Just past the first anniversary of Swachh Bharat Abhiyan, as we ruminate about the achievements of the Modi government’s much-vaunted programme, it might also be worthwhile to take a look at what our next-door competitor and inspiration China has done about waste. Especially, other people’s waste.
China’s rise as a manufacturing hub and exporter is widely discussed and documented. But what does it import from other countries? It is scrap. China, as it happens, is the world’s largest importer of recyclable waste materials such as paper, plastic, steel and copper. According to the United Nations Statistics Division, scrap was China’s biggest import from the United States in 2012. Across the Atlantic, the United Kingdom exports approximately 70% of its domestic plastic waste, and nearly 90% of this ends up in China.
From the Chinese perspective, this commerce is greatly beneficial. Facilitating the trade in recyclable waste materials secures it the raw materials required to sustain its large and growing manufacturing sector. However, it doesn’t just allow its manufacturing to run on the waste trade alone. Increasingly, it is pushing its industry to transition to a circular economy (an idea that is gaining currency in the European Union as well). What this means is that manufacturers are being encouraged to design products in such a way that the materials can be recycled or reused. This way, costs are saved, manufacturing ensured and, in an era of growing scarcity, new resources not mined.
But how does this dominance impact India?
Cheaper raw materials
China enjoys significant competitive advantage over others, thanks to its access to cheaper raw material embedded in waste. This enhances pressures on competing businesses in other countries, and, additionally, means that waste management systems in the developed world are reliant on China for recycling their waste.
Like China, the demand for raw materials in India is expanding rapidly to meet the consumption needs of the growing middle class. India also aspires to expand its manufacturing sector, which has grown sluggishly over the past two decades. The most prominent example of this new focus is Prime Minister Narendra Modi’s Make in India campaign. However, the speed and growth of the Chinese manufacturing sector has shrunk the space for Indian manufacturing in global markets for both finished products and raw materials.
Manufacturing that uses paper and plastics as primary raw materials is a case in point.
China dominates the paper and plastic scrap trade feeds and, according to the UN Comtrade Database, it is the leading exporter of finished paper and plastic commodities across the globe. Due to this, Indian recycling companies are unable to make inroads into the world’s largest scrap markets – the US and the European Union. Moreover, because the manufacturing sector is not as large, there is relatively less demand for the raw materials in India.
Shipping advantages
Chinese businesses have a further advantage due to the differences in costs of reverse haulage. The rise in Chinese exports has meant that ever more ships, loaded to full capacity, are travelling from there to ports around the world. These ships returning to China – referred to as reverse haulage – would have been empty if they weren’t carrying back scrap. As a result, the shipping costs to China are substantially lower than the shipping costs from China. For instance, the cost to ship from the US to China is one-fourth of the cost to ship from China to the US.
In the market for recyclable waste materials, where prices are determined through international competition, favourable prices for reverse haulage is an unparalled advantage that India doesn’t have.
Still, laggards can compete too. India can learn from the Chinese experience. A starting point is to ask this question: what propelled China to transition from being the world’s toxic dumpsite in the 1990s (like India) to a magnet for clean waste? The answer is: Being ahead of the curve in the wealth-from-waste discourse. China realised there was money to be made from waste. More than that, it recognised that massive wealth could be created nationally if the waste was recycled into exports from the formal sector. This would not only secure the material base but also feed on competitive advantage, such as reverse haulage.
At the heart of all this – and this is the key learning for India – was the policy formulation promoting the transition to a circular economy. The Chinese policy on circular economy is embedded in the overall industrial policy which is struggling to turn sustainable. In India, policy initiatives related to a circular economy are being implemented in silos and industrial policy still has limited focus on closing the loop of material cycles.
Circular economy
This is not to make the case for waste imports into India. Rather, this is to underscore the value waste – even domestically generated – can bring to a country’s economy, instead of pulling it down by disease, pollution and putting off investors who see filthy cities.
The Swachh Bharat Abhiyan, in its first year, has put the issue of waste as a priority on the minds of millions. While cleaning up localities, wards and cities is important, simply focusing on these solutions should not be the full story. The place for waste is simultaneously in systematic approaches – in the Circular Economy.
A vital spin-off from the Swachh Bharat Abhiyan that India needs is policy guidance to transition to a circular economy. For this, the macro step will be to develop infrastructure that facilitates a circular economy. But at the same time, India’s millions of recyclers, currently mostly informal, must be recognised and included as active service providers in Swachh Bharat Abhiyan and the Circular Economy Framework. With all this in place, Indians and India could reap the fortunes that waste has enabled for China.
