The people of Bangladesh are now experiencing a record price hike of fuel oils in the face of global energy crisis. Severe competition to get the fuel energy against the current huge demand led to high inflations around the world as well as in Bangladesh. As our dependence rises on oil and other necessary foreign products, a significant amount of foreign currency is being spent on imports and the enduring crisis makes it even worse. In this backdrop, the country needs to lessen its dependence on foreign imports and divert attention towards promoting domestic industries. MOHAMMAD RAFIUL HASSAN writes in details
Of late, fuel price has increased incredibly in the global market and Bangladesh is apparently one of the victims due to this unprecedented rise. The modern world operates on fossil fuel energy such as coal, oil, natural gas, and other sources of energy to meet its demand. As these resources are limited, the price often fluctuates due to various crises in the globe. Sometimes it reaches to skyrocketing high. And, developing countries like Bangladesh and its low-income people suffer the consequences. If the price of fuel goes up, the country has to spend a huge amount of foreign currency to import it which reduces the foreign exchange reserves. Consequently, it affects the import of other essential products. To avoid this, austerity was urged from all responsible levels of the government before the recent increase in fuel prices in Bangladesh. The government’s decision probably was to reduce the use of and dependence on fossil fuels. But, what are our other alternatives? Unfortunately, our so-called energy resources are short in supply. The alternative might be the proper utilisation of our domestic resources with the renewable energy. The country needs to develop its home industry using alternative energy resources, making proper use of adequate human resources along with other domestic resources.
1. INDUSTRIALISATION: CONTRIBUTION AND PROGRESS
Economic prosperity is not possible without sustainable industries. In the last few decades, the industrial sector of Bangladesh has made great progress. The country’s economy started moving upwards rapidly from being an agricultural economy to become an industrial economy. The contribution of the industrial sector to the Gross Domestic Product (GDP) is also increasing. According to the Bangladesh Bureau of Statistics, the contribution of the industrial sector to the GDP was 23.04 percent in the fiscal year 2000-2001. From this time onwards its contribution continued to increase. Its contribution increased to more than 35 percent in the fiscal year 2021-2022. Along with the industrial sector, the contribution of the service sector is also increasing in the GDP. Prominent economists see this situation as a sign
of progress. They said, Bangladesh is slowly turning from a strong and stable agricultural economy into an industrial economy. This is one of the ways to transform into a middle-income economy. Bangladesh has progressed in various economic indicators including education, health, export-oriented industrialisation, garment industry, pharmaceutical industry. It has achieved GDP growth of more than 7 percent in the last few years. At the same time, foreign exchange reserves have exceeded 40 billion dollars. It is noteworthy that Bangladesh ranks fourth in rice production, third in fish and vegetable production, fifth in manpower export, and eighth in remittance collection, besides occupying the second place in the world in the ready-made garment industry.
Bangladesh’s ready-made garment industry controls nearly 80% of total exports. At least 6 million people are directly employed in this sector. Along with the garment industry of Bangladesh, housing, ships, pharmaceuticals, rods, cement, and processed food industries have also expanded. Ships, medicines and various processed food items have been added to the list of Bangladesh’s export products. The IT industry of Bangladesh has gained an unprecedented reputation in the outside world. About 1 million small and medium industries have been established in the country in the last few years. These SMEs are contributing 23 percent to industrial GDP and 80 percent to total industrial employment. The livelihood of the country’s workforce of about 60 million people is associated to this private sector.
With the efforts of the government and entrepreneurs, the leather sector is moving forward on the path of continuous growth. Our footwear exports have increased 7 times in the last decade. As a result, the private sector has become the driving force of the industry. Bangladesh Economic Zones Authority (BEZA) Executive Chairman Pawan Chowdhury said to media, “Our economy is moving away from agriculture to industrialisation. With the aim of building industrialised and developed Bangladesh, 100 economic units are being set up all over the country. By 2030, the work of establishing these economic zones will be completed. Already we have shifted away from agrarian dependence towards industrial dependence. And the private sector is leading here.
