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Light Engineering Sectors in Bangladesh

Light Engineering Sectors in Bangladesh

Light Engineering Sectors in Bangladesh

 

Like many other developing countries, Light Engineering sectors(LEIs) is an important manufacturing sector of Bangladesh that occupy strong and vital position in the economy of the country. It prudently acts as feeder or support industries to all other industries to all other industries and plays a vital role in the socio-economic development of the country. These industries  have potentials to make significant contribution towards technological and economic development along with wide opportunities for employment generation. Small industries are engaged in manufacturing various import-substitute products and thus saving valuable foreign currency. Manufacturing and processing activities in small and micro engineering enterprises contribute to the livelihood of huge number of poorest citizen.

 

There are certain socio-economic advantages that the LEIs enjoy over the large-scale industrial units. The advantages are: lower capital investment, lower job-creation cost, low risk factor, shorter start-up period, lower capital output ratio., less management problem, lower energy cost, moderate infrastructure requirement, promotion of entrepreneurial talents, more environment friendly production process, and promotion of agro-industrial linkages.

 

In Bangladesh, there are hundreds of roadside light engineering workshop scattered all over the country, starting from small towns to metropolitan cities like Dhaka, Chittagong, Rajshahi and Khulna. Some are equipped with only an electric small size welding machine, various types of horizontal, vertical and turret lathe machines, gas, electric and ac welding sets, various type of drilling machines and grinders, etc. These small workshops make substantial contribution to gross domestic products (GDP) and create employment opportunities. But unfortunately  these industries could not  prosper and develop as it should have been. Due to many reasons large numbers of small industries and enterprises in the country had to curtail or stop their activities.

Light Engineering Sectors in Bangladesh

Light Engineering Sectors in Bangladesh

Perspective of LEIs in Bangladesh

The SMEs sector-as a whole provides over 87 per cent of industrial value added goods (1) There are lack of information about total number and types of small firms existing presently in Bangladesh. However, according to survey on small industries done by Bangladesh Small & Cottage Industries Corporation (BSCIC), it was revealed that there were total 197 types of small industries with total 38294 industries in the country (BSCIC Survey report, 1994). (2) An estimate shows that presently there are about 60,000 small industries in the country. Among them, Light Engineering Industries are deemed to be approximately 25% i.e., LEI are about 15000. In addition, evidence suggests that there are over 347,000 cottage industrial units and a large number of handloom and power loom enterprises. But as per report of BEIOA (Bangladesh Engineering Industries Owner Association), there are total about 40,000 LEIs in the country generating 50,000 employment per year.

  

Definition of Light Engineering Industries(LEIs) 

LEIs corresponds to those engineering industries that posses smaller capital investment and falls in the gamut from cottage industries to small industries (cottage and small industries have been defined in Industrial Policy –2005 .In Industrial Policy 2005 the Light engineering sectors  has been included in the list of thrust sectors category. LEIs includes- all kinds of ferrous and non-ferrous metal mechanical products, machinery (electrical and non-electrical), spare parts, equipment, instrument, parts of mechanical system, electrical and electro-mechanical products, electronic products, machine parts or parts of manufacturing process that is made of ceramics, rubber, plastic, wood, glass etc.   Repair, maintenance, erection, installation, fabrication, support service, consultancy etc. are service variety in the light engineering sector. In Export Policy 2003-2006 LEIs  is  considered as one of the highest priority sector.

 

Problems of Light Engineering Industries in Bangladesh

Raw materials:

  • High price of raw materials
  • Required raw materials are not Unavailability of the required raw materials
  • Scarcity of quality raw materials in the local market

 

Finance:

  • Lengthy and cumbersome procedure to receive bank loan
  • Difficulties to get required amount of bank loan
  • Non-availability of sufficient working capital
  • Low tariff rate of imported goods that are competing with the local ones
  • Difficult to get financial help for technological innovation, development and for big investment
  • Non-availability of venture capital
  • High rate of interest on bank loan

 

Innovation promotion and management:

  • Non-availability of metal testing facility. Difficult to identify the metal and its quality
  • Non-availability of efficient and skilled manpower in many cases
  • Sometimes, space is not available or sufficient for extension of the workshop
  • Lack of specified policies for price determination of a product
  • Difficulty to get Govt, contracts.
  • inadequate electricity supply
  • Non-availability of heat treatment facility
  • Durability of the products become low due to lack of tempering facility
  • Lack of skilled manpower required for product diversification
  • Due to limited purchasing capacity of market it is not possible to produce quality products with full production capacity
  • Lack of designing capability
  • Manual in Bangla on production and technology is not normally available in the market
  • Lack of standard & quality of product
  • Lack of knowledge how and where to patent the product

 

Light Engineering

Light Engineering Sectors in Bangladesh

Marketing

  • The price of local goods is high in comparison with foreign goods due to high production cost of local goods. Thus local goods cannot compete with the foreign goods
  • Lack of facility or capability of the owner to disseminate information about the workshop and its products.

 

Priority sub sectors of LEIs  may  be promoted:

The following sub sectors of LEIs to be upgraded so that these can produce export quality products:

  1. Automobile Sector: Automobile spare parts has got great export market potential around the world. This sub sector includes Cylinder kit, radiator, engine filters etc.
  2. Marine engine spare parts: Marine engine spare parts includes gear, pinion, crankshaft, axle, engine head etc.
  3. Railway spare parts. This sub sector includes railway radiator, railway rolling stock and other 600 parts are being produced by LEIs presently.
  4. Agro-based and Agro—supportive sector: This sub-sector includes plough head, irrigation pump, trashing machine etc.
  5. Machinery, equipment and spare parts of various sector: This sub sector includes spare parts of various industries, capital machineries, accessories etc.
  6. Electrical Machineries: Electrical machinery such as AC, fan, electrical appliances, cooking unit, spare parts, and machine for production of electrical bulb etc.
  7. Household machinery products: Household machinery products such as wheel chair, mechanized bed, mechanized / hydraulic chair etc.

 

Priority areas for capacity development:

Capacity may be developed in the following areas on priority basis:

  • Modern foundry development
  • Heat treatment facility
  • Sheet metal products manufacturing facility
  • Alloy steel production
  • Alloy, CI & DI (Ductile Iron) foundry establishment
  • Introduction to CAD, CAM, CIM, CNC etc.
  • Mold and Die making
  • Use of EDM, Pantograph, Copy milling machine, CNC machine, Wire cut, Machining center
  • Surface treatment such as galvanizing, nickel coating, Powder coating Chrome coating
  • Die casting products

 

Recommendations:

 Following recommendations may be considered to promote the light engineering sector of the country:

  • A definite policy for Light Engineering Industries (LEIs) should be prepared.
  • Business / technical information is to be readily available to the enterprises to improve their performance. Networking among the concerned trade Associations and R & D Institutions should be established in order to collect, compile and disseminate the information for ready reference for the entrepreneurs. Data Bank for the LE sector may be created.
  • Necessary measures are to be introduced to upgrade the institutional structure of the LE enterprises.
  • Appropriate raw materials required to produce quality products should be identified and made locally available.
  • Government’s decision to allow duty free import of standby Generators should be continued in future until such time it is possible to ensure reliable power supply.
  • Product/ production technology should be upgraded from conventional to modern level as per market demand. Technical support services should be provided to the local machinery manufacturers to enhance their capability for machine designing.
  • Material testing facility and R & D facility should be ensured.

 

Light Engineering Sectors in Bangladesh

Light Engineering Sectors in Bangladesh

 

  • Awareness campaign on standardization and quality of the products should be made.
  • LEIs require exposure to modern machines and technology. Support should be given to LEIs in this regard. A technological support cell should be established under Ministry of Industries to ensure the feed back. Workshops, Seminar, exhibitions and discussions with foreign suppliers may also be arranged.
  • Entrepreneurial culture should be established so that their capability can be upgraded from the average level to excellent level.
  • Technicians working in LEIs are quite innovative. But as most of them do not have formal technical education, they do not understand engineering drawing and are not familiar with scientific methods of measurements, limit, fit, tolerance etc. Formal technical education should be ensured for the personnel of the sector.
  • Technical training should be provided to the personnel of LEIs to improve the quality of their work. Training manual written in a simplified way in Bangla should be given to the trainees so that they can use these effectively.
  • Necessary provision should be made to make the LEIs familiar with VAT, Tax and other documentation. Knowledge on safety measures, hygiene, environment pollution etc. should also be ensured.

 

  • The management of the industries should be given enough tools and knowledge for reaching foreign markets, preparing price quotations, selecting foreign distributors/ agents, documentation, Letter of Credit, shipping and all other tasks related to export.
  • There is a need to consider friendly financing policy for the LE sector. Extensive financial support should be made to the sector. LE sector should get the facility of EPF.
  • There should be arrangements for periodic/ permanent exhibition of locally produced engineering products in the country. Permanent Display Center may be established for LE products.
  • Periodic professional training courses should be organized for capacity building of the LE sector.
  • Continuous searching for export in global markets should be made. Frequent visit to developed countries and participation in int. trade fairs may be helpful to get experience on using modern technology and get export orders.
Light Engineering Sectors in Bangladesh: Light Engineering Sectors in Bangladesh: Light Engineering Sectors in Bangladesh

Developing Bangladesh          Md. Joynal Abdin            Read More…

Functions of Trade Bodies

FBCCI

Functions of Trade Bodies

 

The private sector of Bangladesh has been promoting various activities for the promotion of exports from Bangladesh. The private sector is providing institutional support & advocacy; maintains liaison with local & foreign trade related bodies; arranging meetings, seminars & conferences for creating awareness among entrepreneurs; disseminating trade related information and conducting training courses & workshops for developing skills of the businesspeople for increasing exports day by day.

There are 79 local & bi-national Chambers of Commerce & Industry and 256 trade & product related Associations. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is the apex trade organization of the entire private sector. The national level Trade Associations, like- Bangladesh Garment Manufacturers & Exporters Association (BGMEA), Bangladesh Frozen Foods Exporters Association (BFFEA), etc. are promoting specific products and trade. The Chambers and the Trade Associations are performing various functions for the development of its member entrepreneurs including export promotion such as:

 

Exploration of Export Market

FBCCI and other leading Chambers and export related Associations are searching overseas export markets continuously. They are sending trade & investment delegations in different countries for enhancing country’s export and seeking foreign direct investment to establish export-oriented industries in the country. They also receive foreign delegations for introducing export products of the country and to sign export contracts with foreign importers.

 

The Chambers/Associations also take part in international trade fairs and exhibitions in different countries and also encourage the exporting firms to participate in those fairs/exhibitions.

 

Issuance of Certificate of Origin

For ensuring the origin of production of the export products the leading Chambers/Associations are issuing Certificate of Origin and authenticate documents for promotion of exports.

 

Export Performance of Bangladesh and Contribution of   Trade Organizations:

Our major export sectors – woven garments, knitwear, frozen food, leather, jute goods, pharmaceuticals, chemical products, raw jute and tea are dominated by the private sector entrepreneurs with a successful marketing performance to the USA, Germany, UK, France, Belgium, Italy, the Netherlands, Canada, Spain, Sweden, Japan, Hong Kong, India, Denmark, Ireland, China, Pakistan, Turkey, Singapore, Iran and other countries. Out of the total foreign exchange earnings of US $ 10.53 billion in 2005-06, private enterprises represented more than 95% of the total export earning which has risen from 74.27% in 1990-91. In-spite of adverse global trade and economic scenario, Bangladesh export over the last few years has registered commendable growth thus enabling the country to meet her import bills more and more out of the export earnings. As a result of the considerable efforts the export earnings for the FY 2005-06, meeting 71.38% of our import bills, were the ever highest.

 

Functions of Trade Bodies

Functions of Trade Bodies

 

Activities of FBCCI and other trade bodies for the development of our export market:

 Exchanging Dialogue with the Government on Different Policies:

The private sector trade bodies have been providing support in the formulation and implementation of Government Policies in respect of import, export, industry, investment, banking, insurance, fiscal measures, annual budget, etc. and provide inputs for the conferences relating to WTO, UNCTAD, SAFTA, BIMST-EC, ASEAN, RTA/FTA, BTA, TIFA, Kunming Initiative, BIBN, SASEC, etc.

 

Product and Management Development:

For ensuring quality export products the export related trade associations, like- BGMEA, BKMEA, Bangladesh Frozen Foods Exporters Association, Bangladesh Jute Mills Association, Bangladesh Leather & Leather Goods Manufactures and Exporters Associations, Bangladesh Aushad Shilpa Samity and other trade bodies including leading Chambers have been organizing training courses, seminars and workshops for awareness and developing knowledge & skill of the entrepreneurs & officials of exporting firms for the development of export products, quality requirements as well as their management system.

 

ISO management system and other recognized standards certifications are increasingly becoming a requirement for doing business in international market. For that purpose, FBCCI has formed a Quality Forum named “FBCCI Quality Forum”. This Quality Forum will provide assistance to business organizations in implementing ISO 9001 Quality Management System (QMS), ISO 14001 Environmental Management System (EMS), Hazard Analysis Critical Control Point (HACCP), Food Safety Program, etc.

 

Dissemination of Export Information:

The private sector trade bodies are regularly disseminating export/import business information to their members by Electronic Communication, Fortnightly /Monthly Trade Bulletins, Monthly Reviews, Newsletters, Circulars, Notifications, Statistical data, etc. They also assist to develop export business through Internet/Webpages of their own.

 

Implementation of Development Projects:

The trade bodies have been preparing, implementing and evaluating different projects for entrepreneurship development and other export related matters with the technical & financial assistance of donor agencies, like- World Bank, ITC, UNDP, GTZ and ZDH of Germany and other local & foreign organizations.

 

Functions as a Business Forum for Exchanging Views Globally:

The private trade organizations are acting as the forums for exchanging views on trade and economy as well as export development among different Chamber/Association members, Government agencies and local/foreign and international organizations. They are conducting meetings, conferences, seminars/workshops/symposia, etc. for the promotion of country’s export as well as trade, commerce and investment. They also conduct research on burning policy issues including export promotion.

 

Trade Agreements with overseas Chambers of Commerce and Industry:

The FBCCI and other leading Chambers/Associations have signed Memorandum of Understanding (MOU) with many overseas Chambers of Commerce and Industry, Regional & International Chambers and other business organizations for promotion of bilateral trade and investment.

 

Functions of Trade Bodies

Functions of Trade Bodies

 

Some important issues for Bangladeshi Exporters:

In spite of government support a number of impediments remain to the growth of the private sector contribution to export. The major ones are the lack of long-term capital availability through banking channels; lack of long-term capital in the capital market / bond market; dumping of products largely by smuggling; inadequate support of infrastructure like utilities, specifically power, port services, including land ports, high transportation costs and inefficient telecommunications system, high-interest rates in the banking sector; lack of credible statistics;  lack of an appropriate education system to support an industrial economy; slow process of deregulation and privatisation; lack of industry friendly social and political environment; lack of local technology and lack of research and development.

 

The private sector and trade organizations need assistance and facilities to overcome the impediments in order to play its role smoothly in the development of the country. The government should take steps to ensure the creation of an enabling environment through legal and administrative measures and infrastructure support so that the private sector can function and contribute according to its potential. The Government is aware of the constraints hindering the growth of the private sector and would implement effective measures to remove the hurdles through effective and coordinated policies and actions.

Functions of Trade Bodies: Functions of Trade Bodies: Functions of Trade Bodies

Developing Bangladesh          Md. Joynal Abdin            Read More…

Functions of Trade Bodies: Functions of Trade Bodies: Functions of Trade Bodies

SME Development and Challenges in Bangladesh

Top 10 Healthy Foods

SME Development and Challenges in Bangladesh

SMEs (Small & Medium Enterprises) occupy a unique position in the economy of Bangladesh. They play an important role in Bangladesh socially as well as economically. Lasting private sector development depends on them. In the present era, SMEs have emerged as the cornerstone of economic development in Bangladesh providing the platform for job creation and economic growth. They provide over 87% of the total industrial employment and is also responsible for creation of over 33% of industrial value-added goods. There are the following sub-groupings among the small sectors, namely Cottage Industries, Handloom Industries, Small Enterprise, and Medium Enterprise.

 

If only the number of Small Industries is compared with that of the large and medium firms, it is found that over 94 per cent units fall into the category of the SMEs sector. Even in the employment size of 10 or more, most recent information indicates that over 78 per cent of the total industrial units are from 10 to 49 employment band, and about 56 per cent fall in the 10-19 employment bracket in the manufacturing sector of Bangladesh (GOB, 1993f:xi). The SMEs sector – as a whole – provides over 87 per cent of the total industrial employment in Bangladesh (GOB, 2001). This sector is also responsible for creation of over 33 per cent of industrial value added (GOB, 2001).

 

Definition of Different Types of On industries

There is no universally accepted definition of small and medium industries. They are defined to suit the particular purpose that the authorities or the analysts have in mind. The industrial policy 1999 provides the following size classification scheme of the industries:

 

Large Industry: Large Industries with 100 and more workers of having capital of over Taka 300 million.

 

 

Medium Industry: Medium Industries with employees between 50-99 with a fixed capital investment between Taka 100-300 million.

 

 

Small Industry: Small Industries employing fewer than 50 workers with a fixed capital investment of less than Taka 100 million and cottage industry covering household based units operated mainly with family labour.

 

Present Industrial Scene of Bangladesh:

 In the present industrial scene of Bangladesh, barring a small number of large fertilizer factories, composite textile mills, some modern basic chemicals and pharmaceutical factories or specialized paper mills, no grave mistake would be made if we notionally consider the bulk of our industries to be of either ‘medium’ or ‘small’ category in global scale. This is also indicated by the fact that our industrial goods, according to economic end-use classification, have maximum weight age for consumer goods as may be seen below:

 

Finished consumer goods                                 62.098%

Intermediate consumer goods                           28.899%

Finished capital goods                                        2.248%

Intermediate capital goods                                  6.755%

100.00%

(source: c.m.i, statistical year book 1999,bbs).

 

SME Development and Challenges in Bangladesh

Start-Ups and SMEs

Similar picture emerges also from the weightages of our general industrial production statistics seen as follows at the 3-digit level of codes:

Table 1

 

Code

 

Industry
Weightage
311-314 Food & beverages 23.295%
321-325 Textiles including leather 37.419%
331-332 Wood products & furniture 0.221%
341-342 Paper & paper products 4.562%
351-357 Drugs, chemicals etc 23.567%
361-369 Glass & non-metallic products 2.719%
371 Basic metal products 2.028%
381-385 Mfg of metal products 6.189%
100.00%

(source: cmi, statistical year book 1999,bbs).

 

The “thrust sectors” identified by the industrial policy, 1999 include at present 16(sixteen) industries namely,

  • Agro-based industries
  • Artificial flower making
  • Computer software and information technology
  • Electronics
  • Frozen food
  • Floriculture
  • Gift items
  • Infrastructure
  • Jute goods
  • Jewelry and diamond cutting & polishing
  • Leather
  • Oil and gas
  • Sericulture and silk industry
  • Staffed toys
  • Textiles
  • Tourism

 

Except oil and gas, a few composite textiles, some large infrastructure, all other activities in the thrust sectors can be classified as SMEs at the present state of our industrial development.

                                                                          

 Industrial Development in Perspective

The development of the industrial sector was overlooked or biased towards the colonial powers during the British colonial regime. Consequently, no significant progress was made during the colonial period in this sector. During the Pakistani rule, 1947-71 when Bangladesh was a part of Pakistan as East Pakistan, whatever industrialisation took place was in and around the Karachi region because it was the capital city of Pakistan. Moreover, political and administrative factors were a major consideration for developing industries there. As a result, West Pakistan was industrialised substantially within a short period of time, while East Pakistan remained far behind. This is vividly clear from Table 2. Despite owning about three-quarters of the total industrial units, the Bangladeshi entrepreneurs had control over less than a fifth of total assets of this sector before independence. This picture reveals not only the weak position of the Bangladeshi entrepreneurs but also the West Pakistan oriented industrialisation of the Pakistani government.

 

After independence in 1972, all major industries were nationalised including banks and insurance companies and were brought under the control and ownership of the government. Only small industries up to a total investment value of Tk. 2.5 million were allowed to function under private ownership. Although the government owned only 13 per cent of the industrial units, it was in control of nearly 92 per cent of the total fixed assets. Very soon after independence, the country’s inherited structural weaknesses were aggravated by mismanagement, inefficiency, corruption and labour trouble in the industrial sector. As such, the industrial scenario until 1975 was in a chaotic situation reflecting a blocked and stagnant economy. In fact, during the first few years after liberation, the country’s industrialisation meant re-organisation of the existing production capacity and resuming activities in the ­industries stopped during the liberation war.

