Mapping out an effective jute sector revival strategy
Sunday, 14 December 2008
Shahiduzzaman Khan
IN an interesting revelation, the People's Commission on Jute Industry -- a private citizens' watchdog body -- has found the chief executives of the governments, executives of jute ministry, World Bank, International Monetary Fund, chairmen and directors of state-owned Bangladesh Jute Mills Corporation (BJMC), general managers and managers, trade union leaders and the managers of the privatised jute mills responsible for the destruction of jute sector.
The 11-member commission was formed on June 1 last year to identify the persons responsible for the crisis in jute sector, assess the losses and make recommendations for the development of the jute industry. Justice Mohammad Golam Rabbani is the chairman and Shah Alam, a jute expert, is the secretary of the Commission. It launched its first report on jute sector irregularities recently.
Demanding trial of those involved in corruption, the People's Commission said that the wrong policies of the government and irregularities have contributed to the destruction of jute sector in the country. It said the government should form a commission to investigate irregularities by the chief executives of the successive governments, jute ministry, officials involved in management of industries and leaders of the central bargaining agencies (CBAs).
The total loss in jute sector would be over Tk 1500.00 billion from 1982-83 to 2005-06. Bangladesh can earn this amount if the authorities patronise jute cultivation and industry creating huge employment opportunities and earning enormous foreign exchange. The government should form a commission to probe the irregularities in a transparent process. Apart from traditional ways of investigation, the commission will collect complaints by publishing notices, and the trial should be conducted in a special court within the fastest possible time.
The People's Commission said in its report that the government should also nationalise all privatised jute mills, provide autonomy to the mills in selling and buying raw jute and exporting jute products and bring all the agencies related to jute under the jute ministry. It should also conduct modern researches on jute, diversify jute products, ensure timely supply of raw jute and power in the mills and appropriate wages to the workers, he added. The middlemen system in selling and buying jute should be scrapped, and the use of any artificial fibre harmful to jute industry should be banned.
In fact, the jute ministry could not make inroads into its plan so far to constitute a national commission for mapping out an effective jute sector revival strategy due to reservation about involving trade unions in the process. Instead, officials said, the government is now weighing up options for viably running the recently-closed public sector jute mills, particularly under private management. Citizen's groups have time and again rejected such official claims, oversimplifying the problems and blaming trade unions for everything for the near-destruction of the sector. They demanded formation of a national jute commission comprising experts and stakeholders to work out a strategy to revive the jute sector.
However, the private jute mills have already requested the government to set criterion so that the local jute-mill operators get priority in this regard. Under the move, the government has planned to adjust the liabilities of the closed jute mills with their leased money. The authorities have already advised the concerned banks to stop levying interest on the outstanding loans that the closed jute mills owed them. Initially, those mills are expected to be leased out for short terms, and such arrangement can be extended if the programme becomes successful.
After the jute mills were nationalised in 1970s, BJMC never took any steps to become competitive. No governments viewed BJMC jute mills as businesses which must be run profitably and expanded. Governments were solely interested in rewarding their supporters with jute mill jobs. Politicians viewed excess workers as prospective voters. Productivity of BJMC jute mills declined drastically for years because money which should have been spent on machine maintenance was paid out as wages to excess workers. As the loss-making mills could not afford to buy spare parts, they drew parts from some machines to keep others running. Gradually more and more restructured machines were reduced to useless piles of scrap metal and the productivity plummeted.
When synthetics crowded out the demand for jute in international markets in the 1970s, Bangladesh's 'golden fibre' jute was believed to have been extinct. It was for a while until recently when demand for jute resurfaced in the global market, particularly in light of the environmentally-friendly and renewable nature of the product. A surge in global demand resuscitated jute exports, both raw and products, from Bangladesh. Export of these two items increased by 120 per cent and 40 per cent, respectively over the last six years. Availability of superior grades of jute makes Bangladesh well placed to enter and compete in export markets for high value-added and price-competitive jute products.
