Plastic Industry of Bangladesh: Driving Growth in Export Earnings

Plastic Industry of Bangladesh

Since the invention of plastic, it saw rapid commercialization that had turned it into an essential part of our lives. In 2018, plastic production globally topped 359 million metric tons that had a net profit of 13.2 billion dollars. Plastic has become the 12th highest source of income from foreign export trades in Bangladesh. Plastic is regularly used in garment factories, healthcare, and automotive industries. In the future, plastic may play a big role in the nation’s economy.

Overview of The Plastic Industry in Bangladesh

Bangladesh has exported plastic and plastic-made goods worth 1 billion dollars in the fiscal year 2017-18, from which 1.9 billion worth was supplied locally. It was 20% more than the previous year. Locally the high requirement for plastic is due to the ever-growing demand for plastic furniture, household plastic equipment, plastic hardware, toys, and so on. Besides, industrial packaging requires a large bulk of plastic production. Yet, Polyolefin, one of the fundamental ingredients for plastic, is not in abundance in the country’s resources. Hence, we depend on China, India, Thailand, and other neighboring countries to acquire the raw materials. Regardless, there are 142 different types of plastic being used in production and is expected to add more in the future. On average, a Bangladeshi citizen uses 6 kilograms of plastic. Compared to India, it is half what Bangladeshi citizens consume. The average use is nearly 30 kilos in south-east Asia and 40 kilos in the Middle East. Compared to that, we are trailing behind. The plastic industry is being reinforced; manufacturing factories are high in number reaching over 5000. 98% of which is SME included.

Nearly 15 lakh people are employed in the plastic industry of Bangladesh; 2 lakh in the lower unit, 5 lakh in the middle unit, 1 lakh in the top unit and another additional 6 lakh people are indirectly working in the sector.

Exports from Plastic Sector:

Plastic sector contributes 1.5% of all Export earnings. Normally the plastic exports account for two major varieties. First is plastic-made goods and the second is business-to-business plastic as raw materials. 90% of the earning comes from the supplies to other businesses. 80 % of that is delivered to the garments sector. For example, cloth hangers, buttons, clips, and collar chips require a massive supply. The profit was 117 million dollars from exports in the fiscal year 2016-17. But, that year, a price hike in raw materials for plastic resulted in a decrease in the production of a whopping 16% that sums up to 98 million dollars. But, the following year, the earnings regained momentum with 120 million, a 22% increase in 2018-19.

Currently, the export business of plastic is considered stable. Supplies are being sent to the USA, Canada, India, China, and 68 more nations. 180 metric tons of plastic waste is being recycled every day through the plastic recycling cluster system. Recycling primarily produces polyethylene terephthalate which is a widely applied material for packaging. Recycled plastic accounted for 26% of the entire export products. The lion’s share of plastic toys was being imported from China. The value of plastic toys accounts for a billion dollars in Bangladesh’s market right now, 60% of which is now supplied by local manufacturers. There are over a hundred toy manufacturing companies that include Hakkani Hark Group, Kabir Garden Industries, Sabbir Plastic Industries, and Aman Plastic Industries. These are some of the leading manufacturers in the plastic industry.

Manufacturing plastic toys have seen an increase of 161% in the last 5 years. Due to this huge growth, the sector has been declared as a special development sector in the Seventh Five Year Plan of Bangladesh. About 40 million worth of plastic toys are currently being exported. Pran RFL Group and GSL Export are at the top of the list of exporters who mainly export plastic hardware, plastic models and other plastic toys. Notable among the major exporting countries are France, Belgium, Japan, Germany etc.

Assistance by Governmental Policy

The Government of Bangladesh has identified the plastics industry as an emerging sector and has been providing a good amount of policy support. Let’s discuss them now:

Tax-free raw material imports: Until the 2015-16 financial year, the import duty on raw materials for the plastics industry was 25%, which has now been reduced to 5%. Bonded Warehouse facilities are also being provided to export-oriented industries. This makes it possible to import raw materials without any duty.

