Prioritising capacity utilisation of industries

Capacity utilisation is pivotal to viability of an industry. As an industry depends mainly on its return on investment (ROI), capacity utilisation is a measure of profitability of an enterprise. This is particularly crucial for industries that are operating much below their capacities. A lot really depends on capacity utilisation of an industry as it not only maximises production and revenue, but also reduces production and overhead cost and serves the purpose of additional investment in some cases.
In Bangladesh, only 5 per cent of our existing industrial units are running full capacity or close to it and the remaining 95 per cent are operating below their capacities. This was revealed in a study made by Bangladesh Bureau of Statistics (BBS). In general, the phenomenon of underproduction may be attributed to the following factors: lack of demand, unplanned investment and lack of policy support, lack of skilled manpower, raw materials scarcity and transportation. But the problem that is fairly acute and common for all industries is less than required supply of gas and electricity and inadequate infrastructure. If the existing industries can not run full capacity due to one or more aforementioned reasons, potential investors will not come forward to invest. Besides, there are industries that can not compete with foreign products due to lack of protection and security in domestic market and as such capacities of those industries remain underutilised. To some, underutilisation of installed capacities of these industries appears to be an inevitable result of globalisation although the issue is currently being debated around the world. Globalisation does not mean globalisation of industries which will ultimately destroy local industries and render local people jobless.
Therefore, before issuing permission for new industries, capacity utilisation of the existing industries will have to be closely looked into. If the economy has excess capacity despite short supply of gas, electricity and inadequate infrastructure, the possibility of new investment will further shrink.
However, as we need more industries to match the increasing demand of the growing population, new investment will be required. Our targeted GDP growth rate is 8 per cent and by now, we have been able to achieve more than 7 per cent according to BBS; and further investment, both local and foreign, will be required to achieve the extra 1 per cent. Unfortunately, investment is not forthcoming and the finance minister himself expressed his frustration about the state of investment in the country. Savings are also equally necessary for investment and the state of national savings has been stagnant for over a decade.
We need new public limited companies (PLCs) including multinational companies (MNCs) to raise capital from the market for increased investment. If they do not do so, investment scenario will not improve. We are not aware if any such company has entered the market in the last couple of years. In addition, the MNCs are expected to bring in capital from outside which they are not doing, and instead, they are borrowing from local banks.
The private sector is also suffering from other problems apart from dearth of investment. There have been unwarranted setbacks due to Britain's decision to leave EU and ascension to the office of US President by Donald Trump. Both these events are going to bring about fundamental changes in the political and economic landscape of the world. According to a recent newspaper report, our export of apparel is already affected as a British chain store Next is reported to have reduced its purchase orders. Besides, our overall export is behind target. Growth in export during July-December period of 2016-17 fiscal was only 4.4 per cent compared to an annual target of 10 per cent. Remittance income is also declining because of reduced wages of the migrant workers due to record fall of petroleum prices early last year. Amount of remittance dropped further as increasing number of migrant workers are sending money through unofficial and non-banking channels. Needless to say, falling remittance is also affecting investment adversely.
Since fresh investments are not forthcoming, priority should be given to capacity utilisation of the existing industries by removing the bottlenecks in their way, so that with increased production, they will be in position to earn more and pay fair wages. Higher wages will raise the consumption level and higher consumption will create additional demand for goods and services which will generate additional employment. All these occur in a cyclic order culminating in GDP growth.  
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