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Bangladesh's CERAMICS

From an importer to an exporter

SAJIBUR RAHMAN | March 27, 2024 00:00:00

Bangladesh's ceramics sector holds the potential to grab a greater slice of the global market share but for some hurdles not insurmountable. Much of the prospect of ceramic products remains largely untapped for factors like unfavourable tax policy, geopolitical instability, erratic gas supply, steep increases in gas prices, and a prevailing dollar shortage, industry sources say.

Despite the problems, however, ceramics have recorded some enviable gains in terms of both local and foreign investments, annual production capacity, export, the number of industries, employment, and local sales volume. These positives have shown an uptrend in recent years.

The industry looks poised to enhance its export competitiveness, benefitting from duty-free market access to several developed nations through the Generalized System of Preferences (GSP). The destinations include the European Union (EU), the United Kingdom (UK), Australia, New Zealand, Japan, Canada, and Russia.

In contrast, Chinese ceramics face a competitive disadvantage as they are subject to additional duties, such as up to 12-percent tariffs, to access the EU market.

Prior to the year 2000, Bangladesh had found itself heavily reliant on importing over 80 per cent of its ceramic products, necessitating significant spending of foreign currencies.

A recent study conducted by USAID revealed that the manufacturing capacity of country's ceramics sector saw a significant increase by around 200 per cent between 2008 and 2018. And the expansion was pivoted by enhanced capital investment.

Both local and foreign investments witnessed a 16.37-percent increase in the fiscal year 2022-23 compared to 2021-22. Total investment stood at Tk 178.45 billion, equivalent to more than US$ 1.62 billion, as of the fiscal year 2022-23, according to the Bangladesh Ceramic Manufacturers and Exporters Association.Total investment, local and foreign combined, was Tk 153.56 billion or over US$ 1.06 billion in the FY 2021-22, the association data revealed.

According to the Bangladesh Investment Development Authority (BIDA), the ceramics sector has demonstrated an impressive average annual growth of 20 per cent on the domestic market and 26 per cent on the export market. Moreover, it has witnessed a remarkable growth of 200 per cent in both investment and production over the past decade.

Industry-insiders strike an upbeat note that the ceramics sector can significantly bolster the country's economy by exporting eco-friendly products worldwide, akin to the success of the ready-made garment (RMG) industry, if it receives requisite policy backing from the government.

While Bangladesh's status is world's second-largest as RMG exporter, of course hugely relying on imported raw materials, stakeholders argue that the ceramics sector holds comparable promise as a key foreign- exchange earner.

Nowadays, ceramic tableware, pottery, tiles, sanitaryware, insulators and other ceramic products are very popular and have high demands both on the domestic as well as world market. And it has the perfect geographical position for producing and supplying all ceramics to meet the current demands of local and international market.

The export volume of ceramic products had increased by nearly 21.06 per cent during FY 2021-22 to FY 2022-23. In terms of value, the volume of exports reached Tk 6.03 billion, equivalent to more than US$ 54.86 million, according to BCMEA, in FY 2022-23 whereas it was Tk 3.85 billion or more than US$ 45.31 million in FY 2021-22.

Manpower involved directly and indirectly reached 0.5 million. Direct employment stood at 56,502 in FY 2022-23 while it was 54,037 in FY 2021-22, according to the BCMEA data. Female workers in a factory on average stood at tableware 55 per cent and tiles & sanitaryware 20 per cent.

There are presently 74 active companies operating across various sectors. Among them, 31 specialize in tiles, 19 focus on sanitaryware, while 20 are dedicated to producing tableware and ceramic bricks.

Among the companies engaged in ceramic sanitaryware production are RAK, Abul Khair, Akij, Charu, Excellent, Sanita, Euro Bangla, BISF, Apple, Glory, Solar, and Dhaka Ceramic and Sanitary.

The ceramic industry in Bangladesh primarily manufactures four main categories of products: tiles, tableware, sanitaryware, and ceramic bricks. These products are exported to over 50 countries, including, but not limited, to the USA, Canada, the UK, Germany, France, Italy, Sweden, Switzerland, Norway, Greece, Ireland, the Netherlands, Spain, Austria, and Belgium.

The key features of the sector include the use of lead- and cadmium-free glaze and pigments, access to sulfur-free natural gas supply through state-owned channels, adherence to ISO static production standards, and flexibility in Minimum Order Quantity (MOQ), facilitating bulk exports.

Moreover, the sector benefits from Generalized System of Preferences (GSP) facilities for export, competitive pricing strategies, a strong global reputation, and certifications from several reputable international entities.

According to data from the BCMEA, in the fiscal year 2022-23, the country produced over 2.70 trillion pieces of tableware, with tiles production reaching 2.30 trillion square meters and sanitary ware production totaling 156.31 lakh pieces.

Advanced ceramics refer to ceramic products that have diversified applications beyond traditional uses. These applications include energy conservation, water purification, electrical, and biological fields. Projections suggest that by 2025, the global market for advanced ceramics could reach a substantial value of US$ 141.53 billion. Bangladesh's industry-insiders indicate efforts to explore opportunities beyond conventional ceramic applications to capitalise on this growing market.

Irfan Uddin, secretary-general of BCMEA, has highlighted the persistent challenges facing the sector, particularly an acute energy crisis. This crisis not only hampers production but also impedes export growth. "The combined impact of the pandemic and the energy crisis is severely affecting our industry. Production costs are soaring, inevitably affecting our customers. Additionally, our products suffer due to irregular gas supply crucial for firing ceramic items, "he stated.

While the dollar-purchase rate remains high, he says, there is a slight easing in letter of credit (LC) compared to previous times. The sector has also embarked on initiatives to address the skills gap by aiming to train 10,000 skilled workers from 2024 to 2028.

Mr Irfan emphasizes that overall production growth in the sector could be significantly higher if the current energy crisis is promptly alleviated.

Despite promising orders from abroad, challenges persist in meeting deadlines due to disruption to power and gas supply.

As the Director of FARR Ceramics Ltd, Irfan's insights underscore the urgent need for sustained efforts to mitigate these challenges and capitalize on the industry's potential.

He highlights the evolving landscape of the sanitaryware and tiles industries. He expresses optimism in projecting a gradual growth trajectory with sanitaryware exports expected to reach a better growth within the next five years. Notably, tableware has already made significant strides in export markets, positioning itself as a lucrative export-oriented sector.

"The local market's capacity to meet demand for both tiles and sanitaryware falls short, indicating opportunities for expansion and investment in production capabilities to bridge the gap between supply and demand," he says.

Prof. Mustafizur Rahman, a distinguished fellow at CPD, feels a critical need for collaboration and cooperation among the government, academia, and industry to elevate product diversification and tap into higher market segments amidst the sector's rapid growth.

He underscores the necessity of training programmes to facilitate product diversification. Additionally, Rahman stresses the importance of industries focusing on producing high-quality products to access global markets.

"In order to compete effectively in the global market, our country must enhance the quality of its products by adopting cutting-edge technology," the economist recommends, adding that the government should provide proper policy support for boosting the sector.

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