 

 

                                                                     Table 2

Basic Indicators of Industrial Statistics in Bangladesh: 1985-93

Characteristics 1985-86a 1988-89b 1991-92 1995-96
Total Establishments (No.)

Ownership: Government

Private

Joint-Venture

Fixed Assets (Million Tk.)

Total Employment (Person in ‘000)

Gross Value Added (Million Tk)

  4 519

174

4 274

25

30 293

497.6

31 954

23 752

NA

 

 

83 279

1 175.3

60 663

26 446

NA

 

102 414

1327.2

222868

28920

167

28708

46

206831

2023.8

182222

a       Includes manufacturing units having 10 or more workers registered with Chief Inspector of

Factories;

 

b       Includes manufacturing units employing 10  or  more  workers registered or not with Chief

Inspector of Factories.

 

Source: GOB (1993:6 & 252), Table 1, (1993f:xi), Table 1 & 2, (1998) and (2001)

 

SME Development and Challenges in Bangladesh

SMEs in the Age of Globalization

 

Industrial Contribution to GDP

When the country’s national accounts are used as a benchmark for comparison, the share of manufacturing industrial value added in GDP is found to be only around 10.5 per cent, as shown in Table 3, with a situation of stagnation or declining trend during 1972-98.

 

 

Table 3

Sectoral Share of GDP in Bangladesh: 1999-2003 (% of GDP)

Economic Sectors 1999-00 2000-01 2001-02 2002-03
Agriculture

Industry

(Manufacturing:

-Large scale

-Small scale)

Others

Total =

25.58

15.40

 

(11.01)

(4.39)

59.20

100.0

  25.03

15.59

 

(11.13)

(4.46)

59.38

100.0

23.98

15.76

 

(11.16)

(4.60)

60.26

100.0

23.46

15.91

 

(11.20)

(4.71)

60.63

100.0

a          Shows provision figure;  b Figures in  percentage.

Source: Bangladesh Economic Review 2003

 

 

However, the industry sector is the second largest contributor to GDP in the economy of Bangladesh.

 

Industrial Contribution to Employment

In terms of employment, the share of manufacturing industrial enterprises was estimated at about 13.9 per cent in 1989, as shown in Table 5. This sector historically contributed not more than 6 per cent of total employment before 1984. However, it is presently the second largest provider of employment after agriculture. While the employment share of the agriculture sector gradually fell from 84.61 per cent in 1961 to 64.94 per cent in 1989, the share of the manufacturing sector showed a consistently increasing trend during the last three decades. There has been a noticeable increase in manufacturing employment from 4.80 per cent in 1974 to 13.91 per cent in 1989, and 11.10 percent in 1995-96.

 

 

Table 4

Employment by Major Economic Sectors in Bangladesh

 

Sectors LFS-1990-91 LFS-1995-96 LFS-1999-2000
Agriculture

Industry

(Manufacturing, Gas,Electricity)

Others

Total    =

 

66.40

11.81

 

 

21.79

100.00

63.20

7.40

 

 

29.4

100.00

  62.30

7.60

 

 

30.10

100.00

a    Figure in percentage

Source:      Calculated from GOB (1993 & 1998)

 

                                                                     Table 5

Growth of Small Enterprise in Bangladesh: 1961-2001

 

 

Year

 

Number of Units

    Employment

(in ‘000 persons)

     Value added

(in million Tk. at constant 1980-81 price)

Small Cottage Hand-loom Small Cottage Hand-loom Small Cott-age Hand-loom
1961

1978

1981

1990

1991

2001 (June)

16331

24005

24590

38104

38294

55280

234934

280000

321000

403237

NA

511621

137304

197280

205874

NA

NA

143.8

322.1

NA

NA

523.0

808.9

 653.1

NA

855.2

1331.0

NA

1664.7

521.2

847.6

897.4

NA

NA

2513

2772  NA

NA

NA

1401.8  NA

3146.1  NA

NA

 NA

NA

NA

NA

NA

Growth1 (%) 5.96 2.94 2.49 11.56 3.87 3.60 0.57 4.12  –
  • Growth (average annual) rates are calculated based on the available figures of the first and last

years;   NA  Not available

Source: Ahmed (1987:16), Table 1.2,  GOB (1993d:1 & 2001)

                                                                                                                                      

 Relative Importance of Various Sizes of SME

The relative numerical significance of the SMEs sector in the industrial structure of Bangladesh can be understood in terms of the number of units, of employment and value added as depicted in Table 6. Clearly, there is a superabundance of SMEs in numerical terms in the total industrial structure.

 

For instance, if only the number of Small Industries is compared with that of the large and medium firms, it is found that over 94 per cent units fall into the category of the SME sector. Even in the employment size of 10 or more, most recent information indicates that over 78 per cent of the total industrial units are from 10 to 49 employment band, and about 56 per cent fall in the 10-19 employment bracket in the manufacturing sector of Bangladesh (GOB, 1993f:xi). The SME sector – as a whole – provides over 87 per cent of the total industrial employment in Bangladesh (GOB, 2001). This sector is also responsible for creation of over 33 per cent of industrial value added (GOB, 2001). According to World Bank (1992), it was estimated that the real contribution of MVA would be much higher, from 30 to 50 per cent higher than the Census of Manufacturing Industries (CMI) and 10 to 20 per cent higher than Bangladesh Bureau of Statistics (BBS), if underestimation in the official statistics is accounted for. One study recently reported that the contribution of SMEs appeared to be over 52 per cent of the total MVA in the year 1989-90 (Microenterprise News, 1993:2).

 

 Table 6

                                  Sectoral Distribution of SMEs in Bangladesh:1978-1993

 

 

Industry Sectors

Small Industry

Survey-19781

No.        %

Directory of

Man.Ind.-19932

No.      %

Small Industry Survey-19933

No.       %

SMEs listed with BSCIC4

No.       %

Food & allied

Textile & apparels

Forest & Furniture

Paper, printing etc.

Chemical, Rubber etc.

Glass, ceramics etc.

Basic metal/engineering

Fabricated metal/electrical.

Others

Total  =

17 358     72

1 391       5

886      4

1 092       5

527      2

218      1

1 743       7

646      3

144      1

24 005   100

 7 623    31

5 714    23

1 804     7

1 078     4

1 903     8

2 359     9

483     2

3 455   14

526     2

24 945  100

21 080    55

3 196      8

1 745      5

2 385      6

2 864      7

1 113      3

3 078      8

1 880      5

953      3

38 294   100

 8 152     46

741      4

1 794     10

590      3

1 026     6

124      1

2 987     7

1 989    11

245      2

17 648   100

Source: Compiled from 1 GOB (1981);  2 GOB (1993f); 3 GOB (1993d) and 4 GOB (1993e).

 

Agro Processing

Agro Processing Sector of Bangladesh

 The Birth and Death Scenario of SME

There is no data covering the entire SME sector concerning the birth or death of enterprises. From information shown in Table 9, however, a partial picture can be formed about SMEs between 20 and 49 employment size. Using the entrants and exciters from the CMI during the period 1974-75 to 1983-84, it was found that about 59 per cent of the net addition in the number of new enterprises were from the SME sector.

 

Table 7

Birth and Death of Manufacturing Enterprises in Bangladesh:

Employment Size       Entrants

No.        %

     Exiters

No.        %

Net Addition

No.        %

20 – 49

50 & above

Total      =

  674      60.2

446      39.8

1120    100.0

 186      64.4

103      35.6

289    100.0

 488      58.6

343      41.4

831    100.0

Source: Calculated from Reza et al. (1990:81), Table 1.6.

 

 

It was also estimated that there was one death per four new births in the economy during the period under consideration. Expectedly, birth rate was found relatively high in the 20-49 employment size, while death rates vary even more markedly, the 20-49 and 50-99 employment size classes, having even more disproportionately high percentages of deaths compared with the large size class (Reza et al., 1990:81).

 

Market Coverage and Backward and Forward Linkages

One of the very important functions of SME is to serve the needs of local consumers by supplying a wide range of products. In Bangladesh, over 90 per cent of SME serve the local needs of the people (Rahman et al., 1979:83), and thus, work every day in every economic sphere of the Bangladeshi society. Moreover, it is revealed that there are strong backward and forward linkages between the SME and other sectors – such as agriculture – of the economy in Bangladesh.

 

The foregoing discussion clearly indicates the numerical significance, one dimension of the role of small firms in the economy of Bangladesh. The other dimension, what Kohlo (1991:34) called the ‘subjective dimension‘, is that SME also provide productive outlets for individuals with independent and enterprising minds. This sector, thus, provides opportunities for developing the ‘seedbed’ of indigenous entrepreneurship. In Bangladesh, small enterprises are also regarded as ‘engines’ of technological innovation, leading to industrial transformation and modernisation in the economy.

 

It is, therefore, evident that small enterprise is a vital element in the economic legacy of Bangladesh, and that there is much development potentiality in this sector (Sarder, 1990:191-202). However, every year numerous small firms are developed, while unfortunately many of them disappear, abandoning the potential role they could have played in economic development (Reza et al., 1991:81). To combat this undesirable failure, and to accelerate rapid growth, it is necessary to clearly understand the growth prospects as well as the problems faced by the SME sector, to take appropriate remedial measures This is the content of the following section.

 

 

The Growth Prospects of SME 

The growth prospect of the sample enterprises was assessed by exploring the perception of the entrepreneurs about future growth potential of their enterprises. As expected, most respondents gave multiple answers, which are summarized in Figure -1. These appear to be, as replied by the respondents, prospect of bright, 28.9 percent, export oriented,23.7 percent, large market, 23.7 percent, employment potential, 13.2 percent, positive,7.9 percent and environmentally conscious projects, 2.6 percent. As such, the study findings suggest a growth prospect of the C sector in Bangladesh.

 

leather goods

Leather Goods Business Idea

Problems of SME

Most SME in Bangladesh face a number of interrelated problems/difficulties in their business. The most acute of them include server shortage of short and long-term finance, marketing problems, lack of technology and lack of research and development facilities (Rahman et al., 1979; Ahmed, 1999; Sarder, 2001). As revealed in a recent study depicted in Figure 2, those problems appear to be lack of modern technology, 13.2 percent, low investment, 13.2 percent, irregular/inadequate supply of power (electricity), 13.2 percent, high interest, 13.2 percent, lack of government. subsidy, 10.5 percent, unavailability of raw materials, 10.5 percent, no clear government policy,10.5 percent, high competition, 7.9 percent, lack of skilled workers, 5.3 percent and lack of research and development, 2.6 percent.

 

Need of SME for Assistance

Against of problems faced by small entrepreneurs, possible need of assistance that could help solve those problems faced was also explored. As expected, the small entrepreneurs in Bangladesh express their need (multiple) for various type of assistance. Based on the findings of a recent study, those needs are displayed in figure 3.3. As shown in the figure, expectedly most responds, 35.8 percent expressed their need for financial help. The second cited pressing need appears to be technological assistance,25.6 percent, followed by low interest rate, 10.3 percent, help for improving quality of their products/services, 10.3 percent  research and development facilities , 7.7 percent , political stability, 5.1 percent and others(environmental consciousness, and solution of port problems), 5.6 percent. As such the findings suggest the pressing need of financial as well as technological assistance.

 

To recap, it is clearly evident that most entrepreneurs face a member of interrelated problems. These include, among others, insurmountable hindrance to access to finance, lack of modern technology, irregular supply of electricity, low investment facilities. To overcome those problems, as expected, the express their need for several types of assistance, both financial and non-financial. These include mainly adequate supply and easy access to financial assistance, technological help, support to improve quality of products, formulation of small firm friendly policy, measures to prevent illegal imports, and providing research and development facilities. The SME sector appears to have a very good growth prospects. This is clearly evident from multiple answers of the respondents: ‘prospect is bright’, ‘export oriented’, ‘large market’, ‘employment potential’, ‘profitable’ and so on. As such, the study findings suggest a bright growth prospect of the SME sector in Bangladesh.

Recommendations for Development of SMEs

1          Definite Policy for SMEs: Fortunately, most SMEs in our country develop and survive even in an environment having no policy. Since this sector comprises of a diverse variety of species having myriad characteristics in Bangladesh, we should have a separate policy for this sector. Treating ‘unequal’ – the SMES, on equal footing with the large industries, will accelerate the existing policy induced constraint to the development of small firms.

 

  1. Development of Networks: The SME sector in Bangladesh needs to develop networks. They should also participate in and influence the contents of Government policies and programmes developed in their interest.

 

  1. Government Policy: Policies geared toward boosting small firm development should not be confined to the SME sector per se. The government commitment to sustained economic progress must ensure that all aspects of economic system are conducive to and supportive of increased levels of SME activity. This includes mainly minimizing taxation, ensuring access to labour, lowering interest rate, reducing the regulatory burden, neutralizing policy induced constraints, preventing unfair competition form illegal imports, formulating small firm friendly policy, and developing a real private-public sector partnership.

 

  1. Seed Money, Leasing, Venture Capital and Investment Funding: There is a great need for improving different aspects of financial services of SMEs, such as seed money, leasing, venture capital and investment funding. There is a lack of long term loans, interest rates are high, Guarantee/Security issues, exchange risks etc. All these limit the development of SMEs. Finance, both short and long term, should be provided at market cost of capital.

 

  1. Extensive Financial Support to SMEs: Various banks, financing institutions, NGOs may further increase its technical and financial support to SMEs through its various financing facilities and windows, which may significantly contribute to the creation and development of SMEs.

 

  1. Alleviating Poverty through SMEs Development: There is great scope of alleviating poverty through SMEs development. So poverty alleviation strategies and policies for SMEs should be developed, in order to provide job opportunities and enhance living standards for large segment of this poverty ridden country.

 

  1. Priority Sectors or Thrust Sectors: Since some sectors like Metal Engineering, Cottage Enterprises, IT sectors, Agro-based & Agro-supportive businesses got special suitability for development, special attention should be given to promote such sub-sectors by providing necessary support.

 

  1. Penetration of SMEs into New Markets: Special attention should be paid to the penetration of SMEs into new markets through E-commerce, as well as the possibilities of accessing foreign markets. Greater trading co-operation with other countries should be developed. Perhaps, such cooperation is most urgently needed now in the changed global political environment of the world.

 

  1. Training on Different Aspects of SMEs Activities For Entrepreneurs: Training on different aspects of SMEs activities for entrepreneurs is crucial to the development of an entrepreneurial spirit in Bangladesh. Entrepreneurial education could be given for grater long-term impact.

 

  1. Information Network & Central Data Bank: Information technology can be very effective tool for swift collection of different markets demand pattern, price trends and changing policies structures in various trading partners. For this purpose, it is important to create an information network for SMEs in Bangladesh, creating a Central Data Bank in collaboration with the IDB, ICCI and business associations of the Islamic countries.

 

  1. Comprehensive Package of Assistance: A comprehensive package of assistance will have much desired long-term impact on the development of this sector. It should be comprised of both financial and non-financial components and should be tailor-made to the needs of SMEs.

 

  1. Technology Assessment, Diffusion and Dissemination: Technology assessment, diffusion and dissemination around country should be given top priority. Thus, technology R&D Center (Research, Training and Development) should be developed. Transfer of technology and know-how from advanced market economies could be important part of developing R&D capacity in Bangladesh.

 

  1. Expansion and Diversification of SMEs: Bangladesh’s industrial sector needs expansion and diversification. For this purpose, growth of SMEs is essential. However, SMEs have to equip themselves with modern technologies and effectively use them to raise their production efficiency.

 

  1. Seeking International Financing: Various international donor agency/bank extends financing to SMEs through National Development Financing Institutions (NDFIs). It is found that they are not explored properly. The procedure of those donor agencies/banks for loan facilities to SMEs through NDFIs may be reviewed and term and conditions may be examined in order to make international financing more accessible to SMEs in the country.

 

  1. Inter-Firm Linkages: In order to develop sub-contracting among large and small enterprises around the country and between Bangladesh and other SAARC or OIC countries, Sub-contracting Exchange Schemes can be launched. Professional associations and National Chambers can set-up such establishment. They may collect information about engineering industries components, and what vendor industries can provide such components. In this way, inter-firm linkages could be expanded at home and abroad. The activities of these organizations for inter-linkages among SMEs and assistance to SMEs should be properly identified. Thereafter, programme of maximum utilization of their services may be formulated. This will lay a strong foundation for promoting effective cooperation among small and medium enterprises at home and abroad.

 

jute products

Jute Products

 

  1. Establishment of Separate Micro Bank: The country should start with ‘something effective’ for industrial development in general and the SME sector in particular. Such a step, for example, could be the establishment of a separate Micro Bank. To make the proposed initiative effective in achieving its goals, experts and resources should be gathered around the Islamic countries.

 

  1. Mitigation of Problems of SMEs: SMEs are of diverse categories facing myriad problems in the country. However, there also do exist specific problems of SMEs in individual sector. Such specific problems require special support in some cases. As such, specific problems should be dealt with the context of that sector.

 

  1. Uniform Definition of SMEs: There should be a consensus on developing a uniform definition of SMEs around the country. It should be given standard industrial code (SIC).

 

  1. Trade Fairs, Exhibitions, Symposiums, Seminars and Workshops: Trade fairs, exhibitions, symposiums, seminars, workshops etc. on SMEs should be organized on a regular basis. Publications of all these events should made available for all SME establishments. Chambers around the country can arrange exhibitions for SMEs products, so that larger number of consumers may gain awareness about the diversity and quality of SMEs products.

 

  1. Interlinkages among SMEs: The activities for interlinkages among SMEs and assistance of SMEs should be properly identified. Thereafter programme of maximum utilization of their services may be formulated. This will lay a strong foundation for promoting effective cooperation among small and medium enterprises around the country

 

21        Service to Define Problems and Devise a Package of Measures: SMEs often cannot identify and define their own needs clearly enough to seek the best remedies. Thus, a service that can reach out, help SMEs to define their problems and devise a package of measures that deals with the above identified problems has the best chance of success.

 

  1. Proactive Policy to Promote SMEs: Proactive policy is needed to promote SMEs competitiveness. The first step in this regard is to make firms fully aware of the competitive challenges they have to face. The next step is to help SMEs prepare to meet the challenge, by understanding their strengths and weaknesses and providing the inputs they need to help them upgrade. The main inputs are finance, market information, training, management tools, technology, skills and links with support institutions.

 

  1. Business Environment Should Be Conducive: The business environment should be conducive to SMEs development, with minimal transaction costs, clear and transparent rules and a stable macroeconomic environment.

 

  1. Public and Private Sectors Cooperation: For strengthening SMEs in the country the public and private sectors will have to cooperate effectively. In this connection various suggestions are provided herein. They need full consideration for cooperation among various organizations of the country.

 

  1. Production Structure of SMEs: SMEs’ production structure should be flexible and dynamic. Due to relatively smaller size they can change their machinery or add new plant at relatively less cost. Similarly, they can retrain their workforce in new technologies. Hence SMEs can adopt modern technologies more quickly compared to large enterprises. Their productivity is relatively high, hence they can be more competitive in domestic and foreign markets.

 

  1. Internet facilities and Web Site of SMEs: There should be greater access to information through internet of SMEs. In this connection, FBCCI can take initiative to create web site of SMEs. Computers, scanners and diskettes can be used for providing necessary information to SMEs as well as member chamber. Information through this device can be provided on identification around the country as well as other countries such as SAARC and intra-OIC countries. Trading opportunities and assistance to SMEs can be diversified through these opportunities. Analysis of trade data in various regions within and outside the country can be undertaken to identify products which have the greatest potential for Trade. This data can be disseminated through internet or other tools for transfer of electronic information. This is urgently needed for various reasons, developing a network with on-line connection with international website, if we really mean business and want to survive in the new millennium of information super high way.

 

  1. E-Commerce: Electronic Commerce has also great potential for development around the country and abroad. Through this device, matching of buyers orders to sellers can be done in such products in which SMEs are dealing. Such exchange of information about sellers and purchasers shall be most useful for Agro products, leather products, textiles and clothing, IT and metal products as well as raw materials and intermediate goods.

