DEV101-- Industrial Sector of Bangladesh--term paper

Industrial Sector of Bangladesh

This is a research paper on the Industrial Sector of Bangladesh

Mr. Rehan AhmedFacilitatorDEV 101Sec 08

3/29/2012

Samiya Yesmin 11304043 Rubayet Rehan 11222035 Lamisa Manzoor 11304072 Protiti Khan 11304018 Rafid Feisal 11236003 D.M. Ashiquzzam 11236004


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Table of Contents

I. Introduction 3

II. Objectives 3

III. Methodology 3

IV. History of the Industrial Sector

4

V. Developments in the past four decades

5

VI.Millennium Development

Goals and the Industrial Sector

9

VII. Challenges faced by the Industrial Sector

11

VIII. Recommendation 13

IX. Conclusion 13

X. References 14


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I. Introduction

We were assigned this group work on the industrial sector of Bangladesh. We were to find facts,

study and analyse the data we could find regarding this topic. We have found out how the industrial

sector was before the liberation war from Pakistan in 1947 and how after the war we faced a lot of

challenges and grew up to be what we are now. This research paper assignment has given us a very

practical insight of the current situation of economical growth related to industrial developments in

Bangladesh.

II. Methodology

We used secondary source research method to do our investigation. All highly reliable sources

were used to gather the data. References of our sources are given at the end of the research paper.

III. Objectives

We did this research with a few objectives in mind. And throughout the study these objectives

helped remind us, our goals. They are:

1. To find out about the history of industrial growth in Bangladesh.


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2. To find and analyse data about the current situation of the industrial sector.

3. To find out future goals and vision.

4. To find out the challenges faced and how to overcome them

And below, you can read about all our findings and analysis regarding them.

IV. History of the Industrial Sector

In 1947, the Indian subcontinent was divided into two parts. One was India and the other one was

Pakistan. Pakistan had two parts. One was West Pakistan and the other one was East Pakistan, which is

now known as Bangladesh. The government of then West Pakistan dominated the people of this country in

different sectors. In the economic sector, the discrimination was the most. Most of the industries of

Pakistan were in this country. However, the profit from them was taken to West Pakistan. The progress in

jute manufacturing started in that period.

Jute manufacturing sector is one of the oldest traditional manufacturing sectors of Bangladesh,

which emerged in erstwhile East Pakistan in the early 1950s. During the1960s and 1970s major share of

the manufacturing sector in national income and manufacturing employment was accounted for by this

sector. Exports of jute and jute goods were the two most important sources of foreign exchange of

Pakistan during the 1960s. The East were subjugated, as all the revenue went to West Pakistan.

In 1971, with the liberation war of 9 months, Bangladesh became independent. As after the war,

the country was left in dire states, the industrial development was very slow. However, Ready Made

Garments (RMG) started during this period. And in this sector, Bangladesh could lay claim to

considerable success. Today garment export is the main source of foreign exchange earnings. Its success

was not necessarily influenced by government policy but essentially by outside forces. It originated in the

1970s when the investors of other South East Asian nations ventured to set up garment factories in

Bangladesh and to work around the export quotas imposed on their native countries by the United States.

In the 1980s, the Pharmaceutical Sector made advancement in Bangladesh. It is one of the most

developed hi tech sector which is contributing in the country's economy. After the circulation of Drug

Control Ordinance - 1982, its development accelerated. During the 80s, other sectors like tea


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manufacturing, leather factories etc also gained importance. In 1990s, sectors like ship breaking, steel,

cement and cold storage goods etc developed and gained momentum. From 2000 to 2012, many industries

started their journey successfully, and contributed to the economic growth of Bangladesh. Among them

are- electronics, glass, aluminium, plastic, cycle, and ceramic etc. industries. To sum up the whole thing,

we can say that after 1971, Bangladesh is slowly and steadily turning its attention to develop its economy,

through industrial development, moving away from the agricultural sector.

V. Developments in the past Four decades

Ready-made garments sector

The ready-made garments industry in Bangladesh (RMG) contains many small to medium garment

factories, both registered and unregistered, that produce garments providing to foreign buying houses. The

export finance from this industry is one of the three major sources of economic growth in Bangladesh.

