Working for a turnaround in the jute sector
Sunday, 22 July 2007
Shahiduzzaman Khan
THE caretaker government announced a comprehensive reform programme last week for the state-owned jute mills in order to make them profitable and viable units. Under the programme announced by the jute and textiles adviser, four state-owned jute mills, out of 22, would be shut down soon to sell them out to private entrepreneurs and 6000 of their staff and workers would be retrenched.
The mills are Peoples Jute Mills in Khulna, Karnaphuli Jute Mills and Forat-Karnaphuli Carpet Factory in Chittagong, and Kaumi Jute Mills in Sirajganj. Besides, another 8,000 employees of the remaining 18 mills will be retrenched by December this year under a golden handshake programme. A total of Tk 13.67 billion (1,367 crore) will be required to implement the golden handshake programme. The workers would get their benefits like gratuity, retirement benefits and notice-pay when they would be retrenched. After the retrenchment, they are likely to be employed on daily basis. Under the programme, reforms would be carried out in administration, management, finance, marketing and other segments of the state-owned jute mills.
The government would provide Tk 2.0 billion (200 crore) from the "unseen head" of the national budget and private banks will provide Tk 1.38 billion, while the rest would come from the sale of 120 acres of land of the state-owned jute mills. After implementation of the programme, the government believes, the state-owned jute mills will come to a break-even point within three years.
Under the same arrangement, two mills would be operated under public-private partnership and an Australian firm has already invested money to operate those mills. However, the government dismissed the view that donor agencies like the World Bank were against any kind of financial support to the state-owned enterprises and pressing to squeeze the public sector. It expressed the view that the golden age of the golden fibre was coming back and the jute sector has a good prospect as its demand was growing internationally.
The state-owned jute mills have consistently been incurring losses in running their business and their cumulative losses stand at Tk 47.70 billion until 2003. They incur a loss of Tk 4.21 billion annually. Experts opine that there were various reasons behind the staggering losses, including inordinate delay in getting government funds for jute procurement, mismanagement, power shortage and, above all, CBA activities.
However, the country has so far failed to tap the potentials of environment-friendly jute and jute goods in the international market. When jute and jute goods are driving out plastic and synthetic products on environmental grounds, the country's jute industry is on the verge of ruination. But the jute industry in neighbouring India is thriving but Bangladesh's jute sector faces ruin due to lack of policy support.
A number of specialists on jute sector said that although Bangladesh enjoys advantages in production of jute and jute goods, the country is failing to reap the benefits as it follows the 'faulty prescriptions' of the World Bank and the IMF. Sensing the increasing demand, Indian government in its 2005 jute policy fixed a target to increase the earning from jute sector. When Bangladesh government is privatising or shutting down jute mills, the West Bengal government in India has taken up a project to set up three new jute mills by investing Rs 100 billion.
In yet another development, Finance adviser Mirza Azizul Islam rebuffed suggestions for budgetary measures for revival of public sector jute mills, saying the jute industry is not in a position to survive. In a rebuttal to criticism for absence of budgetary guidelines for the jute sector, Mirza Aziz said it would not be possible for the state to subsidise a loss-making sector taking money away from another sector. This year's budget had no mention of the jute sector, which witnessed a labour unrest even in a state of emergency prevailing in the country. A citizens' group, however, demanded a package of incentives to save the ailing jute industry.
The interim government has also taken a new move to formulate a new jute policy for the revival of the ailing sector. The new policy is expected to give a boost to its development. Enhancement of the country's jute production capacity, diversification of product base, ways to attract foreign investment and increase of export earnings are high on the policy agenda.
The new policy is expected to also include strengthening the coordination between the related government agencies and private sector operators for the development of the country's jute sector and reducing poverty through ensuring fair prices for jute growers. In fact, the flawed policy 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. Most of the nationalised jute mills went out of production for lack of jute. According to an estimate, 30 per cent loss of the jute sector is caused by power shortage and another 30 per cent is attributed to interest charges. Jute sector itself is responsible only for another 30 per cent of the losses.
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 assisted by the government and no assistance is available to the private sectors mills. Farmers lost interest in jute for not getting fair price. There was a minimum price of jute in the past but now it is not enforced because of open market economy policy. Besides 22 public sector jute mills, the private operators are running 77 jute units and 150 jute-spinning mills in the country. Except for the spinning units, most of the jute mills, especially those are under the BJMC, are in bad shape due to multifarious reasons like managerial deficiency, fund crisis and corruption
In order to have a balanced jute policy public sector mills may be privatised. This will eliminate the loss of the government. There is no chance of improving the operational efficiency of public sector mills. The government can adopt a uniform policy for the private sector if all the jute mills are in the private sector. Adamjee area has been converted into an Export Processing Zone (EPZ) and a number of industrial units are already under implementation. New jobs are expected to be created in the Adamjee area. The allocation of Taka 3.0 billion was proposed to purchase raw jute, spares, fuel and other material for production. If the government is convinced about revival of the jute sector, then only it should make such allocation.
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 public sector jute mills are not interested to run these. They are selling the property of the mills. They blame the government for discriminatory policy. Private sector owners cannot maintain these mills with losses. But they cannot also pass on the loss to the government. Supporters of jute sector are pressing the government for cash incentives. Such incentives should, however, not be made without a rational policy.
