Pakistan: LTFF to boost potential of glassware export-oriented units

The decision of the State Bank of Pakistan (SBP) that the glass-manufacturing industry producing exportable goods is eligible for financing under the SBP Long-Term Financing Facility (LTFF) was greete…

The decision of the State Bank of Pakistan (SBP) that the glass-manufacturing industry producing exportable goods is eligible for financing under the SBP Long-Term Financing Facility (LTFF) was greeted positively by the Pakistan Glass Manufacturers Association (PAGMA). According to a representative of the sector, high production costs, along with those of soda ash, electricity and furnace oil and so on, are a major impediment preventing Pakistan“s glassmakers from being competitive in the international market. The sector representative also said that after the LTFF, with latest technology and extension and modern machinery and equipment, the export-oriented sector would grow. The SBP said that financing for plant, machinery and equipment used by the export-oriented projects in glass sector for producing exportable goods would also be eligible under the LTFF scheme. He added that production could even go higher if impediments such as high input costs, non-existence of strict anti-dumping laws, existence of special concessions in Customs duty on imports of some glass products and other matters were resolved in favour of the sector. Pakistan exports glassware products to the United Arab Emirates, Iran, South Africa, Tanzania, Oman, Bangladesh, Belgium and other countries. During 2009-10, the sector manufactured glass products for USD 134.50 million and production of all types of containers has seen an average annual growth rate of 5.0% over the past five years. However, dumping of glass containers from Japan, Germany, China, Malaysia and the Middle East is a major impediment to the growth of this sub-sector of the glass industry. Pakistan exported glass products for PKR 60 million to PKR 120 million per year during 2005-2010. The country also imports glass products and, during the past five years, imports of glass products increased from PKR 975 million to PKR 1,782 million, an increase of 83%. Total investment in the sector, which manufactured glass products worth PKR 6.90 billion in 2010, contributing 1.9% to the total manufacturing sector“s value, is about PKR 15 billion. There are more than 35 glassworks in Pakistan producing sheet glass, glass containers, electric glass tubes and bulbs, neutral glass tubing and glassware, with production capacity ranging between 15 tonnes and 250 tonnes per day. About 73% of the units are situated in Punjab, 19% in NWFP, 5.0% in Sindh and 3.0% in Balochistan. There are more than 20 units manufacturing pharmaceutical ampoules and vials from neutral glass tubing, while flat glass units are operating below 100% capacity mainly due to low demand on account of sluggish construction activities in the country. The increase in demand and supply gap over the past five years was largely caused by the lack of facilities for float glass production. Costs of raw material, energy such as fuel, electricity and gas and other overheads are about 35% of the total cost, while soda ash accounts for 80% of the total cost of raw materials used to produce flat glass. The average capacity utilization of the auto glass sector from 1996 to date dropped from 50% mainly caused by an increase in installed capacity of neutral glass tubing from 2,400 tonnes to 4,300 tonnes per year, along with a decline in production of containers (glass bottles) because of some glass units closing down. At present, Pakistan has more than five units manufacturing tableware with an annual capacity of about 30,500 tonnes. Demand for glassware has shown a rising trend due to the increase in population, as well for rising income among the buying segment of the population. There are eight units manufacturing automotive glass, art glass products, furniture glass and so on, which add value by carrying out secondary processing of locally produced and imported glass. A number of units in the informal sector are also producing glass products such as art glass, glass furniture, as well as 100 units in the unorganized sector engaged in production of various glass products in Karachi, Hyderabad, Multan and Lahore. About 60% of these produce small glass containers, tableware.