DIAGNOSTIC STUDY
Prepared by
Hamid Minhas (Regional Business Coordinator)
TABLE OF CONTENTS
Introduction
What Is Plastic
Characteristic Of Plastic
Possible Uses Of Plastics
The Growing Market
Plastic Industry Global Perspective
International Trade Statistics
The National Scenario
Market Overview
Market Players
Consumption & Imports
Benchmarked Cluster
Lahore Cluster
Analysis Of Business Operations
Business Status
Social & Regulatory environment
Finance
Human Resource
Raw material Procurement
Product Sale
Process Flow
Extrusion Molding
Injection Molding
Blow Molding
Core Cluster Actors
Manufacturers
Recycling Of Plastic
Raw Material & Chemical Suppliers
Machinery Suppliers
Mold & Die Makers
Traders / Wholesalers / Distributors
Component Industries
Interest Groups
Pakistan Plastic Manufacturers Association
Lahore Chamber Of Commerce & Industry
Strengths
Weakness
Opportunities
Threats
Cluster Map
VISION
Action Plans
Annexure
10 Things about Plastics everyone should Know
PET Bottles Manufacturing Process Flow
INTRODUCTION
What Is Plastic?
A plastic is a type of synthetic or man-made polymer; similar in many ways to natural
resins found in trees and other plants. Webster's Dictionary defines polymers as: any of
various complex organic compounds produced by polymerization, capable of being
molded, extruded, cast into various shapes and films, or drawn into filaments and then
used as textile fibers.
Plastics are used because they are:
Attractive
Hard
Soft & Rubbery
Easy to Clean
Flexible
Good insulators of heat or electricity
Light weight
Hygienic
Easy to Shape & Color
Economical
Apart from some of the properties of plastics mentioned above, one important feature of
plastic is that it is a non-rusting material, which makes it a very usable commodity
especially in coastal areas where there is a lot of humidity.
As stated earlier, the use of plastics is increasing all the time as they replace materials
such as metal, wood, paper, ceramics and glass in a wide variety of uses. More over
the overall demand and local supply gap that prevails in the market remains largely
unmet which also provides opportunities for entering in to this business
cent to 3.2 per cent. Similarly, the share of Thailand has jumped from less than 1 per
cent to over 7 per cent during the period of six years.
THE PAKISTANI INDUSTRY SCENARIO
Pakistan's economy achieved an impressive GDP growth rate of 8.4% in 2004~05, the
highest in two decades and the third fastest growing economy in Asia. Powering the
economy with its superb performance, the manufacturing sector accounted for 18.3% of
GDP while registering a growth of 12.5%. The co-related industries of Plastic, Printing &
Packaging have registered a phenomenal growth during the past few years where
printing and graphic arts industries are the second largest industries in terms of work
force in Pakistan.
Pakistan's plastic industry is thriving at an average annual growth rate of 15% with a
total estimated production capacity of 624,200 M/T per annum. The industry attracted
investment amounting to more than US$ 260 billion, almost half of which was foreign
direct investment (FDI), all contributing to an exceptional export growth by 35%.
Automotive, cosmetics, toys, chemicals, stationery, paper & board, electronics, food,
publishing and furniture are some of the major industries utilizing materials and state-ofthe-art related equipment and technology to increase output and meet increasing
demands in domestic & foreign markets.
Adding further strength to the industrial progress, Pakistan has established successful
export markets for its plastic goods. In foreign markets including countries like Australia,
South Africa, Saudi Arabia, West Indies, UAE, Kuwait, Taiwan, Nigeria and Zimbabwe;
Pakistan is strategically well placed to target the all-important local and international
buyers in one of the world's largest trading regions.
Particular growth is being seen in exports of plastic components for the automobile
industry. This growth happened, besides entrepreneurial efforts, due to simplified tax
policy on local production and reduction in import tariff on plastic raw materials. The
industry is contributing more than Rs7.5 billion annually to the national exchequer in
shape of custom duty, sales tax and income tax. Its contribution to the gross domestic
product (GDP) was 1.69 per cent.
It is a high tech industry; plastic processing machinery is mostly imported from Japan,
Korea, Italy, Taiwan, Hong Kong, England, China and Germany. However, locally
manufactured machinery is also being used. Raw material is also imported.
