Smaller and medium industries in Bangladesh are becoming weaker as their production has steadily been down over the years, painting a grim picture of employment generation, according to officials.
The manufacturing growth in cottage, micro, small and medium enterprises (CMSMEs) had been lower in fiscal year (FY) 2023-24 than in previous years, official data showed on Saturday.
An estimated 85-per cent employment of the country is created in the informal sector, which mostly deals with CMSMEs.
Economists say lower growth in CMSMEs means slim employment generation as these industries are the country's top generator of jobs.
Since CMSMEs are the backup industry for larger ones, their production fall will ultimately affect manufacturing at bigger industries, they add.
The Bangladesh Labour Force Survey-2022 shows an estimated 60-million people, who constitute 84.9 per cent of the total working population here, are engaged with the informal employment.
According to a recent disclosure by the Bangladesh Bureau of Statistics (BBS), the year-on-year industrial production growth rate in micro, small and medium enterprises (MSMEs) lowered to only 5.07 per cent in FY24.
The rate was lower than that in the previous two consecutive fiscals of FY22 and FY23.
According to the MSMEs industrial production index, the FY22 growth was 15.39 per cent and that in FY23 was 9.03 per cent, according to the National Accounts Statistics-2024 report.
Under MSMEs, the production of machinery and equipment has dropped drastically as it marked 45.55-per cent negative growth in FY24.
Machinery and equipment output maintained positive growth in FY22 and FY23.
The production of wood-made goods and corks, printing and reproduction of recorded media, chemicals and chemical products; pharmaceutical products and preparations, computer, electronic and optical products, and transport equipment posted negative growth in FY24.
Based on the production index, the growth rate in the cottage industry also lowered in the same fiscal.
The BBS data showed that the year-on-year production at the cottage industrial has been lowered to 6.7 per cent in the last FY2024.
The home-based industry expanded at a 7.67-per cent rate in FY22 and 9.96 per cent in FY23, reveals the BBS data.
Although machinery and equipment manufacturing has got a good leap over the last few years in the cottage industry, gadgets like computer, electronic and optical items, coke and refined petroleum products, rubber and plastic goods maintained negative growth.
Dr Zahid Hussain, a former World Bank economist, told the FE that a gradual decline in demands has affected the production of CMSMEs domestically.
"Inflation is higher. The month-on-month real wage has been declining in the last couple of years. Thus, the purchasing power of people has fallen. So, the demand for CMSME products has dropped."
Since the demand has dropped over the years, production at smaller and medium industries has ultimately declined, said Dr Hossain.
He urged the government to supply seamless power and gas, formalise smaller manufacturing sectors and subsectors, ensure internal and external markets, and cut the inflationary pressure with intent to boost production at CMSMEs.
As the highest number of jobs is created by CMSMEs in Bangladesh, their lower growth might affect the employment, according to Policy Exchange Bangladesh chairman Dr Masrur Reaz.
"If the trend continues, Bangladesh's employment will shrink further and people will fall behind the poverty line," he told the FE.
As these sectors are the backup industry for large manufacturers, their recovery is needed, continued the economist.
Cottage, micro and small industries should be brought under the formal sector for their survival and also for the growth of the national economy, he cited.
"Most of the cottage, micro and small industries in Bangladesh are set up on an informal basis. They should be brought under the formal system in a bid to upgrade their capacity to create decent employment," Mr Reaz said.
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