Resolving the problems of sick industries
Sunday, 4 November 2007
Shahiduzzaman Khan
THE government is likely form an integrated arbitration committee for framing necessary laws to rehabilitate as many as 3,769 sick industries and also resolve prevailing problems in this regard. The committee to be formed soon may comprise, among others, representatives of the sick industries of all sectors to place suggestions to the government. On the basis of their suggestions, the government will enact a law to resolve these long lasting problems in the country's industrial sector.
The government has asked the leaders of the Bangladesh Sick Industries Association (BSIA) to represent the industry in a single body to assist the ministry in this regard. The entire industry sector as a whole should be represented in the committee, so the recommendations to be made by it could resolve the problems of all sick industries.
Owners of sick industries have urged the government to publish a gazette giving a directive to the commercial banks for keeping the identified and registered sick units out of the list of loan defaulters. They made the plea while meeting the industries adviser to the caretaker government, recently. The BSIA chief informed the adviser that presently the number of sick industrial units is 3499, 1,580 of which were identified as sick ones in FY 1991-92 by the then Sick Industries Rehabilitation and Reinstatement Cell (SIRRC) and the remaining 1,919 units are now registered with the industries ministry. The BSIA chief also narrated their sufferings to the adviser for being sued as loan defaulters by some commercial banks as there is no law for protection of the sick industries.
Although the SIRRC was supposed to take necessary action for adopting a law in this regard within 90 days after defining which are sick units, it had not been able to do so even after 15 years passed. Due to absence of such a law, the banks have filed cases under the Money Loan Court Act against the sick industries. According to the SIRRC definition, the sick industries are those which have failed to make any profit for three consecutive years or could not stay at the break-even point for the same period. The industries adviser assured the association of taking necessary measures in the connection
About 1,580 sick industrial units owe around Tk 3.0 billion to the nationalised commercials banks. Bangladesh Bank (BB) wrote off the debts, but it has not yet issued any circular in this regard, which is worrying the entrepreneurs. Besides, through two circulars, one on June 9, 1987 and the other on November 12 in 1988, the BB instructed the commercial banks to extend working capital and collateral-free loans to the sick industries, but the commercial banks did not comply with this instruction. The sick industries in various sectors include textile, leather, medicine, loom, food, chemical and rubber. At least 200,000 employees were employed in those industries, and now at least 50,000 of them are unemployed leading inhuman life in absence of any alternative income source.
Country's half of the ready-made garments (RMG) units have fallen sick due to global crises, slump in the business as well as other industrial constraints at home. Country's civil society that includes noted economists, entrepreneurs and chamber leaders called for revival of such sick industries in order to protect jobs and boost economy.
The civil society has expressed its concern over such a matter that touches upon the hearts of the teeming millions. Those workers and employees of the sick industries are starving for non-payment of their salaries and fringe benefits, and thus crying for help. It is, however, not understood who is responsible for these industries going sick. Examples are galore that many industrial units, after a hectic but smooth beginning, have fallen sick. Many profitable units are suddenly meeting premature death. Many others remain sick since their launching. Questions thus arise -- who are the culprits? Who are responsible for all this mess?
Many entrepreneurs are themselves responsible for bad condition of the industries. Some unscrupulous entrepreneurs try to get government incentives by showing their mills and factories sick. After getting incentives, these owners spend the money accrued from the incentives in other way round and thus seal the fate of the industries willing to be back on tract.
The government is sometimes responsible for making a good industrial unit fall sick. It changes rules and regulations so frequently without any discussions with the stakeholders. Sometimes, these rules act as deterrent to the smooth running of the mills. Incentives to the affected mills and factories are not given in due time. Banks and financial institutions, on many occasions, fail to provide working capital to the entrepreneurs in time.
All of these reasons are certainly not good examples for any country's industrialisation process. In fact, the industrialisation of the country hit a snag after take-over of all the industrial units by the state in the early 70s. The process of nationalisation failed to yield any desired results as most of the industries were incurring heavy losses. Successive government rejected the nationalisation programme and started privatisation of the mills and factories taken over by the government.
In the late seventies, there was a mad rush for setting up specialised textile mills and power looms in the country as the demand for the textile products went very high. A huge number of mills sprang up like mushroom throughout the country. Country's commercial banks were also liberal in sanctioning loans for such specialised textile mills without going into detailed feasibility studies. The end result was disastrous. Very soon, most of these specialised textile mills and power looms became sick.
There is no denying that the government is very casual in addressing the problems of the state-owned sugar mills -- all becoming sick. These mills were earning robust profit since their inception. Due to mismanagement, widespread corruption and bureaucracy, these mills have quickly fallen sick. The BMR (balancing, modernisation and rehabilitation) programme, that remains long overdue, could not be done as yet. As such, the mils have been incurring huge losses for the last many years. The authorities tried to close some of these mills several times. But political compulsions force the government to keep the shutters open. As a result, there is a huge drain of money from the national exchequer.
What is needed at this moment is that the government must have the political will to build on these initiatives and that its reform efforts will develop the momentum and breadth necessary to realise the growth potential of Bangladesh's domestic entrepreneurs. Such momentum may lead to positive and sustainable growth of the sick industries that need immediate revival.