The capacity utilization has been in between 43 to 95 per cent. Plastics industry in the
un-organized sector is totally self-financed. Export share in total exports was 0.163 per
cent. The industry is presently split into organized and un-organized sectors. About 60
per cent of the units are located in and around Lahore and the remaining at Karachi,
Hattar, Gadoon, Faisalabad, Multan and Quetta.
The organized sector is capable of producing quality products whereas the unorganized
sector produces low quality, cheap products through excessive use of plastic scrap.
During the last decade, the unorganized sector has grown much more rapidly then the
organized sector.
Market Overview
The per capita consumption of plastic in Pakistan is 3.1 kilograms, while this is 3.3 kg in
India and 7 kg in China. The highest per capita consumption of plastic is in United
States and Germany, where per capita consumption is 120 kg per annum. Globally, the
per capita plastic consumption works out to be around 24 kg per annum. The
consumption of plastic is less in Pakistan as the local industries are not developing as
rapidly as they are growing in the other parts of the world.
Market Players
There are some 6,000 plastic products manufacturers in the country and 600,000
people are directly and indirectly engaged with this business. The plastic industry falls in
cottage industry and there are some manufacturers, who are medium-sized industries.
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product of crude oil. The prices are directly related to crude oil prices as the raw
material is made from Naphtha, which is a by-product of crude oil.
Moreover, the recent penetration of cheap Chinese products into Pakistan has made
the competitive situation in the local plastic industry very intense. Local manufacturers
have to import raw material which is a substantive cost of their total produce while
Chinese products offering a large variety at affordable rates have made survival difficult
for the local industry.
BENCHMARKED CLUSTER
China has the seventh-largest economy in the world in terms of gross domestic product
(GDP). With more than 1.3 billion people, China also has the world's largest consumer
market. The plastics processing industry has been developing at an average annual
rate of 10% since 1997 in response to massive developments in the Chinese building
and construction, automotive, packaging and agriculture sectors. The evolution of the
use of plastic products in these sectors is forcing plastic processors to upgrade and
replace current infrastructures with high-tech, high-precision, plastic production
machinery and moulds that can develop new products with higher added value.
Chinas domestic output of synthetic resins can only satisfy 40% of market demand.
This supply imbalance continued during the 2002-2005 period, requiring China to rely
heavily on imports to fill its shortfall of resins. Rapid growth in the construction and
packaging sectors in China are driving demand for commodity synthetic resins like
polyvinyl chloride, polyethylene and polystyrene. Engineering plastics are expected to
have good market prospects for exporters as a result of the expansion of major
consumers such as the automotive and telecommunications industries.
According to the China Plastic Processing Industrial Association (CPPIA), the plastic
processing industry will experience rapid development from 2001 to 2005. An increase
in demand for plastic products from downstream manufacturing industries, such as
construction, automotive, packaging and agriculture, will account for the industrys rapid
growth.
Chinas per-capita consumption of plastics is relatively low, despite its position as a
major producer. The annual consumption of plastics per capita in China is only 10
kilograms (kg), while the world average is 45-55 kg in developed countries. Germany is
one of the highest per-capita consumers at 120 kg, while per-capita usage in Canada
and the United States is about 80 kg.
The China Plastics Processing Industry Association replaced state control over the
plastics processing industry. The Association consists of over 700 member companies
nation-wide that produce plastic films, plates, sheets, pipes, rods and other plastic
products.
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suppliers of raw material are keep stock of different types according to seasonal
requirements.
Product Sale
Enterprises located in this region are selling their products directly to the local
markets and one recent example of a Factory-owned Retail shop has been started
for direct selling to the customers. Almost 70% of the products are consumed within
the same region. Export figures for this region cannot be measured as estimates do
vary significantly. Businesses engaged in international trade have separate sales
and marketing department looking after the international sales. Some major firms do
participate in International exhibition for buyer-seller meet but small and medium
firms cant afford and hence seldom participate in Intl fairs and exhibition.
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PROCESS FLOW
There are several different processing methods used to make plastic products.
Below are the main methods in which plastics are processed to form the products
that end consumers use,.
No.
Molding process
Product
Extrusion molding
Injection molding
3
4
5
6
Blow molding
Vacuum forming
Pressure forming
Rotation molding
Extrusion Molding -- the main process used to form plastics. A heated plastic
compound is forced continuously through a forming die made in the desired shape (like
squeezing toothpaste from a tube, it produces a long, usually narrow, continuous
product). The formed plastic cools under blown air or in a water bath and hardens on a
moving belt. Rods, tubes, pipes and sheet and thin film (such as food wraps) are
extruded then coiled or cut to desired lengths.
