FE Report (July 03, 2011)
A leading Thai firm's plan to invest in Bangladesh's fast booming paper market has raised alarm among the local manufacturers who have sought government protection for their multi-billion taka investment.
Sources said the company, Double A, has been looking for a land in Chittagong to set up its factory, with an initial investment of Tk 1.50 billion, after its plan received clearance from the Board of Investment (BoI).
"We're already in the final stage to purchase land in Chittagong and our state-of-the-art paper making machinery will arrive from Australia very soon," said an insider of the company.
Thailand-based Double A, is one of the world's top-five paper and pulp makers, which procure trees from 1.5 million Thai farmers. The company has recently expanded into China, the globe's largest paper market.
The Thai company holds two-thirds of the offset and 80-GSM computer paper market in Bangladesh.
The country's fast booming paper market is worth about Tk50 billion, with computer and offset paper being the fastest growing segment. Local papers dominate the newsprint, industrial and writing paper markets.
An official familiar with Double A's investment plan in Bangladesh said the company would set up the paper and pulp plant this year, aimed at maintaining its leadership here and export to the Middle East and india.
"We want to make Bangladesh as an export hub. Paper to be produced at the Chittagong plant will be shipped to the Middle East and northeastern Indian states," he said.
The company had earlier sought to tie up with leading local conglomerate TK Group in early 2010. But the Chittagong-based company rebuffed the offer at a final stage.
As part of its expansion drive, the Thai paper maker has already contracted farmers in the country's western districts of Magura and Jessore and some northern parts so as to ensure steady supply of raw materials i.e. trees.
The Thai firm's move, however, caused panic among the local paper manufacturers, some of whom have in the recent years invested billions to produce diversified paper products.
Bashundhara, who owns some 20 per cent of the country's newspaper and offset paper markets, has sought government intervention to protect its Tk5.00 billion investment in the sector.
"The government should take measures to protect us. No way we can compete with Double A because of its superior financial strength," said a senior Bashundhara official.
Bashundhara Group, which had launched paper production on a large-scale in 1996-97 with a capacity of 100 tonnes a day, is the local market leader. It now has nine units with a combined annual capacity of 100,000 tonnes.
He said at least 60 small and large paper mills now operate in the country, accounting for more than half of the country's writing paper and newsprint demand.
"The smaller paper mills will die out gradually as soon as Double A flexes is marketing muscle," Abu Hasnat Obaydah, chairman of Maf Paper Mills, a subsidiary of TK Group.
He said some local companies including Maf have set up plants to produce industrial and specialised paper including offset, A-4, and carbon-less in the last couple of years in view of their soaring demand in the local market.
TK Group, known for their trading and chemical business, launched its paper plant in 1999 in Chittagong. Currently, TK is producing 74000 tonnes of writing, industrial and newsprint paper a year.
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