Duty exemption on machinery imports: Zero duty has been imposed on the import of machinery from fully export-oriented industries. In addition, only 2.5% to 6% import duty has been imposed on the machinery of other industries. As a result, the additional cost of machinery in the manufacturing sector is being shrunk a lot.

Cash Incentive: Since 2016, the government has been giving a 10% cash incentive to the plastic industry for the export of plastic products. This is encouraging the country’s plastic manufacturers to work in the plastics industry.

Adversities in The Plastic Industry

Despite the recent potential development in the plastic sector, it is constantly facing a number of hurdles. Let’s discuss them below:

Absence of Testing Labs: Since there is no testing laboratory to test the quality of plastics in Bangladesh, we have to rely on Singapore, Germany, and Hong Kong for quality certification. Due to the lack of national recognition for the quality of plastic materials, the global market is creating some bad ideas about the quality of domestic products. As a result, many times international investors are hesitant to invest in the country’s plastics sector. Undoubtedly this is a big obstacle for us.

Extra Expenses: In the absence of adequate warehouses in the country, it is not possible to import raw materials for plastic production in bulk in the global market. As a result, there is not much opportunity to import a limited amount of raw materials. As a result, the price of raw materials falls a bit more and the production cost also increases.

Lack of Appropriate Knowledge: There is a great lack of knowledge about polymer science in our country. Also, the number of skilled workers in the plastics sector is very low due to the limited number of trainers in the local establishments. Which is a big obstacle to our development in the plastics industry.

Altering from GSP Scheme: Under the GSP scheme, developed countries generally allow developing and least developed countries to import goods at low or zero tariffs. Although Bangladesh enjoys these benefits under European and Japanese GSP schemes, it was removed from the USA GSP scheme in 2013 for failing to ensure labor rights and workplace protections.

emerging plastic industry of bangladesh

Necessary Steps for The Future

The growth of the plastics industry is having a huge impact on other important sectors of the country’s economy, including readymade garments. For which the government of Bangladesh is giving high priority to the plastic industry of the country. A total of 2.44 billion has already been invested in the plastics sector. If it succeeds in sustaining this growth in the domestic and export markets, the market value of the country’s plastics industry is expected to reach USD 115.10 billion by 2023. In addition, the current global plastics market value is about 68.6 billion. Of which, Bangladesh is contributing only 0.5%. However, according to the Bangladesh Plastic Goods Manufacturers and Export Association (BPGMEA), by 2030, Bangladesh will have a 3% share in the global plastic market. However, in order to reach that goal, we have to take several steps to avoid obstacles. The following could be some of the ways:

Reducing operating costs: Separate plastic economic zones can be set up to avoid additional production costs. Under which several warehouses can be constructed for stocking imported raw materials. In this way, more raw materials can be imported together and production costs can be reduced.

Product diversity: Attempts can be made to diversify the products by arranging quality control. In this way, the growth rate can be further increased by further expanding the country’s plastic market.

Improving skills and technology: The number of technical education institutes related to plastics should be increased. At the same time, the number of skilled and qualified trainers should be increased. So that we can overcome the inefficiency and incompetence in the use of modern technology in the plastics sector.

Expansion of the recycling industry: Naturally, single-use plastics are extremely harmful to the environment. However, plastics can be recycled and reused up to 20-30%. Therefore, recycling plants, waste management systems, and necessary infrastructure can be provided in the plastic economic zones. Recycling and increasing the quality of plastics will help in further expansion of the export market.
With the expansion of the plastics industry, plastics have become an important part of our lives. Plastics are playing an important role in the country’s economy by meeting the daily demand as well as contributing to various industries. And so the plastics industry is contributing 1% of the total GDP of the country. However, by taking the right steps, it is possible to develop the plastics industry as well as the country’s economy by creating a conducive environment for the production of plastics.

Leave a Comment