Sherpa Hossainy's Blog

BASF plans to ramp up investment in Asia Pacific; targets Myanmar

Posted in ASEAN, Business, Industries, Investment, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013
Ethylene Unit at BASF-YPC Company Limited / Ethylen-Anlage in der BASF-YPC Company Limited

A steam cracker operator carries out a routine inspection at a BASF plant in China. BASF

Aims to invest $13b in the region

Published in Myanmar Business Today (Vol 1, Issue 20) on June 20, 2013

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German chemical giant BASF announced it will invest over $13 billion (€10 billion) and create around 9,000 new jobs in the Asia Pacific region as part of its new growth strategy.

While about half of the money set aside for expansion will be spent in China, BASF is also planning to explore “untapped markets” in Myanmar, Laos, Cambodia and Mongolia, it said.

According to the firm’s new global strategy, BASF aims to scale up its sales to $32.6 billion (€25 billion) in the Asia Pacific region by 2020.

“BASF is implementing its global ‘We create chemistry’ strategy in Asia Pacific with a set of ambitious targets and a focus on sustainability. By being involved in those emerging markets, we not only open up new growth opportunities beyond 2020, but we become part of an emerging industry structure in these countries,” Dean Draper, Managing Director, ASEAN sub-region, BASF Southeast Asia, told Myanmar Business Today in an email response.

“BASF will set up task forces to explore the potential in Asia Pacific’s untapped markets. We target annual sales of €110 million in these markets by 2020,” Draper said.

Draper said: “In Myanmar, BASF is present and working with partners in the construction, agriculture and rubber industries. For example, end of May this year in Yangon we launched “Master Builders Solutions,” our global BASF brand of advanced chemical solutions for the construction industry.

“The untapped markets are a new area and we are at a relatively early stage. You will see other announcements of our more specific plans in the future.”

The world’s largest chemical company saw its margins slide in the region to 10 percent in 2012, which prompted it to shift its research and procurement to the world’s fastest growing chemical market to help double profitability.

BASF has a “good chance” to reach the average profitability of the group, Martin Brudermüller, vice chairman, board of executive directors, said at a press conference in Hong Kong.

On a group level, BASF aims to lift margins to 20 percent by the end of 2020 from a current 14 percent.

“In the next decade, Asia Pacific will face huge challenges while remaining the fastest growing market for the chemical industry. With our Asia Pacific strategy, we are positioning BASF as the leading provider of sustainable solutions for the Asia Pacific region. Based on our strong global R&D network, we will considerably strengthen our innovation capabilities in Asia Pacific, enabling us to better serve our customers in all industries in the region,” Brudermüller said in a statement.

BASF estimates the cumulative annual growth rate (CAGR) for real chemical production through 2020 for Asia Pacific at 6.2 percent, well above the world average of four percent.

BASF will conduct around one quarter of its global research activities from Asia Pacific. By 2020, BASF plans to reach a total of around 3,500 R&D personnel in the region, up from around 800 in 2012.

BASF is also going to establish research facilities in the areas of electronic materials, battery materials, agriculture, catalysis, mining, water treatment, polymers and minerals.

The company is currently considering establishing a second Innovation Campus Asia Pacific following inauguration of the BASF Innovation Campus Asia Pacific in Shanghai, China.

More than $ 2.62 billion in regional sales will be achieved through new business and acquisitions by 2020, BASF said.

By 2020, BASF aims for local production of approximately 75 percent of the products it sells in the Asia Pacific region in order to intensify its collaboration with and strengthen its supply position to customers in Asia Pacific.

BASF, which currently operates more than 100 production sites in the Asia Pacific, including two highly-integrated Verbund sites, located in Kuantan, Malaysia, and Nanjing, China, will invest in a range of efficiency measures that will save approximately $1.31 billion annually by 2020, it said.

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Tumbling taka hurts gold business

Posted in Bangladesh, Business, Dhaka, Economy, Industries by Sherpa Hossainy on January 24, 2012

Published in The Independent on 19 January 2012

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The country’s gold industry is going through a lean patch as flagging taka against dollar forces gold traders to push the item prices up, consequently driving the buyers away.

Gold is already trading higher in the local market than the global level, but the perpetual decline of taka is pushing the gold traders into a quandary as customers are averse to buying the precious metal at a higher rate.

“Gold prices should not be this high. But as taka gets weaker we are paying more for gold purchases and this is forcing us to hike the prices,” said Dewan Aminul Islam Shahin, general secretary of Bangladesh Jewellers Samity (BJS).

