Home ›› 17 Jan 2022 ›› Opinion
It is well-nigh impossible to find a child in the world who has not played with at least a single toy. Toys are made of different materials, such as plastic, wood, metal, textile, paper, fibre, felt, sand, plywood, straw, etc. Among those, plastic is one of the principal materials used for durable, light and colourful toys for children of different ages. Plastic is highly resistant to scratches, fading and weather impacts. Plastic sector has a long history in Bangladesh and a number of SMEs and large manufacturing units are engaged in manufacturing a myriad of plastic products. Considering the capability of Bangladesh in producing plastic products, making different types of toys has come up as good choices for the entrepreneurs to explore.
Studies show that domestic market size of plastic industry is about taka 70 billion and it is increasing. It constitutes 1.0 percent of GDP and provides employment to half a million people directly. Domestic consumption of plastic in Bangladesh is about 10 kg/ per capita annually, whereas the average global consumption is 45 kilograms.
However, the sector was hit hard by the Covid-19 pandemic and had a negative growth of 11.5 per cent in FY 2019-20. Despite the negative growth during this pandemic, it is believed that the sector will recover and grow fast in the future. If proper policy support is extended, the sector can emerge as a thriving export sector. Global toy sales reached $95 Billion in 2020 and are expected to reach $103.8 billion by 2027. The Compound Annual Growth Rate (CAGR) since 2015 is 2.7 per cent. The change in 2020 vis a vis 2019 is +2.6 per cent. Bangladeshi entrepreneurs can increase their sales to grab a good pie of this segment. Children and their parents are always keen on buying toys. The Chinese manufacturers have come up with multifarious intricately designed toys maintaining safety regulations. The Chinese products must meet certain standards and have to undergo repeated harsh treatment. Toys are the objects that we play with– which can be anything from simple pieces of string and plastic to fancy dolls and flashy gadgets. It is important for toys to be attractive, safe and risk-free.
Statistics show that Spain is the biggest export market for Bangladesh, consuming 31.76 per cent of the export products followed by Italy and France at 18.49 per cent and 18.15 per cent respectively. The share of export value of toys in total plastic export of Bangladesh is 0.10 per cent. Major global exporters of toys are China, the Czech Republic and Germany. Among the main importers USA (29.4 per cent) dominates followed by UK, France and Japan which collectively imports about 21 per cent.
The local market for toys is seeing a steady decline in its reliance on imported toys. As per Bangladesh Toy Merchants Manufacturers and Importers Association (BTMMIA), local toy manufacturers have taken over 60 per cent of the market and trying hard for sustenance following competition against imported toys. About 150 small and large factories are making toys in Bangladesh. The sector was completely import-dependent about a decade back. Industry insiders estimate that the market size of the toy industry is quite huge. Local toy manufacturing companies have already captured 60-80 percent of the market share. Some local market leaders are; Aman Plastic Industries; Zihan Plastic Industries, Gazi Toys, RFL, Akij Plastic Industries etc., and some are operating in the EPZs.
Despite the fact that it has all the potential to expand, the sector faces a number of challenges like the other export sectors. Plastic industry in Bangladesh is dependent heavily on imported raw materials. It is also suffering from lack of advanced technology, safety and quality issues etc. Traditional toys such as; Barbie dolls, teddy bear that are not associated with high-tech will be more difficult to attract people in the current days. Children nowadays are playing games more frequently with their smart phones or tablets rather than with traditional toys. The toy industry has tried to add some special features to their products like sound and light, but it is still unable to compete with electronic games and some other toy items entering the markets on a regular basis.
Under the GSP (Generalized System of Preferences) 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 labour rights and workplace protections– and USA is one of the top potential buyers of toys. Because of absence of adequate warehouse facilities, bulk import of raw materials is not possible here in Bangladesh. And import of a limited amount of raw materials leads to increasing costs. Bonded Ware House facilities are among the requirements for this emerging sector.
The art tool mould and die-making industry is virtually non-existent in the country. The high raw material cost, longer lead times for procurement of moulds required for meeting export orders can easily be avoided if there are central bonded warehouses for bulk import of raw materials. The pilot tool mould and die-making centres are being established by the government with the objective of helping SME manufacturers and kick-start the mould making industry in the country. These are expected to solve some of the problems faced by the sector.
The Bangladesh Standards and Testing Institution do not have proper testing and certification facilities (physical and chemical) which are globally recognized and accepted and it forces exporters to send their product samples to India, Hong Kong and Singapore for testing and certification. Non-compliance with safety, social, and environmental standards affects industry perception in the global market. A testing and certification agency for plastic products in Bangladesh with tie-ups with international institutions of repute is one of the primary requirements according to the industry players.
Design Infringement of plastic products is very common here. Toys companies that manufacture famous toys and print animation characters on their product must get authorisation and trade mark registration and the organization concerned should ensure compliance with copyright issues. Designs of toys are examined by foreign customs and those with no authorization get destroyed and face legal action for selling unauthorized products. It is required to develop a national framework for creation and protection of Innovation and Intellectual Property Policy, which should continuously evolve meeting global standards.
Lack of innovation and collaboration between academia and industry is a restricting the development of new products. Skilled manpower is a big concern. Bangladesh Institute of Plastic Engineering and Technology (BIPET) is a platform that is bridging the gap. However, more funds and expertise are needed to develop this platform for testing lab, design centre, etc. to make the plastic toy manufacturers competitive. There is a need for both long-term and short-term training. BIPET needs to be developed like, for example, the Central Institute of Petrochemicals Engineering and Technology (CPET) in India.
There is no market intelligence platform or technology centres available. Most of the products especially the models of toys are being copied from Chinese products. All different types of spare-parts, such as motors, speakers, etc. are being imported. In China they have vertical and horizontal integration, so after sale, if any change is requires, they can replace it instantly, but in Bangladesh, they cannot do the same. They have to bear the burden of 10 per cent wastage cost, and they do not have alternatives but to bear with it. Policy support in this respect is very important. For ensuring sustained rates of export growth, it is important that plastic manufacturers in Bangladesh keep pace with the requirements of international buyers and forge new business connections while leveraging existing ones. There is a need for plastic institutes or technology centres for research regarding new designs along with repairing and servicing.
Access to finance is a major constraint for small and medium firms as commercial banks do not accept movable assets as collaterals to disburse loans. Inadequate pre-shipment facilities like back-to-back L/Cs and export cash credit, working capital requirements affects export competitiveness. It is suggested that an SME credit scoring methodology be developed based on which commercial banks can accept movable assets as collateral. In addition, pre-shipment finance benefits available to the RMG sector, such as back-to-back letters of credit (L/Cs) and export cash credit, should be extended to the plastics industry. However, larger plastics sector firms will need access to international funding sources in order to obtain competitive interest rates for larger investment needs.
Bangladesh is in a transition phase and its graduation from an LDC to a developing country will happen in 2026. The government is preparing a transition strategy and export diversification is one of the primary elements of that strategy. Plastic toy manufacturing is gradually emerging as a sector with potential. Strong research and development backup and strengthening institutions and establishing new ones to support the sector will be timely moves to reduce import dependency and allow the sector contribute significantly to be competitive and sustainable.
The writer is Chief Executive Officer Business Initiative Leading Development (BUILD). She can be contacted at ceo@buildbd.org