 

  1. Periodical Professional Training Courses for SMEs: Periodical professional training courses should be arranged for technical staff of SMEs. Moreover training in management of small enterprises and efficient marketing can also provided. Islamic Chamber regularly organizes training workshops on management, marketing, procurement of technologies, quality control system and financing of SMEs, for the benefit of representatives of private enterprises and staff of member chambers in different regions of the Islamic World. Training programme/workshop should be organized for the development of SMEs capabilities to acquire enhanced knowledge and skills about how to choose, use and improve technology.

 

  1. Community Development Programmes through SMEs: There is a great scope for human and social development. A large section of our community is below poverty line, who are underprivileged . They have no income for educating their children and have not even access to such employment which can generate sufficient income for their living. Those families are compelled to put their children on odd jobs in informal sector or in SMEs. Here community developed programmes can be organized, in which members of the distressed communities can be employed on reasonable wages. In such programmes of community development, Islamic Chamber can be approached to affiliate such programmes with Islamic Development Bank (IDB) and the Islamic Corporation for Development of private Sector (ICD).

 

  1. Assistance for SMEs from Board of Investments and Export Development Centres: Public sector agencies like Board of Investments and Export Development Centres can also provide useful information to SMEs. They can provide necessary information about trade fairs in member countries as well as training in organization of exhibitions. They can identify foreign buyers and assist local SMEs in establishing contacts with them. Information on changing demand conditions in various international markets can be provided and advisory services on exploring trade opportunities can be provided to prospective exporters.

 

baby cloths

Cute Floral Romper 2pcs Baby Girls Clothes Jumpsuit Romper+Headband 0-24M Age Ifant Toddler Newborn Outfits Set Hot Sale

 

  1. Credit Guarantee Scheme & Financing to SMEs: Financing to SMEs can be successful, if two arrangements can be undertaken: (1) Separate institutions dealing with SMEs loans should be established around the country. They can provide adequate volume of finance, on less strict terms and can supervise the loan repayment process as well. (ii) Credit guarantee schemes. Credit guarantee schemes for SMEs can be an effective means of supporting small enterprises development, especially in our country where access to credit is constrained for small borrowers.

 

  1. BSCIC to be Reorganized: BSCIC to be reorganized so that SMEs can grow in the country in a better manner. Alternatively, a separate organization such as Small and Medium Enterprise Development Authority (SMEDA) may be established to act as a one-stop consultancy Agency to: (a) act as a body for facilitating policy making for SMEs, (b) provide and facilitate support services for SMEs, (c) act as a resource base for the SMEs, and (d) represent SMEs on domestic and international forums. The authority may be state supported, private or jointly supported organization.

 

33.       Sub-Contracting Exchange Schemes among large and small enterprises: In order to develop sub-contracting among large and small enterprises among member countries, Sub-Contracting Exchange Schemes can be launched. Professional Associations and Chambers can set-up such an establishment. They may collect information about engineering industries components, and what vendor industries can provide such components. this way inter-firm linkages can be expanded around the country.

 

  1. Implementation and Monitoring of Policy Measures for SMEs. Only policy prescription is not the end, if it is not implemented through different measures timely and properly. How far policy measures are implemented, along with, what effect – desired or not – such policy measures has had on the development of SMEs should also be monitored from time to time. This monitoring will provide feed back for taking corrective actions, if necessary, to ensure desired effect of the policy adopted. Of course, an independent body should do the monitoring of implementation of the policy measures, and possible impact.

 

  1. Rationalization of Exiting Policy Induced Constraints: Rationalization of Exiting Policy Induced Constraints to the development of SME. There has been evidence on constraints, created by existing policies, to the development of SME in Bangladesh. A thorough review of the existing policies should be made, along with empirical study, to clearly identify such policy induced constraints so that appropriate measures could be implemented for correcting such constraints.

 

  1. Conducive Policies for Boosting Enterprise and Entrepreneurship: Policies geared toward boosting enterprise and entrepreneurship should not be confined to the entrepreneurship sector per se. Since the process of enterprise development is being influenced by a myriad variety of variables, policies relating to other sectors and having influence on enterprise development should be carefully designed.

 

  1. Developing Institutional Network through Public-Private Partnership: The design of most government agencies appears to be overly bureaucratic and unsuitable for effectively supporting SMEs in Bangladesh. As such, re-organization of the design of these agencies has for long been overdue. Public-private sector partnership, by redesigning the existing public agencies, could be developed, developing appropriate institutional network. The objective behind this would be to utilize the strengths of public and private agencies, while neutralizing the limitations, if any, inherent in their existing organizational design.

 

  1. Development of Entrepreneurs: The perceived social legitimacy of entrepreneurs should be encouraged. Entrepreneurs are the architects of the modern socio-economic development. Therefore, the society should recognise the contribution of entrepreneurs and value their activities so that they feel encouraged, if anyone fails anywhere, for taking further initiatives for future success. This is very important because only few – not everybody – could be successful in entrepreneurial endeavors.

 

  1. Conducive Infrastructure Facility: Water, gas, telephone and electricity connection to be given on priority basis. Stable power supply facility to be ensured. Cost of various capacities of generators to be reduced by reducing duty and other taxes on generators.

 

  1. Separate Financing Institution for SMES: Finance is the main obstacle to the SMEs sector, with no sign of immediate improvement of the situation in Bangladesh. Therefore, a separate financing institution could be developed, with joint ownership of the public and private sector. No concessional but the principle of market rate of cost of capital should be applied in lending procedure. Another source of finance could be raising fund from share market by flotation of IPO by SME under ‘Group IPO Scheme (GIPS)’. In the case of GIPS, a group of SME would utilize their assets for issuance of public shares to be managed by an independent agency. Finally, fund should be made available through encouragement for setting up ‘Venture Capital’ organisation in Bangladesh. The concept of venture capital (VC) has successfully operating in the USA, EU countries, and Canada.

 

  1. Establishment of R&D Institute for Enterprise and Entrepreneurship Development, Training and Research Institute: In a country like Bangladesh, where entrepreneurial initiative is rare and shy, a separate institute for enterprise and entrepreneurship development, training and research should be developed. Presently, there exists no such institution except a project of the BSCIC called ‘SCITI’ (Small and Cottage Industries Training Institute). Presently, the SCITI has ended its contact period, and has been struggling for survival. Once again public-private partnership should be developed. To make it a ‘centre of excellence’ in SMEs development, it should be designed, involving educational institutions, business associations, relevant government bodies, private research agencies, and individual consultants having experience in SMEs development.

 

  1. Tchnology Transfer: Technology transfer is of vital importance for development of SMEs. Technology transfer through various means and Reverse Engineering to be arranged through Government and private levels.

 

  1. ISO Standards: Quality Assurance & Environmental Friendliness: Compliance to quality assurance & environmental friendliness to be ensured through Standards such as ISO9000 & ISO14000. Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy implied or stated needs (ANSI/ASQC Standard A3-1987). Conformance of the product or service to these specifications is measurable and provides a quantifiable and operational definition of quality.

 

44.       Women Entrepreneurship: Women entrepreneurship should be encouraged. In our economy, we have nearly 50 percent women population, while an insignificant proportion of women is entrepreneur. No country can be developed without proper participation of such a big community in the entrepreneurial activity. As such, policy should be designed to encourage more and more women to be involved in entrepreneurial endeavors.

 

SME DEVELOPMENT & CHALLENGES IN BANGLADESH: SME DEVELOPMENT & CHALLENGES IN BANGLADESH: SME DEVELOPMENT & CHALLENGES IN BANGLADESH

Developing Bangladesh          Md. Joynal Abdin            Read More…

Privatization in Bangladesh

Privatization in Bangladesh

Privatization in Bangladesh

Compiled from the Speeches of one of the 

Former Presidents, FBCCI 

 

The prevailing industrial management scene is replete with pictures of sick units of production. They have become sick due to inefficient management and ultimate loss of market share for their products. Those in management have apparently failed to keep the industrial installations operational and that largely due to their failure to adopt any production schedule and supply inputs including raw materials.  Some of the installations could not ensure disposal of their products both for lower quality and for higher price. Some local products also face competition from producers abroad. Foreign producers managed to gain a share in the market opened in pursuance of the policy of liberalization. But local production units have not taken into consideration the upcoming needs and realities.

 

That some abandoned units of industries were nationalized by the government immediately after the liberation of the country has to be appreciated by all. These units were set up in fifties and sixties and after necessary analysis of the investment climate.  Some industries were set up for processing farm sector products like jute and sugarcane, natural gas and the like. Other industries were set up by entrepreneurs, like textile mill owners, who wanted to produce textile products for meeting local demand. These installations had machinery imported from abroad. Some local entrepreneurs invested in production units that produce intermediate products including spare parts of machinery needed in the country. Pharmaceutical units of production, set up both in private and public sector, have either become profitable or losing concerns and that also due to ineffective management.

 

Bangladesh experienced rapid growth in the public sector immediately after its liberation, between 1971 and 1975 to be precise. The regime in power had firm commitment towards a dominant public sector. Moreover, it had to take over possession of businesses abandoned by the Pakistani owners. Although subsequent regimes demonstrated less inclination towards the public sector, still the country has about 200 public enterprises (grouped under 38 cooperation) in operation. They are incurring a loss of about Tk. 25 billion per year. State-owned Enterprises (SOEs) relating to industries and public utilities are the worst loss makers.

 

Losing concerns in public sector have already drawn support from the treasury. Every year, the government has transferred part of revenue earnings to financially non-viable and sick industries. Such transfer has not only diverted money that could be used for more productive purposes, it has also made sick industries dependent on subsidy or grants from the treasury. Sick units in private sector are normally closed by entrepreneurs, who look for alternative use of their investable capital. For sick industries in the public sector, the government created the Privatization Board for ultimate transfer of such industries to private sector buyers. The response from private sector remains inadequate and official authorities have not succeeded in transferring public sector industries to private buyers.

 

Privatization in Bangladesh

Privatization in Bangladesh

 

Apparently, the exercise on privatization has not been all that objective. The value of asset side of listed industries has been quoted on the basis of current price of land, machinery and spares as well as raw materials and finished products. The liability side has also been calculated on the basis of depleted value of machinery, on the one hand, and the inflated value of loans and interests thereon, on the other. The quoted value of selected public sector industry looks very high and buyers from private sector and foreign investors are not found showing interest in entering into any deal for transfer. As a result, the pace of transfer remains largely slow.

 

The private sector entrepreneurs in this country, have done their bit in setting some profitable industries in different sub-sectors including garments, leather goods, pharmaceuticals and the like. They are not all that interested in buying sick industries, even though price thereof may be cheap. Some of them have since bought disinvested units, only to recover the money spent by immediate sale of machinery, land and allied assets. The ultimate goal of the public authorities to keep the transferred units’ operational looks largely defeated. That being so, more positive measures may have to be taken by official agencies to go for privatization.

 

The government has come up with the passage of the Privatization Act duly approved by the Parliament. It was, nevertheless, an onerous task on the part of government to implement the privatization programme and indeed, the Act is destined to hasten the process. The government thinks the guidelines of the Act have been formulated in conformity with the needs of the present-day requirements.

 

According to the Act, Privatization Commission has been set up replacing Privatization Board to expedite the denationalization process of the State-owned Enterprises (SOEs) as the existing rules failed to make any headway in offloading those.

 

The Commission has been empowered to adopt any alternative means to sell out State-owned Enterprises (SOEs) if tender and re-tender fail to get successful bidder. If necessary, it can take steps for commercialization of an enterprise. There are also provisions that the Commission can take over any of the denationalized enterprises if the conditions of agreement are not followed.

 

As, privatization in Bangladesh has generally been associated with sale of loss-making state-owned industrial enterprises. However global experience shows that meaningful and rapid economic development is possible when infrastructural sectors, such as, power generation, electricity and gas distribution, telecommunications, airlines, tollways are privatized. The infrastructural sectors have the potential of attracting massive foreign direct investment which in turn would spur a chain of economic activities in the country. In a country like Bangladesh where one of the biggest hindrances to rapid economic growth is weakness in our infrastructure, we should proactively look at privatization of these sectors, as has been done successfully in many other countries. The authorities need to shake off fear of pressure groups and take bold, urgent and effective steps towards a meaningful privatization of both state-owned industrial enterprises and equally important infrastructural sectors.

 

The SOEs in infrastructural sectors are prime candidates for immediate privatization. These sectors are important for a number of reasons. First of all, in most developing countries including Bangladesh, prices of infrastructural services do not reflect cost and growth, or development of these sectors do not depend on consumer demand. Second, these sectors have powerful spill-over effects on the growth and development of other sectors. Third, privatization of the infrastructural facilities- such as water, energy, telephone system, railways- promise tremendous gains.

 

Privatization target is, no doubt, achievable provided a strategy is firmed up. Firming up a strategy, based on consensus, however, is not an easy task. The political parties react keeping at the back of mind, the likely impact on the political situation. The trade unions being the vested party, resist privatization for fear of losing their employment. The bureaucracy creates snags in the fear of losing the empire and there are some academicians for whom privatization will mean defeat of an ideology.

 

Privatization is still largely a misunderstood concept in Bangladesh. Many still do not realize that privatization refers to transferring, to the private sector, of activities and functions which have traditionally been with the public sector. Also, privatization may take many forms, such as public ownership with operation contracted to the private sector, private ownership and operation under government regulations and community and user provisions. Another problem with the privatization effects is that privatization did not start in the country with clear policy guidelines. Therefore, besides firm political commitment and public education, making progress in privatization in Bangladesh would require a clear-cut policy, perhaps a privatization master plan.

 

Privatization in Bangladesh: Privatization in Bangladesh: Privatization in Bangladesh
Privatization in Bangladesh

Public Private Partnership

 

Economic reforms give rise to social costs in the form of losers and gainers. Careful management of these transitional costs will, therefore, be an important part of the government policy for years to come. Concerns about job losses and other adjustment costs still deter many countries from undertaking privatization and liberalization. The available evidence, however, suggests that adjustment costs tend to be limited than sometimes feared. Nevertheless, there is much that governments can do to minimize such costs by fostering strong private investment and facilitating a smoother movement of workers from declining ones to expanding sectors. By contributing to economic growth in the longer term, trade liberalizations in likely to make contribution to poverty reduction. Policy makers may also wish to put in place social safety-net to assist adjustment for vulnerable groups who may be adversely affected by reforms.

 

Privatization does not mean only transferring the liability or the state to the private shoulders; it means privatization of over-all economic activities having impact on the growth and developments, in order to achieve competitive efficiency keeping pace with the changes. For a speedy privatization, the following steps should be taken and carried out with utmost sincerity:

 

  1. The privatization process should be accelerated with a work plan and phased timetable for accomplishing the set targets. Privatization of highly loss-making SOEs related to industries and utility sectors should be undertaken on priority basis.
  2. Steps should be taken to encourage more buyers and better bids.
  3. Specific and adequate safety-net programmes including attractive severance package may be undertaken to allay fear of retrenchment of workers.
  4. The Privatization Act should be widely discussed outside and inside parliament.
  5. While accepting bids, highest quoted price should not be the only consideration.

Effective financial sector reforms, introduction and enforcement of modern corporate laws, share bidders right, transparent free market policies, etc., should be ensured to pave the way for privatization.

Privatization in Bangladesh: Privatization in Bangladesh: Privatization in Bangladesh

Developing Bangladesh          Md. Joynal Abdin            Read More…

Privatization in Bangladesh: Privatization in Bangladesh: Privatization in Bangladesh

Foreign Investment Climate in Bangladesh

invest in Bangladesh

Foreign Investment Climate in Bangladesh

Compiled from the Speech of a Former Director, FBCCI

 

Bangladesh has liberalized its economy in keeping with the global trend. As an underdeveloped country she has to increase her production capacity rapidly to prepare herself for integration with free market economy by 2005. Bangladesh follows private sector-led growth economy, where the Govt. is the facilitator and private sector is the main player.

Bangladesh has been maintaining a steady economic growth of about 5% during the last ten years. There is a target to increase this growth rate at 5.7% in the next year and in medium-term 7%.  In the year 2002-2003, the domestic savings rate was about 18.23%, GDP at current market price was about US $ 51.90 billion, annual per capita GDP US$ 389, growth rate 5.3%, industrial growth rate at constant price 6.62%, inflation rate: 5.2%, investment rate:23.2% of GDP.

 

In Bangladesh, sharp decline in the availability of Official Development Assistance (ODA) and limitations of capital formation and export earnings, the need for Foreign Director Investment (FDI) has become a major issue. Government policies tried to induce foreign investments not only for capital formation but also to acquire technology and management skills besides having access to the export markets. Bangladesh Govt. has been providing various type of incentives to the foreign investors. The balance of trade is always against Bangladesh. In 2002-03, Bangladesh export was only US$ 6548 million and import US$ 9658 million, the balance of trade being US$ 3110 million against Bangladesh. To reduce this trade gap, it is highly required to increase country’s industrial growth for enhancing its export earnings. Being deficient capital like many other developing countries, Bangladesh needs substantial foreign direct investment for attaining sustained economic growth along with for developing its industrial base and poverty reduction.

INCENTIVES AND FACILITIES FOR THE INVESTORS

To attract foreign direct investment, the Government of Bangladesh has offered most liberal package of investment facilities and incentives.

 

Tax holiday: Tax holiday facilities will be available for 5 or 7 years depending on location of the industrial enterprise. Tax holiday facilities will be provided in accordance with the existing laws.

 

Accelerated depreciation: Industrial undertakings not enjoying tax holiday will enjoy accelerated depreciation allowance. Such allowance is available at the rate of 100 per cent of the cost of the machinery or plant.

 

Concessionary duty on imported capital machinery: Import duty, at the rate of 5% ad valorem, is payable on capital machinery and spares imported for initial installation or BMR/BMRE of the existing industries.

 

Rationalization of import duty: Duties and taxes on import of goods which are produced locally will be higher than those applicable to import of raw materials for producing such goods.

 

Incentives to Non-Resident Bangladeshis (NRBs): Investment of NRBs will be treated at par with FDI. Special incentives are provided to encourage NRBs for investment in the country. NRBs will enjoy facilities similar to those of foreign investors.

 

Foreign Investment Climate in Bangladesh

Foreign Investment Climate in Bangladesh

Other incentives:

  • Tax exemption on royalties, technical know-how fees received by any foreign collaborator, firm, company and expert.
  • Tax exemption on the interest on foreign loans under certain conditions.
  • Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements.
  • Exemption of income tax up to 3 years for the foreign technicians employed in industries specified in the relevant schedule of income tax ordinance.
  • Tax exemption on income of the private sector power generation company for 15 years from the date of commercial production.
  • Facilities for full repatriation of invested capital, profit & dividend

 

  • 6 months’ multiple entry visa for the prospective new investors.
  • Re-investment of repatriable dividend treated as new investment.
  • Citizenship by investing a minimum of US$5,00,000 or by transferring US$10,00,000 to any recognized financial institution (non-repatriable).
  • Permanent residentship by investing a minimum of US$ 75,000 (non-repatriable)
  • Tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange.
  • Special facilities and venture capital support will be provided to export-oriented industries under “Thrust sectors” .

There will be no discrimination in case of duties and taxes for the same type of industries set up by foreign and local investors and in the public and private sectors.

 

Incentives to export-oriented and export-linkage industries: Export-oriented industrialization is one of the major objectives of the industrial Policy 1999. Export-oriented industries will be given priority and public policy support will be ensured in this respect. An industry exporting at least 80% of its manufactured goods or an industry contributing at least 80% of its products as an input to finished exportable, and similarly, a business entity exporting at least 80% of services including information technology related products will be considered as an export-oriented industry. To make investment in 100 per cent export-oriented industries, the following incentives and facilities will be provided:

  • Duty free import of capital machineries and spare parts upto 10 percent of the value of such capital machinery will continue.
  • Existing facilities for Bonded Warehouse and back-to-back Letter of Credit will continue.
  • The system for duty drawback will be further simplified and to this end, duty drawback will be fixed at a flat rate on exportable and potentially exportable goods. Exporter will receive duty drawback at a flat rate directly from the relevant commercial banks.
  • The arrangement for providing loans up to 90 percent of the value against irrevocable and confirmed Letter of Credit/ Sales Agreement will continue.
  • To ensure backward linkage, incentives will be extended to the “deemed exporters” supplying indigenous raw materials to export-oriented industries. Export-oriented industries including export-oriented RMG industries, using indigenous raw materials will be given facilities and benefits at prescribed rates.

