Jute industry : Present and future
Saturday, 20 October 2007
Shabbir Yusuf
THE contribution of jute sector to economy of Bangladesh is enormous. This sector has been generating employment to a large segment of total population of the country, directly and indirectly over the years. Bangladesh produces 5.5-6.0 million (55-60 lakh) bales of raw jute every year of which some 3.2 million (32 lakh) bales are used in the existing 148 jute mills. The country exports 2.4 million (24 lakh) bales of jute. Some 1,60,000 employees of the country are directly employed in the jute mills.
The total demand for jute goods in the international market is 0.75 million (7.50 lakh) tonnes. Bangladesh exports 0.46 million (4.60 lakh) tonnes of jute goods while India enjoys a share of 0.285 million (2.85 lakh) tonnes in the international market. Dhaka controls 62 per cent share of the total jute goods market of the world and earn Taka 20.125 billion (2012.5 crore) by exporting jute goods. Bangladesh is the lone exporter of raw jute. Last year the country exported 2.4 million (24 lakh) bales of raw jute valued at Taka 9.77 million (977 crore). In total Bangladesh fetched Taka 29.395 billion (2939.5 crore) by exporting raw jute and jute goods.
Locally jute goods are extensively used in India in packaging cement, sugar, rice, wheat and for other agro products. India produces 1.597 million (15.97 lakh) tonnes of jute (goods of which 1.372 million (13.72 lakh) tonnes of jute goods are internally used. Bangladesh produces 0.55 million (5.50 lakh) tonnes of jute goods of which only 83,513 tones of jute goods are locally consumed. Our government needs to formulate a pragmatic policy to increase local demand as well in international markets. Bangladesh can carve a good niche in the international market provided it can overcome the sickness of jute mills.
High bank interest rates on working capital loan (12-14% compound), corruption, mismanagement and inefficiency lack of accountability, excess manpower, lack of maintenance, power crisis, and undue interference of trade union have contributed to the present situation of the jute industries particularly in the state-owned Jute Mills under Bangladesh jute mills Corporation (BJMC). Negligence and lack of proper patronisation by the government also aggravated the situation of jute industry further.
It is being observed that recently different organisations organising seminars, symposium etc. and publishing various articles in newspaper regarding present ailing situation on jute industries. All are concerned how to overcome this situation and salvage the jute industry. Various sections have expressed various opinions and suggestions.
In past and now also our politics are greatly attached with jute. Our liberation war was also based on such issues but we are such unfortunate that after long years the fortune of jute industries have not yet changed. It is obvious that in past all the government have neglected the industry, despite of everything our government in different "time had come forward and formulated various fiscal measures to re-juvenate the ailing jute sector. Still the government is providing subsidy @ 7.5% on freight on board (FOB) value on export of jute goods but all measures gone in vain. It still remains a big question why jute sector can not stand on it's own feet properly.
There are two types of jute mills in Bangladesh. a) Twenty seven conventional/traditional jute mills are running under Bangladesh Jute Mills Corporation (BJMC) producing Hessian, CBC and sack and 42 conventional jute mills are under the Bangladesh Jute Mills Association (BJMA) in the private management. Out of these mills only seven to ten mills running well, five to seven are limping and the rest being closed. The reason is because of original entrepreneurs are burdened with heavy bad debts and banks are unable to finance them due to overdrawn position.
After closing down the largest jute mill in Asia, Adamjee Jute Mills at Narayanganj, the government handed over some of its good condition machineries to mills under Bangladesh Jute Mills Corporation (BJMC) and sold rest of almost useless machineries to the private entrepreneurs by which they set up having a capacity of 20-50 looms. Now, there are such 30 mills, producing traditional jute goods, they are also under Bangladesh Jute Mills Association (BJMA).
There are 50 private jute spinning mills producing jute yarn/twine under Bangladesh Jute Spinners Association (BJSA). The mills under jute spinning sector produce 0.29 million (2.90 lakh) tonnes of jute yarn/twine and export 0.261 million (2.61 lakh) m. tonnes of quality yarn/twine consuming 1.9 million (19 lakh) bales of high quality raw jute and earn foreign exchange worth Taka 12 million (1200 crore) per annum.
Before the independence, the country had six jute yarn mills. However, this sector had flourished during the '80s as the industry experienced a setback in the developed countries during the same period. The entrepreneurs of the country bought these second-hand jute mills machineries with a very low investment and started setting up these jute spinning mills.
Two types of opinion exist in Bangladesh over the management of existing mills under BJMC. One group is in favour of privatisation of the existing state owned jute mills, where another group advocates reorganisation/restructuring of BJMC mills. The mills under Bangladesh Jute Mills Corporation are exporting 0.128 million (1.28 lakh) m. tonnes of jute goods i.e Hessian, Sacking and CBC.
