Bangladesh Economy and Politics
ECONOMY OF BANGLADESH :
Bangladesh, which was one of the major exporters of textiles, silk and sugar in the eighteenth century, experienced deindustrialization during the 200 years of colonial rule. As a result Bangladesh had a narrow industrial base when it become independent in 1971. The industrial sector grew at an annual compound rate of 5.32 percent during the period 1972-73 to 1990-91. The growth rate in manufacturing is, however, lower. The annual growth of manufacturing fell from 3.87 percent during 1972-73 period.
Industries in Bangladesh are categorized into 3 groups : large scale, medium scale and cottage industries. "Small Industry" means an industrial undertaking engaged either in manufacturing process or service activity whose total fixed investment excluding the prices of the land, expenses for inland transportation and commissioning of machinery appliances and duties and taxes, is limited to Tk. 30 million (including initial working capital). "Cottage Industry" is defined as an industrial unit either engaged in manufacturing or servicing generally run by the family members either as full-time or part-time and the total investment is limited to Taka half a million (Tk. 5,00,000).
According to Planning Commission estimates, there were about 32,000 small industries and 3,83,000 cottage industries (excluding handloom) in 1990. Small and cottage industries account for 4.5 percent of GDP. However, these industries employ about 5 million people directly or indirectly which accounts for 78 percent of the industrial labour force. While the lion's share of total manufacturing value in Bangladesh originates from large and medium industries, small and cottage industries are by far the largest employers. The private manufacturing in Bangladesh is dominated by small and medium scale establishments, and firms with less than 20 workers account for more than half the total number. The government is actively encouraging small and cottage industries by various facilities and incentives provided through the Bangladesh Small and Cottage Industries Corporation (BSCIC) such as subsidized industrial plots, reduction of duty on imported machinery, tax holiday, preferential credit etc. Small and cottage industries play a significant role in sub-contracting and linkage industries. Sub-contracting and linkage industries have shown a steady progress in recent years. There are more than 20001ight engineering workshops in and around Dhaka city.
Despite recent privatization of a large number of enterprises, the public sector in Bangladesh continues to be a very significant factor in industrial production. The government still retains a monopoly over the production of refined sugar, fertilizers, basic steel (excluding rolling) and cement. At the peak of nationalization drive in 1973, government share in the total assets of the manufacturing sector stood at 92 percent and the government took over the management of 800 manufacturing units. The number of state owned enterprises has now been reduced to 160. Nevertheless public manufacturing enterprises own about 40 percent of the total fixed assets in the manufacturing sector. The public manufacturing enterprises are now supervised by 6 government owned corporations. The Bangladesh Jute Mills Corporation oversees 33 jute mills. The Bangladesh Textile Mills Corporation manages 43 textile mills. The Bangladesh Chemical Industries Corporation is a conglomerate of 6 urea fertilizer
factories, 1 TSP factory, 1 newsprint mill, 3 paper mills, 1 hardboard mill, 1 rayon mill, 2 cement factories, 1 chemical and 7 miscellaneous factories. The Bangladesh ;. Steel and Engineering Corporation consists of 21 enterprises which produce steel engineering products and consumer goods. The Bangladesh Sugar and Food Industries Corporation owns 16 sugar mills and 9 miscellaneous enterprises. The Bangladesh Forest Industries Development Corporation manages 14 enterprises which grow rubber and process forest-based products.
The privatization efforts in Bangladesh could be divided into 4 periods : 1973-81, 1982-86, 1987-90 and 1991 to present. In the first phase which lasted till 1981, 389 small units were divested. In the second phase (1982-8C,), 35 of the 66 jute mills and 27 of the 68 textile mills were restored to their previous Bangladeshi owners and 2 nationalized banks were privatized. In the third phase (1987-90), additional 12 units were privatized. At the current stage, 40 enterprises under the Ministry of Industries, 10 textile mills under the Ministry of Textiles and 17 jute mills have been selected for privatization.
