Dr. Anu Mahmud :
Bangladesh started its journey for industrial growth with a predominantly public sector since the independence of the country in 1971. All the major industrial units left behind by the erstwhile Pakistani owners were nationalised; naturally employment during the early ages of the new born country meant jobs mainly in nationalised sectors while small and medium enterprises were the fields of employment in the private sector. But, during the last four decades the country witnessed a reversal of the trend – the decreasing role of the public sector and the growth of private one. Industries under private ownership are now the highest sources of employment and economic growth of the country. Private sector industries like the readymade garments are the major employers and of the twin 1argest foreign exchange earners. Credit for innovation in opening new avenues industries and market expansion both at home and abroad goes to the private sector.
The public sector, especially the jute and textile industries, had a great potential. But allegedly for corrupt and incompetent management it gradually turned into a sick sector turning many units losing concern and leading some others to total collapse. On the other hand, privately owned enterprises showed better performance in production, management and market expansion and thus displayed tremendous possibility of growth.
But because of the failure in developing and providing adequate infrastructural support like power and energy, creating better investment-friendly environment, attracting more domestic and foreign investment, the growth of industries has almost come to a standstill. Government efforts in that direction are yet to make positive impact.
Industrial and economic growth of the country and solving of the unemployment problem, one of the millennium development goals, presupposes striking a balance between the public and private sector. The government will have to play a stronger role as the facilitator of industrial development by removing the bottlenecks that stand in the way of industrial growth. Greater momentum for the growth of industries now hinges around how quickly the government removes the constraints.
Constrains facing the development of a sound industrial base in the country are aplenty. But it is unacceptable if it’s claimed that the country is unsuitable for any kind of industrial take-off. What actually matters most is the right selection of industries and development of entrepreneurship suiting our economic and environmental realities. On that score the emphasis on import-substitute industrial units instead of what we call primary industries is the salient feature of the newly approved industrial policy. The argument put forward in its favour is to promote export- oriented industries.
We are yet to know about the details of the policy frame but the impression is that it has sought to develop backward linkages, particularly in reference to the readymade garments industry. It has been a longstanding demand and addressing this would certainly be a move in the right direction.
So long our labour remains cheap and employment scarce, it makes sense to attach priority to this still profit-making sector. But we think we must keep our option open for development of entrepreneurship in other areas as well as go for non-traditional industries, particularly those that are agro-based. It will serve our purpose in more ways than one.
After all, ours is a land-scarce country with an over-size population. We can ill-afford to use of agricultural land for setting up industrial plants and we are happy that the industrial policy this time has duly recognised this fact. Yet we also need diversification of industries simply because we have to weather bad times for some industries and make up for the consequent fall in revenue by income from other sectors. Surely, we must learn to absorb shock of global economic downturn and still maintain economic growth at a reasonable level. The other benefit of such home-based and labour-intensive industrial units is the employment of village people. Employment at the grass-roots level means they can stay in their familiar environment with back-up facilities which actually help raise their purchasing power. It is an exercise worth trying.
However the emphasis on agro-based food processing industry, human resource export, shipbuilding, solar power, ICT products, and services, tourism, light, engineering industry, home textiles and handicraft, readymade garments, herbal medicine, energy efficient appliances is well-taken. Prioritisation of export and import-substitution industries and some non traditional segments is laudable, only that it requires an extra ordinary level of inter-ministerial coordination.
Notably, the principle of divesting loss-making state-owned enterprises (SOEs) outright has been discarded in favour of making these competitive and profitable, a tall order for the conventional management resources. The astronomical loan default on the part of the SOE cannot be lost sight of as this has been a huge drain on the national exchequer.
It is understood that a legal frame work will be provided for the operation of the sick industry which, among other things, will stipulate alternative employment for those to be retrenched. This should be linked to retraining of the workers so that they fitted into the requirements of a new order.