According to Bangladesh Bank, in the last one year alone taka devalued 15.43 per cent against the greenback. The dollar was trading on Wednesday at Tk 84.05 whereas it was around Tk 69 a year ago.

“It wouldn’t matter if the international gold price remained constant. Now we are paying Tk 12-14 more for every dollar than what we paid a year ago,” said Shahin.

After the historic rise of gold in the international market in mid-August last year, amid the Eurozone debt crisis, situation eased at the year-end. Gold crossed $1,800 per ounce [1 ounce = 31.1034768 grams] in mid-August, while in December it came down to $1,540 per ounce. However, since January gold prices started to shoot up again and on Tuesday gold traded at $1,630 per ounce.

In the course of this rising trend, BJS, the country’s largest gold traders’ association, is set to take the gold prices up again. The 35-member executive committee of BJS will sit  next Tuesday to decide the hike. “If majority of our members opine for a price increase we will implement it immediately,” the BJS general secretary said.

The latest price hike happened only last Saturday (January 14) where the price of 22-carat gold was increased by Tk 1,513 per “bhori” (local unit of gold measurement, 1 bhori = 11.664 grams). The prices of 18-carat, 21-carat and traditional gold were increased by Tk 1,222, Tk 1,397 and Tk 1,280 per “bhori” respectively.

After the hike, the prices of gold stood at: 22-carat Tk 56,454 per “bhori”, 21-carat Tk 53,888, 18-carat Tk 46,189, and traditional gold Tk 35,109 per “bhori”, according to BJS.

In India, gold prices continued to move up to new highs well beyond September and into December 2011 mainly because the rupee depreciated sharply against the dollar. In early December, spot gold in Delhi market hit a record high of Rs 29,540 per 10 gram. The rupee had moved down to around Rs 54 per $1 in December.

According to the World Gold Council, sharp volatility in gold prices and inflation do impact discretionary spending.

“When the gold price crossed the Tk 25,000 mark we started losing business as the customer base shrank,” Shahin said.

Very few customers now buy gold, and this is also confined to wedding occasions. No one wants to buy gold now unless it is mandatory, he said.

However, the traditional gold buying for wedding ceremonies is also hit by the rising prices, especially the middle-class is suffering the most. “A few years back, you could buy a whole set of jewelleries at Tk 50,000. Now you have to spend six times more just to get a bare minimum of five ‘bhoris’,” Shahin said.

The reluctant customer base is also forcing small jewellers to shut down businesses even amid the “wedding season”, which otherwise usually buoys the market. Dilip Roy, president of BJS, said, “20 per cent of the small shops have closed down now and the overall business is halved.”

Roy believes formulation of a gold policy can make this wobbling situation change. “If there was a gold policy, we would be able to buy gold from Bangladesh Bank. Then the price fluctuation in the international market would have a much lower impact,” he said.

In April, the ministry of commerce formed an inter-ministerial committee after receiving a letter from the BJS seeking formulation of a gold policy in three months. The committee then decided to make a jewellery industry policy, under the supervision of the industries ministry, immediately after formulation of the import policy, which will allow Bangladesh’s jewellery manufacturers to purchase gold through proper channels.

However, the progress following the formation of the committee has been sluggish, making matters much worse, Roy lamented.

Making living out of nothing at all

Posted in Bangladesh, Business, Dhaka, Industries, Interviews by Sherpa Hossainy on February 5, 2011

Published in The Daily Star’s Business section (in the special page — Business Life) on 31st January 2011

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MD Shahjahan, 50, a father of three, has been in the metal handicrafts business for 27 years. It was 1983 when he came to Dhaka from Noakhali to try and make a living.

“I saw some people selling scrap products to the shops here and I got interested. I thought why not give it a shot,” says Shahjahan. He started doing the work of a broker in partnership with his friend who also owns a shop now in the Gulshan 2 DCC market.

Once upon a time, the scrap selling business was not that well known. Very few people were involved. “I used to sell products at shops in Gulshan and even to individuals. Then I started to run the business from this shop, Hossain Handicrafts. It was 1990.”

“One can’t climb a palm tree with a leap. You have to climb slowly, and I did,” Shahjahan says, explaining his success in business in the past. But those days are long gone now, he adds.

“Almost all the shops you see around here are incurring losses. There are no products, no customers. Some shops can’t even sell a single item in 5 to 7 days. Although, if new ships come in, sales picks up as lots of buyers come and get them,” he says.

“But that seldom happens. Look around my shop, I can show you products which are here unsold for 10 years or even 15 years.”

Replicas of deities are displayed at a shop in Dhaka.

