Attending to the self-driven sectors of the economy
Saturday, 23 June 2007
Syed Fattahul Alim
ECONOMIC growth of any society depends classically on the manufacturing sector. Bangladesh-though a nation born in the last quarter of the twentieth century-has not been able to get rid of the blemish of underdevelopment.
There are reasons aplenty to explain away why Bangladesh has failed to catch up with its neighbours, both in the east and the west, even after the elapse of so many years since its independence. The sum and substance of the story of lack of success is obviously politics. But then one need not have to be a seer to say that it is politics that is the villain. Contrarily, in the cases of success stories it is again politics that is invariably the hero.
In our particular case, however much one may like to heap all the blame on politics and the politicians, the inescapable reality is that there is no other way but to fall back on politics to get out of the present crisis in the national life. The post-colonial nations that have finally been able to attain their economic freedom know it all too well. A breed of politicians that is not timesaving, but in the know of what the time demands is what a nation needs when it is on the threshold of a change. The problem of every single nation is unique. That is why it is not possible to repeat the developmental path charted by any particular nation lock, stock and barrel by another country.
In fact, politicians do not really discover the economic potential of a country. It is the people who possess the talent and represent the growth potential of the economy. And since genuine political leaders know the pulse of the people, they also know their growth potential. The late Chinese leader Mao Ze Dong knew the economic potential of the people he led. So it was hardly surprising that he came up with the first industrial policy for a bleeding and impoverished land of a billion human souls after the revolution. His industrial policy was simple and classic. As industry is not conceivable without capital, what is the ideal source of capital in a post-colonial and predominantly agricultural economy? Naturally, Mao Ze Dong suggested that the agricultural surplus be invested to establish light industries.
In a similar vein, he suggested development of heavy industries at strategic locations using light industries as backward linkage. For the capital of heavy industries, the China of his time depended both on local resources and foreign investment, technology and expertise. More advanced socialist countries like the-then Soviet Russia came in aid of post-revolution China's growth in the sector of heavier industries. The economic miracle of modern-day China cannot be comprehended unless one is also willing to look at the base on which it all stands. The architects of modern China did not fail to understand the importance of light industry before graduating to the heavy industry. In a similar fashion, even in the very advanced economies of Europe, North America and Japan, one can always discover the vital role played by the small and medium enterprises and the light industries.
The political leadership in Bangladesh failed in this particular context. Rather than depending on the people's potential and encouraging as well providing them with necessary assistance in what they did best, the politicians here looked up to the Western donors for everything. As a result, in most cases, the enterprising people of the country failed to look eye to eye with the government in its development efforts.
Take for example, the case of the Small and Medium Enterprises (SMEs) and more particularly the light industries. Most of the enterprises in this sector are indigenous growths and manifestations of people's enterprising talent. But these indigenous manufacturing units did never get the government patronage they deserved, except lip service to the importance of the sector.
There are about 80.000 enterprises in the country that fall under the category called SMEs. Of theses enterprises, 38 per cent are what can be termed manufacturing units proper. However, an overwhelming portion (about 93 per cent) of these SMEs are really Small Enterprises (SEs), while the rest are Medium Enterprises (SEs). Of the SEs, those engaged in manufacturing have fixed assets worth not more than 15 million taka, while those known as MEs have fixed assets worth at best 100 million taka. The size and number of the SMEs are an indicator of what a vital role they play in the economy. Though they hardly get any support either from the government or from the mainstream financial institutions, they contribute the lion's share (75 per cent) of the incomes of the households that own the enterprises. An estimate shows that only 6.0 per cent of the SEs and 5.0 per cent of the MEs of the country have any access to the lending facilities provided by the country's nationalised commercial banks (NCBs). On the issue of their creditworthiness, the picture is not better even with the private commercial banks (PCBs). Taken together, only 13 per cent of the SMEs have any access to the state-owned, private and foreign-owned banks.
Coming to the case of light industries, the scenario is not different. This sector is already playing its role as the feeder and supporting industries for a large number of medium and heavier industries as well as a host of other sectors of the economy including transport and agriculture. Some 30,000 such light industrial units are operating in the country with an annual turnover of 170 million US dollars. This sector has already created employment for more than 800,000 people and makes 2.15 per cent contribution to the Gross National Product (GDP). However, what is this sector getting in return for its huge contribution to the economy? Dearth of modern technology, expertise, capital and other kinds of official patronage is ailing this sector of the economy.
