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European crisis takes shine off ceramics

Exports posted a negative growth last fiscal year

Sajjadur Rahman
Ceramics export, which had been growing at 15 percent on average since 2007-08, witnessed a negative growth last fiscal year due to the ongoing financial crisis in Europe, according to government data.
A surge in bank interest rates has added further woes and decreased competitiveness of the emerging industry, market players said.
Bangladesh bagged only $33.75 million by exporting ceramics in fiscal 2011-12, down by more than 10 percent compared to a year ago, according to Export Promotion Bureau (EPB).
“We are seriously affected by the ongoing financial crisis in Europe,” said Iftakher
Uddin Farhad, chairman and managing director of Farr Ceramics, an export-oriented porcelain maker.
European countries, particularly Italy and Spain, were the biggest export destinations for Bangladesh's ceramics a few years ago. Now these two countries are in deep trouble.
“The industry is going through bad times due to the crisis in the export markets, especially in Europe,” said Rizvi-ul Kabir, chief operating officer of Shinepukur Ceramics, the market leader in export. In the past, Kabir said they had around 20 buyers only in Italy, but they have none at present.
More than Tk 3,000 crore has so far been invested in the sector from home and abroad. The local market size was at around Tk 1,500 crore in 2011, according to market players.
Presently, around 40 ceramic factories are making porcelain wares, tiles, tablewares and sanitary wares. Around 10 new factories have appeared in the scene in the past few years.
Bangladesh exports two types of ceramics — porcelain and bone china. Most of the Bangladeshi exporters make porcelain products, which have been affected more than bone china.
After Shinepukur, the other exporters are Monno, Farr, Artisan, Paragan and Pratik. But none of them except Shinepukur makes bone-china products.
“Our porcelain exports have gone down by 10 percent, but it is covered by a rise in bone-china exports,” said Kabir of Shinepukur.
He blamed the downtrend in porcelain exports on a huge competition from thousands of makers in different countries.
“There are more than 10,000 porcelain factories only in China,” he said.
In addition to the crisis in Europe, Farhad of Farr Ceramics finds a jump in bank interest rate as another reason that will erode the industry's competitive edge.
“My bank has raised the interest rate
to 19.5 percent recently from 16 percent, which was 11 percent a couple of years ago,” said Farhad.
He said the entire ceramics industry has to rely on import for raw materials, mostly from China, which is the main competitor of Bangladesh.
Introducing a complicated system in paying back tax after export has made the industry's business more critical, Farhad said.
The industry has to pay 15 percent value added tax, 5 percent advance income tax and 5 percent duty for import of raw materials. Vat and tax is refundable if goods made of these imported raw materials are exported.
Earlier, exporters got the tax refunded through their banks, but now it has been handed over to the Duty Exemption and Drawback Office of the National Board of Revenue.
“The NBR takes lot of time to pay the money back,” said Farhad.
sajjad@thedailystar.net