However, multifaceted support of the government is playing a very important role behind this.” The spread of coronavirus had an adverse impact on the industrial activities. To counter the impact, the proposed budget has taken multifaceted initiatives to protect the domestic industrial sector. Among them, several tax exemptions have been given in the industrial sector. More opportunities have been created for investment as investment increases will increase employment. At the same time, domestic industry will develop. According to the BBS statistics, it is observed that the growth ratio of all three types of industries: large, small, and medium, is better than the previous year. Both the export-oriented sector and the domestic industrial sector have progressed. It is expected that Bangladesh is moving forward with the goal of becoming a developed and prosperous country by 2041 by relying on this industry-based economy.
2. THE ROLE OF LOCAL INDUSTRIES IN THE ECONOMY
The development of local industry is the main basis of all economic activities in the development of the world economy. Different countries of the world have chosen the development of small and medium industries as a tool to achieve economic growth, reduce income inequality, alleviate poverty etc. Behind the enviable economic success of Japan after the Second World War, the contribution of its domestic industries was immense. In particular, the role of industry in poverty alleviation, productivity growth, import dependency reduction, women empowerment, social and economic stability is an undeniable fact.
Saving and Earning Foreign Exchange
Every year we have to import essential foods and commodities for our large population. For which, we have to spend a large portion of foreign exchange. If small, cottage and large-scale domestic industries expand, it will be possible to meet many of our needs from domestically produced goods. As a result, it will be possible to save the foreign exchange. Also, export of manufactured products will earn foreign currency.
Local industries, especially small and cottage industries are playing an exceptional role in increasing employment in Bangladesh. Cottage industries are often inherited. There are many marginal areas of Bangladesh where government and private sector employment is not possible. There such small and cottage industries provide generational employment reducing the pressure on agriculture.
Utilising raw materials
Domestic raw materials are mostly used in small and cottage industries in our country. Such examples are the textile industry, pottery industry, and bamboo and cane industry where all domestic raw materials are used. As a result, the natural resources of our country are being used and the cost of production is also reduced due to the use of domestic resources. Thus, it develops our rural economy.
Improving quality of life
When a country’s employment increases, its per capita income increases. As a result, the purchasing power of people increases, and the quality of people’s lives improve in a balanced way. This not only improves the standard of living of people in urban areas but also improves that of in marginal areas.
3. PROMOTING LOCAL INDUSTRIES: PROBLEMS AND WAYS FORWARD
Industry is one of the driving forces of economic development in any country. Although Bangladesh is an agriculture-dominated country, the development of the industrial sector along with agriculture is undeniable for the overall economic development of the country. Industries of Bangladesh are basically of three types based on size: large-scale industries, medium-scale industries, small and cottage industries. Usually, industry is formed in the initial stage by one or more individual-entrepreneurs. Small and medium industries gradually take the form of large-scale industries. As a result, these contribute significantly to the sustainable development of a country. In the context of the socio-economic conditions of Bangladesh, there is no alternative to the development of small and medium enterprises (SME) with diversifying products for rapid industrialisation. Therefore, a World Bank Group report said – “Bangladesh needs to initiate a new round of reforms to strengthen the private sector to unlock the economy’s potential for export-led growth and job creation by diversifying its products.”