Ready-made garments had proved to be a successful sector in Bangladesh. The industry initiated in the

late 1970s, expanded heavily in the 1980s and boomed in the 1990s. (Amusing Ocean, 2011). The foreign

trade of RMG from Bangladesh has shown rapid rates of growth over the last decade, currently making

Bangladesh the twelfth largest exporter of garments and it has contributed to about 77% of Bangladesh’s

foreign exchange earnings (Guidebook for European Investors in Bangladesh, 2001, pg.13).

Number OF factories 4000

Number of labour force 3.5 million

Profitability 12.45 billion

Export earnings 76%

Contribution to GDP 10%

Presently there are about 4000 factories for RMG in Bangladesh. The market size of RMG is huge, as can

be seen in the table above. The growth rate is estimated as 21.60% annually. (Amusing Ocean, 2011).

Bangladesh is the second largest garments exporter with a $20 billion industry. Our share is 4.5% in

worldwide garments export. According to the Export Promotion Bureau (EPB), the contribution of RMG


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goods to national export had increased by 1.02% in the fiscal year 2010-2011. During this period, the

contribution of RMG, mainly woven and knitwear, to national export was 78.14% or $17.91 billion

whereas it was 77.12% or $12.50 billion in fiscal year 2009-2010. (The Star, 2011).

Bangladesh has now become a significant RMG supplier to North America and Europe. The textiles have

improved in quality to meet their standards, while still being affordable. The industry has created

sufficient jobs in various support industries, as well as creating job opportunities for women. The

relatively cheap cost of labour in Bangladesh, cheaper technology and machines used and the fact that

women labour are willing to work at fewer wages than men in this sector has enabled massive growth and

development in this industry.

The industry plays a significant role in terms of employment generation. Approximately 2 million workers

are directly and above 10 million inhabitants are indirectly associated with RMG industry. Not only is the

economic contribution apparent, but the expansion of RMG has introduced more than 1.12 million women

to the work force. RMG’s contribution in terms of GDP is also highly commendable; it has reached 13%

of GDP in present days, which was formerly only 3% in 1991. Ever since, the industry has helped in

social development, women empowerment and poverty alleviation (Amusing Ocean, 2011).


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1970-1980 1980-1990 1990-20100

10

20

30

40

50

60

70

80

The graph shows the growth and decline of the respective industries in Bangladesh:

RMG Food Industry HandicraftsJute Goods Pharmaceuticals

Years

% o

f for

eign

exc

hang

e ea

rnin

gs

Source: Compiled from various sources (Bakht, Z. 2001, Export Promotion Bureau, Ministry of Commerce and

Bangladesh Bank data).

Food Industry

One of the other flourishing industry in Bangladesh, is the food industry. It consists of processed, frozen

and manufactured foods, which are exported abroad. One of the biggest components of this industry is the

export of frozen fishes and shrimps, which is now renowned worldwide. From the 70s-80s this industry

contributed to 5.6% of Bangladesh’s foreign exchange earnings, later in 80s-90s in grew to 8.3% and has

doubled to 16.42% in the last decade. This industry shows a lot of promise with its exponential growth.

Handicrafts


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Over the last four decades one of the major growths was in the industry of handicrafts. The fashion

industry of Bangladesh is based on handicrafts. Aarong being one of the pioneers in handicrafts has also

contributed to the popularity of hand made products and also to its export. During 70’s and 80’s the export

of handicrafts was 8.2%. This increased during 90’s to 17.8%. and now it has reached to 29.4%

Jute

One of the largest industries that had once belonged to Bangladesh alone was the jute industry. Jute being

a natural, environment friendly, renewable and bio-degradable fibre has always been in demand all over

the world. This industry was set up in 1971 and it had flourished rapidly. Jute was a major export material

and had brought a lot of foreign currency into our economy even during that period of time with the help

of the erstwhile government of that time. After the liberation war, that particular assistance was lost as the

government was giving more effort for the rehabilitation of the country. That was when the decline had

initiated but the jute industry tackled the situation well by making new policies and still ensured profit.

Then in the 80’s some of the jute industries were privatized which led to further decline even though more

policies were imposed. In the context of recent years, export of jute has fallen drastically due to fall in

production and inefficient marketing system. We can consider it to be extinct if compared to the amount

of profit that they had once contributed with what they provide now. India had taken over the market of

jute with better quality products and better marketing manoeuvres. In conclusion we can say that the jute

industry should be re-vitalized if possible and the government should take urgent initiatives for that

purpose as soon as possible. (Rab, 2011, The daily star, pg 7).

