Supplying some of the key ingredients of house-building (tiles, sinks, sanitary wares, and cutlery), the ceramic industry's growth parallels that of the real-estate revolution and home construction. Though it relies on clay (found particularly in Mymensingh, Netrakona, and Sylhet), since the first industrial unit was opened in 1958 (Tajma Ceramics), to which was added another before independence, in 1966 (People's Ceramics), the massive growth alluded to leaves of the country with 54 plants today, according to the Bangladesh Ceramic Ware Manufacturing Association (BCWMA), employing half a million people, and, like the ready-made garment (RMG) and cement sectors, utterly dependent on imported inputs. Unfortunately, the growing exports must contend with a faster domestic demand growth, creating the same atmosphere that needs ingenuity, expanded production, and greater inter-industry coordination to make the most of both those worlds.
As a January 2015 IDLC monthly "Business Review" report (called "Ceramic Industry in Bangladesh: A Sector Rising Strong") noted, Shinepukur Cermaics, established in 1997, dominates an oligopolistic market, with Munnu, Standard, and FARR Ceramics in control of the tableware segment, Ras al-Khaimah (RAK), Akij, Fu Wang, China Bangla, Mir Ceramics, and Great Wall in charge of tiles, and RAK and BISF controlling sanitary and sink wares.
Foreign engagement has only come naturally. For example, RAK is of U.A.E. (the United Arab Emirates's) origin, and as one of the world's largest, produces not only here (and in India), it has also been expanding its capacity of late, essentially doubling its tiles output to 7.0 million and tripling its sanitary wares to 1.0 million. The global tile market is expected to double its value by 2018 (from five years ago) to just over $102 billion, while the global sanitary ware value will expand by one-third to $33 billion, all of these meaning the growing need for production in low-wage countries like Bangladesh. Not only does Asia produce over two-thirds of global production, with China (37 per cent of the market), Brazil (7), India (6), Iran (4), Italy (4), Italy, Indonesia, and Vietnam leading the list, it also consumes two-thirds of the global supply.
Three-fourths of the Bangladesh exports go to West Europe and the United States, with the United States, United Kingdom, Italy, Germany, and Chile being the key destinations, in that order. Mexico's Ambassador Melba Pria, accredited to Bangladesh (with residence in New Delhi), observed at a "Latin America" seminar at the Bangladesh Institute of International and Strategic Studies (BIISS) in February, Bangladesh ceramics are in high demand in her country, as too across Latin America (and, therefore, the government should simplify trade arrangements by aligning with the Pacific Alliance or the Trans-Pacific Partnership). As Nusrat Jahan of Chittagong's Independent University of Bangladesh noted, FARR Ceramics, which accounts for 10 per cent of our ceramics exports (mostly to Europe) became the first to enter the Latin market (Argentina) as soon as it was founded in 2007. The global demand has been affected not just by the growth in households across particularly emerging countries, but also due to a ban upon Chinese exports across West Europe and the United States, features common to the RMG sector as well.
Our exports have climbed somewhat over the recent years. According to Export Promotion Bureau statistics, we are now exporting one-third more: $42.21 million, against $31.17 million in 2008-9 (out of a $20 billion global market). That is not much, and certainly an area worth greater investor attention. If it serves as an incentive, with the biggest exporter disabled owing to the ban (China, commands 33.7 per cent of the global market), we face softer competition on more favourable terms: Italy is the second largest exporter, accounting for 16.2 per cent of the global market, Spain third with 13.6 per cent, Turkey fourth with 3.9 per cent, and Brazil fourth with 3.5 per cent. Give or take Turkey and Brazil, we could match the others, not just over wages, but also energy supply, since our gas-reserves could be channelled to feed any ceramic plant (as it is already doing with other industries at the expense of fertiliser production).
On the other hand, with the June 2015 GSP (General System of Preferences) suspension by the United States, exporters now have a steeper hill to climb to offset the 7.5-15 per cent import duty, in addition to the 15 per cent value-added tax. Iftekhar Moar noted this is our second-largest ceramic market, after Turkey, but with the United Kingdom, Italy, Mexico, Norway, Denmark, Canada, and Spain, among others (from "Business Outlook," May 10, 2016), the BCWMA response has been to urge the government to withdraw up to 25 per cent of its raw-material import-duty. Finance Minister A.M.A. Muhith only just reminded the industry not to expect future governmental support.
Observing what she calls the "silent revolution" of the Bangladesh's ceramic industry, Jahan also pointed out the industry's spread-effects: of the domestic market valued at Taka 10 billion, one-tenth goes into utility services (gas, for instance), another three-tenths (Tk 3.0 billion) as taxes, while up to four-tenths (Tk 4.0 billion) goes to pay imported inputs. That leaves a tiny amount to cover establishment and operational costs, and generate profits. Nonetheless, producers have responded energetically, with experts serving as the key incentive. Yet, this export-orientation is boosting our imports. Since Jahan also pointed out our imports were twice as large as our exports, some recalculation is due, beginning perhaps with the government: continued infant-industry protection for only a brief spell, but more importantly, afford some fiscal relief to producers.
If the cement industry binds the country together, the ceramic industry (similar to the fashion industry), gives the country a face, adorning it with new styles in everyday household goods, and promises to open new windows by promoting innovation, opening new production windows (like cutlery, or plastic), but mostly expanding production.
It is central to (a) a crucial chain with active and promising backward and forward linkages; (b) encouraging the design industry, thus reinforcing its dominant internalisation effects with viable externalisation effects that even cross national boundaries; (c) revamping our social overhead capital through gas distribution networks; and (d) by making the industry more efficient in production (by eliminating waste expenditures) promoting the country's industrial efficiency.
How long this balance remains depends not only on how adequately those other sectors adapt, but also the social overhead capital (SOC).Â
This shifts attention to two SOC giants: energy and infrastructure.Â
Dr Imtiaz A Hussain is Professor, International Relations, formerly Universidad Iberoamericana, Mexico City.
inv198@hotmail.comÂ
Ceramics: Growth\'s linkage industry
Imtiaz A. Hussain in the seventh article of a nine-part "Second-string sector survey" series | Published: June 24, 2016 00:00:00 | Updated: June 23, 2016 20:06:42
The ceramic industry's growth parallels that of the real-estate revolution and home construction.
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