Salvaging the moribund jute sector

Bangladesh jute sector has long been ridden with problems. The 'golden fibre' is now a myth. Jute played a major role in the economic development of the then Pakistan. But it has failed to so in independent Bangladesh. This is because of the lack of an appropriate policy, and mismanagement.
The problem started with the wholesale nationalisation of jute mills after liberation of the country. Nationalisation could not solve the problems in the jute sector. The nationalised jute mills had continued to make losses. At one stage, the Bangladeshi-owned jute mills were denationalised. This created another problem. It was not possible to make a uniform policy for public and private-sector jute mills.
Public-sector jute mills had always suffered from shortage of funds in buying raw jute during the buying season. Bangladesh Jute Mills Corporation (BJMC) could not buy enough raw jute during the current season for want of funds. This happens every year. The government is blamed for not releasing sufficient cash. Nobody thinks that the government is not supposed to release money for buying raw jute. BJMC never returns the money to the government. The government reluctantly releases some amounts of money for purchase of jute. But who is going to provide funds for the private-sector jute mills? The government must look after the interests of both public and private-sector jute mills. It cannot adopt a discriminatory policy for public and private sectors.
Public-sector jute mills are gradually closing down. Nobody is showing any concern for the jute sector. As has already been mentioned, BJMC could not buy enough raw jute during the current season. The mills are facing closure for want of raw jute. BJMC mills can produce 700 tonnes of jute goods per day. 80,000 workers are operating in the jute mills. About Tk 600 million (60 crore) is spent on payment of wages and allowances in a month. The jute mills have stocks of raw jute for 20/25 days. There was a target of buying 26 (26 thousand) quintals during the current season. BJMC could buy only 50 thousand (five lakh) quintals up to December 15. This is 18 per cent of the target. The mills cannot continue production for long due to want of raw jute.
An allocation of Tk five billion (500 crore) was sought from the Ministry of Finance. But so far BJMC has received only Tk 200 crore.  There is no logic behind asking for release of money from the government. BJMC is a 'business organisation'. They should manage their own funds to go ahead with their activities. They may go to banks for loan, but banks are reluctant to comply with them. It is because their past record of loan repayment does not inspire any confidence for giving them further financial support.
The government has reopened some closed jute mills. Who will give them money to buy jute? If the mills' management cannot run those, they may go out of business. Machinery and equipment of the mills may be put on auction.
The government has initiated a move to overhaul the jute mills by replacing the century-old machinery with modern ones aiming to make the units commercially viable. BJMC has signed three memorandums of understanding with Chinese companies for balancing, modernisation, rehabilitation and expansion of 26 state-run jute mills. As per the memorandum of understanding, the Chinese government will send a high-level delegation to Bangladesh to conduct a survey for assessment of the financial requirement for implementing the project. The Chinese government is expected to provide soft loan for the project. After completion of the project, the jute mills will be able to produce high-value jute textiles that are expected to have wide range of demand in local and international markets. Till now, no Chinese delegation has come to the country for the survey.
Private-sector jute mills are doing good business. But the state-owned units are counting losses. These mills are incurring losses because of inefficient management, century-old equipment, lack of product diversification and ineffective marketing strategy. It has been found in a government economic survey that out of 27 state-owned jute mills, 18 are run by BJMC. These mills incurred a loss of TK 8.58 billion (850 crore and 84 lakh) in 2013-14. In the previous year the loss was Tk 3.85 billion (384 crore and 75 lakh). The finance ministry report has mentioned that financial crisis and power shortage and many other factors are responsible for underutilisation of the capacity of jute mills. The think-tank Centre for policy Dialogue (CPD) has shown that old machinery is responsible for 10 per cent increase in cost.
BJMC mills have been producing sacking and yarn for the last 40 years. These items can not be sold because of their old design. These remain stockpiled in warehouses. Jute goods worth TK six billion (600 crore) are now lying in those places. Production has been reduced because of the old stocks. In December 1913, daily production was 700 tonnes, but currently it stands at 200 tonnes.
In January 1983, one Nazmul Haq received a loss-making jute mill (Janata Jute Mill) from the government. The mill was in bad shape because of dilapidated machinery and bank-related and other liabilities. Haq identified the problems of the mill and tried to solve them. By dint of hard work the mill returned to profitability within a short period of time. New products are being manufactured there. The demand for the items was rising, and it was not possible to meet the demand.
At state-owned mills there is collective responsibility. Individuals are not held accountable. But at the private ones, individuals are responsible for the mills' performance. There is neither reward nor punishment at the BJMC mills. The workers are interested only in their monthly salaries.
One option for solving the problems of BJMC mills could be the privatisation of the units, so that the private sector can cope with their problems in a pragmatic manner. The government may give incentives to the mills without taking the total liability as in the case of state-owned jute mills. The private sector is now running 130 jute mills in the country, compared to 27 in the public sector.

The writer is an economist and columnist. [email protected]