Financial assistance for jute sector
Tuesday, 12 June 2007
Syed Jamaluddin
AT the time of every budget, proposals are floated for addressing the problems of the jute sector. Many arguments are advanced for assisting the jute sector. The main thrust of this proposal is on providing financial assistance to the jute sector. It is forcefully pointed out that given the government assistance, the jute sector can stand on its on legs.
It is said that 30% loss of the jute sector is caused by power shortage and another 30% is attributed to interest charges. Jute sector itself is responsible only for another 30% of the losses. This is nice arithmetic. Readymade garments, ceramics, cement and many other sectors are operating profitably inspite of power problem and high interest rate. It is argued that coordinated initiative can solve the problem of the jute sector. But the details of this initiative are not known.
It is true that jute industry is associated with livelihood of many people. Even if these mills are closed, the government will have to pay to many agencies. But this will be one time payment. Public sector jute mills are assisted by the government and no assistance is available to the private sectors mills. Farmers lost interest in jute for not getting fair price. There was a minimum price of jute in the past but now it is not enforced because of open market economy policy. Bangladesh Jute Mills Corporation (BJMC) can not buy jute in July for lack of money which becomes available in September / October. Farmers got good prices during the last two years. It is time that India is getting the market for jute goods and Bangladesh is losing. This is because India is competitive. Environment friendly products are wanted by international buyers but we do not have enough research and capability to produce such goods.
In order to have a balanced jute policy public sector mills may be privatised. This will eliminate the loss of the government. There is no chance of improving the operational efficiency of public sector mills. The government can adopt a uniform policy for the private sector if all the jute mills are in the private sector.
During Pakistan time, it was argued that the then West Pakistan was being developed with the earnings of jute products but where the money is going now. India is successful in the jute sector but Bangladesh is unable to do the same. We may have feelings for the jute sector but this will not help us to become competitive and without this there is no future for jute industry.
Donors are blamed for the failure of the jute sector. This is a political statement. Donors are not imposing jute policy on the government. In a recent seminar the following proposals were made:
(i) to waive the interest charges of public sector jute mills, (ii) to re-open the closed mills, (iii) to pay the due of the workers, (iv) to release money to buy raw jute, (v) to reduce power shortage, (vi) to produce geo-textiles, (vii) to set up modern jute mills, (viii) to nationalise the privatised jute mills and (ix) to provide assistance for jute farming and diversification of jute products. These are all good proposals. But who will bear the cost of implementing these proposals.
A left-oriented politician has suggested for an allocation of Tk. 3.0 billion (300 crores) for the jute sector in the coming budget. He also said that the money spent on the closure of Adamjee jute mills could have been utilised for making the mill viable. He did not realise that a financial disaster was averted by closing down the Adamjee Jute Mills. According to him, bonus voucher was given to jute goods exporters in Pakistan for making the mills profitable. This was abolished after independence. The government may examine the reintroduction of bonus voucher. But the amount of bonus voucher may not be adequate to recover losses. It is alleged that there is a conspiracy to destroy the jute sector.
It is argued that jute is part of our culture. The excuse given for loss-making jute mills is not acceptable. But this is an emotional statement and is far from reality. Adamjee area has been converted into an Export Processing Zone (EPZ) and a number of industrial units are already under implementation. New jobs will be created in the Adamjee area.
The allocation of Taka 3.0 billion was proposed to purchase raw jute, spares, fuel and other material for production. If the government is convinced about revival of the jute sector, then only they should make this allocation. Without addressing the jute sector as a whole, this money will go into the black hole. It has been proposed to set up a jute commission to deal with the entire situation. I think no commission is called for. The government has enough information for taking decision. It must take a hard decision once for all about the jute sector. The caretaker government is in the best position to take such a decision. Piecemeal allocation of money will go down the drain.
It is argued that a system is to be evolved for the jute sector and full autonomy is to be given to the agency dealing with jute. If all the jute mills are privatised, the private sector can take this responsibility. Keeping the jute sector in the hands of the government will not be a viable proposition.
It is mentioned that the wage of jute mill workers in India is almost double the amount of pay of jute mill workers in Bangladesh, although Bangladesh produces superior quality jute. India is also smuggling jute from Bangladesh at a high cost. Even then the jute industry in India is flourishing and our jute industry is dying. This means we are not producing jute goods at a competitive price. This is alleged to be an international conspiracy. But why we are not in a position to detect the conspiracy.
Jute is a political issue. Some politicians are speaking for this sector to satisfy their constituents. The government is in a dilemma because it can not speak against the jute sector for political reasons. But it can not support the jute sector because of its failure. This caretaker government can take a realistic view about this and close the issue once for all.
There is a problem of excess labour in jute mills. This excess labour can not be dismissed for political reasons. Therefore, these mills can never be competitive with the baggage of excess labour.
It is argued that private sector mill owners are not running their mills.
The neo-rich people who bought these mills are not interested to run the mills. They are selling the property of the mills. They blame the government for discriminatory policy. Private sector owners can not maintain these mills with losses. But they can not also pass on the loss to the government. Supporters of jute sector are pressing the government for allocation. Such an allocation must not be made without a rational policy. The government can not afford perennial liability.
The government has not made any allocation for jute sector in the budget. This decision was taken perhaps on the basis of the fact that there is no viable project in the jute sector. Private sector may consider funding viable jute diversification projects.