 

  • The export-oriented industries, further to the provisions of Bangladesh Bank foreign exchange regulations, will be entitled to receive additional foreign exchange, on case-to-case basis, for publicity campaign, opening overseas offices and participating in international trade fairs.
  • The entire export earnings from handicrafts and cottage industries will be exempted from income tax. For all other industries, income tax rebate on export earnings will be given at 50 percent.
  • The facility for importing raw materials, which are included in the banned/ restricted list, but required in the manufacture of exportable commodities, will continue.
  • The import of specified quantities of duty-free samples for manufacturing exportable products will be allowed consistent with the prevailing relevant government policy.

 

  • The local products supplied to local industries or projects against foreign exchange payment or foreign exchange L/C will be treated as indirect exports and be entitled to all export facilities.
  • The Export Credit Guarantee Scheme will be further expanded and strengthened.
  • 10 percent products of the enterprises, located in both public and private EPZs will be allowed to be exported to domestic tariff area against foreign currency L/C on payment of applicable duties and taxes.
  • 100 % percent export-oriented industry outside EPZ will be allowed to sell 20% percent of their products in the domestic market on payment of applicable duties and taxes.

 

Apart from the above-mentioned facilities, other facilities announced and provided in the Export Policy will be applicable to export-oriented and export-linkage industries.

 

Export Processing Zones (EPZs)

Export Processing Zones are considered by the foreign investors as an ideal location for the export-oriented industries. In Bangladesh, the Export Processing Zones with necessary infrastructural facilities offer very attractive incentives. Export Processing Zones in Chittagong and Dhaka provide necessary fiscal, non-fiscal and infrastructure facilities for export-oriented enterprises. Four more Export Processing Zones in Mongla, Ishurdi, Comilla and Syedpur (Nilphamari) are under implementation.

 

Foreign Investment Climate in Bangladesh

Foreign Investment Climate in Bangladesh

EPZ IN THE PRIVATE SECTOR

The Government enacted “The Bangladesh Private Export Processing Zones Act 1996” allowing setting up of Export Processing Zones in the private sector with a view to attracting more investment especially foreign investment in the country. Accordingly, quite a good number of private EPZs have been registered. The first private EPZ by a Korean company in Chittagong has already been implemented.

 

Bilateral Investment Guarantee Agreement has been signed with a number of countries. Bangladesh is a signatory to the Multilateral Investment Guarantee Agency (MIGA), Overseas Private Investment Corporation (OPIC) of USA, International Centre for Settlement of Industrial Disputes (ICSID) and is a member of the World Intellectual Property Organization (WIPO). It has already signed agreements with a number of countries for avoidance of double taxation. Besides, Bangladesh enjoys quota free and duty free market access into EU, Canada, Japan, Australia and Norway. This offers a tremendous opportunity to the foreign investors to set up production facilities in Bangladesh targeting those lucrative markets.

 

Meanwhile the Govt. of Bangladesh is committed to increase trade related capacity including trade and investment infrastructure and she has improved infrastructure facilities and Utility Services, Road Transport, Railway, Airways, Marine Transportation, Electricity, Water and Sewerage, Gas, Telecommunication, Industrial land, etc.

 

POTENTIAL SECTORS FOR INVESTMENT

The major potential sectors including “Thrust Sectors” identified by the Bangladesh Government, which offer probable choices for investment are:

Textiles: Being labor-intensive it is the most comparative advantage sector in Bangladesh. The captive demand of over 2.5 billion meters of fabrics of the burgeoning ready-made garments industries which are currently being met from imports and domestic unmet demand of about 280 million meters offer enormous potential for setting up backward linkage industries. Composite textile mills with modern dyeing and finishing facilities have excellent prospects.

 

RMG and Knitwear: High fashion readymade garments (RMG) and knitwear are identified as thrust sector in Bangladesh. This sector has a great potential for FDI along with general RMG and knitwear.

 

Energy (Power Generation and Transmission): In view of the gradual widening of supply gap and pursuant to the policy of privatization the Government has recently opened the energy sector to private investment.

 

Natural Gas-based Industries: Bangladesh is endowed with large deposits of Natural Gas. Gas being the major source of energy for power generation, fertilizer factories, commerce, industries and domestic use, its exploration and development is a high priority for the country.

 

Telecommunication: The all-pervasive influence of the recent revolution in information technology on the telecommunication sector has opened up a new vista for private investment. This is a highly potential area not only because the possibilities and potentialities are immense, but also because there is a ready market of eager clients in the country.

 

Fisheries: There is large domestic demand for fish including shrimp & frozen fish and foreign markets are sizable and ever growing because of its proven superiority over meat proteins. Given extensive coastlines, large water bodies and excellent climatic conditions, the potential for fisheries development including hatcheries in Bangladesh is enormous.

 

Agro-based Industries: Bangladesh enjoys the basic attributes for successful agro-based industries namely, rich alluvial soil, a year-round frost-free environment, adequate water supply and an abundance of cheap labour. Increased cultivation of vegetables, tropical fruits, spices now grown in Bangladesh could feed agro-processing industries for both domestic and export markets. Floriculture can also be developed to meet export demand.

 

Electronics: Already a number of overseas electronics companies have established technical collaboration with Bangladeshi counterparts to produce electronic gadgets at competitive prices. But these are mostly assembling plants. The creation of feeder industries to supply parts such as transformers, fuses, printed circuit boards and coils to existing electronic operations has begun in a limited sale. The development and expansion of these and other areas offer large investment opportunities for the manufacture and export of electronic components and products.

 

Foreign Investment Climate in Bangladesh

Foreign Investment Climate in Bangladesh

 

Computer Software Development and Data Entry: The revolution in the information technology facilitating computerized global networking has opened tremendous opportunities for the highly lobour-intensive computer software development and data entry in Bangladesh. There is a large pool of educated girls and young man who can be easily trained to man these ventures.

 

Leather and Leather Goods: Bangladesh leather is of compact fiber structure and fine grains. Available quality hides can support a variety of increased value-added products such as jackets, garments, gloves, shoes, wallets, hand bags, watch bands etc.

 

Tourism: Tourism is another potential sector for foreign investment. There is the longest sea beach in Bangladesh and many other historical & attractive natural places have high potentials for investment.

 

Light Industries: Light industries of Bangladesh produce variety of labour-intensive goods including toys, consumer durables, small tools, and paper products for a large domestic market. Further development of these industries offers large investment opportunities. Some export oriented light industries have already been established by entrepreneurs from Hong Kong. Japan and Korea taking advantage of cheap and easily trainable local labour and available infrastructure facilities in EPZs. There are enormous potential for expansion of capacity in this sub-sector.

 

Besides, there are other potential areas for investment in Bangladesh, such as: light engineering, ceramic, dairy farming & dairy products, poultry farming & poultry products, jute goods, paper and pulp, cement, sheet and plate glass, etc. The government also welcomes investments in the development of port facilities and industrial parks.

 

Most of the foreign investors consider the investment potentials in Bangladesh to be bright and many of them would like to explore further the possibilities of investments either on their own or in partnership with local entrepreneurs and the incentives for foreign investors are quite attractive. They highly appreciate the policies of the present government for liberalization, private sector driven and market led growth in the economy.

 

Foreign Investment Climate in Bangladesh: Foreign Investment Climate in Bangladesh: Foreign Investment Climate in Bangladesh

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Poverty Reduction in Bangladesh

Poverty Reduction in Bangladesh

Poverty Reduction in Bangladesh

Compiled from the Speeches of one of

the Former Presidents, FBCCI

 

Bangladesh is one of the most densely populated countries in the world. Nearly 80 percent of the people live in the rural areas and the majority of the rural people remain unemployed for and under employment some months of the year. More than half of the rural people are landless or nearly so and another 25 percent find it difficult to ensure subsistence from their cultivable land and need to seek supplementary sources of income. About three-fourths of the rural households are dependent totally or partially on the market economy, for their livelihood.

 

In the sixties, the percentage of the poor was around 25. During the last three decades, it has jumped to over 60%. A recent BIDS study shows the condition of the absolute poor in the country, by and large, has remain static. Poverty is the condition that is said to exist when people lack the means to satisfy their needs.

 

To determine the elements of the basic needs, the same can be defined narrowly as “those necessary for survival” & broadly as “those reflecting the prevailing standards of living in the communities”. The first criterion would cover those near the border line of starvation, the second would the people whose nutrition, housing & clothing, though sufficient to maintain life, do not measure up to those of the population as a whole. Poverty is associated with poor health, low level of education, inability or unwillingness to participate in society. Whatever definition one uses, authorities & laymen equally agree that the effects of poverty are harmful to individuals & to the society.

 

Poverty may be classified as:

  1. Cyclical Poverty
  2. Collective Poverty
  3. Case Poverty

Land is the main productive asset in rural areas; it represents both economic and social status. According to the agricultural census 1983/1984, about 56.5 percent of the rural households are effectively landless with 8.7 percent owning neither homesteads or cultivable land, 19.6 percent having homesteads but no cultivable land and 28.2 percent owning homestead and upto 0.2 ha of land. Landlessness is increasing rapidly as a result of population growth, river erosion and various other social and economic factors.

 

In the backdrop of the prevailing rural scenario, the prime needs for rural development in Bangladesh are productive employment and income generating programs in both farm and non-farm sectors along with the development of agriculture and basic infrastructure in the rural areas. The primary vehicles for the promotion of such rural development will be local level institutions within the principle of participatory development as far as possible.

 

Poverty Reduction in Bangladesh

Bangladeshi Farmer

ROLE OF BUSINESS COMMUNITY IN POVERTY REDUCTION

Agriculture remains the largest sector of the economy occupying three-fifth of the employed labor force and producing nearly half of the economy’s output. The role of Business Community is vital in expansion of almost all the above-mentioned sectors in any country or society. The business community can bring out technical revolution, new and modern techniques can increase productivity by reducing cost and getting more output or performance.

 

Poverty is a multi-dimensional phenomenon whose dimension is by no means reducible to any single indicator. Poverty alleviation calls for multi-dimensional approach, such as nutrition, health and sanitation, housing, education, personal security etc. For poverty reduction, macro-economic policies for development and technological development strategies have to be appropriate for our socio-economic background, general level of technical skill, and our goals of developing rural Bangladesh. Businessmen, as a prime profession, who are relentlessly making contribution towards national growth and creation of new resources, seek for their legitimate role in poverty reduction efforts. This role lies in the linkage between the approach, strategy and program for poverty reduction and the scope of professionals and businessmen.

 

By their very position with respect to production process and relations, the businessmen contribute directly to economic growth. Nevertheless, through continuous R & D activities, we business counterparts have to play an indispensable role within the framework of formulation of strategies for technological development for poverty reduction as well as converting the principles of science, acquired knowledge and experience to develop local technology. All the above activities that contribute to poverty reduction dependent on investments of business entrepreneurs. Thus, businessmen can play a major role in poverty reduction of the country through promotion of small and medium sized industries, which can directly create employment opportunities as well as help poverty reduction by contribution to the growth of the economy.

 

GOVERNMENT OBJECTIVES AND STRATEGY FOR RURAL DEVELOPMENT

Poverty is the most pressing problem in the rural areas of Bangladesh. A rural development plan must continue to effectively address the poverty problem. For this, the plan has to pursue an employment-led growth policy. The focus of the policy would be to promote greater opportunities for the rural poor for productive employment in both farm and non-farm sectors of the economy.

 

Appropriate strategies and effective policies for rural development are needed for the realization of the objectives. For the development of rural economy, the Government formulated the strategy of Rural Development Projects on addressing the following:

  • Development of physical infrastructure including roads and markets.
  • Irrigated agriculture, drainage and minor flood control works.
  • Production and Employment Program (PEP)
  • Keeping alleviation of rural poverty as the end in view, the objectives of the Rural Development Institution (RDI) sector under FFYP are to:
  • Reduce rural poverty by means of increasing gainful employment and income opportunities on a sustained basis through expansion of the productive sectors;
  • Develop rural institutions;
  • Improve technology and skills for productive activities and ensure better access for the rural poor to the means of production;
  • Facilitate agricultural development through institutional support and expansion of irrigation;
  • Improve basic physical infrastructure (Roads, markets) in the rural areas;
  • Promote participation of women in rural development

 

For rapid poverty reduction, the Government’s priority is to develop the rural areas where most of the poor people live. This requires accelerated growth of agriculture and the rural non farm sector. A rapid agricultural growth will sustain high growth with better capacity to reduce poverty through enhancing rural wages, creating synergies for diversifying the rural economy, and enabling the supply of low-cost food to improve nutritional status and food security of the people.

 

Encouraging agricultural growth requires various policies ranging from new technology to credit for small farmers. The past growth in agriculture was helped by new high yielding variety (HYV) technology, particularly in rice, in which both the state and the market played important roles. The Government would continue its pro-active role in key public goods in agriculture particularly in improving the ability of the farmers to adopt new technology and providing appropriate mix of incentives to pursue profitable operations.

 

The recent growth of agriculture was greatly influenced by macroeconomic and sector specific policy changes. Reforms in trade and exchange reate policies created favourable incentive structures and dismantling of state interventions, market-oriented reforms and reduced regulations favoured growth in agricultural production and productivity. The reforms led to faster growth in minor irrigation, increased the supply of fertilizer and seeds, helped in wider adoption of high yielding varieties (HYVs), and encluraged the farmers to go for more rational input use and production decisions. The Government’s priority would be to intensify efforts such that positive achievements are expanded and the constraints limiting their potential are resolved.

 

Poverty Reduction in Bangladesh

Rural Bangladesh

 

PROPOSED STRATEGY FOR IMPLEMENTATION OF RURAL INFRAST-TRUCTURE DEVELOPMENT ACTIVITIES AND ROLE OF BUSINESS COMMUNITY

In the process of construction and maintenance activities of rural infrastructures, the following strategies may be followed by the engineers and business community:

  • Directly involve the landless groups / people in construction and maintenance of rural infrastructure in the form of Labour Contracting Society (LCS) which has already been experimented in various RD projects.
  • Ensure that landless groups of poor men and women get maximum employment opportunity under the contractors and they are paid fair wage.
  • Ensure wider participation of rural infrastructure and keep certain activities reserved for the destitute women.
  • Impart skill development training to the rural poor involved with construction and maintenance of rural infrastructure for further development of their competence.

PARTICIPATORY MODEL: EMPOWERING THE POOR

Participatory development model calls for empowering the poor, to recognize their inalienable right to decide their own destiny and their access to education, health, sanitation, housing, employment and credit facilities. To ensure these rights there should be structured or institutionalized arrangement at the grass root level. These necessitate building and strengthening of local bodies like counties, municipalities, union etc. with elected representatives in all tiers. Development cannot be thrust from above. Development must originate from those for which it is essentially meant. This means that there should be first of all firm political commitment for poverty alleviation. Politics and development are inter-related. Politics of development and production is the main pillar for building effective bridges with the masses. Proper political and social atmosphere is the sine qua non for development. This will generate mass awareness for development at the lowest level and will thereby ensure social justice.

 

The participatory development model presupposes the working people as the main component of all development activities. Under this model, human being is not the problem, rather they are the keys to problem solution. Sustainable and meaning full development only takes place through the optimum utilization of human creativity and productivity. The Peoples Republic of China achieved tremendous progress by following this model. Mexico, under President Salinas, was also deriving rich dividends in the same way. In an interview with Readers Digest (August 1992 issue) President Salinas explained the inherent philosophy of his solidarity program which aims at alleviating poverty. He said- “Trust the people. In the past we relied on the central government to determine what the poorest people needed. Now we have reversed this process. No longer will official in Mexico City decide the needs of the people in the rural areas. Local, democratically elected committee, how to use some of the proceeds of the privatization and savings from debt re-negotiation to have running water and electricity, to builds schools and clinics and to pave roads. All of these decisions that people, not bureaucrats are taking today.

 

In Bangladesh, where we will be able to empower and trust the people and not depend on the bureaucrats in the capital city, a breakthrough can definitely be achieved in the prevailing poverty situation i.e., our development initiative should be target-oriented. The Bangladesh Economics Association in its 10th Biennial Conference has, therefor, called for national consensus by effectively involving the government, the opposition, industrialists, businessmen, volunteers (NGOs), the peasants and the workers. The Association was of the opinion that national participation in the country’s development process was minimal. It was some sort of a dictate from the bureaucracy-oriented government as per the prescription of donor countries and agencies. Poverty alleviation will continue to remain elusive if this process persists. Union councils, Thana councils and Zila councils should be so constituted with people’s representatives that they are able to function as independent decision-making agencies without bothering for dilatory approval. When this can be done, projects will no longer remain unimplemented.

POLICY FOR POVERTY REDUCTION

To remove poverty the following policy outlines needed to be implemented on top priority basis and without any further delay: –

  1. Re introduction of farm subsidies to the extent of at least 50% of the value of the products.
  2. Strong price support as in Thailand.
  3. Refixation of the prices of agricultural inputs and ensuring their easy and cheap availability to the farmers.
  4. Mechanization and modernization of agriculture through intensive research and extension programs for increasing yields.
  5. Setting up of agro-industries like food and fruit processing plants, Agro- machinery factories, extension of irrigation facilities, rural electrification etc.
  6. Change of cropping pattern, switching over to more profitable produce like vegetables, fruits, livestock, poultry, fisheries etc.
  7. Development of basic infrastructure likes road highways and transport.
  8. Skill development among farmers through education, healthcare, family planning, training and easy access to information through radio, TV, cinema, telephone etc. as in South East Asian countries Japan and South Korea.
  9. Setting up of raw materials related industries in the rural areas, which will galvanize rural economy.
  10. Formation of rural co-operatives, restructuring and reorganizing credit facilities and arranging better marketing of agricultural produce.
  11. Forming agri-food consortia with the SAARC countries to gain comparative advantage and better bargaining clout in the international market.

The measure noted above fall within the category of targeted development. Since most of the poor live in the rural area. Unless agriculture is developed their condition will not improve.

 

Bangladesh

Tea Garden in Bangladesh

APPROACHES TO POVERTY REDUCTION: The poverty reduction program includes:

  1. Poverty reduction through enforcing higher investment in social sector.
  2. Poverty reduction through fostering an accelerated sustainable growth process.
  3. Poverty reduction through promoting targeted income and employment generating programs designed for the vulnerable segment of rural poor.

 

The Engineers are the key element for the timely execution of all development programs of physical infra- structure, setting up of new industries of small & medium scale, ensuring protection against natural diseases etc. But for the context of poverty alleviation, 40% of the rural & urban families should be the target of all national & local poverty alleviation efforts. Poverty alleviation programs must be based on the smallest social units in rural areas i.e., Communities, Upo- Zilas, Unions & Paras.

 

Small-scale rural food industries such as Bakeries can employ 10-15 woman of the village; lozenge/toffee-making unit may employ 20 workers. Private fish-tank can be developed, and a few poor persons can be benefited from fishing. The government “beel-area” borrow-pit may be developed into large/small fish tank. The landless population may be given the opportunity to get good and regular income from fishing, Duck rearing,

 

Growing banana trees, pineapple and vegetable on the banks of the tank. A large number of poor families may use the unused land near the house from ½ decimal to 1 decimal size can grow vegetables 3-4 times a year. This may be a good source of earning. Intensive scheme for rearing cattle, cows, goats are to be undertaken for a protein source.

 

Productivity of the small land holding of the poor can be doubled or tripled through manual irrigation by “treadle pump” or hard pump ensuring multiple cropping, better inputs and technology; the technology for holding the high yielding variety of grain for long term storage is still unknown to our farmer. Small-scale storage bins & new technology for storage will help the poor to store their product till market prices are advantageous.

 

Business communities will work hand in hand with the Engineers in developing the following improvements, which will promote the rural areas & strengthen the local economy.

  1. Mechanized crop drying and releasing/reclaiming the drying yard especially at the mill premises for production.
  2. Improved and appropriate technology for seed production, storage, holding the fishing upto 24 hours of marketing, simple irrigation and harvesting tools (produced by BARRI) and so forth.
  3. Use of solar energy and other non-conventional energy sources.
  4. Country boat mechanization & improvement of the mechanized country boat.
  5. Setting up of light engineering industry and strengthening the existing.
  6. Rapid expansion of the cottage industry.
  7. Development of small industries at the rural level.

 

Out of the above tasks the effective of improvement of country boat mechanization, light engineering industries and treadle pump is given below:

After mid 1980’s the situation in country boat sector changed dramatically. Mechanization has taken place on large scale with the help of imported low-cost diesel engine for irrigation almost in an indigenous fashion by the boatmen themselves without any assistance from outside. This change gives the boatmen increased financial benefit.