Mismanagement, corruption, inefficiency and lack of skilled manpower have gripped the BJMC mills. The mills should be run professionally to remain competitive in the open market but that are not practised in case of BJMC, which is causing hundreds of millions of taka losses to the national exchequer.
Time has come to put pragmatic/realistic thought on the jute sector to revive this promising sector. The government should devise plans to bring back the glory of the golden fibre. The demand for environmental friendly jute products are on the rise in the global market and Bangladesh should tap this opportunity by implementing some short-,mid- and long-term plans to rejuvenate the ailing jute sector of Bangladesh.
At present it is useless to be nostalgic about old prime era of our jute industry. Now we must formulate a pragmatic short, mid and long-term plan keeping in mind about future needs of jute goods' demand. Instead of remembering past mistakes, we must take lessons out of that and look forward with practical solutions which will bring back viability to our ailing Jute sector. This should be our only prime object.
Some recommendations are prescribed below to be considered by the government in the greater interest of the jute sector:
To revive the glory of the jute industry, a high-powered committee should be constituted comprising the Finance Secretary under the direction of the Chief Adviser.
It is important to evaluate cumulative losses and liabilities of the existing jute mills.
The government should implement some short-, mid- and long-term proposals in a bid to revive the jute sector.
The exiting jute mills of the Bangladesh Jute Mills Corporation should be converted into public limited companies keeping some shares in the hands of the government like that of the Bangladesh Biman. The government may create a "Regulatory Board" to run its existing corporations professionally and efficiently. The Regulatory Body will monitor every unit of the corporation and ensure their accountability.
The government should arrange a 'special fund' to upgrade its existing jute mills to purchase necessary spares for machineries. Under this package the government will provide 50 per cent of the total credit as grants and banks will give rest 50 percent on a long-term credit to jute mills.
Irregular power supply is adversely affecting production of existing jute mills by cutting their competitiveness. The government may ask donor agencies like the World Bank (WB) and the Asian Development Bank (ADB) to arrange a 'special fund' to provide long term loans at 3.00 per cent interest to the existing jute mills to help them to procure "stand-by generators". The use of stand by generators by the jute mills will help to save electricity at our national grid.
Government is giving 7.5 per cent cash incentives on jute goods exports. To expand the market and increase competitiveness, the rate of cash incentives should be raised to 15 per cent from present rate.
The government should enact a law making mandatory or compulsory to use of jute bags for internal consumption in packaging. To meet requirement of local markets, an initiative is necessary to pack sugar, rice and pulse in 5-10 K.G. jute bags. The use of jute goods in the local market is limited. To increase the use, the government should also make law to use compulsory at least 20 per cent of total sugar and cement packaging with jute bags.
The jute industries being an agro based and 100% export-oriented industry, the commercial banks are not implementing the Bangladesh Bank's order to provide export credit at lower internet rate (7%), commercial banks should provide "Export Cash Credit" to jute mills which they give to the leather sector.
"Export Cash Credit" should extend to jute mills for 180 days and they should allow to draw 90% of export value as per L/C/ contract of foreign buyers/contract of their local agent. Normal interest will be charged by the banks if the mills fail to adjust it within 180 days.
Crisis of quality jute seed is a regular phenomenon in the country every year. The total requirement of jute seeds are 4,000/5,000 tonnes against government supply of only 400-500 tonnes. To meet local demand, sub-standard Indian seeds enter the Bangladesh market through imports and smuggling. To improve the situation and ensure quality seeds, the government should set up a 'seed bank' to distribute seeds among planters at subsidised rate. Government should also arrange to provide fertiliser at subsidised rate. Bangladesh Jute Research Institute (BJRI) should also take appropriate measures to familiarise their new invention "retting process" among the farmers.
Lack of skilled manpower has put the industries in grave situation. To overcome the situation at least a 'jute college' may be arranged to set up at one of the closed BJMC jute mills. To address this situation promptly, government should introduce "Diploma Course" on jute in the six textile institutes as early as these are under the ministry of textile and jute.
The jute industries of Bangladesh are in need of good quality jute mills spares and machineries. For this, the government should give the responsibility of producing quality spare parts/jute mills machineries to Bangladesh Machine Tools Factory and Galfra Habib.
The significance of Mongla Port has increased as several hundred industrial units have been set in the southern part of the country recently. The government should initiate necessary steps to expand and develop the Mongla Port.
To improve the market intelligence with a view to ensuring greater transparency in the international jute goods market a programme may be undertaken by the govt. in collaboration with ITC of the United Nations.
The government should also take measures to promote and expand international' trade of jute products by maintaining existing markets and by developing of new endusers.
.......................................