(The writer is an economist and columnist)
AT the time of every budget, proposals are floated for addressing the problems of the jute sector. Many arguments are advanced for assisting the jute sector. The main thrust of this proposal is on providing financial assistance to the jute sector. It is forcefully pointed out that given the government assistance, the jute sector can stand on its on legs.
It is said that 30% loss of the jute sector is caused by power shortage and another 30% is attributed to interest charges. Jute sector itself is responsible only for another 30% of the losses. This is nice arithmetic. Readymade garments, ceramics, cement and many other sectors are operating profitably inspite of power problem and high interest rate. It is argued that coordinated initiative can solve the problem of the jute sector. But the details of this initiative are not known.
It is true that jute industry is associated with livelihood of many people. Even if these mills are closed, the government will have to pay to many agencies. But this will be one time payment. Public sector jute mills are assisted by the government and no assistance is available to the private sectors mills. Farmers lost interest in jute for not getting fair price. There was a minimum price of jute in the past but now it is not enforced because of open market economy policy. Bangladesh Jute Mills Corporation (BJMC) can not buy jute in July for lack of money which becomes available in September / October. Farmers got good prices during the last two years. It is time that India is getting the market for jute goods and Bangladesh is losing. This is because India is competitive. Environment friendly products are wanted by international buyers but we do not have enough research and capability to produce such goods.
In order to have a balanced jute policy public sector mills may be privatised. This will eliminate the loss of the government. There is no chance of improving the operational efficiency of public sector mills. The government can adopt a uniform policy for the private sector if all the jute mills are in the private sector.
During Pakistan time, it was argued that the then West Pakistan was being developed with the earnings of jute products but where the money is going now. India is successful in the jute sector but Bangladesh is unable to do the same. We may have feelings for the jute sector but this will not help us to become competitive and without this there is no future for jute industry.
Donors are blamed for the failure of the jute sector. This is a political statement. Donors are not imposing jute policy on the government. In a recent seminar the following proposals were made:
(i) to waive the interest charges of public sector jute mills, (ii) to re-open the closed mills, (iii) to pay the due of the workers, (iv) to release money to buy raw jute, (v) to reduce power shortage, (vi) to produce geo-textiles, (vii) to set up modern jute mills, (viii) to nationalise the privatised jute mills and (ix) to provide assistance for jute farming and diversification of jute products. These are all good proposals. But who will bear the cost of implementing these proposals.
A left-oriented politician has suggested for an allocation of Tk. 3.0 billion (300 crores) for the jute sector in the coming budget. He also said that the money spent on the closure of Adamjee jute mills could have been utilised for making the mill viable. He did not realise that a financial disaster was averted by closing down the Adamjee Jute Mills. According to him, bonus voucher was given to jute goods exporters in Pakistan for making the mills profitable. This was abolished after independence. The government may examine the reintroduction of bonus voucher. But the amount of bonus voucher may not be adequate to recover losses. It is alleged that there is a conspiracy to destroy the jute sector.
It is argued that jute is part of our culture. The excuse given for loss-making jute mills is not acceptable. But this is an emotional statement and is far from reality. Adamjee area has been converted into an Export Processing Zone (EPZ) and a number of industrial units are already under implementation. New jobs will be created in the Adamjee area.
The allocation of Taka 3.0 billion was proposed to purchase raw jute, spares, fuel and other material for production. If the government is convinced about revival of the jute sector, then only they should make this allocation. Without addressing the jute sector as a whole, this money will go into the black hole. It has been proposed to set up a jute commission to deal with the entire situation. I think no commission is called for. The government has enough information for taking decision. It must take a hard decision once for all about the jute sector. The caretaker government is in the best position to take such a decision. Piecemeal allocation of money will go down the drain.
It is argued that a system is to be evolved for the jute sector and full autonomy is to be given to the agency dealing with jute. If all the jute mills are privatised, the private sector can take this responsibility. Keeping the jute sector in the hands of the government will not be a viable proposition.
It is mentioned that the wage of jute mill workers in India is almost double the amount of pay of jute mill workers in Bangladesh, although Bangladesh produces superior quality jute. India is also smuggling jute from Bangladesh at a high cost. Even then the jute industry in India is flourishing and our jute industry is dying. This means we are not producing jute goods at a competitive price. This is alleged to be an international conspiracy. But why we are not in a position to detect the conspiracy.
Jute is a political issue. Some politicians are speaking for this sector to satisfy their constituents. The government is in a dilemma because it can not speak against the jute sector for political reasons. But it can not support the jute sector because of its failure. This caretaker government can take a realistic view about this and close the issue once for all.
There is a problem of excess labour in jute mills. This excess labour can not be dismissed for political reasons. Therefore, these mills can never be competitive with the baggage of excess labour.
It is argued that private sector mill owners are not running their mills.
The neo-rich people who bought these mills are not interested to run the mills. They are selling the property of the mills. They blame the government for discriminatory policy. Private sector owners can not maintain these mills with losses. But they can not also pass on the loss to the government. Supporters of jute sector are pressing the government for allocation. Such an allocation must not be made without a rational policy. The government can not afford perennial liability.
The government has not made any allocation for jute sector in the budget. This decision was taken perhaps on the basis of the fact that there is no viable project in the jute sector. Private sector may consider funding viable jute diversification projects.
(The writer is an economist and columnist)