Last year Bangladesh celebrated its 40th birthday. Possibly a celebration for some but more likely, for others, the occasion brought back terrible memories of suffering and hardship. This country of fertile plains, luscious terrain, with its remarkably rich history and heritage, was born in 1971 following a bitter struggle for independence that claimed the lives of over 3 million people. The birth pains linger; there is much poverty and many challenges lie ahead, but there are also expectations for better things to come through foreign direct investment (FDI) and infrastructure development.
Meeting infrastructure needs
Last year, the International Monetary Fund (IMF) indicated that Bangladesh’s economy had become the 48th largest in the world. The UK Investors Chronicle has identified Bangladesh as one of the world’s seven hottest emerging markets due to its relatively stable currency with solid foreign reserves and record foreign remittances, as well as 6.7% real growth rate in 2011. The Bangladesh government has set itself the challenge to transform into a middle income country by 2021. In line with this strategic vision, the government has undertaken massive programmes for infrastructure development in partnership with the private sector. As the government allows 100% FDI, the infrastructure sector offers an interesting mix of opportunities for overseas interests.
In October 2011, Bangladesh and the ADB announced a US$4.5 billion five-year Country Partnership Strategy (CPS), which will include an investment programme of about US$4.5 billion for 2011 – 15. ADB’s support will be focused on six sectors: energy, transport, urban development, education, agriculture, and natural resources and finance. In the energy sector, ADB will aim to enhance access to power, to improve energy efficiency and to develop a policy and regulatory setting conducive to private sector participation. In transport, ADB’s assistance will be targeted at better road and railway infrastructure for fostering higher growth, and support for environmentally friendly modes of transport. To accelerate growth, the CPS will prioritise private sector development by addressing major infrastructure constraints and skills gaps.
Building for the future
In February, transport expert, M. Rahmatullah, said that Bangladesh could earn about US$44 million pa by providing a transit facility to India and its neighbours over the next five years while developing the infrastructure for this facility. If the infrastructure was ready in five years, the country could earn US$0.5 billion from the sixth year and US$1 billion from the sixteenth. He said: “For Bangladesh, transit will open up new avenues of opportunities. It will make out a case for India and China investing in deep-sea port facilities in the country.” Some 16 million t of cargo would possibly move between the northeastern Indian states and the rest of the country. Bangladesh would require US$7 billion over the next decade to develop its transport system, including roads, rails and waterways for the transit system to be in place. As might have been expected, these comments were met with a degree of derision and cynicism in some sectors, but with welcome comments in others.
Whatever the outcome of talks surrounding this and other projects, the construction industry in Bangladesh is currently booming. “This is due to housing, industrial and infrastructure demand,” says Mehedy Amin, Technical Director, Development Constructions Ltd. “We expect this demand to stay on due to the high population and expanding middle class society.”
Cement production increases
Mehedy Amin is predicting some problems in the future, especially regarding cement prices. “The country imports most of its clinker from abroad and with the increasing value of the US$ against local currency, the price of cement is rocketing up along with most construction materials.”
In January 2012, Bangladesh’s Export Promotion Bureau released data confirming that cement exports had witnessed a 21% increase in the first seven months of the current fiscal year (July 2011 – January 2012). Abdul Khaleq Parvez, Vice President of the Bangladesh Cement Manufacturers Association, commenting on the export situation said: “The export market is growing slowly as the prices of local cement increased sharply following devaluation of the local currency. Cement prices have increased by at least US$17/t”. The prices rose because of the sudden rise in production costs, this being a consequence of power shortages and a rise in labour wages.
Shankar Kumar Roy, General Manager, Business Development, Holcim Bangladesh, told WORLD CEMENT that in 2011 there were 45 active cement companies in the country. “Cement demand was 14 million t, while capacity reached 24 million t and exports totalled 250 000 t”. It is said that cement production has boomed in Bangladesh since the late 1980s, with many cement plants springing up across the country.
Shun Shing Group International Ltd (SSGIL) has developed into a successful bulk commodity trading, shipping and investment company. A landmark investment took place in 2001 when it established a 0.5 million t cement grinding mill in Kaligoni in Bangladesh. By the end of 2012, SSGIL’s cement production will be 3.1 million t through increased capacity at the current site and a new plant in Khulna city, to cover the southwest market.
In January of this year, HeidelbergCement officially inaugurated a new cement mill at its plant at the seaport of Chittagong. The project involved the installation of a cement grinding mill with a capacity of 105 tph, and a slag dryer with a capacity of 45 tph. HeidelbergCement has been active in Bangladesh since 1998 and is one of the largest German investors in the country. In addition to the grinding plant at Chittagong, the Group operates another grinding plant in Dhaka.
Bashundhara Cement, part of the major Bashundhara Group, is currently building a 7000 tpd plant in Narayaganij. Meghna Cement, also part of the Bashundhara Group, together with Bashundhara Cement will jointly manufacture 13 500 tpd of cement, equating to 15 – 18% of cement demand in the country.
In July 2011, India’s Supreme Court granted permission for Lafarge Surma Cement to resume mining limestone in the East Khasi Hills in Meghalaya state in the country’s mineral-rich northeast. The limestone is transported from Meghalaya to Lafarge Umiam Mining Pvt Ltd by a 17 km conveyor belt, where it feeds the company’s cement plant at Chhatask in Bangladesh. In February 2010 the court halted Lafarge from extracting the limestone as it was mining in an environmentally sensitive zone. India’s environment ministry told the court in April that it had cleared the mining project with strict conditions. Up to then it was reported that Lafarge had been importing clinker from abroad. The original agreement between India and Bangladesh to permit the cross-border industrial project was signed in November 2000. It was financed by Lafarge, Cementos Molins, the IFC, the ADB, German Development Bank, the European Investment Bank and the Netherlands Development Co.
SourcesInvestor’s Chronicle.The Financial Express (Bangladesh)
.The Daily Star (Bangladesh)
.Asian Development Bank
.BBC News, Business
.Bangladesh at a Glance
This article is an abridged version of the full article, which appeared in the April 2012 issue of World Cement.
Written by Paul Maxwell-Cook (abridged article).