THE government is likely form an integrated arbitration committee for framing necessary laws to rehabilitate as many as 3,769 sick industries and also resolve prevailing problems in this regard. The committee to be formed soon may comprise, among others, representatives of the sick industries of all sectors to place suggestions to the government. On the basis of their suggestions, the government will enact a law to resolve these long lasting problems in the country's industrial sector.
The government has asked the leaders of the Bangladesh Sick Industries Association (BSIA) to represent the industry in a single body to assist the ministry in this regard. The entire industry sector as a whole should be represented in the committee, so the recommendations to be made by it could resolve the problems of all sick industries.
Owners of sick industries have urged the government to publish a gazette giving a directive to the commercial banks for keeping the identified and registered sick units out of the list of loan defaulters. They made the plea while meeting the industries adviser to the caretaker government, recently. The BSIA chief informed the adviser that presently the number of sick industrial units is 3499, 1,580 of which were identified as sick ones in FY 1991-92 by the then Sick Industries Rehabilitation and Reinstatement Cell (SIRRC) and the remaining 1,919 units are now registered with the industries ministry. The BSIA chief also narrated their sufferings to the adviser for being sued as loan defaulters by some commercial banks as there is no law for protection of the sick industries.
Although the SIRRC was supposed to take necessary action for adopting a law in this regard within 90 days after defining which are sick units, it had not been able to do so even after 15 years passed. Due to absence of such a law, the banks have filed cases under the Money Loan Court Act against the sick industries. According to the SIRRC definition, the sick industries are those which have failed to make any profit for three consecutive years or could not stay at the break-even point for the same period. The industries adviser assured the association of taking necessary measures in the connection
About 1,580 sick industrial units owe around Tk 3.0 billion to the nationalised commercials banks. Bangladesh Bank (BB) wrote off the debts, but it has not yet issued any circular in this regard, which is worrying the entrepreneurs. Besides, through two circulars, one on June 9, 1987 and the other on November 12 in 1988, the BB instructed the commercial banks to extend working capital and collateral-free loans to the sick industries, but the commercial banks did not comply with this instruction. The sick industries in various sectors include textile, leather, medicine, loom, food, chemical and rubber. At least 200,000 employees were employed in those industries, and now at least 50,000 of them are unemployed leading inhuman life in absence of any alternative income source.
Country's half of the ready-made garments (RMG) units have fallen sick due to global crises, slump in the business as well as other industrial constraints at home. Country's civil society that includes noted economists, entrepreneurs and chamber leaders called for revival of such sick industries in order to protect jobs and boost economy.
The civil society has expressed its concern over such a matter that touches upon the hearts of the teeming millions. Those workers and employees of the sick industries are starving for non-payment of their salaries and fringe benefits, and thus crying for help. It is, however, not understood who is responsible for these industries going sick. Examples are galore that many industrial units, after a hectic but smooth beginning, have fallen sick. Many profitable units are suddenly meeting premature death. Many others remain sick since their launching. Questions thus arise -- who are the culprits? Who are responsible for all this mess?
Many entrepreneurs are themselves responsible for bad condition of the industries. Some unscrupulous entrepreneurs try to get government incentives by showing their mills and factories sick. After getting incentives, these owners spend the money accrued from the incentives in other way round and thus seal the fate of the industries willing to be back on tract.
The government is sometimes responsible for making a good industrial unit fall sick. It changes rules and regulations so frequently without any discussions with the stakeholders. Sometimes, these rules act as deterrent to the smooth running of the mills. Incentives to the affected mills and factories are not given in due time. Banks and financial institutions, on many occasions, fail to provide working capital to the entrepreneurs in time.
All of these reasons are certainly not good examples for any country's industrialisation process. In fact, the industrialisation of the country hit a snag after take-over of all the industrial units by the state in the early 70s. The process of nationalisation failed to yield any desired results as most of the industries were incurring heavy losses. Successive government rejected the nationalisation programme and started privatisation of the mills and factories taken over by the government.
In the late seventies, there was a mad rush for setting up specialised textile mills and power looms in the country as the demand for the textile products went very high. A huge number of mills sprang up like mushroom throughout the country. Country's commercial banks were also liberal in sanctioning loans for such specialised textile mills without going into detailed feasibility studies. The end result was disastrous. Very soon, most of these specialised textile mills and power looms became sick.
There is no denying that the government is very casual in addressing the problems of the state-owned sugar mills -- all becoming sick. These mills were earning robust profit since their inception. Due to mismanagement, widespread corruption and bureaucracy, these mills have quickly fallen sick. The BMR (balancing, modernisation and rehabilitation) programme, that remains long overdue, could not be done as yet. As such, the mils have been incurring huge losses for the last many years. The authorities tried to close some of these mills several times. But political compulsions force the government to keep the shutters open. As a result, there is a huge drain of money from the national exchequer.
What is needed at this moment is that the government must have the political will to build on these initiatives and that its reform efforts will develop the momentum and breadth necessary to realise the growth potential of Bangladesh's domestic entrepreneurs. Such momentum may lead to positive and sustainable growth of the sick industries that need immediate revival.