A unique case of what a miracle this sector operated by self-taught and self-employed entrepreneurs can achieve is the well-known Dholaikhal area of the city. Though at a very miniscule scale, the story of Dholaikhal does bear a strange resemblance to many countries that have in the last few decades grown out of their previous state of backwardness and underdevelopment. Even farther in the past, there was a time when people in the Western world looked down upon products from Japan as they considered those inferior to that of Europe and America. At the initial stage, such notion of the people was not totally unfounded either. The same story was repeated in the case of products from Taiwan, South Korea, India and China in the generations that followed. What is the present scenario? Japan is now an epitome of high quality industrial products. Meanwhile, Taiwan and South Korea, too, have graduated to the global elitist club of highly industrialised nations. It is only a matter of time that one day China and India will also become brand names in the industrialised world.
There was a time when Dholaikhal was compared to Japan in a microcosm within the context of Bangladesh. Notorious for its cleverness in producing spurious items that looked like various foreign made products, this very Dholaikhal has by now turned into a hub of light engineering enterprises of the country. One can have replicas of even state-of-the-art engineering goods from very advanced countries of the world from Dholaikhal. It is already supplying spares to various industries in the country. Even very sensitive and delicate equipment for power stations are being designed and produced from this area of the capital city. In this manner, Dholaikhal alone is saving foreign currencies worth Tk 24 billion for the economy by way of import substitution.
Interestingly though, this powerful hub of the country's light engineering sector has grown of its own, unattended and unnoticed by the policy makers of the government who thought nothing of the genius of the mostly uneducated, capital-poor and self-employed entrepreneurs of this area of the capital city.
It is time the government now focused its attention on this forgotten, indigenous sector of the economy where the entrepreneurs want only to help the economy without ever asking for any official patronage. And what a miracle they have achieved in spite of everything! Many such miracles are waiting to be discovered in other parts of the country. The proof of future leadership of the country will be in discovering those self-grown and self-propelled spots in the economy and then linking them to the mainstream through necessary official attention and patronage.
ECONOMIC growth of any society depends classically on the manufacturing sector. Bangladesh-though a nation born in the last quarter of the twentieth century-has not been able to get rid of the blemish of underdevelopment.
There are reasons aplenty to explain away why Bangladesh has failed to catch up with its neighbours, both in the east and the west, even after the elapse of so many years since its independence. The sum and substance of the story of lack of success is obviously politics. But then one need not have to be a seer to say that it is politics that is the villain. Contrarily, in the cases of success stories it is again politics that is invariably the hero.
In our particular case, however much one may like to heap all the blame on politics and the politicians, the inescapable reality is that there is no other way but to fall back on politics to get out of the present crisis in the national life. The post-colonial nations that have finally been able to attain their economic freedom know it all too well. A breed of politicians that is not timesaving, but in the know of what the time demands is what a nation needs when it is on the threshold of a change. The problem of every single nation is unique. That is why it is not possible to repeat the developmental path charted by any particular nation lock, stock and barrel by another country.
In fact, politicians do not really discover the economic potential of a country. It is the people who possess the talent and represent the growth potential of the economy. And since genuine political leaders know the pulse of the people, they also know their growth potential. The late Chinese leader Mao Ze Dong knew the economic potential of the people he led. So it was hardly surprising that he came up with the first industrial policy for a bleeding and impoverished land of a billion human souls after the revolution. His industrial policy was simple and classic. As industry is not conceivable without capital, what is the ideal source of capital in a post-colonial and predominantly agricultural economy? Naturally, Mao Ze Dong suggested that the agricultural surplus be invested to establish light industries.
In a similar vein, he suggested development of heavy industries at strategic locations using light industries as backward linkage. For the capital of heavy industries, the China of his time depended both on local resources and foreign investment, technology and expertise. More advanced socialist countries like the-then Soviet Russia came in aid of post-revolution China's growth in the sector of heavier industries. The economic miracle of modern-day China cannot be comprehended unless one is also willing to look at the base on which it all stands. The architects of modern China did not fail to understand the importance of light industry before graduating to the heavy industry. In a similar fashion, even in the very advanced economies of Europe, North America and Japan, one can always discover the vital role played by the small and medium enterprises and the light industries.