Plastic fibers also are made by an extrusion process. Liquid resin is squeezed through
thousands of tiny holes called spinnerets to produce the fine threads from which plastic
fabrics are woven.
Injection Molding -- is the second most widely used process to form plastics. The
plastic compound, heated to a semi fluid state, is squirted into a mold under great
pressure and hardens quickly. The mold then opens and the part is released. This
process can be repeated as many times as necessary and is particularly suited to mass
production methods. Injection molding is used for a wide variety of plastic products,
from small cups and toys to large objects weighing 30 pounds or more.
Blow Molding -- pressure is used to form hollow objects, such as the soda pop bottle or
two-gallon milk bottle, in a direct or indirect method. In the direct blow-molding method,
a partially shaped, heated plastic form is inserted into a mold. Air is blown into the form,
forcing it to expand to the shape of the mold. In the indirect method, a plastic sheet or
special shape is heated then clamped between a die and a cover. Air is forced between
the plastic and the cover and presses the material into the shape of the die.
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The recycled material is used for manufacture of low cost and inferior quality products
such as, house holds utensils, Sandals / Chappals, Washers and seals for water supply
fittings, some units mix the re-cycled material with pure material to reduce their cost of
production, and some other plastic goods.
2- Raw Material & Chemical Suppliers
GE Plastics is a leading supplier of Engineering Plastics, Silicones, Specialty Chemicals
and Sheets. It has 66% and 33% of total market share of Pakistan for engineering
Plastics and Silicones market respectively.
Raw material production in Pakistan is extremely low and does not meet the required
demand. Almost all plastics raw material consumed in Pakistan is being imported. In
neighboring India, Raw material producers are not only catering to the local industry, but
also exporting the surplus. Engro Asahi Chemicals Pakistan, who took the lead and set
up a PVC Plant in Karachi- the first of its kind in Pakistan. It was a joint venture with
Japanese companies that took the initiative and established this mega project in the
country. Similarly 3 more plants producing PET, High Impact Polystyrene, Melamine
Formaldehyde and Expandable Polystyrene were also set in Karachi.
No statistics are available on the exact consumption of plastics raw materials in the
country, but a modest estimation indicates that more than 1.5 million M/T of different
plastics are required every year. This local production barely meets 30% of the
estimated demand, leaving a shortfall of more one million M/T. This gives room for
imports and constitutes a burden on the national economy.
3- Machinery Suppliers
Plastic processing machinery is mostly imported from Japan, Korea, China and
Germany. However, locally manufactured machinery is also being used. A list of major
suppliers of imported plastic processing machinery is given in the table below:
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These are the largest units in terms of number present in the Lahore plastic products
cluster and are located in almost all major industrial location ( Shal Alam Market, Bund
Road, Circular Road, Kot-Lakh Pat, Gulberg, etc.) They purchase the products directly
from factories and distribute locally. Some Manufacturing units also have their own
distribution system and they have established their own retail stores as well. Their main
problems identified were that of infrastructure. The local markets have their own trade
bodies and they work to protect their own market interests. These Trade bodies are not
recognized anywhere in the Government agencies.
5- Component Industries
As discussed earlier, the plastics are used in many a component industries e.g.
Automotive Industry, Electrical, Packaging and Construction. These industries itself
represent their own clusters and have their own association for highlighting the
problems.
INTEREST GROUPS
Pakistan Plastic Manufacturers Association
The PPMA was established to safeguard the interests of Plastic Manufacturers in
Pakistan in 1980s. The main objectives were to protect, promote, encourage and
develop plastic processing industry in Pakistan and raise the production standards of its
member enterprises.
The association has a zonal office located in an industrial zone (Kot Lakhpat) and
operates from the premises of a manufacturer. The zonal association doesnt have any
paid staff. The elections are held almost every year to elect five Executive committee
members, which then nominates the President and Vice President for a year. The
association charges Rs. 1000 for a year as membership fee and that is the sole fund
raising point. Currently Association is looking forward to selecting a separate place for
its zonal office in Lahore and then a full time Secretary and other support staff will also
be recruited.
The Association often holds certain seminars, trainings and Annual Exhibitions. They
exchange budget proposals with local Chamber of Commerce. Financial institutions
also dont have any interaction with association. The association representatives are
linked with a BDS provider (SMEDA) and often meetings are held for the purpose of
sharing information. Technical Experts from International countries like Japan who visit
SMEDA does have interactions with association representatives as well.