The privatization process in Bangladesh offers exciting opportunities for private sector investment at a barbain price. The privatization of smaller units has succeeded in reducing the drain on the government budget. Their performance is reported to be better than public mills. The limited success of privatization is attributed to government control on input/output prices, employment and wage restrictions and special assistance offered to public mills. In view of the modest success of privatization, the government has already established a Privatization Board which auctions public enterprises through public tender.
According to a census of manufacturing of large and medium industries, the number of manufacturing establishments in Bangladesh increased from 3356 in 1981-82 to 23,752 in 1988-89; value of fixed assets from Tk. 13,962 million to Tk. 83,273 million, value added from Tk. 10,362 million to Tk. 60,663 million and number of employees from 4,66,471 to 9,91,686. In terms of value added 5 categories of industries account for 68.5 percent production. These categories are textiles (26.2 percent), food manufacturing (16.6 percent), industrial chemicals (11.5 percent), wearing apparel (7.9 percent) and drugs and chemicals (6.3 percent).
Textiles which contribute the highest percentage of value added is also the largest employer in the industrial sector. This category consists of cotton yarn, cotton cloth, hessian, sacking, carpet-backing and synthetic yarn. The value of production in this sector was Tk. 20,436 million in 1990-91. Except cotton yarn, production stagnated or fell in other sub-sectors during last 2 decades. Apart from the modern textile sector, traditional handloom employs more than 1 million people producing about 50 percent more cloth than textile mills. There are 77 textile mills in public and private sectors. Besides there are 27,793 power looms and 530 thousand handlooms. There is a big market for quality yarn in Bangladesh. The production of quality yarn will make possible the harmonious development of both modern textile sector and handloom.
Jute manufacturing with 64 operating jute mills used to be the largest industry in Bangladesh. Jute industry now faces serious constraints because of decline in external demand and misguided domestic policies pursued in the past. .A project has recently been undertaken to restructure the jute industry. Bangladesh has considerable comparative advantage in jute manufacturing over other jute
producers; it has the best quality of jute in the world and has lower wages and raw jute prices than competing countries. The main thrust of reforms in the jute sector is enhancing the productivity of labour and rehabilitation of run-down equipment in the mills.
Food manufacturing industries constitute the second largest category in terms of value added and the third largest employer in the industrial sector. This category includes sugar, edible oil, tea, salt and frozen shrimps and frog legs. Because of strong external demand, the quantity of frozen shrimps increased from 1,094 MT in 1982-83 to 6,172 MT in 1990-91. Similarly the production of sugar increased from 1,77,652 MT in 1982-83 to 2,46,102 MT in 1991-92. There was also a significant growth in the production of edible oil.
The third largest industry in terms of value added is the industrial chemicals. This includes production of urea, ammonia, sulphates, TSP, sulphuric acid, caustic soda, chlorine and paints and varnishes. This sector is also growing fast because of ever-increasing demand for fertilizer in the agricultural sector.
Wearing apparel industry is the second largest category in terms of employment and the fourth largest in terms of value added. This is the fastest growing industry which experienced annual growth rate of 63 percent over the decade. Private sector garment exports in 1979 were valued at $ 0.1 million; it now exceeds $ 1.06 billion.
The fifth biggest category of industry in Bangladesh is drugs and chemicals. There are over 35 major pharmaceutical manufacturers in Bangladesh.
Though textiles is the largest category in terms of value added and employment, industrial chemicals is the biggest category in terms of fixed assests. Wearing apparel is the second largest employer, but in terms of fixed assets it ranks seventh. In terms of value added, 10 largest industrial categories contribute about 84 percent of the industrial production; in terms of fixed assets 10 biggest categories constitute 87 percent of the total fixed assets and 10 largest types of industries employ 89.6 percent of the total industrial labour.
ALL YOU NEED TO KNOW ABOUT BANGLADESH:
