Promising Outlook for Indian Subcontinent Plastics processing industry
Historically the region has been fraught with policy restrictions on foreign investment in certain industries, high tariff barriers and protectionist government policies but a process of deregulation and the removal of quotas and production licences has facilitated greater investment in both petrochemical and plastics processing activities. Strong economic growth is raising living standards and increasing consumption of a wide range of consumer goods from packaged foods to automobiles. Investment in infrastructure and agriculture is also important in driving the plastics industry in the region.
Whilst the outlook for plastics processing in the Indian subcontinent is undoubtedly positive, the industry still faces many challenges in terms of its infrastructure and the fragmented nature of its plastics processing industry. Infrastructure limitations relate not just to transport links but to a whole range issues from energy to the banking system, the limitations of which all serve to hold back business. Whilst these countries tend to have a strong entrepreneurial ethic this has led to a proliferation of small processing companies, running old and inefficient equipment, which lack the access to capital to invest and really develop an internationally competitive, modern manufacturing industry. For the Indian subcontinent to reach its full potential the plastics processing industry will need to rationalise, consolidate and invest in modern equipment to reduce costs and improve performance.
The scale of the potential for the region is illustrated by its per capita demand which for 2013 will still be less than 8kg/head, although this compares to 5kg/head in 2008. By contrast, per-capita consumption of polymer stands at 24kg in China and 75kg in Europe, with the world average 28kg.
Unsurprisingly India has led the growth as it accounts for 87% of the subcontinent's consumption of polymer. Growth has been driven through a number of different end use industries such as building and construction, packaging, automotive and agriculture. Sri Lanka now has the second highest level of per capita demand for thermoplastics, highlighting the recovery in manufacturing following the ending of its long civil war with the Tamil Tigers in 2009. Pakistan has experienced the slowest growth in the subcontinent over the past five years where the economy was more impacted by the effects of global recession reducing its exports and the on-going security situation. Bangladesh has a population that is only 15% smaller than Pakistan's but a polymer consumption which is roughly a quarter of Pakistan's. The market has been constrained by lack of infrastructure, its tendency to flood during the monsoon and a lack of local polymer production, but the availability of cheap labour gives it the potential to develop as a low cost manufacturing base for exported plastic products. Nepal is the smallest subcontinent consumer of polymer and although demand has been growing ahead of GDP, it is developing from a very small and unsophisticated base. The country is unlikely to be able to develop a significant plastics processing industry because of its geography, both in terms of its landlocked mountainous terrain and its proximity to two manufacturing giants in China and India.
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