2- Lahore Chamber Of Commerce & Industry
Lahore Chamber is a premium institution providing different kinds of services to its
regions members. These activities range from providing membership of the institution
to holding different International Exhibitions. The LCCI Membership department serves
SMEDA_UNIDO Cluster Development Programme Pakistan
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Financial Institutes
Commercial banks and specialized Financial Institutes (SME Bank, PICIC, etc.) are
individually linked to the industry. Banks have not been associated with any cluster
stakeholder for any activity other than providing financial services. The demand of the
cluster has been on the increase for expansion and the finances are mostly required for
working capital needs, longer term supply contracts and machinery leasing. The Loan
Repayment history of the cluster on the whole has been remarked as excellent.
TECHNICAL INSTITUTES
1- Pakistan Standards & Quality Control Authority
The development of Metrology, Standards, Testing and Quality (MSTQ) infrastructure
provides an essential building for industrial development in a country. Feeling this need,
government of Pakistan established Pakistan Standards and Quality Control Authority
(PSQCA) in 2000.
The three organizations namely, Pakistan Standards Institution (now SDC), Central
Testing Laboratories (now QCC) and Metal Industries Research and Development
centre (now TSC) have already been merged in PSQCA to provide one window
standardization, quality control and other technical services
Main Activities of PSQCA:
Establishment of National Standards.
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SMEDA started Sectoral approach for Plastics sectors some two years back and
consultations with association and stakeholders were held. Due to lack of interest by
Stakeholders/Association, nothing happened and work was halted. Various Seminars
have been conducted for the Plastic industry in Lahore and participation from the
industry has been excellent. Demands for more market driven trainings was placed by
the participants.
3- Export Promotion Bureau:
EPB is also a Government institution that has a mandate to promote products with
MADE IN PAKSITAN label. There are various kinds of services like organizing
international Exhibitions, arranging international delegations, Seminars, Export
subsidies, developing export markets, providing support services to local industry
capable of earning foreign exchange. The Vision of EPB is stated below;
Providing Leadership, Direction, Pro and Re-active Facilitation, to an aggressive
national drive for maximization of sustainable growth of Pakistan's Foreign Trade
As this cluster has just started to do exports, demand for International Trainings,
Exhibitions are on the rise and industry is in demand of new technology to compete in
the international market.
4- Large Enterprises:
Some of the Large Industrial organizations in the cluster also provide business
consultancy and support services (technical & Mechanical) for the small cluster
members.
5- Environment Protection Agency:
The Environmental Protection Agency Punjab functions under the provisions of Pakistan
Environmental Protection Act, 1997. Its main functions and duties are to promote
environment friendly policies and programmes. EPA existence in the cluster is hardly
noticeable.
6- Lahore Development Authority
The LDA is divided into three main Wings for the performance of its functions.
Infrastructural facilities are the responsibility of this organization for the city.
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Pakistans export processing zones have much to offer to investors and are making a
positive contribution to the countrys economy. The Export Processing Zones Authority
of Pakistan (EPZA) has contributed significantly in the governments drive to attract
foreign direct investment by offering a state-of-the-art package of incentives and
facilities. During the last three years, the success of export processing zones (EPZs) in
Pakistan has generated new faith in business circles, demonstrated by the inflow of the
large number of investment proposals being received by EPZA.
In Lahore, recently a SUNDER INDUSTRIAL ESTATE was established last year, for
which the EPZA received overwhelming response from the industry and all plots were
allocated to potential Businessmen to establish Industries. People from Plastic Industry
also showed interest in that and obtained certain space for their relocation or new
setups.
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SWOT ANALYSIS
Strengths
Opportunities
Weaknesses
Threats
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CLUSTER MAP
Large Firms
Technical
Support
PITAC
JICA
Financial
Institutes
NPO
TEVTA
Chemical
Suppliers
Wholesalers
Traders
Plastic Products
Manufacturers
Distributors
End
Consumers
Component
Industries
PPMA
Raw material
Suppliers
Machinery
Suppliers
Mold & Dies
makers
Direct Export
EDB
EPA &
EPZ
PSQCA
LCCI
LDA
UNIDO
EPB
SMEDA
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Educational
Institutes
PPMA LCCI EDB EPB SMEDA FIs PSQCA PITAC LDA EDU NPO EPA/EPZ LF UNIDO
PPMA
LCCI
EDB
EPB
SMEDA
FIs
PSQCA
PITAC
X
X
X
4
X
X
X
X
LDA
EDU
NPO
EPA/EPZ
LF
UNIDO
X
Not Applicable
Formal Relationship
Not Explored
**
Just interacted
Enthusiasm
Negative
-1
Formal Correspondence
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VISION
To Create Strong Linkages Among Cluster Actors And Improve Production Standards
And Productivity To Compete With International Quality Benchmarks. Increase Exports
Of Cluster To US $ 100 Million In Five Years By Focusing On New Geographic Markets
And Marketing / Distribution Channels.
