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by Channa Kasturisinghe

The Task Force for the plastics sub-sector set up by the Ministry of Enterprise Development, Industrial Policy and Investment Promotion presented its five-year plan to Minster Prof. G.L. Peiris last week.

The Task Force studied the business issues related to the development of the plastics processing industry for the first time in Sri Lanka and made vital recommendations for the growth of the industry to become the leader in the Asian region.

The report sets out a broad business plan for the industry and makes recommendations to government and private sector entrepreneurs of the steps to be taken and issues to be addressed in developing the industry. It has addressed quantitative aspects in profiling the current status of the plastics industry in Sri Lanka, analysed the strengths and weaknesses of the industry, addressed areas of business opportunities for developing competitive advantage and identified constraints in policy and in the outlook of entrepreneurs.

According to Sarath Wijesinghe the Chairman of the Task Force, the local processing industry produces nearly 120,000 MT per annum at present. It has an annual average growth rate of around 10 percent. The industry processes all commodity plastics and many engineering plastics using a range of technologies. Products are manufactured for local and international markets. Many medium-scale plastics processors have developed overseas markets for polyethylene bags. In addition many plastics processors supply packaging products to exporting industries such as garments, food processing and jewellery exports.

Wijesinghe said Sri Lanka has an ideal opportunity to expand its market and attract investors to set up plastics processing industries as a result of new developments in the international scene.

"Due to rapid changes in technologies and materials developed countries have been relocating their plastics processing industries to countries with the ability to manage technology. The newly industrialised countries such as Singapore, Taiwan and Korea were the first beneficiaries of these relocations, which are now moving to Vietnam, Indonesia, and China. This has also helped to attract the FDI to link industries. Sri Lanka has the scope to attract such industry relocations. However, the entire plastics processing industry needs to focus on developing a competitive edge," Wijesinghe said.

He said although plastics processing is one of the fastest growing and changing industries in the world Sri Lankan policymakers have paid little attention to this industry.

"The local industry itself is fragmented and comprises a few large, mainly privately owned, companies and many small and medium scale companies. The industry has no formal organisation and each company is focused on its own products and markets with no intra industry cooperation.

However, most of the present exporting sectors are for low value added products where cost advantages will soon be eroded. Plastics processors supplying to local markets too are increasingly competing against export prices of overseas suppliers due to the rapid opening of the local market. Sri Lankan processors will soon lose home-base advantages except in products too bulky to freight. These advantages too can get eroded with changes in technology and materials," Wijesinghe said.

He said in order to gain sustainable advantages in international trade Sri Lanka needs to identify products and markets for processing and assembly of high value added engineering plastics.

In order to run a competitive assembly operation the present labour laws will need to be changed immediately. This is necessary to enable companies to make the most productive use of the present labour base and encourage risk taking and flexibility for entrepreneurs emerging into global markets.

The immediate necessity for the industry is to make an indepth study of products available and market opportunities to the extent of preparing pre-feasibility studies which can be immediately acted on by potential investors. In doing so it will be possible to channel investment towards a sustainable competitive advantage for Sri Lanka and arrest the harvesting of obsolete technologies with little potential for development.

This pre-feasibility study will require the commitment of a small group of industry experts and adequate financial resources. The industry has already identified a small team of experts who will devote time to this study and it is now necessary for the Ministry to seek long-term technical assistance for this detailed project under the Competitiveness Initiative of the USAID project in Colombo.

A member of the Steering Committee, Sunil Liyanage told the Daily News that that almost all raw material requirements for the plastics industry in Sri Lanka are imported clearly indicating the industry's dependence on external supply sources.

"In general, Sri Lanka uses about 11 types of plastics in general purpose and special purpose and application. This is valued at over seven billion rupees annually," he said.

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