Though some remarkable progress can be seen, a number of challenges remain in the way towards industrialisation. Due to the low per capita income of the people of Bangladesh, capital formation has not occurred, which has been creating obstacles for rapid industrialisation. Besides, following the Rana Plaza tragedy in Savar, that killed many workers, the United States cancelled the GSP facility for Bangladesh. This had long-term effects on other industries. Moreover, the industry in Bangladesh is facing many difficulties including the shortage of technical knowledge, mineral and energy resources, industrial loans, proper planning etc. some measures can be taken to overcome these challenges with the followings:
The rate of higher education in the country is increasing, along with the number of unemployed. Frustration is growing among highly educated youth due to unemployment. The rate at which the country’s economy is growing, employment opportunities are not being created as much. There is no substitute for massive job creation in the industrial sector in achieving the Sustainable Development Goals (SDGs). This opportunity is possible in the SME sector. It is reported that the government is taking a loan of 75 thousand crore US dollars from the World Bank to increase the pace of employment. If this money can be properly invested in the SME sector, then huge employment opportunities will be created in the country. In case of selection of affected and genuine entrepreneurs, assistance of concerned government institutions can be taken if necessary. Disbursement of loans to distressed and genuine enentrepreneurs can be done quickly and on time.
Banks are not usually interested in lending to small and medium industries. To solve this problem, the government should make the state-owned and private commercial banks accountable. Necessary legal reforms can be made in the interest of SME entrepreneurs for easy access to credit and expansion of the sector. The country’s economy will be benefited by providing single-digit loans to SME entrepreneurs rather than single-digit loans to large customers. Under the leadership of Bangladesh Bank, concerned banks and financial institutions, Animal Resources Directorate, BCIC, Weaving Board, Silk Board, and SME Foundation and related other institution can organise and form review committee with prescribed scope of work.
Formulation of policies
The government should formulate policies to support SMEs. It should adopt a policy of easing the revenue system. A report titled Country Private Sector Diagnostic (CPSD) prepared by the International Finance Corporation (IFC) and the World Bank said, “Now is the time for Bangladesh to change its pace to meet its aspirations of becoming an upper middle-income country in the next decade.” And for this, to build a modern, diverse and vibrant private sector, necessary reforms in various laws and policies should be brought.
The radical change in the communication system in Bangladesh in the last few decades has had a positive impact on business and commerce. SME entrepreneurs in rural areas can easily bring their products to city markets and get good prices. This is why it is necessary to provide support and incentives to the small entrepreneurs in the SME sector to find suitable markets for marketing the appropriate products and to obtain competitive pricing of the products produced. The SME sector will benefit by making product marketing attractive and accessible through innovative processes. “Bangladesh can focus on the high-value ready-made garment market and introduce new technologies and exploit opportunities in footwear, leather, electrical goods, and agri-business exports,” said Wady Warner, IFC’s country manager for BanBangladesh, Bhutan and Nepal, at a briefing.
Technology and technical skills
Entrepreneurs in the SME sector of our country are far behind in science, technology and technical skills. Reasons for lagging behind are reluctance of educated technologists to become entrepreneurs, lack of proper measures for skilled development of workers, and lack of suitable technology. It is necessary to establish technical schools, polytechnic institutes, engineering colleges for improved technology and technical knowledge. Therefore, government and private sector should invest in technology and technical education heavily to create skilled manpower in the country.
Entrepreneurs of indigenous industries should be assisted in collecting and disseminating necessary information. Small and medium industries need to develop business linkages with the large industries in Bangladesh. Domestic industry should be linked with overseas markets too. To conclude, there is no alternative to develop domestic industries as well as the agriculture sector for the country’s prosperity. The significant role of small and medium enterprises in the overall economic development of a developing country like Bangladesh is undeniable. Bangladesh has already come a long way from an agrarian economy to industrial development.
The development of small and medium industrial sector is gaining special importance as the driving force of the country’s socio-economic development and poverty alleviation. The government has recognised SMEs as a tool for achieving economic growth, eradicating poverty, and improving the standard of living of the people. Many of our local industries are labour intensive and capable of contributing rapidly to national income growth and employment generation.
The national industries can play a major role in achieving sustainable development goals, especially in eradicating poverty and hunger. Therefore, we need to focus on the growth of our home-grown industries in the journey of making an enterprising and energetic Bangladesh, and in building an innovative and knowledge-based economy.