BVV SANGHA

BASAVESHWAR ENGINEERING COLLEGE BAGALKOT

A Presentation on impact of Globalization on Chemical Industry

Objectives of the Study

Objectives of the Study The overall objective of this study is to examine the impact of globalization on the

manufacturing sector.
will enable the country benefit maximally from the current globalization trend in the world economy. In order to achieve this main objective, we intend to do the following. analyze the challenges, opportunities and risks of globalization and their implications for sustainable development in Nigeria;

examine the impact of globalization on the manufacturing sector of the economy .

discuss socio-economic policy issues and reforms needed for the country to maximize the benefits and minimize the risk associated with globalization.

INTRODUCTION TO chemicals industry

Over the last eighteen years the Indian chemicals industry has moved from manufacturing principle chemicals in a highly regulated market to being a mature industry in a liberalized economy. Until 1991, with the domestic chemical industry enjoying protection in the form of differential import duties on raw materials and finished chemical products. Chemical manufacturing was largely controlled by licensing regulations.

The Indian chemical industry, 12th largest in production, is growing at an average rate of 12.5%. However, sector modernization of existing technology through foreign collaborations could further enhance growth.

DEFINED GLOBALIZATION A S
international integration of markets for goods, services and capital. It is the process of change towards global economic integration and a world economy characterized by liberation of trade , and rapid diffusion of advanced technologies and consumption patterns. Again, Aina (1996) proceeded to review theliteratur e and suggested that globalization connotes a presence, the process of making global, being present world wide, at the world stage or global arena. These imply visibility,120 M.A.O. ALUKO, G.O. AKINOLA AND SOLA FATOKUN immediacy, or availability. Abubakar (2001) argued that an issue, object, value(s), institutions, or practices is globalized if either through commerce, production, consumpt ion, politics and the information technology it is visible or considered relevant in global centres. In this sense, therefore, globalization entails universalization whereby the

Globalization is the process by which businesses create value by leveraging their resources and capabilities across borders, and includes the co-ordination of cross-border manufacturing and marketing strategies.

Positive impacts of Globalization

varied opportunities for the developing countries . It gave a fillip for better access to the developed markets. The technology transfer promised better productivity thus improved standard of living.

Negative impacts of Globalization

Globalization has also thrown open varied challenges such as inequality across and within different nations, volatility in financial market spurt open and there were worsening in the environmental situation. Another negative aspect of globalization was that a majority of third world countries stayed away from the entire limelight. Till the nineties, the process of globalization in the Indian economy had been guarded by trade, investment and financial barriers. Due to this, the liberalization process took time to hasten up. The pace of globalization did not start that smoothly. Economic integration by 'globalization' enabled the cross country free flow of information, ideas, technologies, goods, services, capital, finance and people. This cross border integration had different dimensions - cultural, social, political and economic. More or less the economic integration happened through four channels -

Strategies
Effects of Globalisation on Chemical Industry The chemical industry has been traditionally been developed in protected environment. The globalisation posed several challenges to the Indian Chemical Industry. The Indian Chemical manufacturers were not globally competitive and hence they struggled to deliver quality as the import quality chemicals (KPMG, 2004). Another challenge Indian Industry faced is the environmental regulations forced by the policy makers due to the International pressure (Gopalkrishnan R., 2008). Entry of Foreign Players like Dow Chemicals, Akzo Noble and BASF has made the Industry more competitive. As explained by Mr. P.N. Shah, GM, Larsen & Toubro Ltd., (Personal Communication, January 15, 2009) the foreign players use the world-class technology which gives both, Cost effective as well as better quality products.

Contd
The import duty has been reduced after opening the economy. This has made Indian producers suffer. Especially, the smaller players were affected adversely. The earlier years of 21st Century saw closing of many small scale players in India. This hinted Government of India to take up initiatives such as Cluster Development approach for the Development in India (Sachitanand, 2009). Prof. R.N. Shukla (Personal Communication, January 16, 2009) stressed upon the point that Indian Chemical Industry faces the challenge of dumping which is also a result of Globalisation. This has made the import cheaper and local producers less competitive. This also resulted into shift of focus towards export markets for the Industry.

 The chemical industry is facing some challenges as well as new business opportunities. The globalisation has increased Indias foreign trade and also forayed new avenues in Pharmaceutical industry. The growing numbers of expiring patents have increased the importance of Research and Development. While basic chemicals segment is facing a declining demand, it needs to focus on cost reduction tactics. The growing competition from China and implementation of REACH agreement are the challenges faced by the industry. The entrance of foreign players has witnessed technological advancement in the industry for the larger players. The smaller players have suffered due to lack of funds and hence collaborative strategies such as Cluster Development is required.

The advantages of manufacturing high class chemical products in India are as follows Friendly Government of India policies Low cost labor Low and world class infrastructure Strong technical education Large number of science and engineering graduates Quality output Highly skilled workforce Usage of innovative process Good client relationships labor cost

Huge scope for innovation Expansion of existing relationships Huge demand in overseas markets Availability of more technical work force Increased number and quality of training facilities Large and very fast growing Indian petrochemical market Huge trained talent pool Competitive

Weaknesses of Indian chemical industry

Insufficient basic infrastructure for the chemical industry High feedstock cost in comparison to Middle East countries Prevalence and use of old and outdated technology Synthetic fiber industry is unorganized and operates in small clusters

Opportunities of Indian chemical industry Huge demand for polymer and synthetic fiber Great opportunity for product development Low consumption of polymer in comparison

to global consumption rate

Ever increasing size of domestic markets

Threats to Indian chemical industry Stiff competition from other regional players like, china and the Middle East countries Stiff rational pricing pressures Environmental hazards concerns Low market recognition Relocation of manufacturing sites to region with abundance of feedstock

Notable points of Indian chemical industry -

It share stands at 2% of world market Annual rate of growth of the Indian chemical industry is 10% Its business is worth US$ 30 billion Profit incurred is around 14%

Wide variety of products

Basic components are petrochemicals, inorganic chemicals and fertilizers The Indian states of Gujarat, Maharashtra, West Bengal and Andhra Pradesh have the largest concentration of chemical and petrochemical units

CONCLUSION
Lastly it can be concluded that Globalization has both positive and negative impact on the chemical industry. Globalization often results in a
melding of functions foreign & domestic product forms &