 

The gross income has almost doubled after mechanization. On the other hand, contrary to believe, there had not been any major unemployment as a result of mechanization. In fact, there has generated additional activities due to mechanization.

 

The engineering section of Bangladesh Small and Cottage industries Corporation with its engineering decision took some equal credit projects in Dhaka area in 1985 for the strengthening of the efficiency, productivity of these industries. There were some training components in the program also. Out of total credit amount of Tk. 50 million, Tk. 37.30 million given to 173 industrial units of Dholaikhali (Dhaka) area & Tk. 6.6 million to 55 industrial units of Zinjira (Suburb) area. The loan was given purchase of new machinery & as an operational capital.

 

The decision about which economic activities, can be undertaken will depend on the physical resources available in a local area, the ability of those implementing the poverty alleviation projects to mobilize local society for these activities, market for small industry products and the like. Always the local context must determine what activities are viable and are most economical to promote. Program taken they do not suit the local context.

 

Rural Development

Rural Bangladesh

Finally, we can state that, the Businessmen can play tremendous role in poverty reduction in situation that is characterized by the following factors:

-strong political will,

-adequate appreciation of engineers’ & business community’s role

-ensuring Engineers & business community of unfettered opportunity to contribute

-favorable policy framework

-necessary resources allocation

-strict accountability

 

We are striving earnestly to make FBCCI into a more dynamic, internationally counted, truly representative & powerful organization of the private sector. But the challenges are enormous. The country is currently undergoing an unstable situation. The social conditions are in a deplorable condition. Level of erosion of social capital & corruption in society are beyond belief. Infrastructure is inadequate. Over-centralization of power as well as absence of rule of law & of human rights have taken toll on transparency, accountability & obligation of responsibility. On the other hand, interdependence, interaction & interfacing of new technologies, globalization of culture & economics is posing unprecedented threat to our daily lives, our trade & commerce as well as our means of production.

 

To face the challenges & play its proper role, the private sector needs a conducive environment & a level playing field. But the reality is opposite. Taking advantage of political unrest, gross social in-discipline, anti-social activities & anarchic tendencies have assumed immense proportions. Dishonest people are questioning honest people, corrupt people are putting the righteous & the dedicated people on the dock. Plunderers of national wealth are undermining those who are involved in creating wealth for the nation. Ignorant & uneducated people are throwing the gauntlet at knowledgeable & qualified society.

 

If this situation continues, then the philosophical fundamentals constituting the Republic will become defunct & the country may become unfit to govern.

 

Nevertheless, FBCCI as the vanguard of the private sector & the apex body of business organizations will continue to do its utmost, along with other civil society organizations to remove all obstacles standing in the way of economic growth & productivity. In doing so, it will be guided by a moral philosophy in promoting trade & commerce in line with sustainable socioeconomic development.

 

We firmly believe that by our combined efforts, brisk vigor & dynamism will enable us to return to the nation’s economy. Investment will increase. Wealth will rise. Employment opportunity will be created. Climate will change so that individual members of the society may be able to utilize their knowledge & skills in production & nation building mission. In effect, social disturbance will die down. Poverty reduction will only be possible then.

Poverty Reduction in Bangladesh: Poverty Reduction in Bangladesh: Poverty Reduction in Bangladesh: Poverty Reduction in Bangladesh

Developing Bangladesh          Md. Joynal Abdin            Read More…

Regional Cooperation in SAARC

Regional Cooperation in SAARC

Regional Cooperation in SAARC

 Compiled from the speeches of one of the 

Former Presidents of FBCCI

The Economy of Regional Cooperation

The global economic environment is now marked by momentous changes. There are two apparently opposite trends developing simultaneously in the world. On the one hand, countries are moving towards global economic integration, particularly after the conclusion of Uruguay Round of GATT negotiations leading to establishment of World Trade Organization (WTO). On the other hand, developed and developing countries around the World are increasingly attempting at forming regional economic and trade blocs for intra-regional trade liberalization and economic integration. As the trend indicates, it is now widely recognized that global economic integration can best be achieved in a graduating or a step-by-step process through sub-regional and regional trade and economic cooperation.

 

Moreover “regional cooperation is fast becoming the key link” for success in the ever-continuing battle of mankind for its survival and prosperity. Countries with varying sizes, geographical features, and endowment of natural resources, with diverse religions, social complexities, political systems and different levels of growth and development are trying to find ways of establishing regional cooperation. In UNO’s efforts to achieve the goal of promoting social progress and better standard of life globally it is now increasingly felt that between the world today and its member states an intermediate stage is required to promote this objective.

Exploitation of the mutual advantages of trade and economic growth and of their link to geography has always been recognized as a vital tool for generating national and regional wealth.

 

The benefit of regional trade is an age-old reality and extensively dealt by Adam Smith even three hundred years before in his writing. He mentioned in his famous book “The Wealth of Nations.” I Quote

“The wealth of a neighboring nation, however, though dangerous in war and politics, is certainly advantageous in trade. A nation that would enrich itself by foreign trade, is certainly more likely to do so when its Neighbours are all rich, industrious and commercial nations. A great nation surrounded on all sides by wandering savages and poor barbarians might, no doubt, acquire riches by the cultivation of its own lands, and by its own interior commerce, but not by foreign trade”.

 

Unquote

For smaller nations in particular, it is even more vital because foreign trade enlarges the market and increases the scope and efficiency of division of labor, thereby increasing wealth and economic growth. Indeed, small countries in any particular region usually gets privilege and advantages out of the economically developed larger neighbor in the modern world. In 1995, in the context of Europe, Belgium and Sweden, two smaller countries neighboring France & Germany achieved trade ratios of 143 and 77 percent of their GDP respectively. In North American context we can cite the similar example for Canada and Mexico.

 

Regional Cooperation in SAARC

Regional Cooperation in SAARC

Regional Cooperation in SAARC

Regional Cooperation has two independent elements: that is, regional trade and regional integration. Let us examine the case of Regional Cooperation in SAARC ‘from these two parameters’.

 

Although one-fifth of the world population live in South Asian countries, they hold an insignificant position in the global economy accounting for only 1.9% of global GNP. Poverty is pervasive, bulk of the people are below poverty line in this region. Our region’s share in global trade is only 0.96% of export and 1.3% of import. The trade within the region is hardly 3% of our global trade and our countries rely heavily on the industrial economies for both import and export. The low volume of trade among SAARC countries means that the multiplier effects get their way to other countries, denying the region the benefits of higher production and employment. In the process we are contributing to growth of the economies outside the region.

 

There are several global factors that underscore the need for expediting the process of regional trade and economic cooperation among the South Asian Countries, as for developing countries of other parts of the World. Firstly, the developing countries particularly the countries in our region are being increasingly marginalized in the international trading community. Secondly the powerful trading blocs like European Union, NAFTA, and APEC among the major economies would further marginalize the South Asian economies. Thirdly, regional cooperation is now-a-days used as a dynamic instrument of accelerating the pace of development and economic growth.

 

Most of the countries of the world are increasingly trading with their neighbors and in fact, intra-regional trade often forms the bulk of the total trade of many regions in other parts of the world. Fourthly, the prospects of rightful and adequate improvement of the market access conditions in the developed world for the export of developing countries such as textiles, and clothings, agricultural commodities, footwear, labour-oriented products, etc. are not encouraging in near future even after establishment of free trade regime under WTO. Trade barriers against the export of developing countries are being multiplied on the pretext of environment protection, labour standard and other non-trade issues.

 

On the question of Regional Cooperation in South Asia, Indian Prime Minister Mr. Vajpayee in a recent statement underlined the importance of close regional cooperation for the progress of South Asia, and visioned that regional trade is going to grow faster as because there is unexploited potential in the neighbourhood. It is also important to liberalize cross-border trade to check black-market and underground trade as trade restrictions have given birth to smuggling, money laundering and other transnational crime. So it shows that we have little option but to develop regional trade both for economic development and also for maintaining socio-economic order.

 

Unfortunately Intra-regional trade in South Asia is yet below 5% of the total trade and 1% of total investment, whereas regional trade in case of NAFTA is 49%, EU 78% and ASEAN 53%. Given the population size and GDP growth in the South Asian countries, there are immense potentialities for growth of regional trade. But unfortunately the biggest impediments to regional cooperation is continuing to be posed by historical disputes, mistrust, armed insurrections and warlike situations between countries and sometime within the country itself. We may reap the dividend of regional cooperation by putting aside mistrust and dispelling unwarranted suspicions.

 

Poverty and low income syndrome in the South Asian economies pose a major constraint. It is also mocked as a “poor man’s club”. Savings and investment gap drives them to donors for aid. This in turn makes them dependent on industrialized donor countries for capital goods and input procurements. Hence, those South Asian countries which are capable of producing these goods fail to supply due to lack of funding. Countries of South Asia rely heavily on foreign capital to overcome the resource and trade gaps, and foreign capital is usually tied to import from donors or their allies.

 

SAARC

SAARC Countries

Availability of technical know-how and adequate research base plays a catalyst role in development of product and promoting efficiency and complementarities. At present these facilities are lacking particularly in the least developed countries of the region. forging of economic integration would require cooperation and collaboration in the development of technical know-how and adequate research base in the region.

 

There is also the fear of economic domination of India among smaller countries in the region because of its central location, size, relatively advance stage of industrialization, relatively richer endowment of resources and comparative advantage in most goods produced. India alone constitute 3/4th of South Asian population and about 84 percent of value added in manufacturing. Against these apprehensions about Indian dominance, India is striving for more stronger link with global markets and developed economies than the countries in the region. Consequently, its imports from within the region are negligible accounting for only 1 percent of its total imports.

 

There is a popular misunderstanding that the cooperation between a large country like India and neighboring small countries like Bangladesh, Bhutan and Nepal cannot be a win-win case or in other words beneficial to both the small and the giant partners. That economic cooperation can be beneficial to both the giant and the small partners is amply demonstrated by the success story of NAFTA among the giant USA, relatively small but developed Canada and small & less developed Mexico. These countries historically remained apprehensive of each other. Canada and Mexico had the fear that they would lose more than gain by cooperating with the giant USA. The actual results of NAFTA have proved otherwise.

 

Communication gap is another important constraint to enhancement of South Asian economic cooperation. People in South Asia do not have information about markets and export potentials of each other. The data base of each country has to be significantly improved and networks of exchange of information have to be developed much wider more frequent than the existing official channels.

 

Political conflicts between the two major partners India and Pakistan remains another major obstacle holding back operationalization of SAPTA.

 

There is ample opportunity of benefiting from expansion of intra-regional trade in South Asia considering:

  • huge potential market of 1.3 billion people.
  • availability of relatively less expensive manpower in the region at all levels of skill.
  • availability of all varieties of natural resources shared in different degrees by the member countries;
  • wide possibilities of finding out enough complementarities because of wide disparities in industrial structure and resource endowments;

As regional economic cooperation develops, the South Asian countries will also gain collectively if they work jointly to expand markets for their products in other regions. The larger economies will benefit because of increased market for their products in the very neighborhood while smaller countries will benefit immensely if they gain easier access to vast markets in the neighborhood. The LDC members will also gain if the promised tariff concessions and removal of non-tariff barriers, special facilities and concessions as well as technical assistance are materialized.

 

But smaller countries can only benefit from the opportunities created by SAPTA if they expand their production base and share of value-added in the industrial sector in GDP. In addition to trade opportunities this requires the provision of infrastructure, industrial manpower, better credit system and improved information flow.

 

For the success of regional trade regional economic integration is a must. We must frankly state that we have enough exchange of ideas on the benefit of regional trade arrangements, but have given scantly attention on regional economic integration. For forming a successful regional bloc we should systematically take stock of the elements of  complementarities, product-wise in built capacity, natural endowment, adjustment of division of labour and capacity for an economic integration. Then only we can dream of common currency and burial of all suspicions. Otherwise the free trade conception is likely be translated into creating market for the stronger economy on the weak ones. So for the sake of the continuity of the regional cooperation, we would again underline the importance of economic integration through equitable growth.

 

We should take lesson from the little progress of SAPTA, where list of products were exchanged for tariff and non-tariff concessions. But the implementation of the concessions has not yet materialized. The major constraints to effective operationalization of SAPTA are :

  • political conflicts between the two major member countries, India and Pakistan.
  • restrictive and resistant mind-set of various actors viz; the bureaucrats, inward -looking vested groups.

 

Easing and removal of these snags under the given state of things would be a long-drawn affair though not insurmountable.

We should shake of our apprehension about regional economic integration through equitable capacity building and natural distribution of labour and also of geographical advantages and avoid competition in the global market. This will rather strengthen our bargaining power in the external markets. In fact, the bigger economies of the region should help obtain all possible international concessions, assistance and collaboration in Favour of the LDCs of the region.

 

Regional Cooperation in SAARC

Regional Cooperation in SAARC

The flora and fauna of the South Asian region are more or less common. So, the geographical indication made by an individual country should not apply to the other country of this region to export similar items in the international market.

 

So, SAARC nation’s strategic approach towards regional trade arrangement and economic integration need to be reassessed taking into consideration the hard realities in respect of slow progress of tariff arrangements and also of geo-economic conditions of the countries of the region specially the big ones with relatively vast population, high level of industrial & technological base, richer resource endowment, high prospect of natural complementarities and establishing infrastructural linkage. In fact, it is necessary to create an equitable free trade area (FTA) in the SAARC region for setting up a base to face collectively the challenges stemming from globalization.

Regional Cooperation in SAARC: Regional Cooperation in SAARC: Regional Cooperation in SAARC: Regional Cooperation in SAARC

Developing Bangladesh          Md. Joynal Abdin            Read More…

 

Regional Cooperation in SAARC: Regional Cooperation in SAARC: Regional Cooperation in SAARC: Regional Cooperation in SAARC

The Role of Private Sector in Bangladesh

Bangladesh

The Role of Private Sector in Bangladesh

* Compiled from the Speech of One of the 

Honorable Former President of FBCCI

 

In Bangladesh, as a developing country, there is now a growing realization that a vibrant and dynamic private sector is the key to economic progress and sustained growth. The East Asian miracle exemplifies as to how the government can accelerate progress as a partner and as a facilitator. Developing countries, including Bangladesh, have come to increasingly rely on market forces to guide their development strategy. Efforts are being focused on the promotion and supporting of the private sector and creation of an enabling environment for it to flourish and maximize its contribution to economic progress within a business friendly and equitable framework. Bangladesh has been increasingly relying on this philosophy as a strategy for growth. As a consequence of this, the share of the private sector in total investment has risen. Public sector reforms will continue to be undertaken as a complement to the private sector so that it can function more effectively and up to its potential.

 

Private Sector in Five Year Plans

The growing emphasis on the private sector is reflected in the fact that the share of the private sector investment increased from 11 per cent in the First Five-year Plan to 44 per cent in the Fourth five years Plan. The performance of the private sector was better than what was planned for in the Fourth Plan. In fact, the share of the private sector in the total realized investment was 54 per cent of the total investment in FY95.

 

In view of the intensification of private sector-oriented reforms, it was anticipated that the private investment would increase substantially during the Fifth Plan period. An amount of Tk.1100.58 billion (56 per cent of the Plan outlay) was projected as private investment in the Fifth Plan.

 

During the Fifth Plan, it was said that the private sector is the main engine of growth. The public sector will act both as a promoter and as a partner rather than just as a regulator and will facilitate the growth of the private sector by providing improved physical and socio-economic infrastructure through regulatory and effective policy support measures.

 

The Fifth Plan provided a broad canvas and a framework in which the private sector can play an effective role in the development process for which an indicative guideline is given. The government will take steps to ensure the creation of an enabling environment through legal and administrative measures and infrastructure support so that the private sector can function and contribute according to its potential. The impressive growth registered by many high performing economies including that of East Asian ones has brought into focus some essential ingredients for development, namely the need to have a liberal market-oriented export led strategy along with the involvement of the government to provide necessary catalytic and effective support. The government may, where it is considered necessary, also participate in investment projects along with the private sector. Such ventures will normally be limited to areas where private sector is not forthcoming or where the government’s presence is desirable as a support to the private sector.

 

Bangladesh desperately needs rapid and sustainable economic growth to make a significant breakthrough in poverty alleviation. In the current development strategy, the private sector has to play a pivotal role in achieving the desired growth. We need to lift the economy from the current state of 5% plus growth rate to one of 7% in the short term and 9-10% within 2008. To attain such a growth rate the investment has to go up from the current level of 23.15% to 28% of GDP. There has also to be major structural change in the economy giving a leading role to industrial development, because for a country like Bangladesh with a low per capita income, heavy population pressure and limited agrarian base, development of manufacturing holds the major long-term hope of guaranteeing high level self-sustaining growth. The Fifth Five Year Plan rightly aimed at increasing share of industries in GDP from 9.28% in 1996-97 to 12.70% in 2001/02 raising the growth rate of the sector to about 14% from the benchmark level of 3.5%. That called for huge investment in the private sector. The Fifth Plan envisaged an investment of Tk. 298.78 billion during the plan period for the manufacturing sector accounting for 27.15% of total allocation for the private sector. It means that average annual private investment in manufacturing was to increase to Tk. 59.78 billion against benchmark level Tk. 33.40 billion. In an aid depleting global environment the big chunk of the investment has to come in the form of private capital inflows, that is, direct foreign investment (DFI).

 

The achievement of these objectives will depend on the following investment related factors:

–      Congenial Policy Framework

–      Growth of a dynamic and vibrant private sector

–      Arrangement of adequate finance

–      Enabling environment and efficient infra-structure

–      Development of human capital

–      Stable political environment

–       Investment opportunities.

 

Changed Policy Framework in Bangladesh Economy

During the last 30 years the economy of Bangladesh has witnessed fundamental changes in economic, industrial and trade policies. At the time of liberation, Bangladesh inherited a mixed economic system. But as a natural consequence of wide-spread destruction and abandonment of industries due to Liberation War as well as on account of change of government policy, the public sector acquired a commanding position. The government nationalized various industries, business enterprises and financial institutions exceeding Tk. 15 million in fixed assets. A total of 725 industrial units were nationalized and placed under the management of 10 public sector corporations. But faced with pressures on financial and management resources, the government soon initiated the process of gradual expansion of the private sector. Private investment ceiling was raised from Tk. 2.5 million in 1973 to Tk. 30 million in 1974. It was further raised to Tk. 100 million in 1975 and totally withdrawn in 1978. By now, the policy has completely been reversed assigning private sector the dominant role, although a heavy burden of losses on account of the state owned enterprises (SOEs) is causing serious haemorrhage on the nation’s economic vitality. The government has also been implementing structural adjustments and liberalization policies enhancing the role of the private sector and opening the economy to free competition.

The Mirror of Bangladesh Economy

The Mirror of Bangladesh Economy

Potentials and Performance of Private Sector

Though relatively new and inexperienced, the private sector has already demonstrated its capability and buoyancy in the economy. A new generation of private sector entrepreneurs has emerged in Bangladesh who are well educated, hardworking, capable and eager to face the challenges of the globalized competitive market. They have proven their mettle in all sectors where they had opportunities to work with freedom and where the Government played the role more off a facilitator than a controller. The booming industries in ready-made garments, knitwear, shrimps, leather, ceramics etc. are clear indicators of the latent capabilities of the private sector and they also act as pointers to what the Government should do in capturing these potentials. It may be in order to show a few illustrations of promising performance of the private sector.

 

Firstly, private sector’s share in investment shows a rising trend increasing from 10.27 percent in 1990-91 to 15.61 percent of GDP in 1999-2000 and 16.78 percent in 2001-02 while that of public sector stagnates between 6-7 percent.

 

Secondly, private enterprises are more efficient than state owned enterprises in respect of utilization of assets for generation of employment and value addition. Owning 37.62% of fixed assets private enterprises accounts for 74.57% employment and 66.2% value addition while owning 62.38% of fixed assets the state owned enterprises (SOEs) account for only 25.43% of employment and 33.79% of value addition as in 1989-90.

 

Thirdly, the private sector performance is more spectacular in foreign exchange earnings from export. Out of the total foreign exchange earnings of US 5.59 billion in 2001-02, private enterprises represented more than 90% of the total export earning which has risen from 74.27% in 1990-91.

 

Private Sector in the Poverty Reduction Strategy

Under the Poverty Reduction Strategy of the Government, the private sector is the engine of economic growth. The Government will create an investment-friendly environment and act as a facilitator through pursuing policies to create a stable macro economy, improve law and order, promote good governance, maintain competitiveness, remove infrastructure bottlenecks, ensure cost effective fiscal and financial services, and provide market information and support services. With increasing role of the private sector, competition and transparent rules would be framed for protecting consumer’s rights and trust in the market, minimizing the cost of information and enhancing sustainable growth of the private sector. Women’s participation in private sector activities will be effectively supported both as participants in the labour market and as entrepreneurs.

