Govt. to come up with new strategies
Local manufacturers of construction materials are struggling to stay in business despite construction being one of the biggest sectors in the country.
The former government issued at least five executive orders, stating that government agencies must consider procuring construction materials from local manufacturers to curb imports and create jobs. The local manufacturers aren’t close to achieving that.
Instead, some of the manufacturing units have closed their business, while others are suffering a significant decline in their business.
A Gelephu-based businessman, Chimi Dorji, closed his brick factory, Kuengacholing Concrete Bricks, about one and a half years ago in Gelephu. He established the factory in 2013.
“There is no market for the product. We can stay in the business only if we get supply orders from government agencies,” he said.
Pema Wangchuk, who owned a wire mesh gabion enterprise in Bumthang, closed his business about eight months ago without buyers. He said government agencies preferred imported wire mesh gabions despite them being inferior in quality in comparison with the ones produced by him.
He alleges collusion between officials and suppliers for the inability of local manufacturers to get business from government agencies.
Pema Wangchuk cited the example of a court case he had filed against the government agency and won in about 10 years ago. The agency had procured wire mesh gabions from another supplier at a higher rate than the price he had quoted.
He said his product was certified by Bhutan Standard Bureau. “In fact, my products were better than imported ones,” he said, adding the use of imported wire mesh gabions was rampant, while locally manufactured product remained unsold.
An official from YT Bricks in Trongsa said production has been suspended. One of the issues facing local manufacturers, he said, was lack of cooperation from procuring agencies.
The main customers for local manufacturers should be government agencies in dzongkhags.
“When the government construction goes for imported materials, there is no market for local products. Even the public hesitate to use local products when the government does not use,” he said.
The factory owner won a contract to construct a school toilet in Trongsa, but had to procure bricks from Wangdue, according to him. The reason was that his product was not included in the bill of quantities (BOQ).
However, he added that it was the responsibility of engineers in the dzongkhag to include them in the BOQ. The government did not follow up with its own order on the use of local products that was issued in 2015, he said.
Proprietor of Yangjung Sonam Bricks and Still Fabrication Enterprise in Gelephu, Sonam Dorji, said that his business has shrunk since January 2018.
He said his business, which was established in 2012, ran well untill 2014. “Now there is no market as customers prefer imported bricks,” adding that a huge chunk of his products remained unsold.
Most of public construction sites continue to use imported blocks and bricks. The Bank of Bhutan Limited’s main building in Thimphu, the expanded building of the Thimphu TechPark, and the Bhutan Post building in Gelephu are some of the major construction sites were imported bricks are used, claims the local manufacturers.
Local manufacturers also say that road construction sites prefer imported wire mesh gabions despite them being produced in the country.
Government’s strategy to support local manufacturers
Given the competitive advantage and the choice of customers, there is little the government can do.
However, economic affairs minister Loknath Sharma said the government will come up with a strategy to help local manufacturers within a few months. The government, he said, was reviewing the procurement rules and looking at providing fiscal incentives.
Lyonpo Loknath Sharma said the taxation policy and procurement rules are undergoing change and that local manufacturers will be one of the target beneficiaries.
He said that the choice of products was still determined by prices as the procurement rules allowed agencies to buy the lowest rates.
Construction materials from India were cheaper than local products as local producers were not able to minimise the cost of products due to high labour costs.
“We are trying to support local manufacturers. This government will do more in doing things that are doable.”
However, the economic affairs minister added that local manufacturers should meet the quality standards and the products should be market-oriented. Local manufacturers, he said, should also minimise the cost of production.
The government has included the use of local products in its manifesto, which states that the government will support establishment of import substitution industries such as construction materials, wood-based industries, paper and agro-industries, among others.
“Green procurement policy will be implemented to encourage green technology. We will consider protecting these industries through preferential procurement by reviewing all trade agreements,” the manifesto states.
The Ministry of Works and Human Settlement in 2015 issued an office order stating that unless government agencies should procure locally manufactured wire mesh gabions as far as possible.
Local manufacturers say that they cannot create employment opportunities in the current scenario. They are concerned about the sustainability of their enterprises if the import of construction materials from India continues.
However, some corporation officials told Kuensel that while they encourage locally produced materials, irregular supplies from local producers hamper work.
According to the former government’s executive orders, import of blocks and bricks should only be allowed upon non-availability or non-feasibility of local materials with prior approval and written certification from concerned agencies and the project engineer in-charge.
Local manufacturers say import of Autoclaved Aerated Concrete (ACC) Blocks and Cellular Lightweight Concrete Blocks that resemble locally produced bricks have affected local enterprises.
They also cite lack of awareness among people and government agencies on the use of locally produced bricks as one of the reasons for the continued import of bricks from India. A manufacturer of local bricks from Paro earlier said his product was cheaper and better than imported ones.
Most local brick owners say they availed loans to set up factories after the government issued the order to stop the import of bricks and that even private construction owners should be encouraged to use locally produced blocks.
In March 2016, the then economic affairs minister Norbu Wangchuk also issued a circular asking all procuring agencies, government agencies, public corporations and hydropower authorities to consider procuring mesh wire from local manufacturers.