The writer is Chairman, Bangladesh Jute Spinners Association
THE contribution of jute sector to economy of Bangladesh is enormous. This sector has been generating employment to a large segment of total population of the country, directly and indirectly over the years. Bangladesh produces 5.5-6.0 million (55-60 lakh) bales of raw jute every year of which some 3.2 million (32 lakh) bales are used in the existing 148 jute mills. The country exports 2.4 million (24 lakh) bales of jute. Some 1,60,000 employees of the country are directly employed in the jute mills.
The total demand for jute goods in the international market is 0.75 million (7.50 lakh) tonnes. Bangladesh exports 0.46 million (4.60 lakh) tonnes of jute goods while India enjoys a share of 0.285 million (2.85 lakh) tonnes in the international market. Dhaka controls 62 per cent share of the total jute goods market of the world and earn Taka 20.125 billion (2012.5 crore) by exporting jute goods. Bangladesh is the lone exporter of raw jute. Last year the country exported 2.4 million (24 lakh) bales of raw jute valued at Taka 9.77 million (977 crore). In total Bangladesh fetched Taka 29.395 billion (2939.5 crore) by exporting raw jute and jute goods.
Locally jute goods are extensively used in India in packaging cement, sugar, rice, wheat and for other agro products. India produces 1.597 million (15.97 lakh) tonnes of jute (goods of which 1.372 million (13.72 lakh) tonnes of jute goods are internally used. Bangladesh produces 0.55 million (5.50 lakh) tonnes of jute goods of which only 83,513 tones of jute goods are locally consumed. Our government needs to formulate a pragmatic policy to increase local demand as well in international markets. Bangladesh can carve a good niche in the international market provided it can overcome the sickness of jute mills.
High bank interest rates on working capital loan (12-14% compound), corruption, mismanagement and inefficiency lack of accountability, excess manpower, lack of maintenance, power crisis, and undue interference of trade union have contributed to the present situation of the jute industries particularly in the state-owned Jute Mills under Bangladesh jute mills Corporation (BJMC). Negligence and lack of proper patronisation by the government also aggravated the situation of jute industry further.
It is being observed that recently different organisations organising seminars, symposium etc. and publishing various articles in newspaper regarding present ailing situation on jute industries. All are concerned how to overcome this situation and salvage the jute industry. Various sections have expressed various opinions and suggestions.
In past and now also our politics are greatly attached with jute. Our liberation war was also based on such issues but we are such unfortunate that after long years the fortune of jute industries have not yet changed. It is obvious that in past all the government have neglected the industry, despite of everything our government in different "time had come forward and formulated various fiscal measures to re-juvenate the ailing jute sector. Still the government is providing subsidy @ 7.5% on freight on board (FOB) value on export of jute goods but all measures gone in vain. It still remains a big question why jute sector can not stand on it's own feet properly.
There are two types of jute mills in Bangladesh. a) Twenty seven conventional/traditional jute mills are running under Bangladesh Jute Mills Corporation (BJMC) producing Hessian, CBC and sack and 42 conventional jute mills are under the Bangladesh Jute Mills Association (BJMA) in the private management. Out of these mills only seven to ten mills running well, five to seven are limping and the rest being closed. The reason is because of original entrepreneurs are burdened with heavy bad debts and banks are unable to finance them due to overdrawn position.
After closing down the largest jute mill in Asia, Adamjee Jute Mills at Narayanganj, the government handed over some of its good condition machineries to mills under Bangladesh Jute Mills Corporation (BJMC) and sold rest of almost useless machineries to the private entrepreneurs by which they set up having a capacity of 20-50 looms. Now, there are such 30 mills, producing traditional jute goods, they are also under Bangladesh Jute Mills Association (BJMA).
There are 50 private jute spinning mills producing jute yarn/twine under Bangladesh Jute Spinners Association (BJSA). The mills under jute spinning sector produce 0.29 million (2.90 lakh) tonnes of jute yarn/twine and export 0.261 million (2.61 lakh) m. tonnes of quality yarn/twine consuming 1.9 million (19 lakh) bales of high quality raw jute and earn foreign exchange worth Taka 12 million (1200 crore) per annum.
Before the independence, the country had six jute yarn mills. However, this sector had flourished during the '80s as the industry experienced a setback in the developed countries during the same period. The entrepreneurs of the country bought these second-hand jute mills machineries with a very low investment and started setting up these jute spinning mills.
Two types of opinion exist in Bangladesh over the management of existing mills under BJMC. One group is in favour of privatisation of the existing state owned jute mills, where another group advocates reorganisation/restructuring of BJMC mills. The mills under Bangladesh Jute Mills Corporation are exporting 0.128 million (1.28 lakh) m. tonnes of jute goods i.e Hessian, Sacking and CBC.