 

Under the 1999 Industrial Policy, restrictions on private sector participation in all sectors except defense, nuclear energy, printing of currency notes, and forest plantation and mechanized extraction in reserved forests, have been removed. The Government is aware of the constraints hindering the growth of the private sector and would implement effective measures to remove the hurdles through effective and coordinated policies and actions. The key areas would be: infrastructure development (e.g. power, telecommunications, roads and ports), strengthened financial and capital markets, quality of the labour force, reduced costs of doing business by reforming institutional and regulatory framework, improved law and order condition, and better environment for foreign investment. Specific measures would be worked out in consultation with the private sector. For proper functioning of the private sector, physical improvements and management reforms in the basic infrastructure including power, water supply, port and telecommunications will be given priority along with private sector participation. The government would take effective measures to encourage the private sector to become gender sensitive, facilitate women’s participation in private sector activities and create institutions like childcare centres to facilitate women’s enhanced participation.

 

Private Sector in the Delivery of Social Services 

There are several reasons why increased role of the private sector is perceived in the provisioning of social services. Neo-liberal perception that state organizations are predatory and inefficient, with rent seeking as the primary motive for the behaviour of the public officials, is dominant in current thinking. One offshoot of such a perception recommends privatization. While vigorous pursuit for privatization in the industrial sector is more frequently observed, outright transfer of responsibility in delivering social services to the private sector is not made due to presence of “public goods” agreement. However, inclusion of private and other non-government sectors are perceived to induce competition and make the state more accountable. With the latter perception, the World Bank document on Country Assistance Strategy for Bangladesh notes that, NGO partnership and stakeholder participation make up for weak, centralized public institutions and increase public accountability. As a part of long-term strategy, the WB therefore intends to support civil society and the private sector to help build constituencies that call for accountable and well-performing public institutions.

 

Participation of private sector in the delivery of social services, either on humanitarian grounds or for commercial motive, is a historical phenomenon and no single agency may be credited to have initiated it. However, awareness about it paved the way for a wide range of experiments; and these experiments have unfolded new sets of relations among various agents involved in the process. Thus, there is a need to have fresh looks into the classification of social services, roles to be played by the state, for-profit and non-profit private sectors, and by the civic society. Such ventures will help in designing a new set of rules of business to be put in place with a view to ensure greater social welfare.

 

Response of Private Sector in Globalization

Globalization is almost entirely market driven. The process has gained momentum and is based upon liberalization of trade, capital and currency markets. Private sector responded in full measure to opportunity thus opened up. The role and function of the private sector in globalization is obvious. Integration of national economies into a global market has been the work of multination stock market operators, currency traders and speculators motivated by profit. Business and industry has been the vital force behind innovations in production, distribution and marketing.

 

Reform measures undertaken by organizations like GATT, WTO, IMF, World Bank and individual governments provided the enabling environment in which individual companies and firms looked for better market for goods as well as for investment of capital. Among 200 biggest economic entities 160 are not states reflecting the command of private sector in to-day’s global economic activities.

 

In view of the above, private sector needs some assistance and facilities for playing its role in the development of the country. Those issues are;

A) Arrangement of Adequate Finance for Private Sector

The private sector of Bangladesh has a notable contribution to the industrial sector. But the industrial sector is currently starved of term lending. Institutional arrangement for meeting the credit requirements for industrial investment is grossly inadequate. The commercial banks are basically ill suited to meet the requirements of term lending for industrial projects. By the very nature of their functions the commercial banks are used to borrow short-term and as such lending for long-term would create serious mismatch between the assets and liabilities of the banks. So, commercial banks can’t be relied upon for heavy involvement in industrial project financing. Unfortunately the traditional development financing institutions (DFI) namely, the Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Sangtha (BSRS) are now virtually defunct. The government should devise new institutions and instruments for financing industrial projects. The experience with the investment companies is not also encouraging, as most of them are currently operating like retail bankers. The stock market can be an important source of mobilizing equity, but the present state of the stock market does not hold any promising outlook for mobilizing equity for new ventures. So, debt financing of new projects will remain an indispensable requirement. The government will have to mobilize on a priority basis funds for financing industries and develop an efficient mechanism for their disbursement.

 

B) Enabling Environment and Efficient Infra-Structure

Liberalization and market economy have exposed the domestic industries to global competition. But the private sector enterprises, although they have enough potentials, are grossly hamstrung by the absence of a requisite enabling environment to survive and thrive. Undoubtedly liberalization has brought in both opportunities and challenges. True, the enterprises can have easier access to inputs and can have share in the vast and growing global market under a liberalized trade regime. But the challenges are much more serious. Local enterprises are to face global competition from those who are more experienced and enjoy better infrastructure and other supportive environment. They have to be efficient in cost, quality and marketing. They need a level-playing-field which is improving but remains grossly inadequate in Bangladesh. The problems and inadequacies in infrastructure facilities in electricity, port, telecommunication, roads and highways need to be attended and improved on a priority basis.

 

C) Business-friendly Administration

The change of development strategy towards private sector-led growth and market economy does in no way mean marginalization of the role of the government. The experience of East and South Asian miracle economies shows that the government institutions played a significant role in enabling the private sector to spearhead the growth process. The growth and performance of a vibrant and dynamic private sector need a lot of support and facilities from the government institutions. There must be an efficient and business friendly administration. The facilities and services that an investor need are; among others, acquire land, have connection of electricity, gas, telephone, water and sewerage, clearance from local authorities and environment authority, port facilities, customs clearance, etc. These should be available promptly and without hassle. But what is the real situation? Are these easily available?  The need for these are well recognized in government policy. There is no dearth of interest and intentions in the top leadership in government. It is an accepted and declared policy that government shall act as a facilitator. But there are problems at mid and operating level of the administration that in fact provides the service. The perception and mindset of them need change. Administrative reform is a must. Administrative efficiency is crucial in facilitating investments in the prospective sectors like power, gas, telecommunication and port development which have been opened for private investment and have already attracted a large number of foreign companies. But delays, indecision and lack of transparency in the bureaucracy in processing and finalizing deals are working as deterrents. We should show more professionalism in negotiation capability. Time and opportunity will not wait for us forever.

The Role of Private Sector in Bangladesh

Bangladesh’s Journey to Economic Development

D) Development of Human Capital

The much talked about comparative advantage of low wages and cheap labour no longer holds well. The gap between developed and developing countries is now not so much of a resource gap, as it is a knowledge gap. It should be a matter of concern to all of us that this gap is widening rapidly. Our companies can’t survive simply by increasing output with the use of capital and so-called cheap labour. Productivity must be increased. To raise labour productivity investments have to be made in human capital. The source of competitiveness should continue to shift from labour intensive to more skill-and-capital intensive investment. But enhancing technological capabilities must propel that shift. We lack adequate trained accountants, technicians, engineers and managers. So the investment in human capital development should draw adequate attention of the government. It is heartening to note that the government has assigned highest priority to the education sector in terms of budgetary allocation. But the quality of education is deteriorating. Discipline and proper environment in the educational institutions must be ensured. Allowing student politics in educational institutions is a major cause disturbing the educational environment.

 

E) Stable Political Environment

Social and political stability is an indispensable pre-condition to development. Although there is a broad political consensus among the political parties of Bangladesh as regards economic policy of market economy and private sector-led growth, confrontational political programmes and activities like hartals, work stoppages and blockades are vitiating the peaceful environment for pursuing productive and new investment initiatives. These are discouraging domestic investment as well as keeping foreign investment at bay. There is urgent need for having a consensus among the political parties to abandon the programs of confrontations that impede development.

 

Economics and Politics

You are aware that we are going to face formidable challenges in every field of our trade and industry after 2004 under the WTO regime.

We also know that ‘the strongest link between economics and the real world has always been politics’. In any organised society there is a structure that simultaneously encompasses both markets and governments. Societies both poor and rich necessarily have their own economics and politics. The economics move the politics and the politics govern the economics; No ideology of markets can leave out governments or politics. If an economy is exogenous, it cannot but be unstable and unbalanced.

The economists in the past have long been evading the matter of dependence of economics on politics, and preparing models on the assumption of steady socio-economic conditions. Realizing the folly of that assumption, the economists now a days are taking into account interrelated aspects of social anthropology, industry, commerce, culture, and politics etc while making new economic models or policies. We have thus come to recognize that socio-economic development is most likely to be on positive dynamics when there is a balance of economic and political pioneering par excellence.

Currently in Bangladesh, the standard public response, indeed the only option available to the citizens in reaction to amoral practices, abuses of power, extra-constitutional behaviour and poor economic policies of successive governments is to elect one of the two major parties, in alternate tenures. They both are widely perceived as autocratic in their conduct of state affairs, without caring much for a democratic process or the rule of law. The democratic ritual of transfer of power from one party to another, now badly needs to be replenished by a moral philosophy which would seek real “solutions to social problems,” in the least by advocating a greater balance of power among existing social groupings. Only if rights and obligations are redefined to reflect such a balance then private sector can do the job entrusted to them in efficient manner.

Economic theory teaches us that a classic liberal society leads to a maximum economy: Contemporary economic indicators clearly show that the distribution of both wealth and income is more skewed in less developed and less democratic societies than in more developed ones, and that distribution of income tends to become more egalitarian with economic growth. Less developed countries have certain characteristics in common, like excessive power in the hands of rulers and ruling parties. Holders of excessive political power accumulate economic and financial resources excessively and prevent productivity of the people and the economy from functioning optimally, thereby preventing the maximum possible production of goods and services. They prevent balanced growth of rules and regulations for the market forces to function properly, or prevent the market from functioning by excess of rules and regulations. They prevent the diffusion of power among the social groupings, and allow corruption unabatedly.

Therefore, it is imperative that in order to achieve full economic potential, to reduce income inequality, reduce the gap between the rich and the poor, and to reduce poverty, the civil society which includes economists as much as businessmen and trade unionists, must work hand in hand to remove obstacles and impediments to our production process and economic growth.

The success or failure of any country over the next few decades hinges on economic growth, which requires profound change in our society. We must identify the areas in which change would help economic performance. The most important of these are:

–     Diffusion of power by way of distribution of constituted authority to various social groupings;

–     Constitutional reforms to dilute the concentration of excessive power in few hands or few focal points through proper checks and balances, so that a small elite does not possess the power to direct all aspects of citizens’ lives;

–     Decentralisation of power by establishment of autonomous local government with adequate political and financial devolution;

–     Reform of electoral process for comprehensive representation;

–     Breaking the nexus between politicians, criminals and the police;

–     Eradication of Mastaani Chandabazi (extortion) culture from politics.

–     Observance of vertical to horizontal accountability necessary to liberalise polity; (Rulers must become more accountable to their constituents. Investors, traders and financiers must become more accountable to one another for the proper quantity, quality and prices of their merchandise, for payment obligations, and for their promises).

–     Complementary formulation of fiscal and monetary policies;

–     Enforcement of contracts freely negotiated by independent parties with the full force of law by the state;

–     Introduction of international standards in accounting; (Government monopolies, and private businesses often do not adhere to standards of accounting and auditing necessary for their transparency to creditors and stockholders. Strict rules must be made and enforced by the state).

–     Redirection of political confrontation and political violence, if not altogether eliminated by a process of conflict resolution;

–     Elimination of ambivalent laws and practices of arbitrary enforcement; (Many laws are unclear and antiquated. Frequently a law, on the books but defunct and widely ignored, is suddenly enforced against a political opponent or as a rent-seeking tool).

–     Improvement of law and order situation; (Crime rate must be reduced. The moral case against crime is beyond dispute. Our civil society, however, hardly takes into account the effect of crime on economic performance. Bangladesh in all probability will continue to have a high rate of crimes for another generation, but if the crime level is not reduced to a tolerable limit it will impose a grave burden on the competitiveness and economic performance of the productive organs of the polity and render the country unfit to govern).

–         Enforcement of a strong Human Rights regime; (A large degree of personal cruelty is found in Bangladesh like torture of suspect felons and repression of political opponents. Constitutional responsibility must be placed on those in power so that human rights are protected, and not violated without being punished. There should be no immunity for violation of human rights).

  • Strict observance of meritocracy; (Ministers and public officials must be appointed on the basis of capability, knowledge and experience, not basis of political favour).
  • Regulatory Framework

Reduction of government monopolies in the market place: (Though some people argue that some of the state monopoly products or services of “national importance” such as oil, gas, railroads, ports, airlines, fertilizers and banks are better retained in the public sector because they belong to “the people”, in practice they are “operated by the few for the benefit of the few.” Prices are fixed, often capriciously, by those who hold excessive power, and are far from cost-related. It is “the people” who pay out of their noses for what belongs to them. There is need for immediate change in the attitude of the Government in this role).

Giving up state monopolies does not mean that there will be little role for the Government in economic management over the coming decades. The government will continue to set policy over a large range of issues, and will continue to provide the basic legal and financial infrastructure under which the market will operate. The Government will retain, or may even increase, its responsibility for ensuring social order and underwriting the basic needs of the underprivileged in the society. But the Government must increasingly look for ways to streamline the economy by regulations rather than intervention. But the current regulatory practices of the government also need to be streamlined, such as:

–     Fickle Regulations – Many regulations are often imposed in a capricious manner. They are enforced in one year and repealed or ignored next year. Changes of taxes, duties, subsidies & incentives year to year make business budget difficult: one must understand that every ill-conceived regulation carries economic costs, so does lack of adequate regulation.

–     Excessive Restrictions – Excessive pre-requisites of rules and regulations must be eliminated so that people can take initiative at will, as and when they wish. The Government also incurs certain costs of interventions, regulations and restrictions, and needs to balance the gains against these costs. The negative economic effects of over regulation of commercial activities are widely recognized since 1980’s.

The Role of Private Sector in Bangladesh

Development Journey

Momentum of Change

The momentum of change in any society has to be generated from within the society itself. In addition to suggested changes in the administrative agenda, our society as a whole, at the civil society level as well as at the community level must address many issues, such as:

–     Removal of socio-cultural inhibitions and restrictions on freedom of speech;

–     Containment of corruption, which has now infested the society from the highest to the lowest level;

–     Total respect for the Rule of Law;

–     Public demand for transparency in the style of governance;

–     Modernization the civil service, customs, and police services;

–     Surveillance against abuse of public funding; (For instance, teachers, engineers, doctors in government pay roll are often engaged in full time consultancy, private tuition and private practise, which apart from dereliction of duty results in inequity of professional opportunities).

–     Patronisation of invention and scientific discovery;

–     Reduction of high unemployment by increasing investment in infrastructure and industrial sector;

–     Improvement of educational standard to support industrial economy;

–     Further reduction of population growth rate;

–     Improvement of medical services.

Most people would see these tasks as political, and indeed they are political tasks in the sense that the country looks forward to politicians to guide it. The system of government in Bangladesh, however, has structural deficiencies which make it difficult to respond to change. The civil society must therefore come forward and take the initiative for fulfilment of these tasks. That would indeed be the first step towards addressing the issue of income disparity.

 

Impediments to Private Sector Growth

The impediments to entrepreneurship and growth of the private sector are numerable and multifarious. These not only impede initiatives but also make many enterprises fail and go into default. I would enumerate for your information the major ones:

  1. The lack of long-term capital availability through banking channels;
  2. The lack of long-term capital in the capital market / bond market;
  3. Dumping of products, largely by smuggling;
  4. Inefficient support infrastructure:
  5. (a)        in the utilities sector, specifically in power,
  6. (b)        of port services, including land ports,
  7. (c)        high transportation costs,
  8. (d)        a largely inefficient telecommunications system which is also very costly.
  9. Widespread tariff anomalies.
  10. High customs’ duties.
  11. Complicated and cumbersome customs procedures aggravated by extensive arbitrary powers exercised by customs officers.
  12. Low productivity and a highly politicised labour sector;
  13. Inconsistency among different government policy statements;
  14. An inefficient and corrupt judicial system;
  15. Widespread corruption;
  16. Political instability leading to frequent hartals or strikes;
  17. High-interest rates in the banking sector;
  18. A lack of credible statistics;
  19. The lack of transparency and unaccountability in government decision-making;
  20. The lack of an appropriate education system to support an industrial economy;
  21. Too many holidays;
  22. A slow process of deregulation and privatisation;
  23. Lack of industry friendly social and political environment;
  24. Lack of good governance;
  25. Lack regulatory bodies;
  26. An “uneven playing field” between the private sector and the public sector;
  27. Lack of local technology;
  28. Lack of research and development;
  29. Government control on public utilities.

 

Legal Reforms for Private Sector Growth

In addition to above major impediments to social, political, cultural and economic progress are antiquated laws and rules based on those laws. All these antiquated laws must be immediately identified and abolished or amended. Many new laws may also need to be enacted that reflect the democratic practices of the 21st century and to establish rule of law. The impact of new technology, synergies of globalisation, the dynamics of a free economy and the demands of liberal democracy have made many old laws ineffective, unnecessary and even detrimental to social and economic growth. Antiquated rules, regulations and laws have become a real block to citizens’ ideas and aspirations of social, political and economic development.

 

The interdependence of various economic agents and the complexity of their relationships increasingly demand a better legal framework. The main purpose of a better legal framework is to reduce the cost and risk of transactions, as well as to harmonise regulations across different jurisdictions. Hence, business leaders look forward to the judicial reform commission who can expeditiously perform these reforms by suggesting priority action on the following:

  1. The company law should be so amended to allow entrepreneurs and enterprises to operate in a modern environment.
  2. Laws to regulate “hundi” and to prohibit money laundering should be introduced.
  3. The Foreign Exchange Regulations Act should be amended.
  4. The Banking Companies Act should be amended.
  5. The Insurance Companies Act should be amended.
  6. The Financial Instrument Act should be amended.
  7. Environmental laws should be amended.
  8. The Power Act should be amended.
  9. The Petroleum Act should be amended.
  10. The Industrial Policy should be enacted as an enforceable instrument.
  11. The Port Authority Act should be amended.
  12. The Dock Labour Management Board should be restructured by law.
  13. The T&T Board should be restructured by law.
  14. The Arbitration Act should be amended to conform to international standards.
  15. Foreign investment laws should be amended to ensure a minimum 15% to 20% local partnership except in the EPZ. This is very important for Bangladeshi citizens to acquire foreign technology and expertise.
  16. Labour laws should be amended.
  17. Factory laws should be amended.
  18. The Shops and Establishment Act (1961) should be amended.
  19. New transparent laws protecting civil rights should be enacted.
  20. Anti-terrorist laws should be reinstated.
  21. The Special Powers Act should be abolished.
  22. Bankruptcy laws should be amended to allow debt restructuring and shielding of the company’s finances against disturbing pressures of creditors while restructuring takes place. Directors should have legal protection.

The IMF President said recently in Thailand that;

(a)        the private sector must feel confident of the legal system and of legal protection so that entrepreneurs can again undertake the risk of business venture,

(b)        if the market economy is to work, then laws must be effective, and the legal system must work efficiently,

(c)        nations must allow entrepreneurs to take risks under the protection of the law and all bankruptcy laws must be revised to help entrepreneurs or bankers to take prudent risks to contribute to the healthy growth of the economy.

  1. New foreclosure laws should be enacted to allow financial institutions to take over mortgaged assets without going to court.
  2. The Artha Rin Adalat Act should be amended.
  3. A new bankruptcy court separate from the “Artha Rin Adalat” is to be established.
  4. Admiralty laws should be amended to protect foreign flag vessels in conformity with international law.
  5. Secrecy laws should be amended and a “Rights of Information Act” shall be enacted.
  6. Patent laws should be amended and IPRL should be immediately enacted.
  7. New laws should be enacted making it mandatory to pay interest on delayed payments.
  8. No laws should have retrospective effect unless so approved by a three-fourths vote in the Parliament.
  9. A new law should be enacted to create a land port authority.
  10. The public must have a chance to interact with lawmakers before any new laws are created or old laws amended.
  11. New laws should be enacted so that affected citizens can file cases against ministers, government officers, elected officials, police officers, customs officers, etc. for injustice, delayed decisions, wrong decisions, malafide decisions, etc.
  12. A new law shall be enacted to protect witnesses.
  13. A new “law of libel” shall be enacted so people can safeguard their rights and liberties.
Bangladesh

Most Prospective Sectors to Invest in Bangladesh

Dynamic and vibrant Private Sector: FBCCI and other Trade Bodies

It is now widely recognized that a dynamic and vibrant private sector is crucial to rapid and sustained economic growth. The government policy has put the private sector to the driving seat of the engine for the growth of the economy.

