'With policy support, Akij Biax Films can save Tk3,000cr in foreign currency annually'

The country's annual market for flexible films – used in packaging and levelling of various products including foodstuff, garments, beverages, medicines, and tobacco – is more than Tk3,000 crore. Akij Group has set up a plant for the first time in the country for packaging films which are used as raw materials by various industries. With a fresh investment of Tk1,000 crore, the new venture, Akij Biax Films Limited, has already started production. SK Bashir Uddin, managing director of Akij Group, recently spoke to Sharier Khan, executive editor of The Business Standard, about the conglomerate's huge investment in flexible films, the market, and the challenges it is faced with.

Akij Biax Films is your new venture…tell us about this new product line?

Flexible films are needed in the packaging of any product such as biscuits, chanachur, powdered milk, garments, and a host of other products. Local packaging companies use the film as raw material. Though the country needs more than Tk3,000 crore worth of films annually, no one except Akij has invested in this industry. The local industry has not developed yet.

We currently manufacture three types of products used in packaging: Biaxially-oriented polypropylene (BOPP), biaxially-oriented polyethylene terephthalate (BOPET), and cast polypropylene (CPP).

Why did Akij invest in this industry?

The use of packaging films started in Bangladesh in 1980. Initially, a fully printed form of film was imported for packaging powdered milk. Near the end of the 80s, the journey of the flexible film industry began here by importing raw materials and printing films. The demand has gone up gradually.

Currently, a market has been created for around 80,000-90,000 tonnes of flexible foil materials. However, a huge amount of foreign currency was being spent as the industry was 100% import-dependent.

We thought of investing in the sector in 2010 to get out of this situation. We studied the suppliers and market requirements of this product. Since it is a plastic product, the environmental issue also needed to be taken care of, which required more investment and a lot of time. We can recycle most of the films in our own plant which used to be considered as wastage earlier.

How did local consumers respond to this Bangladeshi product?

This product received a warm welcome from everyone when it first hit the market. The buyers accepted it, putting aside imported products. Offering quality and affordability, we have set an example of a local product replacing foreign products. However, we had to stumble a bit in sales due to products imported by other companies under the bond facility.

How did bonded products hinder your sales?

Import under the bond facility is 100% duty-free. Factory owners can import it without any kind of tax including VAT, AIT, IT, and customs duty as backward linkage. But we import raw materials paying duty, which puts us in unhealthy competition with others. We are facing headwinds despite producing high-quality products.

Another problem is that we have to count a 5% customs duty on the import of flexible foil raw materials. But traders have to pay a 10% customs duty and 5% regulatory duty to import this product as a packaging material. This small tax gap, which is only 10%, is not acceptable given the huge investment and employment generation that we did in the country. Tax benefits for the development of local industries need to be increased.

How much of the current demand is met by bonded products?

Bonded products account for more than 60% of the total commercial import of BOPP films in the country. Though these products are used in industries, the government does not get any revenue from them. But, we are facing tough competition despite making huge investments, creating employment, and paying taxes.

Did you discuss this matter with the NBR?

I have personally met with the National Board of Revenue's Bond Commissionerate several times. I informed them about the discrepancy but no visible development has happened in this regard so far.

Does Akij have the capacity to meet the demand if the bond facility is discontinued?

Our current production capacity is around 90,000 tonnes, which exceeds the current market demand. We are utilising very little of our capacity. At present, we have managed to capture 20% of the local market. In addition, 40% of our products are exported to 20 different countries including Italy, Poland, France, and India.

Apart from Akij, another company has invested in this sector. Therefore, we are more than capable of meeting the local demand.

How much value does Akij add to foil production by importing raw materials?

Value is added to our films in two stages. The two phases of production together account for 60%-70% of value addition. But more important than value addition is local manufacturers can order products of specific measurements according to their demand. They get raw materials at a specified time without a long delay. Besides, it is possible to save about Tk3,000 crore of foreign currency annually through this industry.

How much revenue is the government losing due to bonded products? Without this facility, how competitive will the prices be?

With a small market share, Akij Biax Films is providing more than Tk100 crore of revenue annually. So, it can be said that the government is losing a huge amount of revenue due to the bond facility.

The price will be competitive even if there is no bonded facility. Local buyers know the global price of this product and they negotiate with us based on that price.

We do not want meagre protections that hurt the consumers or hurt another organisation. We want the global price. We want locally manufactured products to be made easily available to people and at fair prices.