Pharmaceutical Industry

Pharmaceutical sector is one of the most advanced industries of Bangladesh. The Drug Control Ordinance,

1982 was one of the major factors resulting in the acceleration of this sector. This ordinance helped

organize the pharmaceutical sector and reach an international level of acceptance. The professional

knowledge and innovative ideas of the people working under this sector is one of the important

contributions for its success. It is because of the rapid development of this sector that it is now providing

97% of the local medicine requirement. Not only is it fulfilling the requirements locally but also

internationally, including the European markets (Wikipedia, 2012). It is the second largest industry


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contributing to the foreign exchange earning of Bangladesh (Eskayef, 2012). There are two organizations,

one government, which is the Directorate of Drug Administration and another one semi-government,

Pharmacy Council of Bangladesh which controls the practice of pharmacy in Bangladesh. From the graph

above, we can see the fast growing economical contribution this industry has.

VI. Millennium Development Goals and the Industrial Sector

The Millennium Development goals (MDGs) are eight international development goals that all the

193 United Nations member states and at least 23 international countries, including Bangladesh, have

agreed to achieve by the year 2015.

The goals are as follows:

Eradicate extreme poverty and hunger Achieve universal primary education Promote gender equality and empower women


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Reduce child morality Improve maternal health Combat HIV/AIDS, malaria and other diseases Ensure environmental sustainability Develop global partnership or development

The industrial sector of Bangladesh has come a long way since the last four decades. The economic

growth and GDP per capita has increased a lot due to the industrial sector of Bangladesh. The main

contributors are jute, ready -made garments (RMG), tobacco, pharmaceuticals, ship building and ship

breaking, food, shrimp and fisheries industries. Increased employment opportunities offered by these

industries helps to achieve goal number one which is eradication poverty and hunger.

Ready-made Garments Industry (RMG)

The garments industry plays a vital role for the industrial sector of Bangladesh. Most of the export

revenue comes from this industry. It has also helped us in achieving the Millennium Development

Goals, such as goal one and three. This sector employs directly and indirectly a large number of

people. In 1999, the number was 1.4 million, further 200,000 were employed indirectly. 80% of the

workers are female which has led to empowerment of women.

Jute Industry

In the first two decades jute mills played a major role in the industry of Bangladesh. There was a

high demand for Bangladeshi jute around the world during the 70s and 80s. Adamjee jute mill was the

biggest among them all. These industries employed a number of people. So if we relate it with goal

number one of the MDG it helped to reduce poverty by employing people. However, in the 90s when

the demand for jute started to fall, most of the mills were shut down including Adamjee. The closure

of the mills acted as an obstacle in achieving the MDGs due to the unemployment.

Pharmaceuticals Industry

The pharmaceutical industry started booming from 1982 and till now it plays a crucial role for the

industrial sector. If we relate it with the MDGs it has helped to achieve goal number one, three, four,

five and six. The industry employs a significant number of people, a large portion of which are

women, thus also resulting into women empowerment. Additionally, this industry produces almost all


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the medicines required in Bangladesh at a cheaper cost, therefore improving the health sector by

combating diseases, reducing infant and maternal mortality rate.

Tobacco Industry

Bangladesh now not only produces tobacco but also locally manufactures cigarettes. This industry

also employs a lot of people which helps us to achieve goal number one of the MDG. But on the other

hand, it acts as a drawback as well, because smoking is injurious for our health.

Food, Shrimp and Fisheries Industries

This industry helps us to eradicate poverty and hunger by direct means which is goal one of the

MDG.

Ship-building and breaking Industry

The upcoming industry of Bangladesh is ship- building and ship breaking industry. It also helps us

to achieve goal one by employing people.

The industries are helping us to achieve the MDGs in a number of ways as mentioned above. They

have also been working towards ensuring environmental sustainability by reducing pollution and using

environmental friendly equipment, such as ETP.

VII. Challenges faced by the Industrial Sector

The challenges the industry sector of Bangladesh is facing are numerous and handling some of them

should be set as a priority. Challenges are faced by various sectors such the garment industry, shrimp

and fisheries, tobacco and so on.

Shrimp industry: Salim (2008) mentions that the shrimp industry of Bangladesh has got several

challenges. The main concern about this particular industry is the working environment i.e. where the

shrimp is being produced and also the environmental impacts as well. Thus, higher ethical standards are

demanded. According to “The True Cost of Shrimp”, published by a US based NGO- the Solidarity

Centre- the labour conditions are indecent and not appropriate. Another problem which this industry


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faces is that most of the shrimps are not resistant to diseases and this eventually leads to a decline in the

yield. Another concern is the sustainability of shrimp production.