THE caretaker government announced a comprehensive reform programme last week for the state-owned jute mills in order to make them profitable and viable units. Under the programme announced by the jute and textiles adviser, four state-owned jute mills, out of 22, would be shut down soon to sell them out to private entrepreneurs and 6000 of their staff and workers would be retrenched.
The mills are Peoples Jute Mills in Khulna, Karnaphuli Jute Mills and Forat-Karnaphuli Carpet Factory in Chittagong, and Kaumi Jute Mills in Sirajganj. Besides, another 8,000 employees of the remaining 18 mills will be retrenched by December this year under a golden handshake programme. A total of Tk 13.67 billion (1,367 crore) will be required to implement the golden handshake programme. The workers would get their benefits like gratuity, retirement benefits and notice-pay when they would be retrenched. After the retrenchment, they are likely to be employed on daily basis. Under the programme, reforms would be carried out in administration, management, finance, marketing and other segments of the state-owned jute mills.
The government would provide Tk 2.0 billion (200 crore) from the "unseen head" of the national budget and private banks will provide Tk 1.38 billion, while the rest would come from the sale of 120 acres of land of the state-owned jute mills. After implementation of the programme, the government believes, the state-owned jute mills will come to a break-even point within three years.
Under the same arrangement, two mills would be operated under public-private partnership and an Australian firm has already invested money to operate those mills. However, the government dismissed the view that donor agencies like the World Bank were against any kind of financial support to the state-owned enterprises and pressing to squeeze the public sector. It expressed the view that the golden age of the golden fibre was coming back and the jute sector has a good prospect as its demand was growing internationally.
The state-owned jute mills have consistently been incurring losses in running their business and their cumulative losses stand at Tk 47.70 billion until 2003. They incur a loss of Tk 4.21 billion annually. Experts opine that there were various reasons behind the staggering losses, including inordinate delay in getting government funds for jute procurement, mismanagement, power shortage and, above all, CBA activities.
However, the country has so far failed to tap the potentials of environment-friendly jute and jute goods in the international market. When jute and jute goods are driving out plastic and synthetic products on environmental grounds, the country's jute industry is on the verge of ruination. But the jute industry in neighbouring India is thriving but Bangladesh's jute sector faces ruin due to lack of policy support.
A number of specialists on jute sector said that although Bangladesh enjoys advantages in production of jute and jute goods, the country is failing to reap the benefits as it follows the 'faulty prescriptions' of the World Bank and the IMF. Sensing the increasing demand, Indian government in its 2005 jute policy fixed a target to increase the earning from jute sector. When Bangladesh government is privatising or shutting down jute mills, the West Bengal government in India has taken up a project to set up three new jute mills by investing Rs 100 billion.
In yet another development, Finance adviser Mirza Azizul Islam rebuffed suggestions for budgetary measures for revival of public sector jute mills, saying the jute industry is not in a position to survive. In a rebuttal to criticism for absence of budgetary guidelines for the jute sector, Mirza Aziz said it would not be possible for the state to subsidise a loss-making sector taking money away from another sector. This year's budget had no mention of the jute sector, which witnessed a labour unrest even in a state of emergency prevailing in the country. A citizens' group, however, demanded a package of incentives to save the ailing jute industry.
The interim government has also taken a new move to formulate a new jute policy for the revival of the ailing sector. The new policy is expected to give a boost to its development. Enhancement of the country's jute production capacity, diversification of product base, ways to attract foreign investment and increase of export earnings are high on the policy agenda.
The new policy is expected to also include strengthening the coordination between the related government agencies and private sector operators for the development of the country's jute sector and reducing poverty through ensuring fair prices for jute growers. In fact, the flawed policy 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. Most of the nationalised jute mills went out of production for lack of jute. According to an estimate, 30 per cent loss of the jute sector is caused by power shortage and another 30 per cent is attributed to interest charges. Jute sector itself is responsible only for another 30 per cent of the losses.
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 assisted by the government and no assistance is available to the private sectors mills. Farmers lost interest in jute for not getting fair price. There was a minimum price of jute in the past but now it is not enforced because of open market economy policy. Besides 22 public sector jute mills, the private operators are running 77 jute units and 150 jute-spinning mills in the country. Except for the spinning units, most of the jute mills, especially those are under the BJMC, are in bad shape due to multifarious reasons like managerial deficiency, fund crisis and corruption
In order to have a balanced jute policy public sector mills may be privatised. This will eliminate the loss of the government. There is no chance of improving the operational efficiency of public sector mills. The government can adopt a uniform policy for the private sector if all the jute mills are in the private sector. Adamjee area has been converted into an Export Processing Zone (EPZ) and a number of industrial units are already under implementation. New jobs are expected to be created in the Adamjee area. The allocation of Taka 3.0 billion was proposed to purchase raw jute, spares, fuel and other material for production. If the government is convinced about revival of the jute sector, then only it should make such allocation.
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 public sector jute mills are not interested to run these. They are selling the property of the mills. They blame the government for discriminatory policy. Private sector owners cannot maintain these mills with losses. But they cannot also pass on the loss to the government. Supporters of jute sector are pressing the government for cash incentives. Such incentives should, however, not be made without a rational policy.