Saga of the state-run jute mills

The 25 state-run jute mills should have been sent to private hands decades ago, a statement critics may brush aside though. The fact is, these mills started incurring losses only after they were put in government hands for multiple reasons.

Finally, the long story of state-run jute mills came to a grinding halt in Bangladesh on 2 July 2020 as the government formally announced it is not possible to make the 25 factories profitable with ramshackle machinery and ‘traditional management practices.’
In the process, the axe fell on some 25,000 jobs, prompting debates and protests over the move to run the factories under ‘private-public partnership’, although the terms and conditions are not spelt out yet.   
Right now a total of 24,866 workers of these mills will be given 5,000 crore taka ($590 million) in arrears and job-cut benefits through ‘golden handshakes’. The workers indeed were involved for decades in the trade of jute, once dubbed as the golden fibre not only for its colour of gold but also for its ubiquitous spread in the bygone days. These mills chiefly manufactured hessian, jute yarn and carpet backing cloth.  
Immediately after the country’s independence, BJMC (Bangladesh Jute Mills Corporation) was founded in 1972 “with the aim and objective of controlling, supervising and coordinating the activities of jute mills”. In the initial days, there had been some 73 jute mills, many of which were placed under the state behemoth through wholesale nationalisation of privately-run factories.

Over the past 48 years, the state failed to run the factories, once profitable under private ownership and management, incurring a whopping loss to the tune of Tk 10,000 crore. On the other hand, the number of factories was reduced to 26 with one industrial unit being closed.

Nevertheless, some 250 private jute mills employing around 300,000 workers are contributing to 95 percent jute goods produced in Bangladesh. In the fiscal year 2017–18, the jute sector brought home 1.02 billion US dollars, up by 6.56 per cent year-on-year, EPB figures revealed.

Bangladesh exports 4.6 lakh tonnes of jute products every year, controlling 62 per cent of the global jute market. The total demand for jute products in the international market is estimated at 7.5 lakh tonnes.

Earlier in the month-end of June in 2002, the then-government led by the BNP, the Awami League’s arch rival, closed down the country’s first and the largest state-owned Adamjee Jute Mills to cut the increasing losses. Adamjee Jute Mills, established in 1950 on the bank of the Shitalakshya in Narayanganj under private management with active state assistance, used to employ 24,916 workers alone at the time of its closure. The government earmarked 300 crore taka ($51.7 million) for the ‘golden handshake’ programme.

An export processing zone, Adamjee EPZ, has been set up on over 200 acres of land that used to house the iconic Adamjee Jute Mills, generating 62,200 jobs as of 2018-19 data.
At the time of partition of India, and Bengal as well, in 1947 “there were 108 jute mills in Bengal but all of them fell within the territory of India”. This forced the government of new state Pakistan to encourage entrepreneurs to “come forward with proposals for establishment of jute mills”, according to the authoritative Banglapedia.

Jute manufacturing sector, one of the oldest traditional manufacturing sectors of Bangladesh, emerged in erstwhile East Pakistan in the early 1950s, said a study by CPD (Centre for Policy Dialogue), adding that during the 1960s and 1970s major share of the manufacturing sector in national income and manufacturing employment was accounted for by this sector.

Coming back to the government’s latest move to apparently privatise the state-owned jute mills, it is a welcome decision, although critics term the closure as a bad proposition especially at a time when the economy is going through rough patches on the back of novel coronavirus-induced recession. Surely, the government can take care of the people affected by the job cuts by different means, as it is doing in the case of private sector readymade garment factories.

The 25 state-run jute mills should have been sent to private hands decades ago, a statement critics may brush aside though. The fact is, these mills started incurring losses only after they were put in government hands for multiple reasons. 
Certainly, these factories can be made profitable by looking at these multiple causes. However, the cost-effective solution to take the industrial units to black from red is privatisation.

Indeed, in a liberalised economy the government’s job is to facilitate private sector to create jobs, its role is to oversee the rules and regulations for making a level-playing field for businesses, while its goal is not to do business.
Slim is beautiful, slim is smart: the size of the government needs to be reduced to make it efficient, competent, and proficient.   
In a country like Bangladesh it is impossible for even angels to run the state-owned business organasiations because of the perennial flawed systems. Take a few examples from a long list: Bangladesh Jute Mills Corporation, Bangladesh Sugar & Food Industries Corporation, Bangladesh Telecommunications Company Limited, Teletalk Bangladesh Ltd and Biman Bangladesh Airlines Ltd. All these state-run business entities are headed by bureaucrats, the non-technical or non-business persons who often come and go, “strut and fret their hour upon the stage, and then are heard no more”.