Bharati Chaturvedi is the director of the Chintan Environmental Research and Action Group. Ashish Chaturvedi is Senior Fellow, Adelphi (Germany) and Associate, Institute of Development Studies (UK).
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China’s rise as a manufacturing hub and exporter is widely discussed and documented. But what does it import from other countries? It is scrap. China, as it happens, is the world’s largest importer of recyclable waste materials such as paper, plastic, steel and copper. According to the United Nations Statistics Division, scrap was China’s biggest import from the United States in 2012. Across the Atlantic, the United Kingdom exports approximately 70% of its domestic plastic waste, and nearly 90% of this ends up in China.
From the Chinese perspective, this commerce is greatly beneficial. Facilitating the trade in recyclable waste materials secures it the raw materials required to sustain its large and growing manufacturing sector. However, it doesn’t just allow its manufacturing to run on the waste trade alone. Increasingly, it is pushing its industry to transition to a circular economy (an idea that is gaining currency in the European Union as well). What this means is that manufacturers are being encouraged to design products in such a way that the materials can be recycled or reused. This way, costs are saved, manufacturing ensured and, in an era of growing scarcity, new resources not mined.
But how does this dominance impact India?
Cheaper raw materials
China enjoys significant competitive advantage over others, thanks to its access to cheaper raw material embedded in waste. This enhances pressures on competing businesses in other countries, and, additionally, means that waste management systems in the developed world are reliant on China for recycling their waste.
Like China, the demand for raw materials in India is expanding rapidly to meet the consumption needs of the growing middle class. India also aspires to expand its manufacturing sector, which has grown sluggishly over the past two decades. The most prominent example of this new focus is Prime Minister Narendra Modi’s Make in India campaign. However, the speed and growth of the Chinese manufacturing sector has shrunk the space for Indian manufacturing in global markets for both finished products and raw materials.
Manufacturing that uses paper and plastics as primary raw materials is a case in point.
China dominates the paper and plastic scrap trade feeds and, according to the UN Comtrade Database, it is the leading exporter of finished paper and plastic commodities across the globe. Due to this, Indian recycling companies are unable to make inroads into the world’s largest scrap markets – the US and the European Union. Moreover, because the manufacturing sector is not as large, there is relatively less demand for the raw materials in India.
Shipping advantages
Chinese businesses have a further advantage due to the differences in costs of reverse haulage. The rise in Chinese exports has meant that ever more ships, loaded to full capacity, are travelling from there to ports around the world. These ships returning to China – referred to as reverse haulage – would have been empty if they weren’t carrying back scrap. As a result, the shipping costs to China are substantially lower than the shipping costs from China. For instance, the cost to ship from the US to China is one-fourth of the cost to ship from China to the US.
In the market for recyclable waste materials, where prices are determined through international competition, favourable prices for reverse haulage is an unparalled advantage that India doesn’t have.
Still, laggards can compete too. India can learn from the Chinese experience. A starting point is to ask this question: what propelled China to transition from being the world’s toxic dumpsite in the 1990s (like India) to a magnet for clean waste? The answer is: Being ahead of the curve in the wealth-from-waste discourse. China realised there was money to be made from waste. More than that, it recognised that massive wealth could be created nationally if the waste was recycled into exports from the formal sector. This would not only secure the material base but also feed on competitive advantage, such as reverse haulage.
At the heart of all this – and this is the key learning for India – was the policy formulation promoting the transition to a circular economy. The Chinese policy on circular economy is embedded in the overall industrial policy which is struggling to turn sustainable. In India, policy initiatives related to a circular economy are being implemented in silos and industrial policy still has limited focus on closing the loop of material cycles.
Circular economy
This is not to make the case for waste imports into India. Rather, this is to underscore the value waste – even domestically generated – can bring to a country’s economy, instead of pulling it down by disease, pollution and putting off investors who see filthy cities.
The Swachh Bharat Abhiyan, in its first year, has put the issue of waste as a priority on the minds of millions. While cleaning up localities, wards and cities is important, simply focusing on these solutions should not be the full story. The place for waste is simultaneously in systematic approaches – in the Circular Economy.
A vital spin-off from the Swachh Bharat Abhiyan that India needs is policy guidance to transition to a circular economy. For this, the macro step will be to develop infrastructure that facilitates a circular economy. But at the same time, India’s millions of recyclers, currently mostly informal, must be recognised and included as active service providers in Swachh Bharat Abhiyan and the Circular Economy Framework. With all this in place, Indians and India could reap the fortunes that waste has enabled for China.
Bharati Chaturvedi is the director of the Chintan Environmental Research and Action Group. Ashish Chaturvedi is Senior Fellow, Adelphi (Germany) and Associate, Institute of Development Studies (UK).
