50 Years of Independence

Industrialisation yet to be inclusive

Moinul Haque | Published: 00:55, Apr 06,2021


Bangladesh has failed to explore potentials of inclusive industrialisation in the 50 years of its independence due to lack of proper policies.

The country’s traditional industries like jute and textiles have rather been ruined by governments with the concentration on developing the export-oriented readymade garment sector in a favourable global condition over the last four decades.

Although the progress of the country’s readymade garment sector was remarkable, the concentration on only one sector has made its economy vulnerable, making it now trail countries like Vietnam, Thailand, Indonesia and Malaysia in economic development.

The economies of all these countries were in a similar condition in the 90s.

Experts and businesses said that despite having huge potentials, the country’s industrialisation could not attain a desirable pace in the absence of a comprehensive policy.

‘Broadly, Bangladesh’s industrial sector is doing well, but if we have a closer look at it we would see that  our industrialisation is not deeply rooted and not broad-based,’ Policy Research Institute executive director Ahsan H Mansur told New Age.

It was a failure of Bangladesh’s industrial policy that its manufacturing sector is dependent almost on the RMG industry only, he said.

‘Besides, the RMG sector constitutes mainly low-end apparel of a limited range and it is also our failure that we could not diversify our industrialisation like Vietnam, Indonesia and Malaysia, which were in a similar  economic condition  to ours in the 90s,’ Mansur said.

According to official statistics, Bangladesh in 1971 inherited 77 jute mills, about 80 textiles mills, 10 sugar mills and some steel mills.

After independence the government nationalised the country’s industry when jute and textiles were its main industrial ventures, with a few new industries emerging after 1980.

Since the 90s, the government has either closed down or privatised state-owned industries and now almost all the public-sector jute, steel and textiles mills remain closed.

In 2014 the government decided to reopen at least 16 textile mills under public-private partnership but not a single mill has reopened in last seven years.

The state-owned jute industry mainly formed the industrial base of Bangladesh until the 80s but the successive governments did not adopt any policy to tap the potentials of the environment-friendly industry, said Anu Muhammad, a professor of economics at Jahangirnagar University.

‘It was a wrong decision to destroy the country’s jute industry as the domestic agriculture supplied 100 per cent of the raw material and the demand for the environment-friendly jute products was also huge on the global market,’ he noted.

Many countries that were in the neighbourhood of Bangladesh in economic strength, Anu Muhammad went on, have made remarkable progress in inclusive industrialisation as their governments have played a vital role in this regard but the governments of Bangladesh have not pursued any such policy.

‘The RMG sector has grown in the country as a result of a favourable global economic situation but the industry has not grown in quality with the growth of the apparel exports. Besides, the dependence on the highly subsidised RMG sector is risky for the country’s economy,’ the economics professor observed. 

He also said that the governments had miserably failed in ensuring workers’ wellbeing, a congenial working condition and workers’ rights while the situation in the country’s industrial sector has rather deteriorated compared to the 60s.

According to Anu Muhammad, the country has failed to utilise the potentials of pharmaceutical, food processing and light engineering manufacturing.

The Bangladesh Bureau of Statistics estimated that the contribution of the industrial sector to the nation’s gross domestic product was 31.13 per cent in the financial year 2020, which was 0.02 percentage point lower than 31.15 per cent in FY19.

According to statistics, the industrial sector’s share in the GDP has declined by 0.15 percentage point over the past five years as the FY16 share was 31.28 per cent.

BBS data further showed that the manufacturing GDP increased at a very slow pace between 2016 and 2020.

The manufacturing sector’s share in the 2020 GDP was 19.67 per cent while the figure was 18 per cent in 2016.

‘Our industrial sector is contributing around 30 per cent of the GDP but the share of large industries in it is very low. We need to emphasise large industries,’ said centre for Policy Dialogue distinguished fellow Mustafizur Rahman.

After independence, the governments pursued industrial policies that promoted replacement of imports and most of the investments were inward-looking until the 80s, he said.

Bangladesh embarked on export-oriented RMG industry considering its prospect on the global market, Mustafiz said.