Despite being state entities, Telenor, the Norwegian majority state-owned multinational telecommunications company, and Emirates, the state-owned United Arab Emirates airline, are successful examples as the state actors have practised ‘delegation and non-interference’ policy for the business organisations.

Without shedding the existing bulky manpower and changing management structures, the downslide of Bangladesh’s state-owned enterprises cannot be stopped, full stop. 
To speak of the jute industry, it holds huge potential given the fact that jute goods are bio-degradable.

According to a 2012 study of International Jute Study Group, the annual demand of shopping bags is 500 billion (5,000 crore) pieces worldwide. 
It is also estimated that the market size of jute bag will hit $2.5 billion by 2021, while the market size of home textiles will be $130 billion in the same time.

Diversified products such as pulp and paper, particle boards and apparels are still displayed in research centres, failing to make inroad into the mainstream product market.   
Maqsudul Alam’s success of decoding the jute plant genome, thereby heralding an era of finer fibre, high yielding and weather tolerant varieties, could not be harvested on a larger scale to say the least.

Here lies the role of the government in terms of research and development to help private businesses grow, creating employment in the process.
With operational duties gone for good with closure of state-run jute mills, the government now needs to play the role of a facilitator, strategist and catalyst.

The writer is the Executive Editor of The Independent. E-Mail: [email protected]

 

More Articles by Shamim A. Zahedy:

Of friends and foes in politics (26-06-2020)

The unfolding suspense around Masud Rana (18-06-2020)

Moment of truth for AHM Mustafa Kamal (13-06-2020)

Musings on the pandemic: Lessons learnt from Covid-19 (07-06-2020)

George Floyd and beyond (03-06-2020)

Protect purity of every type of media (30-05-2020)

Disturbing disregard for social distancing (24-05-2020)

Interoperability is missing in business (23-05-2020)

“Education divide” in Bangladesh (21-05-2020)

Time to seek alternative financing for news media? (15-05-2020)

Govt needs to be techie to reach out to people in need of aid (09-05-2020)

Handcuffs for journalists (06-05-2020)

New business model required for news media in the post-virus era (03-05-2020)

An apology for print newspapers (03-04-2020)

Thank you, readers (26-03-2020)

 

 

 

Saga of the state-run jute mills

The 25 state-run jute mills should have been sent to private hands decades ago, a statement critics may brush aside though. The fact is, these mills started incurring losses only after they were put in government hands for multiple reasons.

