From trading to manufacturing

Bangladesh economy is particularly influenced by its geopolitical features. Along 75 per cent of its border lie open land, rivers and hills of India, 5 per cent have hillside roads with Myanmar and on the remaining 20 per cent is spread the world's largest mangrove forest the Sunderbans. For a small country like Bangladesh, landlocked by India on three sides of its border, it is not easy to develop an independent self-reliant economy -- a production oriented rather than import based economy. Obviously, the first step forward to this end is industrialisation with adequate protection, so that the manufactured products find a cushion to settle and gradually acquire the strength to fight competition from imported products. The purpose of industrialisation, therefore, is to build an industrial base whereupon industries could be set up to manufacture finished goods by using indigenous raw materials and thereby reduce dependence on imported foreign products and foreign exchange expenditure.
It has been observed that although import and export increased as part of the GDP over the years, there has been a mixed growth of exports. Unstable and multiple tariff structures influenced our external trade indicating that in keeping with the world market, our external trade was hesitant in pursuing the general trade principles. Production did not increase, but the increasing trend of supply adversely affected the price situation in the domestic market. On the other hand, informal border trade is continually affecting domestic production. In fact, informal border trade has always worked as an invisible black hole that has prevented a balance in external trade from taking place. Some imported commodities are again smuggled to other countries, and in some cases, tariffs imposed to prevent illegal entry of foreign goods, interfered with the interests of domestic production.  
Close observation has revealed that general economic principles are in conflict with many areas of our economy and plenty of time has been wasted in tackling those issues by applying various strategies of market economy. It has also been observed that the contribution of primary commodities to exports has gone down remarkably. This can be reverted with proper initiatives and government support in the form of cash incentives, infrastructural facilities etc. For an agro-based economy like that of ours, there is no other alternative but to have a sustained increase in export of primary commodities. A coordinated effort is essential to diversify agricultural products for export. Accordingly, necessary changes are to be brought about in the processing methods of frozen fish for onward export. Marketing approach should also be modified in a manner that conforms to importers' requirements. To accomplish these successfully, it is necessary to explore markets, understand the nature of demand of the markets and strengthen research to bring about necessary changes in production process through use of appropriate technology and attain the capacity to supply according to demand.
The overall export of manufactured products has increased over the years. Export of readymade garments increased, while that of jute and hides registered a steady fall. Therefore, export earning from manufactured items can not be looked upon as steady in terms of value addition. World market for jute and jute goods is shrinking, but with a little initiative, a big success can be achieved in export of hides and skins. If we can attract sunset industries of Japan to be relocated here and have more joint venture investments along with their technology management from Italy, and can further strengthen our commercial diplomacy, we can expect a sustainable development in this area. One of the ways to increase value addition in garments export is to set up backward linkage industries. At the same time, necessity to encourage local investment in the garment sector should be highlighted which will help generate further employment and maintain social peace and harmony.
In import trade, gradual fall in cost of procurement of primary commodities indicates positive progress towards attaining food autarky. But a rise in the import of quantity of manufactured items, has also caused lesser imports of primary commodities. It is observed that import of 'other commodities' in the manufactured items group has increased reflecting a failure to supply those items internally in spite of a rise in demand.
It is known that although the protectionist provisions of Industrial Policy, 1973 were waived in 1982, actual investment did not come till 1991. On the other hand, although there were no expressed plans for development in the garment sector, in industrial policies of 1976, 1982 and 1986, there was poor investment in the sector. Much has been said in the industrial policy about development in infrastructure, food, agriculture and small industries sectors, but very little authority was given to the concerned organisations to extend required assistance and services to the entrepreneurs. More importantly, efforts to apply the given power, was also not noticeable. Lack of coordination among departments and organisations worked as a stumbling block.
Since Bangladesh was born in a socialist environment, driving force of the new economy glided into the sphere of controlled economics. Industries left behind by Pakistani owners were nationalised after liberation. The idea was that state will run the abandoned industries and people will be the actual owners of those units. As a matter of fact, the private sector at that time was not strong and capable enough to take responsibility of managing those units and the government had no other choice but to take them over.
On review of the actual situation of industrial development vis-à-vis implementation of investment strategy as per industrial policy of the country, the following observations can be drawn :
a) public sector industries were victims of weak management and lack of coordination from the beginning, but the ways to get out of the situation were not negotiated at the desired pace as a result of which volume of loss was relatively higher.
b) development capacity of private sector was underrated and consequently it took some time to develop and faced a number of difficulties in its effort to amass large capital. Industries set up with bank loans became sick and unable to repay loan instalments. Due to various complications in the management system, corruption sneaked in which led to an increase in overhead costs and further squeezed profit on investment.
Due to inconsistency in allowing declared facilities and weak monitoring, facilities went to wrong hands and genuine entrepreneurs were deprived. Furthermore, in absence of a realistic review, negative effects outweighed the positive impacts.
Each industrial policy was the repetition of the previous ones since no effective attempt was made to identify its shortcomings and limitations. In over 40 years of our economic history, initiatives for sustainable development were temporary as well as limited. There were reflections of ambition to march forward in each policy, but the process of implementation left a lot to be desired. Although successive industrial policies contained similar objectives and targets, some positive developments in the private sector were noticeable. In most cases, private sector solved its problems in its own way and climbed upwards, while public sector remained way behind despite having the privilege of increased foreign capital. On the contrary in some cases, unrestrained flow of foreign capital weakened the mobility of the sector. Duties and taxes imposed from time to time on the basis of unspecified and incomplete statistics turned out as unhelpful and irrelevant. Even proposals on tax relief or reduction submitted by trade bodies from time to time lacked credible statistics and analyses.
In view of free market economy and import oriented policies being pursued from pre-liberation period, Bangladesh economy grew up as trading-reliant economy. As a result, initiatives to facilitate growth of production-oriented industries were lacking which restrained investments for expansion of export trade by marketing commodities produced from local raw materials. In the same way, it also works as a disincentive towards producing import substitution products. Under the circumstances the economy becomes increasingly reliant on import duty rather than income tax, VAT or sales tax, and export earnings.        
No country, other than those blessed with huge natural resources, can afford to live on an import-based economy. A sustained growth in export coupled with steady fall in imports is the panacea to disorders and maladjustments. Increasing imports and falling export in last two quarters have again highlighted the necessity to develop a strong manufacturing base and stop falling back on others in times of distress.
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