Mismanagement, corruption, inefficiency and lack of skilled manpower have gripped the BJMC mills. The mills should be run professionally to remain competitive in the open market but that are not practised in case of BJMC, which is causing hundreds of millions of taka losses to the national exchequer.
Time has come to put pragmatic/realistic thought on the jute sector to revive this promising sector. The government should devise plans to bring back the glory of the golden fibre. The demand for environmental friendly jute products are on the rise in the global market and Bangladesh should tap this opportunity by implementing some short-,mid- and long-term plans to rejuvenate the ailing jute sector of Bangladesh.
At present it is useless to be nostalgic about old prime era of our jute industry. Now we must formulate a pragmatic short, mid and long-term plan keeping in mind about future needs of jute goods' demand. Instead of remembering past mistakes, we must take lessons out of that and look forward with practical solutions which will bring back viability to our ailing Jute sector. This should be our only prime object.
Some recommendations are prescribed below to be considered by the government in the greater interest of the jute sector:
To revive the glory of the jute industry, a high-powered committee should be constituted comprising the Finance Secretary under the direction of the Chief Adviser.
It is important to evaluate cumulative losses and liabilities of the existing jute mills.
The government should implement some short-, mid- and long-term proposals in a bid to revive the jute sector.
The exiting jute mills of the Bangladesh Jute Mills Corporation should be converted into public limited companies keeping some shares in the hands of the government like that of the Bangladesh Biman. The government may create a "Regulatory Board" to run its existing corporations professionally and efficiently. The Regulatory Body will monitor every unit of the corporation and ensure their accountability.
The government should arrange a 'special fund' to upgrade its existing jute mills to purchase necessary spares for machineries. Under this package the government will provide 50 per cent of the total credit as grants and banks will give rest 50 percent on a long-term credit to jute mills.
Irregular power supply is adversely affecting production of existing jute mills by cutting their competitiveness. The government may ask donor agencies like the World Bank (WB) and the Asian Development Bank (ADB) to arrange a 'special fund' to provide long term loans at 3.00 per cent interest to the existing jute mills to help them to procure "stand-by generators". The use of stand by generators by the jute mills will help to save electricity at our national grid.
Government is giving 7.5 per cent cash incentives on jute goods exports. To expand the market and increase competitiveness, the rate of cash incentives should be raised to 15 per cent from present rate.
The government should enact a law making mandatory or compulsory to use of jute bags for internal consumption in packaging. To meet requirement of local markets, an initiative is necessary to pack sugar, rice and pulse in 5-10 K.G. jute bags. The use of jute goods in the local market is limited. To increase the use, the government should also make law to use compulsory at least 20 per cent of total sugar and cement packaging with jute bags.
The jute industries being an agro based and 100% export-oriented industry, the commercial banks are not implementing the Bangladesh Bank's order to provide export credit at lower internet rate (7%), commercial banks should provide "Export Cash Credit" to jute mills which they give to the leather sector.
"Export Cash Credit" should extend to jute mills for 180 days and they should allow to draw 90% of export value as per L/C/ contract of foreign buyers/contract of their local agent. Normal interest will be charged by the banks if the mills fail to adjust it within 180 days.
Crisis of quality jute seed is a regular phenomenon in the country every year. The total requirement of jute seeds are 4,000/5,000 tonnes against government supply of only 400-500 tonnes. To meet local demand, sub-standard Indian seeds enter the Bangladesh market through imports and smuggling. To improve the situation and ensure quality seeds, the government should set up a 'seed bank' to distribute seeds among planters at subsidised rate. Government should also arrange to provide fertiliser at subsidised rate. Bangladesh Jute Research Institute (BJRI) should also take appropriate measures to familiarise their new invention "retting process" among the farmers.
Lack of skilled manpower has put the industries in grave situation. To overcome the situation at least a 'jute college' may be arranged to set up at one of the closed BJMC jute mills. To address this situation promptly, government should introduce "Diploma Course" on jute in the six textile institutes as early as these are under the ministry of textile and jute.
The jute industries of Bangladesh are in need of good quality jute mills spares and machineries. For this, the government should give the responsibility of producing quality spare parts/jute mills machineries to Bangladesh Machine Tools Factory and Galfra Habib.
The significance of Mongla Port has increased as several hundred industrial units have been set in the southern part of the country recently. The government should initiate necessary steps to expand and develop the Mongla Port.
To improve the market intelligence with a view to ensuring greater transparency in the international jute goods market a programme may be undertaken by the govt. in collaboration with ITC of the United Nations.
The government should also take measures to promote and expand international' trade of jute products by maintaining existing markets and by developing of new endusers.
.......................................
The writer is Chairman, Bangladesh Jute Spinners Association