Finally, the long story of state-run jute mills came to a grinding halt in Bangladesh on 2 July 2020 as the government formally announced it is not possible to make the 25 factories profitable with ramshackle machinery and traditional management practices. In the process, the axe fell on some 25,000 jobs, prompting debates and protests over the move to run the factories under private-public partnership, although the terms and conditions are not spelt out yet. Right now a total of 24,866 workers of these mills will be given 5,000 crore taka ($590 million) in arrears and job-cut benefits through golden handshakes. The workers indeed were involved for decades in the trade of jute, once dubbed as the golden fibre not only for its colour of gold but also for its ubiquitous spread in the bygone days. These mills chiefly manufactured hessian, jute yarn and carpet backing cloth. Immediately after the countrys independence, BJMC (Bangladesh Jute Mills Corporation) was founded in 1972 with the aim and objective of controlling, supervising and coordinating the activities of jute mills. In the initial days, there had been some 73 jute mills, many of which were placed under the state behemoth through wholesale nationalisation of privately-run factories. Over the past 48 years, the state failed to run the factories, once profitable under private ownership and management, incurring a whopping loss to the tune of Tk 10,000 crore. On the other hand, the number of factories was reduced to 26 with one industrial unit being closed. Nevertheless, some 250 private jute mills employing around 300,000 workers are contributing to 95 percent jute goods produced in Bangladesh. In the fiscal year 201718, the jute sector brought home 1.02 billion US dollars, up by 6.56 per cent year-on-year, EPB figures revealed. Bangladesh exports 4.6 lakh tonnes of jute products every year, controlling 62 per cent of the global jute market. The total demand for jute products in the international market is estimated at 7.5 lakh tonnes. Earlier in the month-end of June in 2002, the then-government led by the BNP, the Awami Leagues arch rival, closed down the countrys first and the largest state-owned Adamjee Jute Mills to cut the increasing losses. Adamjee Jute Mills, established in 1950 on the bank of the Shitalakshya in Narayanganj under private management with active state assistance, used to employ 24,916 workers alone at the time of its closure. The government earmarked 300 crore taka ($51.7 million) for the golden handshake programme. An export processing zone, Adamjee EPZ, has been set up on over 200 acres of land that used to house the iconic Adamjee Jute Mills, generating 62,200 jobs as of 2018-19 data. At the time of partition of India, and Bengal as well, in 1947 there were 108 jute mills in Bengal but all of them fell within the territory of India. This forced the government of new state Pakistan to encourage entrepreneurs to come forward with proposals for establishment of jute mills, according to the authoritative Banglapedia. Jute manufacturing sector, one of the oldest traditional manufacturing sectors of Bangladesh, emerged in erstwhile East Pakistan in the early 1950s, said a study by CPD (Centre for Policy Dialogue), adding that during the 1960s and 1970s major share of the manufacturing sector in national income and manufacturing employment was accounted for by this sector. Coming back to the governments latest move to apparently privatise the state-owned jute mills, it is a welcome decision, although critics term the closure as a bad proposition especially at a time when the economy is going through rough patches on the back of novel coronavirus-induced recession. Surely, the government can take care of the people affected by the job cuts by different means, as it is doing in the case of private sector readymade garment factories. The 25 state-run jute mills should have been sent to private hands decades ago, a statement critics may brush aside though. The fact is, these mills started incurring losses only after they were put in government hands for multiple reasons. Certainly, these factories can be made profitable by looking at these multiple causes. However, the cost-effective solution to take the industrial units to black from red is privatisation. Indeed, in a liberalised economy the governments job is to facilitate private sector to create jobs, its role is to oversee the rules and regulations for making a level-playing field for businesses, while its goal is not to do business. Slim is beautiful, slim is smart: the size of the government needs to be reduced to make it efficient, competent, and proficient. In a country like Bangladesh it is impossible for even angels to run the state-owned business organasiations because of the perennial flawed systems. Take a few examples from a long list: Bangladesh Jute Mills Corporation, Bangladesh Sugar Food Industries Corporation, Bangladesh Telecommunications Company Limited, Teletalk Bangladesh Ltd and Biman Bangladesh Airlines Ltd. All these state-run business entities are headed by bureaucrats, the non-technical or non-business persons who often come and go, strut and fret their hour upon the stage, and then are heard no more. Despite being state entities, Telenor, the Norwegian majority state-owned multinational telecommunications company, and Emirates, the state-owned United Arab Emirates airline, are successful examples as the state actors have practised delegation and non-interference policy for the business organisations. Without shedding the existing bulky manpower and changing management structures, the downslide of Bangladeshs state-owned enterprises cannot be stopped, full stop. To speak of the jute industry, it holds huge potential given the fact that jute goods are bio-degradable. According to a 2012 study of International Jute Study Group, the annual demand of shopping bags is 500 billion (5,000 crore) pieces worldwide. It is also estimated that the market size of jute bag will hit $2.5 billion by 2021, while the market size of home textiles will be $130 billion in the same time. Diversified products such as pulp and paper, particle boards and apparels are still displayed in research centres, failing to make inroad into the mainstream product market. Maqsudul Alams success of decoding the jute plant genome, thereby heralding an era of finer fibre, high yielding and weather tolerant varieties, could not be harvested on a larger scale to say the least. Here lies the role of the government in terms of research and development to help private businesses grow, creating employment in the process. With operational duties gone for good with closure of state-run jute mills, the government now needs to play the role of a facilitator, strategist and catalyst. The writer is the Executive Editor of The Independent. E-Mail: [email protected] More Articles byShamim A. Zahedy: Of friends and foes in politics (26-06-2020) The unfolding suspense around Masud Rana(18-06-2020) Moment of truth for AHM Mustafa Kamal(13-06-2020) Musings on the pandemic: Lessons learnt from Covid-19(07-06-2020) George Floyd and beyond(03-06-2020) Protect purity of every type of media(30-05-2020) Disturbing disregard for social distancing(24-05-2020) Interoperability is missing in business(23-05-2020) Education divide in Bangladesh(21-05-2020) Time to seek alternative financing for news media?(15-05-2020) Govt needs to be techie to reach out to people in need of aid(09-05-2020) Handcuffs for journalists(06-05-2020) New business model required for news media in the post-virus era(03-05-2020) An apology for print newspapers(03-04-2020) Thank you, readers(26-03-2020)