbouring countries like Pakistan, India, Thailand is 250kg.
In the same way per capita steel consumption of Bangladesh is only 45kg while world average is 300kg.
Bangladesh is ready to achieve Vision 2041, and as the manufacturer of construction materials, we are also ready to support the government's goals.
10. Do you have any suggestion for the policy makers?
Answer: Definitely we have suggestions or demand, whatever you term it. We would like to urge our Prime Minister, ministers of Finance, Commerce, Industry and Trade:
* To reduce Duty and VAT to a practical level
* Different tariff rates of gas and electricity at consumer and commercial level
* To increase inland waterways connectivity and maintain those channels through capital dredging
* To provide uninterrupted power supply
* To give gas connection industry priority wise
* To increase of four-lane highways
* To decrease duty to 10 to 12 per cent of cement and steel carrier such as RMC trucks, bulk carriers and long trucks.
* To implement of government's directives to furnish municipality connectivity through RCC roads
* To reduce interest rate to single digit at implementation stage
* Sustainable implementation of government's master plan.