 

The contribution of the business leaders, trade bodies and the FBCCI were enormous. The transition and the formation of the private sector were directly linked to the opportunities or facilities that the prevailing policies allowed. This is borne out from the outlook each five-year plan allowed as well as the perception the World Bank and IMF had. The private sector started off without a right to be. Individual efforts were channelized gradually to formation of trade bodies and then the FBCCI.

 

When some 80 percent of trade and 95 percent of the industry were in the public sector, we in the private sector were either suppliers, contractors, overseas suppliers agents at one end or agents and distributors at the other end. Private sector permission to enter the raw jute export trade was secured by the FBCCI and member bodies in late 1975. The industrial ceiling waiver was an uphill task with first relaxation made in 1974 and final withdrawal in 1978. The FBCCI and the member bodies raised issues of return of Bangladesh jute and textile mills; denationalization and return of mills to owners; divesting of government-held shares to activate the stock market; introduction of two sectors – reserved and free; allowing banks and insurance companies in the private sector; abolition of octroi, restricting export trade to the private sector and a host of other demands which were raised.

 

The private sector has demonstrated its ability to undertake most sophisticated industries and meet the demand of the nation. The pharmaceutical industry is a case in point. Not only has the production capacity doubled but also the prices for the consumer have come down substantially.

 

While conducive policy environment has made rapid progress, the procedural problems appear to be a major stumbling bloc. It is foremost on the present agenda of the FBCCI and trade bodies to highlight and seek simplification and transparency of procedures. There is a visible extortion at each stratum, which dissipates initiative and threatens industry and commerce.

 

The private sector is in its early stage and the entrepreneurs of this generation are at work and contribute from their experience and wisdom to innumerable issues that it confronts. FBCCI is the focus and contact point for business viewpoint and manifestation of the thought process of the private sector.

 

In the two dominant areas of export-led growth and privatization, FBCCI recognizes and endeavours to play its role. The private sector growth imperative makes a strong demand and imposes great responsibility on the FBCCI. The strength has to be augmented to effectively facilitate the change it had so long targeted. FBCCI interacts closely with member bodies; contributes to policy through various avenues including consultative committees; it renders a wide range of services in connection with international trade opportunities. FBCCI has the avenue of constructive access to the overseas markets through counterpart apex organizations with whom joint chamber agreements exist and the International Chamber of Commerce (ICC), Islamic Chamber of Commerce and Industry (ICCI), SAARC Chamber of Commerce and Industry (SCCI) and Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI). These are useful mediums but inadequately exploited due to resource constraints. The FBCCI hopes with the support of the members and the government it will continue in the path of progress and national well being with pride and dignity.

 

Now, to perform the desirable responsibilities as an apex representative of the private sector, FBCCI needs to remove the existing impediments against it.

 

The Role of Private Sector in Bangladesh: The Role of Private Sector in Bangladesh: The Role of Private Sector in Bangladesh: The Role of Private Sector in Bangladesh

Developing Bangladesh          Md. Joynal Abdin            Read More…

Harnessing Solar Energy: A Bright Future for Bangladesh

Solar Power

Harnessing Solar Energy: A Bright Future for Bangladesh

Md. Joynal Abdin*

Business Consultant & Digital Marketer

Co-Founder & CEO of Bangladesh Trade Center

In the heart of South Asia, where the sun’s golden rays grace the land with unwavering consistency, lies Bangladesh, a country vibrant with life, resilience, and an insatiable thirst for progress. Yet, amidst its bustling cities, verdant landscapes, and the rhythmic flow of its rivers, Bangladesh faces a significant challenge: the pressing need for sustainable and reliable energy sources. In this quest, a beacon of hope shines brightly above—the boundless potential of solar energy.

 

As Bangladesh propels itself forward, the demand for energy grows ever more urgent. The bustling cities, the expanding industries, and the aspirations of a nation are powered by an energy grid that grapples with intermittent supply and escalating costs. This energy crisis casts a shadow, not only on progress but on the everyday lives of its people, who deserve a consistent and affordable source of power.

 

Bangladesh, in its geographical blessing, boasts abundant sunlight throughout the year. The sun, a tireless companion in the sky, has the potential to become the country’s ally in its energy pursuit. Solar energy, harnessed from this benevolent star, promises to illuminate a brighter path—a path that is clean, sustainable, and tailored to the unique needs of Bangladesh.

 

In a country that faces the wrath of nature’s fury through cyclones and flooding, resilience is not just a virtue but a necessity. Solar energy offers a decentralized and resilient solution, reducing vulnerability to disruptions and providing a lifeline when conventional power sources falter. This resilience has the power to protect communities, sustain vital services, and foster progress even in the face of adversity.

 

 

Solar Energy:

Solar energy is radiant energy emitted by the sun in the form of electromagnetic waves. This energy is harnessed and converted into usable forms, primarily for generating electricity or providing heat for various applications. Solar energy is a renewable resource, as it is continuously available as long as the sun exists, making it a key component in the transition to cleaner and more sustainable energy sources.

 

Classification of Solar Energy: Solar energy can be classified into two main categories based on its applications and the technology used to capture and utilize it:

  1. Solar Thermal Energy: Solar thermal energy refers to the utilization of solar radiation to heat a fluid or a material, which is then used for various heating and cooling purposes. There are two primary types of solar thermal systems:

a. Solar Water Heating: In this system, solar collectors (typically flat-plate or evacuated tube collectors) absorb sunlight and convert it into heat, which is then transferred to a fluid (usually water or a heat-transfer fluid). The heated fluid is used for domestic hot water supply, space heating, and even industrial processes.

b. Concentrated Solar Power (CSP): CSP systems use mirrors or lenses to concentrate sunlight onto a small area, generating intense heat. This heat is used to produce steam, which drives a turbine to generate electricity. CSP is particularly useful for large-scale power generation and can incorporate thermal energy storage for continuous electricity production even when the sun is not shining.

 

  1. Solar Photovoltaic (PV) Energy: Solar PV energy involves the direct conversion of sunlight into electricity using photovoltaic cells (solar panels). These cells are typically made of semiconductor materials (such as silicon) that absorb photons from sunlight and release electrons, creating an electric current. Solar PV can be categorized based on various parameters:

A. Grid-Connected PV Systems: These systems are directly connected to the electrical grid. Excess electricity generated during sunny periods can be fed back into the grid, and the user can draw electricity from the grid when solar generation is insufficient.

B. Off-Grid PV Systems: Off-grid systems are not connected to the main electrical grid. They include solar panels, energy storage (batteries), and sometimes backup generators. These systems are commonly used in remote areas without access to the grid.

C. Hybrid PV Systems: Hybrid systems combine solar PV with other sources of energy, such as wind turbines or diesel generators, along with energy storage. These systems provide more reliable power in areas with intermittent renewable energy generation.

 

The classification of solar energy into these categories highlights its versatility and potential for various applications, from providing clean electricity to meeting heating needs. As technology advances and becomes more affordable, solar energy continues to play a vital role in the global transition to renewable and sustainable energy sources.

Harnessing Solar Energy: A Bright Future for Bangladesh

Harnessing Solar Energy: A Bright Future for Bangladesh

Uses of Solar Energy:

Solar energy offers a wide range of alternative uses beyond its primary role in electricity generation. These innovative applications leverage the abundant and renewable nature of solar power to address various challenges, improve efficiency, and enhance sustainability in diverse fields. Here are several alternative uses of solar energy:

  1. Solar Water Heating: Solar water heating systems utilize solar energy to heat water for domestic, commercial, or industrial use. These systems typically consist of solar collectors that absorb sunlight and transfer the heat to a fluid (usually water or a heat-transfer fluid) that circulates through the collectors. Solar water heaters are particularly effective for providing hot water for showers, laundry, and other applications, reducing the reliance on traditional water heating methods and saving energy costs.

 

  1. Solar Cooking: Solar cookers or solar ovens use solar energy to cook food without the need for traditional fuels such as gas or charcoal. These devices capture sunlight using reflective surfaces and focus it on the cooking chamber, where temperatures rise enough to cook meals. Solar cooking is especially valuable in areas with limited access to cooking fuels, contributing to indoor air quality and reducing deforestation.

 

  1. Solar Desalination: In regions facing water scarcity, solar desalination systems use solar energy to remove salt and impurities from seawater, making it suitable for drinking and irrigation. Solar stills or solar-assisted desalination systems can provide a sustainable source of fresh water, benefiting coastal communities and arid regions.

 

  1. Solar-Powered Ventilation and Cooling: Solar attic fans and solar-powered ventilation systems can reduce the cooling load of buildings by removing hot air from attics and improving airflow. Additionally, solar air conditioning systems use solar energy to power cooling mechanisms, making them an efficient and eco-friendly solution for climate control in sunny regions.

 

  1. Solar-Powered Refrigeration: Solar refrigeration systems, designed with energy-efficient components and solar panels, can provide refrigeration in off-grid or remote areas, preserving perishable goods like food, vaccines, and medicines. These systems are vital for regions with unreliable access to electricity and can be crucial in healthcare and food storage.

 

  1. Solar-Powered Water Pumps for Agriculture: Solar pumps are used for irrigation in agriculture, drawing water from wells, rivers, or other sources using solar energy. These pumps are particularly valuable in remote or off-grid areas, providing a sustainable and cost-effective way to water crops, improving agricultural productivity, and reducing dependence on fossil fuels for pumping water.

 

  1. Solar-Powered Charging Stations: Solar-powered charging stations for mobile phones, laptops, and other devices can be set up in public spaces, rural areas, and off-grid locations, providing a convenient and sustainable way for people to charge their devices, stay connected, and access essential services.

 

  1. Solar-Powered Transportation: Solar energy can be used to power various forms of transportation, such as solar-powered electric vehicles (EVs) and solar charging stations for EVs. Solar panels on vehicles or at charging stations can provide renewable energy to charge EV batteries, reducing greenhouse gas emissions from the transportation sector.

 

  1. Solar-Powered Water Purification: Solar water purification systems use solar energy to power water purification processes, providing access to clean and safe drinking water in areas without reliable electricity sources or clean water infrastructure.

 

  1. Solar-Powered Education and Connectivity: Solar energy can be used to power educational tools, internet access points, and e-learning facilities in remote or underserved areas, promoting digital inclusion and improving educational opportunities.
Uses of Solar Energy

Uses of Solar Energy

These alternative uses of solar energy demonstrate the versatility and adaptability of solar technology to meet various needs, from basic necessities like water and food to advanced applications in healthcare, education, and sustainability. As technology continues to advance and solar solutions become more affordable, the potential for innovative solar applications to contribute to a more sustainable and resilient future is vast.

 

Estimated Cost Benefit of a Solar Home System Installation:

The estimated cost benefit of a solar home system (SHS) installation depends on various factors, including the initial investment, ongoing savings on electricity bills, maintenance costs, and the lifespan of the system. Let’s break down the key components to understand the cost benefit:

  1. Initial Investment: The cost of installing an SHS depends on the system’s size, capacity, quality of components, and installation charges. It’s essential to consider not only the cost of solar panels but also inverters, batteries (if the system has energy storage), mounting equipment, wiring, and installation labor. Additionally, government incentives, subsidies, or financing options can significantly impact the initial investment.

 

  1. Savings on Electricity Bills: Once the SHS is installed, homeowners can significantly reduce or even eliminate their reliance on grid electricity. This translates into substantial savings on monthly electricity bills. The amount of savings depends on the local electricity rates, the size of the SHS, and the household’s energy consumption.

 

  1. Lifespan and Maintenance Costs: A high-quality solar home system can last for 20-25 years or more with proper maintenance. Routine maintenance costs are relatively low, typically involving occasional cleaning of solar panels and periodic inspections. The system’s durability and minimal maintenance requirements contribute to long-term cost savings.

 

  1. Government Incentives and Subsidies: In some regions, governments offer incentives, tax credits, or subsidies for installing solar systems. These incentives can significantly reduce the initial investment, improving the cost benefit of the installation.

 

  1. Environmental Benefits: Although not directly a monetary benefit to the homeowner, the environmental impact of a solar home system should be considered. Solar energy is clean and renewable, reducing carbon emissions and contributing to a healthier environment. This benefit aligns with global efforts to combat climate change and ensures a more sustainable future.

 

Example Calculation: Let’s consider a simplified example: A household in a region with high electricity costs installs a solar home system with an initial investment of Tk. 50,000 (after considering subsidies). The system saves the household Tk. 1000 per month on electricity bills, and maintenance costs are estimated at TK. 500 per year. The system is expected to last for 25 years.

Solar Home System

Solar Home System

Cost Benefit Analysis:

Total Savings on Electricity Bills over 25 years: Tk. 1000/month * 12 months/year * 25 years = TK. 300,000

Total Maintenance Costs over 25 years: Tk. 500/year * 25 years = TK. 12,500

Initial Investment: TK.50,000

Net Benefit:

  1. 300,000 (Savings) – TK. 1,2500 (Maintenance) – TK.50,000 (Initial Investment) = TK. 2,37,500

 

In this simplified example, the estimated net cost benefit of the solar home system installation over 25 years would be TK. 2,37,500/=

 

Keep in mind that the actual cost benefit may vary based on regional factors, energy consumption patterns, changes in electricity rates, and system performance. It’s essential to conduct a detailed analysis considering local conditions to determine the specific cost benefit of an SHS installation.

 

Government Leadership and Innovation:

The journey towards a solar-powered future is a collective effort. The government of Bangladesh has recognized the importance of this endeavor and has taken significant steps to promote solar energy adoption. Initiatives like the “Solar Home System” program, which aims to provide clean and affordable solar power to rural households, showcase the commitment to making a positive change. Additionally, local innovation in solar technology is budding, with creative solutions such as solar-powered water pumps revolutionizing agriculture and enhancing livelihoods.

 

The future of Bangladesh, with its ambitious goals and aspirations, rests on its ability to harness the immense potential of solar energy. This journey is one of promise—a promise of a nation empowered by the sun, resilient in the face of challenges, and determined to create a sustainable, prosperous, and brighter tomorrow. Join us as we embark on this journey, where solar energy isn’t just a resource; it’s a ray of hope, illuminating a path towards progress for Bangladesh and the world.

 

Potential of Solar Energy

Blessed with a strategic geographical location, Bangladesh receives an abundance of sunlight throughout the year. This natural gift bestows upon the nation an immense solar resource waiting to be harnessed. From the northern hills to the southern coastal regions, solar panels gleam under the sun’s rays, offering a renewable and virtually limitless source of energy.

 

Addressing Energy Demand:

The ever-growing energy demand in Bangladesh has led to a pressing need for solutions that are not only dependable but also environmentally sustainable. Solar energy emerges as the perfect match for this demand. By tapping into this vast solar potential, Bangladesh can significantly augment its energy generation capacity, reducing the strain on traditional power sources and contributing to a more resilient and reliable energy grid.

 

Off-Grid Solutions:

In remote areas where connecting to the national grid is challenging, solar energy can be a lifeline. Off-grid solar solutions, such as solar home systems and mini-grids, can bring electricity to villages that have never before experienced the benefits of modern energy. This transformative impact on rural communities has the potential to uplift lives, empower education, and stimulate economic growth.

 

Climate Change Mitigation:

As the world grapples with the effects of climate change, Bangladesh is not exempt from its impacts. Rising sea levels, extreme weather events, and changing precipitation patterns pose significant challenges. Solar energy represents a powerful tool in the fight against climate change. By reducing reliance on fossil fuels, Bangladesh can contribute to global efforts to mitigate carbon emissions and build a more sustainable future.

 

Economic Opportunities:

The solar industry is not just a source of clean energy; it’s a catalyst for economic growth. The adoption of solar technology necessitates skilled workers for installation, maintenance, and innovation. This industry can create job opportunities across a spectrum of skill levels, from technicians to engineers, supporting local economies and fostering a culture of innovation.

 

Government Initiatives and International Collaboration:

The government of Bangladesh has recognized the importance of solar energy and has taken commendable steps to promote its adoption. Initiatives like the “Solar Home System” program have already made a significant impact. Furthermore, collaboration with international partners and organizations can provide valuable expertise, technological advancements, and funding, further bolstering the country’s solar ambitions.

 

A Sustainable Future:

The potential of solar energy for Bangladesh is not merely a concept; it’s a pathway to a sustainable future. It’s a future where clean, reliable energy is accessible to all, where economic growth is intertwined with environmental stewardship, and where Bangladesh shines as a global leader in renewable energy adoption. As the nation harnesses the boundless power of the sun, it moves closer to realizing this future—a future that is not just bright but also resilient, inclusive, and sustainable for generations to come.  

 

Energy Crisis:

Bangladesh is grappling with a persistent energy crisis, manifesting in the form of frequent power outages, inadequate access to electricity in rural areas, and an overall strain on the energy infrastructure. The intermittent power supply not only disrupts daily life for millions but also hampers economic activities, stifles industrial growth, and limits the potential for a better quality of life for its citizens.

 

The current energy crisis can be attributed to a combination of factors, including population growth, urbanization, increasing industrialization, inadequate energy generation capacity, transmission losses, and heavy reliance on fossil fuels. These challenges have led to a widening gap between energy demand and supply, creating a critical need for innovative and sustainable solutions.

Solar Power

Solar Power

Enter solar energy, a transformative source of power that has the potential to bridge this energy gap and alleviate the current crisis. Solar power offers several key advantages that make it an ideal solution:

  1. Abundant Resource: Bangladesh, blessed with ample sunlight throughout the year, has the ideal conditions for harnessing solar energy. Solar panels, strategically deployed across the nation’s rooftops, open spaces, and even in rural communities, can tap into this abundant and free resource, providing a steady stream of renewable energy.

 

  1. Decentralized Generation: Solar energy enables decentralized power generation. By placing solar panels on homes, businesses, and community facilities, Bangladesh can create a distributed energy network that reduces pressure on the centralized grid. This distributed model helps mitigate the strain on existing infrastructure, minimizes transmission losses, and reduces the likelihood of widespread power outages.

 

  1. Rural Electrification: Solar energy holds significant potential for bringing electricity to rural areas that currently lack access to reliable power. Off-grid solar solutions, such as solar home systems and mini-grids, can provide these communities with a dependable and clean source of energy. This electrification enhances education, healthcare, and economic opportunities, fostering development and improving the overall quality of life.

 

  1. Climate-Friendly: Solar power is environmentally friendly, producing no greenhouse gas emissions or harmful pollutants during operation. By transitioning to solar energy, Bangladesh can reduce its carbon footprint, contribute to global climate goals, and mitigate the impacts of climate change—a critical aspect considering the nation’s vulnerability to rising sea levels and extreme weather events.

 

Solar energy is not only a solution to the current energy crisis but also a catalyst for sustainable development, economic growth, and environmental protection in Bangladesh. By harnessing its abundant solar resources and implementing innovative solar solutions, the country can bridge the energy gap, enhance energy security, and pave the way for a brighter, cleaner, and more prosperous future for all its citizens.

 

Reducing Dependence on Fossil Fuels:

The transition from fossil fuels to clean and renewable energy sources, such as solar power, is of paramount importance in the quest for a sustainable and resilient future. This shift not only addresses the pressing challenges of climate change but also brings a multitude of positive impacts to the environment, public health, and economic prosperity.

 

First and foremost, clean and renewable energy sources like solar power significantly reduce carbon emissions, a primary driver of global warming and climate change. Fossil fuels, when burned for energy, release greenhouse gases, contributing to the warming of the planet. In contrast, solar power generates electricity without emitting harmful pollutants or greenhouse gases, making it a crucial component in global efforts to mitigate the impacts of climate change. By transitioning to solar energy, nations can substantially reduce their carbon footprint, play an active role in meeting international climate goals, and preserve the environment for future generations.

 

Furthermore, the adoption of solar power leads to improved air and water quality. Traditional fossil fuel-based energy production results in air pollution, releasing harmful particulates, sulfur dioxide, nitrogen oxides, and other pollutants. These pollutants have detrimental effects on human health, causing respiratory illnesses and other medical conditions. Solar power, being clean and emission-free, eliminates these harmful air pollutants, contributing to better public health outcomes and reducing the burden on healthcare systems.