According to Shahjahan, sales in a month can sometimes go up to Tk 300,000 while at other times, can drop to Tk 150,000. “Now a days, we sell for the sake of selling, with very little margin,” he says.

“Its tough to live by this trade and feed my family with the income from this business. But I have to keep on doing it because I am used to it. I have brothers who live abroad and send me some money. So I get by.”

Shahjahan blames a price hike of metals, and low demands due to customers’ unwillingness to buy metal products for the slump in sales and profit margins.

He wants more ships to come into the country so that the industry gets the fancy products, like watches, chests and compasses, and scrap metals.

“If ships come in, we will survive, the re-rolling mills will survive. If there are harmful substances, steps should be taken and technologies bought in, so that the ships can be broken safely. If the government provides opportunities, it is possible.”

He says many labourers are becoming unemployed as construction works are being hampered due to the increasing prices of rods, for a low supply of scraps. “If you go to the Notunbazar labour market, you’ll see thousands of labours unemployed even at 12 pm.”

“The re-rolling mills are shutting down and people are getting unemployed. If people don’t get food in their stomach they will do anything, so the crime rate will also go up.”

Shajahan pondered, “If someone is working, his mind is occupied but an idle brain is devil’s workshop. If I’m not addicted to work, I will be addicted to something else.”

Myth buster: antiques or handicrafts?

Posted in Bangladesh, Business, Dhaka, Industries by Sherpa Hossainy on February 1, 2011

Published in The Daily Star’s Business section (in the special page — Business Life) on 31st January 2011

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If you ask someone in Dhaka the whereabouts of an antique shop, they might give you the address of Gulshan 2 DCC market, which has many shops displaying marvellously crafted metal products, some are old and some are new.

Are they truly antiques? What qualifies a thing to be termed as “antique”?

According to Wikipedia: antiques are, “an item which is at least 100 years old and is collected or desirable due to rarity, condition, utility, or some other unique feature.” Another general rule of thumb is 75 years for most objects to become antiques.

Different exhibits are up for sale at a so-called marine antiques shop in Chittagong.

When asked, a shopkeeper said that he has no clue how the name “antique” was tagged with this market. “We don’t know anything about any shop or business related to antiques here. Some inexperienced and unprofessional people come here and assume some old items from the ships as antiques.”

A shop owner exclaimed, “They don’t even know what antique is for God’s sake! They come in and say, Oh great! That’s a beautiful antique.”

The replicas of deities that come from Dhamrai have been in the making since the British era. After making the product, some of the owners want them polished and others want it to look a bit rusty and old.

“If someone comes and says that’s an antique, why would I just go into any arguments? Whatever the customers say is right,” said another shop owner.

“What’s the point of doing any squabble? I want to sell the products, not to teach definitions — it is not my headache to know, by whatever name the customers call it. But, the idea of those products being called antiques, is completely wrong I have to say.”

The shop owners said, “If some telegraph wire or steering wheel from a ship is considered as antiques what can we do? We have nothing to say as we only want to sell the product.”

Answering to the question, what they think the market should be called, they said it’s pretty simple — metal handicrafts market or simply handicrafts market, although there are also fancy wooden items too, but very few in numbers.

So, one of these days, when you find your neighbour boasting about an amazing antique bought from Gulshan 2 market, rather than being jealous, you just might try to bust the myth.

The dwindling legacy of metal handicrafts

Posted in Bangladesh, Business, Dhaka, Industries by Sherpa Hossainy on January 31, 2011

Published in The Daily Star’s Business section (in the special page — Business Life) on 31st January 2011

Read the article on The Daily Star website

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Jerry Huang, a Chinese tourist, was having a hard time bargaining with a shopkeeper for an articulately designed showpiece.“This should not cost Tk 2,500. The prices are crazy here,” he grunts. Well, the seller seemed reluctant to let this item go for less than what he asked.

The fancy metal handicrafts shops at Gulshan 2 DCC market are bound to catch one’s attention as they walk along. The shops, neatly lined up one after another, display thousands of handicraft items, mostly made of metal — brass or bell metal — and some made of wood.

Replicas of deities are displayed at a metal handicrafts shop in Dhaka.

The utensils, replicas of Buddha and deities like Shiva, Durga and Ganesh, old compasses from ships, binoculars, daggers, dice to make jewellery, lamps, padlocks that looks like fish, jewellery boxes, replicas of swans, horses and elephants, wooden chests, and even items that make one’s head spin to predict their possible use — it’s all there. Most might not have any utility at all other than being a showpiece only for their immaculate designs and unique looks.