‘Both the government and entrepreneurs will have to come forward to tap new industrialisation potentials in the changed global situation and we have to move towards a digital trade-based economy,’ he offered.

He further said that to fulfil the potentials of pharmaceutical, leather, light engineering, jute and home textile industries the government would have to expand its incentive structure. 

‘We have progressed a lot in last 50 years but we are still lagging much behind some of those countries which were similar to Bangladesh in terms of economic development when we became independent,’ Mustafiz added.

Abul Kashem Khan, former president of Dhaka Chamber of Commerce and Industry, said that the government would have to introduce a liberal policy to utilise the potentials of inclusive industrialisation otherwise the demographic dividend of the country might turn into a liability.

‘There should be a dynamic policy which would promote diversification of industry,’ he said.

Now the government should prepare a plan for every 10 years to foster industrialisation as the country has already missed the opportunity to develop automobile, light engineering, leather and pharmaceutical industries, Abul Kashem said emphatically.

Demanding policy consistency he said that long-term industries could not be possible with short-term policies.  

He also urged the government to establish some special economic zones that would be operational within the shortest possible time. 

Abul Kashem demanded government incentives for other industries with good potentials so that they could also grow fast like the RMG sector.

According to him, the success of Bangladesh in industrialisation over the past 50 years has been insignificant.

‘We first missed the opportunity for digital transformation in 1994 when the government refused to connect with the international optical fibre line,’ said former president Aftab-ul-Islam of American Chamber of Commerce in Bangladesh.

With that refusal Bangladesh has lost an opportunity to become an information technology-based industrialised country, he said.

Bangladesh, going beyond the traditional thinking, would have to develop both knowledge capital and human capital for future industrialisation, Aftab-ul-Islam suggested.

The Bangladesh Small and Cottage Industries Corporation, he said, has been established to promote small industries, mainly light engineering, across the country but it has failed to achieve the target due to corruption and lack of proper policies.

The industries ministry has made BSCIC literally ‘Be Sick’, Aftab-ul-Islam said sarcastically. 

Bangladesh Investment Development Authority executive chairman Md Sirazul Islam, however, said that Bangladesh had achieved ‘world-standard development’ over the past 50 years.

Especially, the development attained in last 10 years was three times the development achieved in the previous decade, he said.

‘It is true that we have to do more. It is our limitation that we are dependent only on the RMG sector and we need diversification,’ the BIDA chairman commented.

Sirazul further said that the government was working to overcome the challenges in attracting foreign direct investment.

‘We had set a target to draw $9 billion FDI for 2019–20 but we achieved only a third of the target. We are working on governance and ease of doing business and we are also trying to remove the policy constraints,’ he said.

PRI executive director Ahsan H Mansur said that most probably the rank of Bangladesh would improve in the ease of doing business index but the practical situation would not improve.

‘We need to do more to attract FDI but who will do that? Everyone is suffering from complacency,’ he said.

The exports from Bangladesh and Vietnam were somewhat same in value at around $2 billion in 1990, but now Bangladesh’s annual exports are worth around $40 billion while Vietnam’s exports have reached the value of $270 billion, Mansur said.

‘Time has come to make constructive criticisms for our realisation, otherwise we will lose more,’ he said.    

According to experts, after independence a few sectors, including pharmaceutical, jute and jute goods, leather and leather products and light engineering, made significant progress in meeting the local demand but the industries could not become competitive on the global market.

The pharmaceutical sector is meeting some 98 per cent of the local demand but the share of the sector in the $600 billion global market is nominal, they said.

The private-sector jute industry has developed but the industry’s annual export has remained stuck at around $1 billion for a few years.

The leather and leather goods industry is also meeting a large proportion of the domestic demand with the sector’s annual export remaining also at around $1 billion for more than five years.

The gradual economic development of the country, experts pointed out, has created local demand and many small and medium industries have developed based on the local demand.

They, however, said that many of the import-substitute industries in the country had remained alive on the government protection for long years.

In the name of protecting the local industry, the high duty on import goods is discouraging some industries to be competitive on the global market, economists viewed.

Want stories like this in your inbox?

Sign up to exclusive daily email