Part I

Introduction

Cement, one of the great creations of modern science which is a very essential ingredient in any
kind of construction activity. So, the cement industry takes a decisive role in the infrastructural
development of the country. Due to the rapid development and massive population of
Bangladesh, various infrastructural projects undertaken by the governments and other
organizations, such as the private sector which give rise to expansive demand for cement. The
commercial demand for cement is increasing persistently because of the increased standard of
living.

As an emerging industry in Bangladesh, this industry started its journey from the early '90s. Even
in the '90s, 95% demand was fulfilled by import. Then a few passionate entrepreneurs saw this
opportunity and took necessary initiatives to set up cement factories from 1997 to 2000 which
paved a new direction in this sector. Over the years, the dependency on imports lowered
simultaneously. Now there are more than 32 manufacturing companies of cement and seven of
them are currently listed in the stock exchange and four of them are multinationals. Every year,
these companies are producing 50 million MT of cement and this stands for 80% of the entire
market share and this all happened because of their competitive dominance in terms of price and
quality.
Analyzing its features

Currently, this industry is holding these enormous features:

1. Against the global trend: Recently research conducted by On-Field Investment

Research (OFIR) shows that the global demand for cement is dropping and it has
declined by 2.8% in 2018, while in Bangladesh, demand saw 12% growth in that year.
OFIR projects also show that in 2019 global cement demand might fall by 1.6%, while
BCMA (Bangladesh Cement Manufacturers Association) sees the annual growth of 10%
to continue at least for the next five years. In 2017, 35% of was used in mega-projects,
while 40% and 25% were used in individual homebuilding and real estate sectors
respectively.

2. Sales Growth of double-digit: According to BCMA, cement sale was at the highest
peak which was standing at 33 million tons in 2018, breaking the previous record, up
from 29 million tons in 2017. Here the sales growth is going on a double-digit on the
back of government mega-projects and the expansion of private-sector construction.

3. Heavy Investment to increase production capacity: After realizing the enormous

growth rate, companies are doing heavy investment to increase production capacity.
Such as Shah Cement Industries has set a Guinness World Record for installing the
world’s largest vertical roller cement mill. Other companies like MI Cement, the
company is set to increase its production by 76% by 2021, taking the current production
of 11,000 tons per day to 19,400 tons. A survey shows that in the last seven-year, the
production capacity of the local cement companies increased by 131 percent.

4. Local companies holding 82% of market; beating multinationals: More than two
decades ago, local companies used to produce only ordinary cement using 95% to 96%
clinker. But, the situation has been reversed, with local companies now holding 82% of
the market share due to their competitive advantage in price and quality, shows BCMA
data. As many as 76 cement manufacturing companies have been registered, but 42 large
 and small scale companies of them are producing cement as of now. Of the 42
companies, seven are listed with the share market and four are multinationals. Once this
market was ruled by foreign companies which are now facing intense rivalry with the
local ones.

5. Exporting Cement: Now, Bangladesh has placed as a 40th country in the world's cement
market. Currently, 14 companies are exporting cement. In the fiscal year 2017-18, around
BDT100 crore’s worth cement was exported, an increment of 17% from the previous year.
According to industry insiders, most of our cement goes to India, especially north-eastern sides.
Besides, Bangladeshi cement is also much popular in the rest of neighboring counties like-
Nepal, Sri Lanka, and the Maldives, etc.

Categorizing as Large industry

The industry policy 2016 defined that those manufacturing industry which has fixed asset of
more than 50 crores (including replacement cost, excluding land, industry building) and also has
more than 300 workers are to be called large industry. For this assignment, I have chosen Crown
cement to analyze this industry. According to 2018-19 financial reports of Crown cement, their
net asset value was 19, 270,753,264 BDT, and also their human resource stands for 1382 people.
So this industry perfectly fits for the definition of large industry. Besides, it has been also earned
a place in the “priority sector” due to its enormous possibilities for exports.

Benefits applicable based on Industry Policy 2016 for Cement Industry

To achieve inclusive development and the goals of Vision-21, the government of Bangladesh has
initiated National Industry Policy-2016 with a duration of five years. Industries can be greatly
benefitted from this policy. Here are some benefits for the cement industry applicable based on
Industry Policy 2016:
 1. One-Stop Zone for Foreign Investors: To attract massive foreign direct investment, this
policy has proposed a proper one-stop zone for foreign investors where they can get all
sorts of paperwork to get done.

2. Rationalized Tax Policy: This policy aims to create a more business-friendly

environment by rationalized tax policies and relieving some tariff barriers.

3. Investment and revenue incentives: Currently, the cement industry is having a few
incentives as national industry policy 2016 proposed. Such as- duty relief on machinery’s
import, subsidy on investment, lowering fees of accreditation certificate, etc.

4. Strengthening Infrastructure: The government has focused to strengthen infrastructure

on this policy by providing efficient power and gas supply, ensuring stable
communication, etc.

5. Upgrading law, rules and regulations: This policy aims to eradicate hassles in public
offices to achieve the credulity of national and foreign investors.

6. Promoting Women Entrepreneurship: This policy aims to eradicate hassles in public

offices to achieve the credulity of national and foreign investors.

Recommendations to flourish Cement Industry

Despite government policies, the cement industry is struggling with problems. Here are some
issues which I would like to recommend to sort out as soon as possible.
1. Lack of co-ordination & cohesion: It has been our tradition that any policy never
gets implemented fully due to lack of evident coordination and cohesion of
government agencies involved in the greater history of conventional bureaucracy.
Drafting and enacting policy is not enough unless it is mobilized by aggressive
movers and shakers, policy advisers, proactive implementers.

2. Negligence towards eco-friendly: This policy hasn’t properly addressed

environmental issues. The spirit of industrial policy and long-term vision, five-year
plan and SDG visions especially Goal 9 for sustainable and environmentally friendly
industrialization doesn’t match fully as the difference in characteristics, objectives are
evident largely.

3. Taxation issues: Industry policy 2016 proposed for a rational taxation system.
However, we can see that it is not being implemented properly. 5% advance income
tax and 5% advance tax have been imposed on the import of raw materials for cement
production along with 15% VAT on the supply stage, as a result, the cost of
production has been increased on BDT 50 per bag cement.

4. Interest rates: Lending rates to businesses in Bangladesh are high by international

standards and still, some of the private banks are lending in double-digit. The
government needs to push more initiatives to reduce the bank interest rate.

5. The disparity between EPZ/non EPZ: The industry policy does not have any
focused and clear initiatives to minimize and lower the disparity between EPZs and
non-EPZs industries in Bangladesh. This policy fails badly to ensure equality within
two segments of industries as the non-EPZs are the prime movers of our economy.

6. The other sides of the 4th Industrial Revolution: This paper enhances the 4th
industrial revolution which is indeed an impressive move. But it didn’t indicate what
will be done for the workers who will lose their jobs because of industry up-gradation
towards automation.