The political leadership in Bangladesh failed in this particular context. Rather than depending on the people's potential and encouraging as well providing them with necessary assistance in what they did best, the politicians here looked up to the Western donors for everything. As a result, in most cases, the enterprising people of the country failed to look eye to eye with the government in its development efforts.
Take for example, the case of the Small and Medium Enterprises (SMEs) and more particularly the light industries. Most of the enterprises in this sector are indigenous growths and manifestations of people's enterprising talent. But these indigenous manufacturing units did never get the government patronage they deserved, except lip service to the importance of the sector.
There are about 80.000 enterprises in the country that fall under the category called SMEs. Of theses enterprises, 38 per cent are what can be termed manufacturing units proper. However, an overwhelming portion (about 93 per cent) of these SMEs are really Small Enterprises (SEs), while the rest are Medium Enterprises (SEs). Of the SEs, those engaged in manufacturing have fixed assets worth not more than 15 million taka, while those known as MEs have fixed assets worth at best 100 million taka. The size and number of the SMEs are an indicator of what a vital role they play in the economy. Though they hardly get any support either from the government or from the mainstream financial institutions, they contribute the lion's share (75 per cent) of the incomes of the households that own the enterprises. An estimate shows that only 6.0 per cent of the SEs and 5.0 per cent of the MEs of the country have any access to the lending facilities provided by the country's nationalised commercial banks (NCBs). On the issue of their creditworthiness, the picture is not better even with the private commercial banks (PCBs). Taken together, only 13 per cent of the SMEs have any access to the state-owned, private and foreign-owned banks.
Coming to the case of light industries, the scenario is not different. This sector is already playing its role as the feeder and supporting industries for a large number of medium and heavier industries as well as a host of other sectors of the economy including transport and agriculture. Some 30,000 such light industrial units are operating in the country with an annual turnover of 170 million US dollars. This sector has already created employment for more than 800,000 people and makes 2.15 per cent contribution to the Gross National Product (GDP). However, what is this sector getting in return for its huge contribution to the economy? Dearth of modern technology, expertise, capital and other kinds of official patronage is ailing this sector of the economy.
A unique case of what a miracle this sector operated by self-taught and self-employed entrepreneurs can achieve is the well-known Dholaikhal area of the city. Though at a very miniscule scale, the story of Dholaikhal does bear a strange resemblance to many countries that have in the last few decades grown out of their previous state of backwardness and underdevelopment. Even farther in the past, there was a time when people in the Western world looked down upon products from Japan as they considered those inferior to that of Europe and America. At the initial stage, such notion of the people was not totally unfounded either. The same story was repeated in the case of products from Taiwan, South Korea, India and China in the generations that followed. What is the present scenario? Japan is now an epitome of high quality industrial products. Meanwhile, Taiwan and South Korea, too, have graduated to the global elitist club of highly industrialised nations. It is only a matter of time that one day China and India will also become brand names in the industrialised world.
There was a time when Dholaikhal was compared to Japan in a microcosm within the context of Bangladesh. Notorious for its cleverness in producing spurious items that looked like various foreign made products, this very Dholaikhal has by now turned into a hub of light engineering enterprises of the country. One can have replicas of even state-of-the-art engineering goods from very advanced countries of the world from Dholaikhal. It is already supplying spares to various industries in the country. Even very sensitive and delicate equipment for power stations are being designed and produced from this area of the capital city. In this manner, Dholaikhal alone is saving foreign currencies worth Tk 24 billion for the economy by way of import substitution.
Interestingly though, this powerful hub of the country's light engineering sector has grown of its own, unattended and unnoticed by the policy makers of the government who thought nothing of the genius of the mostly uneducated, capital-poor and self-employed entrepreneurs of this area of the capital city.
It is time the government now focused its attention on this forgotten, indigenous sector of the economy where the entrepreneurs want only to help the economy without ever asking for any official patronage. And what a miracle they have achieved in spite of everything! Many such miracles are waiting to be discovered in other parts of the country. The proof of future leadership of the country will be in discovering those self-grown and self-propelled spots in the economy and then linking them to the mainstream through necessary official attention and patronage.