Agency/Institution
Finish Date
July 2006
2 Awareness
Workshops
Finish Date
Training need
assessment of cluster
3 Mold Designing and
Process Training
courses
Plastic Export Potential
(Workshop)
SMEDA
Mar 2006
Dec 2006
Dec 2006
Strengthening of
Association
Dec 2006
Establishment of
Plastic Website
PPMA/SMEDA
Dec 2006
2
3
Finish Date
Creation of 2 networks
SMEDA
Aug 2006
Joint activities of
networks (catalogues,
brochures)
Hiring marketing BDS
by networks
SMEDA / Networks
Dec 2006
Mar 2007
Participation in Int'l
Trade Fair by 2
networks
July 2007
Appointments of NDAs in
mature networks
Networks / UNIDO
Dec 2007
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Annexure
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Annexure 1
10 FACTS ABOUT PLASTICS EVERYONE SHOULD KNOW
1. Plastics are one of the most resource efficient and versatile materials available to
society.
2. Plastics make a significant contribution to the vital goals of sustainable
development:
Social progress: plastics provide affordable products giving more people
access to higher standards of living, healthcare and information.
Economic development: the plastics industry chain in Europe adds value to
society. It employs well over 1.5 million people and generates sales in excess of
159 billion euro.
Environment protection: plastics help save resources fossil fuels and energy.
Plastics products save water and food.
3. Plastics consume only a tiny fraction just 4 % of the worlds oil, as feedstock.
4. Plastics products in use save oil:
100 kg of plastics parts in cars reduces oil consumption by about 12 million tones each
year in Europe, reducing CO2 emissions by 30 million tones a year.
Plastics help reduce fuel consumption and CO2 emissions from our homes: the
innovative use of plastics can reduce domestic fuel consumption to 3 liters per square
meter, compared to an average of 20 liters.
5. Plastics are too valuable to waste even at end-of-life. After serving a useful
purpose, plastics can either be recycled or used as an alternative fuel. Plastic waste has
a calorific value at least equal to coal and with lower CO2 emissions.
6. Renewable energies rely on plastics: solar panels, wind turbines.
7. Over 1 billion people in the world lack access to safe water. Plastics can preserve
and distribute water economically, reliably and safely.
8. No other material can compete with plastics when it comes to meeting technological
demands while preserving resources.
9. Plastics are the champions of prevention: Plastics packaging represents 17 % all
European packaging and yet packages over 50% of the consumer goods.
Over a ten-year period it is estimated that plastics packaging per unit has been
reduced by around 28% thanks to technology
Without plastics packaging, the weight of packaging would increase four-fold,
production costs and energy consumption would be doubled and waste volume
increased by 150%
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10. Plastics make our lives safer: airbags, seatbelts, baby seats, bike helmets, medical
devices are just some examples.
Annexure 2
BOTTLE / CONTAINER MANUFACTURING PROCESS STEP BY STEP
Creation of the Preform
A preform is the first stage of bottle production and is the result of the
Injection Moulding process. Each preform is shaped like a test tube with the
upper end in the shape of the bottle mouth (the finish). This preform is thick,
round and comes in many sizes depending on the required final bottle size.
1
A vacuum draws mixed virgin and reformed pellets into the drier.
The resin is dried to below a moisture content of 50ppm
(particulates per million).
Step 2
After several hours, the blended resin is injected into the
preform mould and clamped, resulting in the production of the
embryonic bottle.
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Low pressure air is blown into the preform to form the main part of the
bottle.
Step 7
High pressure air is blown into the bottle to fill out the details like the feet
and any markings (e.g. logos)
Step 8
The air is allowed to escape from the bottle and this time in contact with
the chilled mould allows the bottle to crystallize. Time is allotted in the
cycle to depressurize the mould before opening it and removing the bottle.
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