In the 1990s, the government focused again on the jute sector problems through a restructuring programme in order to create a commercially viable jute industry. Supported by the World Bank's Jute Sector Adjustment Credit, the government put together a jute sector restructuring programme in 1993 to rationalise the cost structure in the jute industry and to introduce mechanisms through which financial discipline and accountability could be established.
It was anticipated that at the completion of the reform programme, most of the jute mills would be in private hands. However, political instability in the following years stalled the reforms. Debt restructuring, loss financing and labour retrenchment were implemented but closure and privatisation of jute mills were put in abeyance. There was an unintended and adverse shift in production from the relatively more efficient private mills to less efficient public mills largely because of the creation of an uneven playing field for private mills. The BJMC's access to budgetary funds as well as a guarantee of loss financing for several years allowed it to under-price its products, making it harder for private mills to compete.
The conversion of Adamjee into an export processing zone in 2006 is a landmark in the country's economic management and industrial development history. One possible direction the jute sector in Bangladesh could take is to consolidate production capacity in the more efficient mills and to create a market-responsive and cost-competitive industry. The government's new jute policy is expected to focus on enhancement of the country's production capacity, diversification of the product base and growth of export earnings. It would be good if it is complemented with good corporate governance practices within the remaining BJMC mills to ensure that both public and private mills can compete on equal footing.
The flawed policy of and non-cooperation by successive governments was blamed for the dismal condition of the jute sector. The nationalisation of jute mills brought havoc to the sector. If the jute industries are saved from the state of ruination, those may contribute significantly to the country's fragile economy as well as rescuing huge number of workers from miserable economic hardship. Public sector jute mills are aided by the government but no incentive is given to the private sectors mills. Farmers lost interest in jute for not getting fair price.
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. The 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. Even then, they can not also pass on their losses to the government.
Most large industrial companies in Bangladesh employ foreign technicians and consultants in order to achieve international standards of productivity and quality. This is true in case of the garments industry, the textile industry and even the poultry industry. Why should the jute industry be any different? In a global marketplace, the companies to survive will be the ones which achieve international standards of productivity and quality.
................................................................
szkhan@thefinancialexpress-bd.com
IN an interesting revelation, the People's Commission on Jute Industry -- a private citizens' watchdog body -- has found the chief executives of the governments, executives of jute ministry, World Bank, International Monetary Fund, chairmen and directors of state-owned Bangladesh Jute Mills Corporation (BJMC), general managers and managers, trade union leaders and the managers of the privatised jute mills responsible for the destruction of jute sector.
The 11-member commission was formed on June 1 last year to identify the persons responsible for the crisis in jute sector, assess the losses and make recommendations for the development of the jute industry. Justice Mohammad Golam Rabbani is the chairman and Shah Alam, a jute expert, is the secretary of the Commission. It launched its first report on jute sector irregularities recently.
Demanding trial of those involved in corruption, the People's Commission said that the wrong policies of the government and irregularities have contributed to the destruction of jute sector in the country. It said the government should form a commission to investigate irregularities by the chief executives of the successive governments, jute ministry, officials involved in management of industries and leaders of the central bargaining agencies (CBAs).
The total loss in jute sector would be over Tk 1500.00 billion from 1982-83 to 2005-06. Bangladesh can earn this amount if the authorities patronise jute cultivation and industry creating huge employment opportunities and earning enormous foreign exchange. The government should form a commission to probe the irregularities in a transparent process. Apart from traditional ways of investigation, the commission will collect complaints by publishing notices, and the trial should be conducted in a special court within the fastest possible time.
The People's Commission said in its report that the government should also nationalise all privatised jute mills, provide autonomy to the mills in selling and buying raw jute and exporting jute products and bring all the agencies related to jute under the jute ministry. It should also conduct modern researches on jute, diversify jute products, ensure timely supply of raw jute and power in the mills and appropriate wages to the workers, he added. The middlemen system in selling and buying jute should be scrapped, and the use of any artificial fibre harmful to jute industry should be banned.
