Despite lack of attention of policymakers some 50,000 light engineering workshops in major cities and towns of the country account for around 50 per cent of the import-substitution items.
These small workshops, run by self-motivated entrepreneurs who never got any institutional or governmental support, are currently manufacturing products worth Tk 250 billion with local technology as import-substituting spare parts for automobiles and major industrial sectors.
Experts have long been saying that the growing light engineering industry’s current turnover could be ten times more if the sector gets government support.
Just by investing another Tk 60 billion yearly, the country could save Tk 650 billion by way of as import substitution and could have entered the country's export basket confined to only a few items, feel experts.
To give the sector an impetus, Prime Minister Sheikh Hasina declared “Light Engineering goods” as the “Product of the Year” for 2020.
“As a part of the export policy, we are declaring Light Engineering [goods] as the product of 2020 aimed at encouraging the product based export while we are calling for more investment,” she said while inaugurating this year’s trade fair.
What the sector produces?
The light engineering industries of Bangladesh currently produce a total 3,815 types of quality machinery, spares and accessories including automobile spare parts, railway engine and railway line spare parts, bicycles and cycle rickshaws, machine tools, jute and textiles machines and spare parts, chemical industry machines and spare parts, sugar and food industry machines and spare parts, engineering and metal industry spare parts, ship industry spare parts and agricultural machine accessories and spares.
Most of the industries are located in Dhaka, Chittagong, Narayanganj, Bogura, Gazipur, Kishorganj, and other places in the country. According to an estimate, around 7 million technically educated and skilled people and innovative entrepreneurs are actively engaged in this sector.
A study conducted by the International Finance Corporation (IFC), in partnership with the UK Department for International Development and the Norwegian government, shows that LES (light engineering sector) employs 6,00,000 people involved in 50,000 micro enterprises and 10,000 Small and Medium Enterprises.
Another study conducted by the Bangladesh University of Engineering and Technology, estimates that LES comprises around 40,000 enterprises employing around 8,00,000 people.
Talking with The Independent, Prof Kamal Uddin, director of the Institute of Appropriate Technology (IAT) at BUET, said, with a little help from the government, Bangladesh could not only meet the local demands but also earn billions of dollars by exporting light engineering products.
He said around 90 per cent of the light engineering industries were meeting local needs. The consumer of light engineering products and services were both the public and private sectors. “With appropriate incentives from the government, we can move into the next stage of exporting these products,” he said.
The export potential
Listing Bangladesh's industrial advantages such as competitiveness, an easily trainable workforce and investment-friendly policies, Prof. Kamal said many spare parts could be produced here for many giant economies of the world due these unique facilities. “A full-scale export-oriented light engineering industry can be developed here.”
The director of IAT said a pool of skilled workforce was there across the country and if the government trained them with modern technology and financial institutions support them with loans, the sector could earn a lot of foreign currency after meeting local demand for engineering products.
“Some workshop owners have already proven that the support from government and financial institution is vital for the sector’s growth. They have set up high-tech machines with financial support from the government and have been providing quality spares and different tools to big industries,” he said, adding that the majority of them was not getting financial assistance and technological supports.
Prof. Kamal said that a number of high-quality light engineering products including spare parts of paper and cement mills, bicycles, fancy light fittings, construction equipment, batteries, voltage stabilizers, iron chains, cast iron articles, carbon rods, automobile spares, electronic items, and stainless steel wares were already going to foreign markets on direct and subcontract orders.
Referring to the 20-bn apparel industry, the BUET professor said that sector alone accounted for 80 per cent of the country's total exports and that was not safe for Bangladesh. “Light engineering products have the potential to be the next big export items and proper measures should be taken to incentivise the sector.”
What the industry says
Industry people say main impediment to the sector's growth is inadequate investment. Bank loans are still not available as per the need of this sector.
Benedict Gomez, owner of Seven Star Engineering, said that he had applied for two loans to two different banks. “I heard that there were some collateral-free bank loan opportunities for this sector and I applied to expand my business. But I have still not got it due to some complicated procedures.”
Sheikh Mohammad Delwar Hossain, owner of Aziz Metal Engineering Works and joint secretary general of the Bangladesh Engineering Owners Association (BEIOA), said that many foreign investors were showing interest in investing in this sector under joint collaboration but a crisis of land and other facilities was holding them back.
Hossain said that, in Bangladesh, light engineering firms were operating in clusters in different districts. In spite of repeated appeals by the BEIOA, a common facility centre (CFC) was yet to be established in any cluster. “Establishment of the CFC is vital to upgrade the technological edge of the light engineering sector,” he said.
Talking with The Independent, Abdur Razzaque, president of the BEIOA said that they had already submitted a proposal to the government for assistance that could help the light engineering industry flourish.
“The sector only needs support in getting land, appropriate technology, finance, raw materials and forming a consortium of small workshop owners. We do not need aid from the government or foreign donors. If the government gives policy support, the sector will show how it can change the country's economic status”, he said.
“It is a matter of frustration that if we do not upgrade and improve our own engineering industries within a short period, foreign products with high technology will dominate the market at cheaper prices”, the president of BEIOA said, adding that some foreign companies had already set up their offices in Bangladesh to promote their products that are already being manufactured by local workshop owners and being sold at low prices.
About the complications regarding bank loans, Razzaque said the central bank received loans worth Tk 500 crore from Japan at a rate of 0.01 per cent but the leasing and financing institutions took it from the central bank at 5 per cent and lent it out to the light-engineering manufacturers at 18 per cent.
“Sustainable development cannot be made with such high interest rates”, he said.
EA