The plastic industry that began its journey in Bangladesh in a small scale in the 1960's has developed into an important industrial sector in the last two decades. A 2012 UNESCAP (The Economic and Social Commission for Asia and the Pacific) study estimated that Bangladesh plastic industry could raise its turnover to US$ 2.0 billion by 2015 and US$ 4.0 billion by 2020, if proper policies are followed.
The plastic sector contributed more than 1.0 per cent to the gross domestic product (GDP) of the country with nearly US$ 117 million worth of direct export in financial year 2016-17. During 2005-2014, the average growth of the sector was estimated at more than 18 per cent, value addition in manufacturing hovering around 51 per cent to 70 per cent.
Domestic market size of the sector is around US$ 950 million. There are more than 5,000 companies with predominant presence of SMEs (small and medium enterprises). The sector generates direct and indirect employment to over 1.2 million people - both men and women.
Recognising its potential in both domestic and export market the government included plastic as a high priority sector in National Industrial Policy 2016 and the Export Policy 2015-18. According to the Seventh Five-Year Plan, plastic sector has the potential to become a diversified export product and it creates a strong backward linkage for the country's textile and light engineering industry.
In the FY 2016-17, around 300 manufacturers exported plastic goods. Besides, there was a significant amount of indirect export or deemed export of plastic materials as raw materials of RMG, (ready-made garment), pharmaceuticals, food processing, electronics and light engineering sectors. Such items included hanger, button, box, poly sheets, other accessories and many more. Thus the sector has led to the growth of several backward linkage sectors.
DEEMED EXPORT: The Ministry of Commerce is in the process of preparing Export Policy 2018-2021. The Business Initiative Leading Development (BUILD) recommended for a separate chapter defining the deemed export which needs to be aligned with the VAT act. A separate database may also be maintained for this purpose. Besides plastic, engineering, procurement and construction (EPC) can be included in the deemed export category.
PLASTIC RECYCLING: One of the components of plastic is recycled products. There is a huge demand for plastic PET flakes in the global market. The plastics recycling subsector, composed of around 300 small units in Dhaka, employs more than 25,000 workers. It produces recycled products out of about 140 tonnes of plastic waste per day. Plastic recycling has also developed into a sizeable component of the plastic industry.
QUALITY OF PRODUCTS: In all these trails, maintaining quality of products is one of the main concerns of the plastic sector. As the sector is largely dominated by small entrepreneurs, investment in large scale is difficult.
From the sectoral study, it was found that most of the small entrepreneurs use retrofitted machinery for production as they find investing in high-end machinery risky and unaffordable. And it is one of the reasons for poor quality of plastic products.
The capital machinery of polymer processing technology, injection blow molding, and extrusion blow molding are imported mostly by the high-end industries from Taiwan, Japan, and Europe. Semi-automatic and manually operated machines are made locally and quality of these do not meet the demand of international buyers. The cost of production may be low, but the product quality has become poor.
In the Import Policy 2015-2018, which is now in the process of being updated, has a provision for import of second-hand machineries. But the conditions are stringent, hence there is a need for a definition of capital machineries.
HARMONISATION OF STANDARDS: Along with the above, lack of product-specific quality standards is also constraining the Technical Product Quality. This affects export competitiveness of the plastic products. BUILD is conducting a study in this regard. It takes too much time to get a standard from the Bangladesh Standards and Testing Institution (BSTI). So the Plastic Goods Manufacturers and Exporters Association prefers to get approval of a design from Department of Patents, Designs & Trademarks (DPDT) under the Ministry of Industries. The design of plastic products changes frequently and they can get registration from the DPDT promptly.
Plastic manufacturers believe that the USFDA standard for food-grade plastic products can be maintained. While having meeting with the BSTI, they informed that CODEX standard can be maintained for food-grade plastic as BSTI has memorandum of understanding (MoU) with codex and they are capable of following all these parameters under codex. Exporters and stakeholders of the sector also feel the need for a harmonisation of standards.
BUILD study recommended for updating the standard of 26 plastic products that have been developed by BSTI for inclusion in the mandatory list of new Import Policy 2018-2021. More plastic product standards should be set up by the BSTI under the certification mark licence for local and export market to ensure use of quality plastic products.
RECYCLING OF WASTE: The plastic sector does not have a good management system of recycling of waste, effluent, and chemicals. Plastic waste has become a serious burden for the country. It is damaging land, rivers, ponds, roads, drains etc. It needs to be controlled immediately.
SKILL DEVELOPMENT: Bangladesh Institute of Plastic Engineering and Technology (BIPET), an initiative of the Bangladesh Plastic Goods Manufacturers and Exporters Association, has been established to increase capacity and skill development of the sector. They have a specific curriculum which should also be upgraded for knowledge sharing and capacity building exchange programmes with plastic sector training institutes from India and other countries.
POLICY SUPPORT: Plastic sector is lagging far behind the RMG sector with regard to policy support. BUILD tried to compare the policies of RMG and plastic sector and a number of discriminations were found. The customs authorities audit the bond licence every year for plastic, although in case of RMG it is three years. RMG sector is listed in the Green Category, but plastic is in the Orange-Kha category. Plastic has an EDF ceiling of US$ 1.0 million while in case of RMG, it is US$ 25 million now. For RMG, corporate tax is 12 per cent while in case of plastic, it is in the normal rate, that is for publicly traded companies 25 per cent and non publicly traded companies at 35 per cent. As the plastic sector export is squat, they do not face duty drawback much. It is found that the facility of Green Transformation Fund (GTF) is not allowed for plastic sector. But it can be extended for environment-friendly production and import of recycling technology for the plastic sector alongside three other sectors already covered - RMG, leather and Jute. So far, utilisation of GTF is not up to the level as per information available with the Bangladesh Bank.
About 28 per cent of the workforce in the plastic sector are women. The ergonomic or occupational safety issues in plastic enterprises should be stressed further.
Both the Ministry of Commerce and Ministry of Industries have responsibilities for formulating a plastic sector policy and roadmap. Their activities should be coordinated to avoid duplication while sharing.
Plastic is a labour-intensive sector suitable for Bangladesh and it has all the potential to develop further.
Ferdaus Ara Begum is CEO and Jannatul Ferdous Shetu is Research Associate of BUILD, which is a public-private dialogue platform in partnership with DCCI, MCCI and CCCI.
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