The foremost thing that would strike anyone there is the insignificant number of customers inside the shops. Most shop owners are sitting idly, reading newspaper or gossiping. Some shops do have customers inside, but they seem to be interested in just window-shopping, their eyes glittering with the exclusivity of the products.

The so-called “antique market” of Dhaka gets its seemingly overpriced items mainly from the scrap metal market at Mitford in old Dhaka. All scrap metal products from all around Bangladesh, primarily from Chittagong and Narayanganj, come to this market. Some products also come from Dhamrai, where production of brass handicrafts, especially replicas of deities, takes place. Even shop owners sometimes patch up the different parts of broken items to make a complete item.

There are brokers who go around collecting different items from the market, and selling here.

Jewel Majumder, a shop owner, says, “There is a scarcity of good stuff nowadays. Seldom do we collect good products and there are not too many customers either.” Customers are leaning towards lighter products such as glass, ceramic and plastic, rather than brass or bronze these days, he says.

“It’s even hard to find brass, let alone find broken and scrap piece of brass. If I ask for Tk 1,500 for a half broken brass glass, would you buy it?” says Majumder. “Some people would say that I’m crazy. How can I make them understand that even scrap brass costs like Tk 450- Tk 500 now-a-days?” he says.

The shop owners rued the fact that business is dwindling day by day. “We don’t have any business. We try our best to get rid of the existing products quickly and usually try not to bring in anything new,” says Swapan, another shop owner.

Brass products had quite a big industry in Nawabganj and these days, 90 percent are now closed, says Md Shahjahan. “The main reason is that there is no demand and no sales because they are heavy and people look for light utensils.”

Different exhibits are up for sale at a so-called marine antiques shop in Chittagong.

“People don’t understand that you don’t lose money by purchasing bronze and brass products. It is almost similar to buying something next-to-gold,” says Shahjahan.

“I’m just saying from my experience. If you buy bronze and brass products, the resale value is always high, maybe close to the purchase price. But this option is not there for glass or plastic products.”

These deity replicas are trademarks of Dhamrai production. These products have been in the making since the British era and are limited among a specific group of manufacturers because of the preciseness of the work. The problem is that there are only a few people who make them and they don’t let other people know about the process, says Shahjahan.

“If they did, there could be mass production and prices would drop. They only want to make profits by themselves, even if they are hurting the business,” he says.

“Big brands, like Aarong and Jatra, are also selling brass products now and customers usually don’t want to come to our shops now.”

The pricey items are obviously out of the reach for the middle-income groups, so these handicrafts mostly go to the high-ups and expatriates living in Dhaka. “Of course, rich people mostly buy these items. The poor can’t fancy buying a brass glass paying Tk 1,500. It’s illogical,” says Shahjahan. Almost 60 percent of customers are foreigners, he adds.

When a ship comes to Chittagong Port for breaking, concerned authorities give clearance after inspection that there are no explosives or other harmful objects. After issuance of a certificate, the owner gets ready to break the ship.

The shipyard owner contracts different people to dismantle different parts of the ship — wooden items, electronics items, and wires. Gradually, after different contractors take away different parts, the ship becomes ready to be cut and various products of this handicrafts market come out, intact or broken.

Different exhibits are up for sale at a so-called marine antiques shop in Chittagong.

Shop owners blamed a lack of ship breaking as the cause behind a low volume of sales. Shahjahan says, “Ship imports are even low now because of some ban on environmental issue.”

“When I can’t buy food for seven days and I’m hungry, there is no time to care about the environment.”

“Some people are sabotaging the ship breaking industry for the sake of the environment. There are always and will be risks of harming the environment. There were times when burnt mobil was thrown into the water but I don’t think anyone does it now. As far as I know, now they scrape it and put it under the soil.”

He says ship importers are capable of breaking the ship in a non-hazardous way. “If they are allowed to do it on a large scale, there would be a surge in metal input — copper, brass, bronze and iron. But if the ships are not allowed to come, what can we do?”

Shahjahan also says the ship import ban is hurting the re-rolling mills, which are shutting down due to dearth of scrap metal. That will also hurt the construction industry, he adds.

Sometimes, handicrafts sellers put together the parts of different items to produce a new one. The recasting process requires lathe machines and casting factories.

Majumder complains, “You have to make craftsmen understand how you want the item to be made, so that it can be sold. If you want to go to old town for all that, your whole day is lost in transportation.”

“Who will take the responsibility? I don’t know what fate has in store for us,” Majumder says, as he started to dust a brass bowl.

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