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Paint industry through thick and thin

Rupali Chowdhury | December 08, 2021 00:00:00


The pandemic has impacted everyone's lives. From the individual level to the business perspective, it has taken away something from everyone in some way or other. Especially for the businesses around the world, the pandemic has thrust upon an unprecedented situation and brought down many of the businesses to knees.

According to ADB, global losses were estimated at 5.5%-8.7% of world GDP in 2020 and 3.6%-6.3% of world GDP in 2021. And the corresponding losses for developing Asian countries amounting to 6.0%-9.5% of regional GDP and 3.6%-6.3% of regional GDP in 2020 and 2021 respectively. This economic contraction has resulted in slump in both aggregate supply and demand affecting businesses globally. Bangladesh, despite being one of the fastest growing economies, went through bouts of economic turmoil over almost 2 years. Export figures fell drastically in 2020 from 2019 due to slump in global demand and import figures also plummeted in parallel due to raw material disruptions, stagnated construction works and falling fuel prices in the global economy.

According to World Bank, Bangladesh's GDP growth rate came down to 2.38% in 2020 - the lowest in last two decades. However, our economy has started recuperating - thanks to strong resilience shown by the export oriented business entities of the country. And the increased flow of inward remittance also spurred economic recovery to a great extent. Now, experts are expecting that GDP growth rate of the country can reach up to 5.6% in 2021 subject to few factors. It is also projected that over next couple of years such GDP growth of the country will stabilise, meaning that economy will be rising from this historic trough marking a strong path of recovery.

When coronavirus first hit the country back in March 2020, it was a huge blow to construction industry. A lot of ongoing projects got postponed resulting in a severe slump in business. People refrained themselves from availing paint solutions and other related services. People were terrified, shops were shut down, and many people became jobless.

This resulted in financial strains not only for individuals working in the paint industry but also for individuals who are part of the construction industry.

The situation even exacerbated with disruption of raw material supply as factories across the globe were shut down aiming to combat this rogue virus. Different businesses resorted to contingency plans to overcome this sudden headwind.

However, Bangladesh economy started seeing signs of recovery from the first quarter of 2020-21. Listed companies of the country saw profit rise in the first quarter of 20-21. People are now ready to loosen their purse strings. So the business is getting back to its previous pace gradually. Riding out the uncertainties, the country's leading decorative paint manufacturer Berger Paints' profit percentage had a tremendous recovery in terms of year-on-year profit in the first quarter of FY 21-22 (April 21 - June 21). However, as suppliers across the globe delve into their respective businesses further and strive to compensate for the loss incurred/sales shortfall during the initial days of pandemic, raw material cost has started soaring impacting profitability significantly. Additionally, with the rise of export and import, freight cost is also on the rise. Such global price-hike has hit local manufacturing of paint significantly in recent times.

Now that the paint industry is ready to experience a rebound, we need to tap into greater potentialities by exploring different strategies, and the government has an important role to play for the economic recovery of this industry. Despite recent surge in raw material price, the global market for paints and coatings is forecast to reach the size of US$183.3 billion by 2026. It clearly indicates the fact that this industry can go a long way and contribute to the overall economic growth of the country. Hence, proper policies must be put in place to ensure steady growth of this industry. It is imperative for the govt. to take necessary steps with a view to streamlining the supply chain disruptions caused due to pandemic which has almost doubled the time and cost of transporting goods. A change in the perception and exemption from supplementary duty is necessary. At the moment, paint is listed as a luxury item despite the fact that paint increases longevity of fixed assets by slowing down the depreciation. Moreover, we have developed many innovative and eco-friendly painting solutions which are indispensable for the development of other industries in the country. For instance, our eco-friendly paint - Breathe Easy Viracare has been used in few of the leading export oriented RMG factories in our country which in turn helped them to achieve LEED (Leadership in Energy and Environmental Design) certification facilitating their export business further. But ironically, such specialized paint and coatings are still subject to supplementary duty.

Small and medium enterprise play a pivotal role for any developing economy. Most of the paint dealers fall under the small and medium enterprise category who have been massively impacted owing to this pandemic. Government may intervene to ensure less stringent policies for SME businesses to avail credit from FIs and NBFIs. In this regard, the government can work with microfinance institutions along with nationwide network of state owned and private commercial banks for channeling low cost funds to the SMEs. Even though Govt. has provided stimulus package to reinvigorate different businesses, it needs continue monitoring different business ecosystems closely taking into consideration global market scenario.

At a time when business is in a position of getting back on their feet, conducive policies and environment are vital to get the impetus. Along with the government, all other stakeholders need to work unitedly so that the industry can stay afloat and get back to its buoyant stage in the shortest possible time.

Ms. Rupali Chowdhury is Managing Director of Berger Paints Bangladesh Limited and President of Foreign Investors' Chamber of Commerce & Industry (FICCI)

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