Pharmaceutical industry: The major challenge faced by this particular blooming industry is that

the demand of foreign medication is higher than the local ones. Oversee markets are quite

overpowering and thus people tend to buy foreign medicines. In Bangladesh we don't have any

recognized government organisation or contractual research organisation like universities or private

institutions to conduct bioequivalence study or clinical trials. Hence, this does not allow our

pharmaceutical products to be recognized abroad.

Tobacco industry: The main challenge the tobacco industry faces is the awareness of the health

impacts of cigarette smoking. This eventually leads to a decline in demand of tobacco and cigarettes.

After planting a large amount of tobacco plants in a particular area the top soil gets damaged. As a

result, many people get reluctant to grow tobacco and this creates a problem for the tobacco industry as

it causes a decline in tobacco production.

RMG sector: The main challenge this sector faces is the labour unrest and poor infrastructure

which is related to lack of electricity.

Let us now consider the challenges faced by the industry sector in general.

Corruption: The most vital drawback of our country is corruption. If one has to establish a new

industry or firm then he or she has to pay the government officials a certain amount of money just to

initiate construction. Once completed, the bribe needs to continue otherwise the officials would hamper

the whole production process and thus result in closing of that firm. This is a major problem because a

huge capital is required to start a business. Paying bribes also causes a fall in the owner’s profit.


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Labour: There is a lack of trained workers in this country. Thus, there is a decline in the

efficiency of the company. This is because most of the people of our country are illiterate. The

companies also need to provide training (apprenticeship) to these labourers and hence quite an amount

of money and time is spent on them. This challenge is faced by every company or firm in Bangladesh.

Political instability: This is a major hindrance towards the advancement of the industry sector

of Bangladesh. Frequent strikes result in disruption of daily business. . This hampers the smooth

running of industries, they are unable to procure raw materials in time hence their production and even

transportation is delayed. The politicians only think about themselves. As such, our industry cannot

progress and compete with the outside world.

Shortage of electricity: without power industrial units cannot operate properly. In order to

continue production, factories opt for own power generation which is expensive.

VIII. Recommendation

Industry sector is one of the major sectors for income source in Bangladesh. There were lots of

flaws in this sector but Bangladesh could come up with phenomenal results for the enrolment of people

and to come out Bangladesh from poverty though this Industry sector. Government had taken lots of

steps for building up the Industry sector; they even thought to build up a city only for the industries, so

that the people can easily get into the job site easily. Even after the tremendous and drastic growth of

Bangladesh in different fields of industries Bangladesh is still witnessing some deficiency which is

proving as an obstacle for the further growth of Bangladesh industries. Those include non-

professionally trained employees, corruption, and of course poor governance such as lack of

accountability, transparency, predictability and proper public participation. Apart from that due to the

overtime spend on garment industries people are not socializing and hence creating a rift amongst the


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known people. If these all problems could be solved through our participation then Bangladesh could

become one of the leading industrialized countries. So we all have to be aware of taking every step to

build this sector and to help us for our betterment to increase the GDP in order to achieve MDG.

IX. Conclusion

Bangladesh is a river based country. The culture and the language they bear is one significant

among the world. The evolution they are bringing among the world is phenomenal. The industrial

sector in Bangladesh is a huge contributor for the country’s economic growth and is also becoming a

role model for the world. The labour cost in our country is one of the least in the world. That is why

maximum companies have given us offer to make their products and in this way we are increasing our

GDP growth. We all have to work hard and let our Bangladesh to make beautiful in every aspect. And

this research paper assignment has given us a very practical insight of the current situation of

economical growth related to industrial developments in Bangladesh. And has made us very proud to

call it our country.

X. References

1. http:// www.infor bd.com/Bangladesh/industry

2. National Policy Forum, Dhaka: 20-22 August, 2001


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3. http://boi.gov.bd/about-bangladesh

4. Moazzem, K.G., Rahman, Tariqur and Sobhan, Abdus (2009), “Jute Manufacturing

Sector of Bangladesh”, Centre for Policy Dialogue

5. Bangladesh Board of Statistics

DEV101-- Industrial Sector of Bangladesh--term paper

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