 

Solar energy also presents a significant opportunity to minimize water consumption in energy production. Unlike fossil fuel power plants, solar panels do not require vast amounts of water for cooling purposes. This is especially crucial in regions facing water scarcity, where traditional energy production competes with essential water needs for agriculture, drinking, and sanitation.

 

Economically, the transition to solar power creates new job opportunities, stimulates local industries, and enhances energy security. The solar industry, spanning manufacturing, installation, maintenance, and research, employs a diverse workforce. As solar technology advances and becomes more affordable, the demand for skilled professionals in the sector grows, fostering economic growth and innovation. Moreover, reliance on domestic renewable energy sources like solar reduces a nation’s dependence on imported fossil fuels, enhancing energy security and insulating the economy from volatile global energy markets.

 

Transitioning from fossil fuels to clean and renewable energy sources, especially solar power, is a critical step towards a sustainable, low-carbon future. By reducing greenhouse gas emissions, improving air quality, conserving water resources, creating jobs, and bolstering energy security, solar energy offers a transformative solution with far-reaching positive impacts on the environment, public health, and the economy. As countries worldwide make this transition, they not only safeguard the planet but also reap the benefits of a cleaner, healthier, and more prosperous tomorrow.

 

Resilience to Natural Disasters:

Solar energy has the remarkable potential to provide decentralized and resilient energy solutions, particularly in areas that are susceptible to frequent cyclones and flooding, as is the case in many regions of Bangladesh. By harnessing the power of the sun, these communities can gain access to reliable, clean, and locally generated electricity, which offers several significant advantages:

  1. Decentralized Generation: In disaster-prone regions, having a centralized energy grid makes the power supply vulnerable to disruptions from natural disasters. When traditional power sources fail due to damage to power lines or other infrastructure, entire communities can be left without electricity. Solar energy, however, allows for decentralized generation. By installing solar panels on homes, schools, hospitals, and other essential facilities, each unit becomes a mini power plant, reducing the reliance on a single point of failure and enhancing the overall resilience of the energy system.

 

  1. Off-Grid Solutions: Solar energy systems can operate off-grid, which means they’re not dependent on a central power distribution network. In areas where the grid may be unreliable, such as during and after cyclones or flooding, off-grid solar systems continue to provide electricity. This ensures that critical services, such as emergency communication, medical facilities, and water pumping, remain operational even in the aftermath of a disaster, contributing to faster recovery and relief efforts.

 

  1. Minimal Infrastructure Vulnerability: Traditional power infrastructure, including power lines and substations, is susceptible to damage during extreme weather events, such as cyclones and flooding. Solar panels, on the other hand, have minimal physical infrastructure that can be damaged. They are designed to withstand a range of weather conditions and can be easily secured or removed when a severe event is anticipated, reducing vulnerability.

 

  1. Quick Deployment and Versatility: Solar energy systems can be rapidly deployed, making them a practical solution for disaster-prone areas. Portable solar panels, solar chargers, and solar-powered batteries can be used for emergency lighting, mobile charging, and powering essential equipment. Solar solutions are versatile and adaptable, making them invaluable during and after a disaster when access to energy is critical.

 

  1. Sustainable Recovery: In the wake of a natural disaster, the traditional energy grid may take a long time to be fully restored, causing extended periods of disruption. Solar energy, however, can help expedite the recovery process. By providing immediate access to electricity, solar systems empower communities to start rebuilding, maintain communication, and engage in recovery activities without waiting for grid restoration.
Green Energy

Green Energy

In regions prone to cyclones and flooding, solar energy represents not just a source of power but a lifeline. By embracing decentralized and resilient solar solutions, communities can become more self-reliant, better prepared for disasters, and equipped to overcome the challenges posed by frequent natural events. Solar energy’s capacity to provide clean, accessible, and adaptable electricity in these areas contributes to a more resilient, sustainable, and disaster-ready future.

 

Government Initiatives:

The government’s policies, incentives, and initiatives play a crucial role in promoting the adoption of solar energy, especially in countries like Bangladesh, where the need for clean and sustainable energy solutions is pressing. One notable initiative in Bangladesh is the “Solar Home System” (SHS) program, which has been instrumental in driving solar energy adoption at the grassroots level. This program, launched in the early 1990s, aims to provide clean and affordable electricity to rural households that are not connected to the national grid.

 

Key Features of the Solar Home System Program:

  1. Affordability: The SHS program makes solar energy affordable for rural households by offering financing options and subsidies. Families can pay for the solar system in installments, making it accessible to low-income communities.

 

  1. Community-Based Distribution: The program involves local entrepreneurs who distribute, install, and maintain solar home systems. This not only generates local employment but also ensures that users have access to timely support and maintenance.

 

  1. Improved Quality of Life: By providing electricity to households that previously relied on kerosene lamps or had no access to electricity at all, the program significantly improves the quality of life. It enables better lighting for studying, extended productive hours, access to information through radios and mobile phones, and refrigeration for storing perishable goods.

 

  1. Environmental Benefits: The widespread adoption of solar home systems helps reduce the reliance on traditional fuels, such as kerosene, which emit harmful pollutants and contribute to indoor air pollution. This has positive implications for public health and the environment.

 

  1. Government Support: The Bangladeshi government, along with support from various development organizations and partnerships, has played a vital role in the expansion of the SHS program. Financial incentives, subsidies, and policy support have been instrumental in its success.

 

  1. Scale and Impact: The SHS program in Bangladesh has achieved significant scale, with millions of solar home systems installed across rural areas. This has made a substantial impact on rural electrification, demonstrating the potential of solar energy to address energy access challenges.

 

Beyond the Solar Home System program, the Bangladeshi government has taken steps to promote renewable energy adoption on a larger scale. It has set ambitious renewable energy targets, established feed-in tariffs for solar power, and introduced policies to encourage private investment in the sector. These efforts align with the country’s commitment to achieving sustainable development goals and reducing greenhouse gas emissions.

 

The government’s policies, incentives, and initiatives, such as the Solar Home System program, have been pivotal in driving solar energy adoption in Bangladesh. They have not only expanded access to clean electricity but have also created economic opportunities, improved environmental conditions, and paved the way for a more sustainable energy future for the nation.

 

Off-grid Solutions:

Off-grid solar installations hold tremendous potential, especially in remote or off-the-grid areas, to revolutionize the lives of rural communities. These installations provide clean, reliable, and decentralized energy solutions that can address multiple challenges faced by rural regions, leading to significant improvements in various aspects of life:

  1. Electrification: Off-grid solar systems bring much-needed electricity to communities that lack access to the national grid. This electrification has a transformative impact, providing households with lighting, powering appliances, and enabling children to study in the evenings, thereby extending productive hours and improving overall quality of life.

 

  1. Education: Access to electricity from off-grid solar systems enhances educational opportunities. Children can study at night, schools can operate effectively, and educational resources, such as computers and projectors, can be used, improving the quality of education in rural areas.

 

  1. Healthcare: Off-grid solar installations can power healthcare facilities, ensuring uninterrupted services. Refrigeration for vaccines and medical supplies, lighting for surgeries, and the ability to charge essential medical equipment all contribute to better healthcare access and outcomes in rural communities.

 

  1. Economic Development: Reliable energy enables small businesses to operate, such as charging stations for mobile phones, refrigeration for small shops, and workshops for craftspeople. These economic activities empower rural communities, create job opportunities, and stimulate local economies.

 

  1. Clean Energy Transition: Off-grid solar installations reduce reliance on traditional fuels like kerosene or diesel generators, which can be expensive and harmful to health and the environment. The transition to clean energy has direct health benefits, improving indoor air quality and reducing the risk of respiratory illnesses.

 

  1. Resilience to Disasters: In areas prone to frequent power outages or natural disasters, off-grid solar systems provide resilience. When the main power grid fails, these systems continue to provide electricity, supporting emergency communication, maintaining essential services, and aiding disaster response efforts.

 

  1. Reduced Energy Poverty: Off-grid solar empowers rural communities to lift themselves out of energy poverty. By giving them the tools to generate their electricity, communities become more self-reliant, less dependent on centralized energy sources, and better equipped to meet their energy needs sustainably.

 

  1. Environmental Benefits: Off-grid solar installations generate clean energy from a renewable source, reducing carbon emissions and contributing to a more sustainable energy future. This environmental benefit is particularly valuable in rural areas, where ecosystems and natural resources are essential to livelihoods.

 

Off-grid solar installations have the potential to bring about a holistic transformation in the lives of rural communities. They provide essential services, improve education and healthcare, stimulate economic growth, enhance resilience, and contribute to a cleaner environment. As the technology becomes more accessible and affordable, the impact of off-grid solar on rural development continues to expand, offering a pathway to a brighter and more sustainable future for those who need it most.

 

Solar Industry Growth:

The solar industry in Bangladesh holds significant untapped potential, capable of driving job creation and stimulating robust economic growth. As the nation recognizes the urgency of transitioning to clean and sustainable energy sources, solar power emerges as a key player, offering numerous opportunities for both skilled and unskilled labor across various sectors:

  1. Solar Installations and Maintenance: The expansion of solar energy infrastructure requires a skilled workforce to install, maintain, and service solar panels, inverters, and associated equipment. Electricians, technicians, and engineers are in high demand to ensure the efficient operation of solar systems.

 

  1. Research and Development: Investing in solar technology research and development can lead to innovations in efficiency, storage, and system integration. This research not only drives technological advancement but also creates job opportunities for scientists, engineers, and researchers.

 

  1. Manufacturing: As the demand for solar panels and related components increases, Bangladesh has the potential to establish a vibrant solar manufacturing industry. This includes the production of solar cells, panels, batteries, and other essential equipment, leading to new factories and job openings in manufacturing and assembly lines.

 

  1. Sales and Distribution: The solar industry requires a network of professionals to market, distribute, and sell solar products and services. This includes salespeople, distributors, and dealers who can reach both urban and rural markets, ensuring the widespread adoption of solar technology.

 

  1. Solar Entrepreneurship: The growth of the solar industry creates an environment conducive to entrepreneurial ventures. Individuals and small businesses can enter the market by establishing solar installation and maintenance services, solar-powered product stores, or even designing innovative solar applications for local needs.

 

  1. Training and Education: A skilled workforce is essential for the sustainable growth of the solar industry. Vocational training programs and educational institutions can offer courses on solar technology, creating a pool of skilled workers and technicians ready to meet the industry’s demands.

 

  1. Ancillary Services: The solar industry generates opportunities in supporting services such as financing, insurance, quality control, and project management. These services are essential for the efficient deployment and operation of solar projects.

 

The growth of the solar industry not only generates direct job opportunities but also has a multiplier effect on the economy. It stimulates demand in related sectors, such as manufacturing, construction, logistics, and research, thereby creating a ripple effect of economic activity. Additionally, solar energy reduces the country’s dependence on expensive imported fossil fuels, resulting in cost savings for both consumers and industries, which can be reinvested into other sectors of the economy.

 

Furthermore, the solar industry aligns with the global trend towards sustainable development, making Bangladesh an attractive destination for international investments, collaborations, and partnerships in renewable energy projects.

 

The growth of the solar industry in Bangladesh has the potential to foster a thriving job market, stimulate economic growth, and position the nation as a leader in sustainable energy. By investing in solar infrastructure, promoting innovation, and fostering a skilled workforce, Bangladesh can harness the full benefits of this dynamic and rapidly expanding sector while addressing pressing energy and environmental challenges.

Clean Energy

Clean Energy

Solar Innovations:

Local innovations in Bangladesh are harnessing the power of solar energy to address critical challenges and improve various aspects of daily life. These innovative applications leverage solar power’s accessibility and sustainability, providing solutions that benefit communities, especially in rural and off-grid areas. Here are a few notable examples:

  1. Solar-Powered Water Pumps for Agriculture: Agriculture is the backbone of Bangladesh’s economy, and water availability is crucial for successful crop cultivation. In many rural areas, access to reliable electricity for traditional water pumps is limited. Solar-powered water pumps offer a game-changing solution. These pumps use solar energy to draw water from wells or other sources, providing a consistent and cost-effective irrigation method. By reducing dependence on fossil fuels and grid-based electricity, these pumps contribute to sustainable agriculture, higher crop yields, and increased farm incomes.

 

  1. Solar-Powered Mobile Charging Stations: In a country with a significant mobile phone penetration rate, access to charging facilities is essential, particularly in areas with unreliable or no grid power. Solar-powered mobile charging stations, often set up in local shops or community centers, provide a lifeline for keeping phones charged, enabling communication, access to information, and mobile banking services. These charging stations bridge the digital divide in remote communities and enhance connectivity.

 

  1. Solar-Powered Home Lighting Systems: Solar home systems (SHS) have been a transformative innovation in Bangladesh, as mentioned earlier. These systems provide affordable and reliable lighting for rural households that are not connected to the national grid. They typically include solar panels, batteries, and LED lights. SHS are essential for extending productive hours, enabling children to study at night, reducing dependence on kerosene lamps, and improving overall living conditions.

 

  1. Solar Dryers for Agriculture: In the agricultural sector, solar dryers have gained popularity for preserving and drying crops such as fruits, vegetables, and fish. These solar-powered devices use the sun’s energy to remove moisture from produce, allowing farmers to extend shelf life, reduce post-harvest losses, and fetch better prices for their products in the market.

 

  1. Solar-Powered Community Water Purification Systems: Access to clean drinking water is a vital issue in many parts of Bangladesh. Solar-powered community water purification systems use solar energy to power water purification processes, ensuring that communities have access to safe and clean drinking water. These systems are particularly beneficial in areas prone to contamination and where traditional purification methods are challenging to implement.

 

  1. Solar-Powered Electric Rickshaws (E-Rickshaws): As a sustainable alternative to traditional cycle rickshaws, solar-powered electric rickshaws, or “E-Rickshaws,” are gaining popularity in urban and peri-urban areas. These vehicles are equipped with a small solar panel on the roof, providing power for the electric motor. E-Rickshaws offer an environmentally friendly transportation option while reducing the physical strain on rickshaw pullers.

 

These local innovations showcase Bangladesh’s ability to adapt solar energy to meet diverse needs, improving livelihoods, enhancing economic opportunities, and contributing to a more sustainable future. By nurturing such innovative solutions, Bangladesh can further leverage its solar potential to address critical challenges and drive positive change.

 

Community Engagement:

Community-based solar projects hold immense potential in Bangladesh, fostering energy self-sufficiency, promoting local participation, and contributing to sustainable development. These projects empower communities to take charge of their energy needs, creating a sense of ownership and shared benefits. Here’s how community-based solar initiatives work and their impact in Bangladesh:

  1. Shared Investment and Ownership: In community-based solar projects, local residents come together to pool their resources, both financial and human, to install solar energy systems. By sharing the investment, the financial burden on individual households is reduced, making solar technology more accessible.

 

  1. Energy Access for All: One of the primary objectives of these projects is to provide energy access to those who need it most, particularly in off-grid or underserved areas. Community members collectively decide where the solar systems should be installed, ensuring that the energy benefits reach every corner of the community, including schools, health centers, and communal spaces.

 

  1. Income Generation and Cost Savings: Community-based solar projects often generate excess energy, which can be sold back to the grid or used to power income-generating activities. This revenue stream benefits the community, helping to fund maintenance, expand the project, or provide financial support to local initiatives.

 

  1. Enhanced Resilience: In areas prone to power outages, especially during natural disasters, community-based solar projects provide resilience. When the main power grid fails, these systems continue to supply electricity to essential services, such as emergency lighting, communication, and refrigeration, supporting disaster response efforts and community resilience.

 

  1. Skill Development and Empowerment: These projects offer opportunities for local training, skill development, and job creation. Community members can be trained to install, operate, and maintain the solar systems, creating local employment and fostering a sense of empowerment.

 

  1. Environmental Benefits: By transitioning to solar energy, communities reduce their reliance on fossil fuels, leading to lower carbon emissions and contributing to a cleaner environment. This aligns with global sustainability goals and local efforts to combat climate change.

 

  1. Social Cohesion and Community Development: Participation in community-based solar projects builds social cohesion, as residents collaborate on a shared goal. This collaboration can extend beyond the immediate energy benefits, leading to broader community development initiatives and a stronger sense of community identity.

 

  1. Government Support and Partnerships: The Bangladeshi government recognizes the importance of community-based solar projects in rural electrification and sustainable development. Supportive policies, financial incentives, and partnerships with local NGOs, international organizations, or private sector entities can catalyze the growth of such initiatives.

 

In Bangladesh, where close-knit communities are prevalent, these projects align perfectly with the country’s social fabric. They not only address energy access challenges but also empower communities to take charge of their energy future, stimulate local economies, and contribute to a more sustainable and resilient society. By fostering a sense of shared responsibility and reaping the benefits of solar energy together, community-based solar projects play a vital role in shaping a brighter future for Bangladesh.

 

Future Outlook:

The increased adoption of solar energy presents a transformative opportunity for Bangladesh, offering a path towards sustainable development, enhanced energy security, and a significantly reduced carbon footprint. This positive outlook holds the promise of creating a brighter future for the nation and its citizens in several key aspects:

  1. Sustainable Development: Solar energy aligns perfectly with Bangladesh’s pursuit of sustainable development. By harnessing the abundant solar potential, the nation can provide clean, reliable, and affordable electricity to all, regardless of geographic location or income level. This electrification fosters economic growth, improves healthcare and education, empowers rural communities, and bridges the urban-rural divide. Solar-powered water pumps, agricultural innovations, and off-grid solutions empower local economies and create jobs, driving self-sufficiency and prosperity.

 

  1. Energy Security: Solar energy contributes significantly to energy security by diversifying the energy mix and reducing dependence on imported fossil fuels. Bangladesh, with its ample sunlight, can generate a substantial portion of its energy domestically, mitigating the vulnerabilities associated with fluctuating oil prices and geopolitical uncertainties. The decentralized nature of solar installations, especially in off-grid or disaster-prone areas, enhances the resilience of the energy system, ensuring continuity in critical services during times of disruptions.

 

  1. Reduced Carbon Footprint: Embracing solar energy helps Bangladesh make substantial strides in reducing its carbon footprint and combating climate change. The transition away from fossil fuels leads to a significant reduction in greenhouse gas emissions, contributing to global climate goals. As the world grapples with the impacts of rising temperatures and environmental degradation, Bangladesh’s commitment to clean energy sets a positive example, positioning the country as a responsible global citizen in the fight against climate change.

 

  1. Technological Innovation: The increased adoption of solar energy fosters innovation and technological advancements. As the solar industry grows, research and development efforts flourish, leading to improved solar efficiency, energy storage solutions, and smart grid integration. This culture of innovation not only benefits the energy sector but also spills over into other industries, driving economic competitiveness and elevating Bangladesh’s technological standing on the global stage.

 

  1. International Collaboration and Investment: The commitment to solar energy opens doors for international collaboration and investment. Bangladesh’s pursuit of sustainable energy solutions attracts partnerships with global organizations, multilateral development banks, and foreign investors interested in supporting the country’s energy transition. These collaborations bring expertise, funding, and technological know-how, accelerating the deployment of solar projects and amplifying their impact.

 

The increased adoption of solar energy holds immense promise for Bangladesh. It is not just a means of generating electricity; it is a catalyst for sustainable development, energy security, and environmental stewardship. By embracing this clean, abundant, and accessible resource, Bangladesh can shape a prosperous future, where its citizens thrive, the nation leads by example, and a sustainable legacy is secured for generations to come.

 

Harnessing Solar Energy: A Bright Future for Bangladesh: Harnessing Solar Energy: A Bright Future for Bangladesh

*Author’s Short Profile:

business consultant

Md. Joynal Abdin

Mr. Md. Joynal Abdin is a Business Consultant & Digital Marketer based in Dhaka, Bangladesh. He is also Co-Founder & CEO of Bangladesh Trade Center. Previously he served at Dhaka Chamber of Commerce & Industry (DCCI) as Executive Secretary; DCCI Business Institute (DBI) as Executive Director; SME Foundation as Deputy Manager; and the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) as Assistant Secretary.

 

The list of services Mr. Abdin is offering includes but not limited to Business Research and Documentations like Feasibility Study, Project Proposal Preparation, Writing Business Manual, Standard Operating Procedures etc.; Export Market Selection and Product Positioning at Home and Abroad; Buyers-Sellers Matchmaking; Website Development; Search Engine Optimization (SEO); and Social Media Marketing etc.

 

Harnessing Solar Energy: A Bright Future for Bangladesh: Harnessing Solar Energy: A Bright Future for Bangladesh

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