Global meltdown squeezes import orders for new capital machinery
Sunday, 2 August 2009
Siddique Islam
Import orders for capital machinery plummeted by nearly 30 per cent in the fiscal year ended on June 30, 2009 as the global economic crisis created a climate of uncertainty in the country's industrial expansion, officials said Saturday.
Letter of credits worth US$1.23 billion were opened to import machinery for factories in the 2008-09 financial year against $1.753 billion in the previous fiscal, according the central bank statistics.
Actual import of capital machinery --- equipment needed for industrial production --- dropped by a meagre 0.78 per cent to $1.403 billion in FY09, boosted by the previous orders executed last year, the Bangladesh Bank said.
The central bank officials have expressed concern over the declining trend of capital machinery import, saying it indicates sluggishness in investment in manufacturing sectors.
"It's a bad trend for the country's industrial expansion. The central bank has taken the issue seriously and is now working out a strategy to boost machinery import in the current fiscal," a senior BB official said.
Officials and experts said the dismal trend in equipment import may weigh on the country's overall economic growth, as industry now makes up the largest slice of the Gross Domestic Product (GDP).
Former BB chief economist and currently director general of the Bangladesh Institute of Development Studies (BIDS) Mustafa K Mujeri said the slump in machinery import is due to the global economic crisis.
"Global meltdown has created an atmosphere of uncertainty in the country's industrial production. Private entrepreneurs have adopted a go-slow policy due to sluggish demand at home and abroad," he told the FE.
"The data clearly shows that our entrepreneurs are placing fewer orders to import new capital machinery," he said, adding the same thing happened in most of the developing countries in Asia following the global meltdown.
Manufacturers said they don't see any sizable increase in machinery import until the economic health of the rich nations improves and the Bangladesh government removes some key infrastructural bottlenecks.
"The import of capital machinery will shoot up as soon as the government ensures adequate gas and power supply to factories," president of Bangladesh Knitwear Manufacturers and Exporters Association Fazlul Hoque said.
"A fall in demand in the recession-hit West and higher lending rates at home are also deterring the investors from setting up new factories or expanding their existing plants," he said.
Mr. Mujeri forecasts an increase in import of capital machinery from the second quarter of this fiscal, as he sees silver lining in the global economy from October. "Things should start improving in the October-December quarter."
"A turnaround in global economy would create huge demand for items such as apparel in the western countries, prompting manufacturers in the developing countries to place new orders for machinery," he said.
The BB in its monetary policy, however, says that the global slowdown would continue until the middle of 2010, or throughout the whole of FY10, "affecting the growth momentum in our export manufacturing and investment activities."
Import orders for capital machinery plummeted by nearly 30 per cent in the fiscal year ended on June 30, 2009 as the global economic crisis created a climate of uncertainty in the country's industrial expansion, officials said Saturday.
Letter of credits worth US$1.23 billion were opened to import machinery for factories in the 2008-09 financial year against $1.753 billion in the previous fiscal, according the central bank statistics.
Actual import of capital machinery --- equipment needed for industrial production --- dropped by a meagre 0.78 per cent to $1.403 billion in FY09, boosted by the previous orders executed last year, the Bangladesh Bank said.
The central bank officials have expressed concern over the declining trend of capital machinery import, saying it indicates sluggishness in investment in manufacturing sectors.
"It's a bad trend for the country's industrial expansion. The central bank has taken the issue seriously and is now working out a strategy to boost machinery import in the current fiscal," a senior BB official said.
Officials and experts said the dismal trend in equipment import may weigh on the country's overall economic growth, as industry now makes up the largest slice of the Gross Domestic Product (GDP).
Former BB chief economist and currently director general of the Bangladesh Institute of Development Studies (BIDS) Mustafa K Mujeri said the slump in machinery import is due to the global economic crisis.
"Global meltdown has created an atmosphere of uncertainty in the country's industrial production. Private entrepreneurs have adopted a go-slow policy due to sluggish demand at home and abroad," he told the FE.
"The data clearly shows that our entrepreneurs are placing fewer orders to import new capital machinery," he said, adding the same thing happened in most of the developing countries in Asia following the global meltdown.
Manufacturers said they don't see any sizable increase in machinery import until the economic health of the rich nations improves and the Bangladesh government removes some key infrastructural bottlenecks.
"The import of capital machinery will shoot up as soon as the government ensures adequate gas and power supply to factories," president of Bangladesh Knitwear Manufacturers and Exporters Association Fazlul Hoque said.
"A fall in demand in the recession-hit West and higher lending rates at home are also deterring the investors from setting up new factories or expanding their existing plants," he said.
Mr. Mujeri forecasts an increase in import of capital machinery from the second quarter of this fiscal, as he sees silver lining in the global economy from October. "Things should start improving in the October-December quarter."
"A turnaround in global economy would create huge demand for items such as apparel in the western countries, prompting manufacturers in the developing countries to place new orders for machinery," he said.
The BB in its monetary policy, however, says that the global slowdown would continue until the middle of 2010, or throughout the whole of FY10, "affecting the growth momentum in our export manufacturing and investment activities."