In fact, the jute ministry could not make inroads into its plan so far to constitute a national commission for mapping out an effective jute sector revival strategy due to reservation about involving trade unions in the process. Instead, officials said, the government is now weighing up options for viably running the recently-closed public sector jute mills, particularly under private management. Citizen's groups have time and again rejected such official claims, oversimplifying the problems and blaming trade unions for everything for the near-destruction of the sector. They demanded formation of a national jute commission comprising experts and stakeholders to work out a strategy to revive the jute sector.
However, the private jute mills have already requested the government to set criterion so that the local jute-mill operators get priority in this regard. Under the move, the government has planned to adjust the liabilities of the closed jute mills with their leased money. The authorities have already advised the concerned banks to stop levying interest on the outstanding loans that the closed jute mills owed them. Initially, those mills are expected to be leased out for short terms, and such arrangement can be extended if the programme becomes successful.
After the jute mills were nationalised in 1970s, BJMC never took any steps to become competitive. No governments viewed BJMC jute mills as businesses which must be run profitably and expanded. Governments were solely interested in rewarding their supporters with jute mill jobs. Politicians viewed excess workers as prospective voters. Productivity of BJMC jute mills declined drastically for years because money which should have been spent on machine maintenance was paid out as wages to excess workers. As the loss-making mills could not afford to buy spare parts, they drew parts from some machines to keep others running. Gradually more and more restructured machines were reduced to useless piles of scrap metal and the productivity plummeted.
When synthetics crowded out the demand for jute in international markets in the 1970s, Bangladesh's 'golden fibre' jute was believed to have been extinct. It was for a while until recently when demand for jute resurfaced in the global market, particularly in light of the environmentally-friendly and renewable nature of the product. A surge in global demand resuscitated jute exports, both raw and products, from Bangladesh. Export of these two items increased by 120 per cent and 40 per cent, respectively over the last six years. Availability of superior grades of jute makes Bangladesh well placed to enter and compete in export markets for high value-added and price-competitive jute products.
In the 1990s, the government focused again on the jute sector problems through a restructuring programme in order to create a commercially viable jute industry. Supported by the World Bank's Jute Sector Adjustment Credit, the government put together a jute sector restructuring programme in 1993 to rationalise the cost structure in the jute industry and to introduce mechanisms through which financial discipline and accountability could be established.
It was anticipated that at the completion of the reform programme, most of the jute mills would be in private hands. However, political instability in the following years stalled the reforms. Debt restructuring, loss financing and labour retrenchment were implemented but closure and privatisation of jute mills were put in abeyance. There was an unintended and adverse shift in production from the relatively more efficient private mills to less efficient public mills largely because of the creation of an uneven playing field for private mills. The BJMC's access to budgetary funds as well as a guarantee of loss financing for several years allowed it to under-price its products, making it harder for private mills to compete.
The conversion of Adamjee into an export processing zone in 2006 is a landmark in the country's economic management and industrial development history. One possible direction the jute sector in Bangladesh could take is to consolidate production capacity in the more efficient mills and to create a market-responsive and cost-competitive industry. The government's new jute policy is expected to focus on enhancement of the country's production capacity, diversification of the product base and growth of export earnings. It would be good if it is complemented with good corporate governance practices within the remaining BJMC mills to ensure that both public and private mills can compete on equal footing.
The flawed policy of and non-cooperation by successive governments was blamed for the dismal condition of the jute sector. The nationalisation of jute mills brought havoc to the sector. If the jute industries are saved from the state of ruination, those may contribute significantly to the country's fragile economy as well as rescuing huge number of workers from miserable economic hardship. Public sector jute mills are aided by the government but no incentive is given to the private sectors mills. Farmers lost interest in jute for not getting fair price.
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. The 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. Even then, they can not also pass on their losses to the government.
Most large industrial companies in Bangladesh employ foreign technicians and consultants in order to achieve international standards of productivity and quality. This is true in case of the garments industry, the textile industry and even the poultry industry. Why should the jute industry be any different? In a global marketplace, the companies to survive will be the ones which achieve international standards of productivity and quality.
................................................................
szkhan@thefinancialexpress-bd.com