Basically, the emphasis laid on SMEs with a redefinition of micro industries enabling them to avail of the facilities catering for their special needs and problems is welcome. So is the idea of setting up separate economic zones for highly potential industry like pharmaceuticals. But in the ultimate analysis its success will depend on evolving mechanisms for the policy’s implementation.
The report titled “Reducing Poverty by Closing South Asia’s Infrastructure Gap” is the first analysis of the region’s infrastructure needs by the World Bank. According to this report-
Bangladesh needs to invest as much as $74bn in infrastructure by 2020 to bring its power grids, roads and water supplies up to the standard.
The amount is 7.38% of the country’s GDP per year and second highest among South Asian region that needs $2.5tn on infrastructure by 2020 to serve its growth population.
It says the region, which includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, could address its ‘enormous’ infrastructure needs by tapping private and public sector funds as well as by introducing reforms.
In 1990-2012, Bangladesh attracted only %10.140bn from the private sector in telecom and energy sectors, which is 1.14% of GDP (2007-2012) and 2.83% of total private participation in infrastructure (PPI), the report says.
But it failed to attract PPI in water supply and sanitation, transport to serve the people best.
“Many people in South Asia remain unconnected to a reliable electricity grid, a safe water supply, sanitary sewerage disposal, and sound roads and transport network,”
“The South Asia region continues to suffer from a combination of insufficient economic growth, slow urbanisation, and huge infrastructure gaps that together could jeopardise future progress.”
To bring its infrastructure up to scratch, the bank said the region needs to invest between 6.6% and 9.9% of 2010 GDP a year.
That is as much as three percentage points over the current 6.9% invested by the region, which includes Afghanistan, Bangladesh, Bhutan, India, Malistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, in 2009.
More than a quarter of the population still lack access to electricity, far more than the less than 10% who lack it in other parts of the developing world.
The Bank said governments should ensure infrastructure access extended to the people who need it the most women, the poor and marginalised groups-and move away from a “build, neglect, and rebuild’ mindset by investing in the rehabilitation and maintenance of infrastructure assets.
In South Asia only 71% of the population has access to electricity, ahead of Sub-Saharan Africa at 35%, but well behind the rest of the developing world at above 90%. According to business in South Asia, a lack of electricity is the biggest barrier to their growth.
Business friendly policies and predictable tax and tariff regime are some of the fiscal issues which are very important to lure enough Foreign Direct Investment (FDI) to the country.
Bangladesh needs steady flow of FDI to support business expansion and set up new business which in turn is very important to create new jobs and income to people entering the job market and secure the steady growth of the economy which is growing above 6 percent annually in recent time.
Bangladesh economy is growing fast with hefty domestic investment along with FDI in some areas such as gantent, telecommunication and some other service sectors. We also require more investment in energy sector such as coal extraction and gas exploration. Only the enough flow of FDI can tackle such huge investment requirement in the energy sector and technical support to develop it in the fledgling energy sector.
Bangladesh is an emerging destination of FDIs in South Asia as more Chinese investors are relocating their apparel industry in Bangladesh. More investors from Korea, Hong Kong, Malaysia, UK, Singapore area also slowly crowding in the local market and we believe that a business friendly tax and tariff regime is highly important to lure them and hold them on the ground.
Another important issue that the more relevant to the country’s political leaders and policy makers also, is to ensure political stability to support business. Disruption in Roads and Highways create bottleneck to timely shipment of exports and transportation of raw materials to clothes.
Fears of violence and vandalism, destruction of transport vehicles and other property spread panic and investors keep away from visiting the country in fear ofsecurity. Moreover, labour unrest is yet another cause of concern to the foreign investors and only the political leaders and workers unions can make sure that the country will enjoy the needed stability that foreign investors bother so much in putting money to a new country away from their home.
The NBR to give proper attention to the need of FDIs and its protection both from harsh fiscal regime and political chaos. Bangladesh economy is poised to move forward and FDIs is one of the big players. Their concerns need to be properly dealt with.
(The writer is an Economic analyst, and Columinst, e-mail [email protected])
