Careful and Transparent Handling Necessary

One of the objectives of industrial policy 1999 is "to rehabilitate deserving sick industries." The issue of rehabilitation of sick industries was not only given less attention, but also kept vague though it was included as one of the objectives in the industrial policy 1991. The objective was worded as "to create possible opportunities for revitalising and rehabilitating sick industries." This connotes the then government's lack of seriousness about the need for rehabilitation of sick industries. Might be they thought that solving the problems created during the past regimes was none of their concern, no matter whether the problem is local or national. The present government also could not yet improve the situation to any appreciable extent. But without proper commitment of government no appreciable result can be achieved. Only coordinated efforts by the ministries of finance, industries, agriculture and commerce can bring about some acceptable solution the problem. In fact the issue of rehabilitation of sick industries is closely connected with another objective of IP 1999, "to effectively utilize the existing production capacity."

It is difficult to get the exact number of sick industries in Bangladesh. However, it is learnt that around 2000 sick industries have approached the government for relief or support. For a least developed country, at the primary stage of industrialisation, such a figure may be considered fairly high and does not present a happy industrial scenario. As such a confusing and ticklish problem needs careful handling to attain success. Few hours of discussions in meetings dominated by generalists (majority without adequate background) is just not enough. Such handling may help in deterioration of situation further.

While a large number of industrialists are suffering from genuine causes the nation is facing the following problems:

* smuggling and growing tendency for unnecessary imports;
* block of scarce capital;
* wastage of skilled and semi-skilled industrial workers;
* block of precious and scarce industrial land;
* possibility for the genuine entrepreneurs leaving the industrial field and discouraging prospective investors to invest;
* possible loss of government revenue due to loss of production; and
* increasing rate of migration of rural workers to cities for employment thus disturbing the cities' eco-system.

We have been able to gather that following decisions were taken in the meeting of the standing committee on sick industries in the ministry of industries about two months and a half back:

(a) To submit a report on the implementation of the government decisions on rehabilitation of sick industries in the next meeting of the committee; and
(b) To take legal action against actual defaulters.

In the ministry of finance two committees are working. They are reconciliation committee and review committee. The first one deals with reconciliation of interest waiving cases. The number of cases under consideration is 1043. More than 1000 cases are pending with the review committee. It has been reliably learnt that the progress of work of both the committees has not been satisfactory.

Despite the government's dealing with sick industries for about a decade no clear policy has yet been formulated. To have some understanding as to why we have so many sick industries one may go through the study made by the price Waterhouse Associates (Australia) (study financed by UNDP) in the early eighties. Generally speaking, the main factors that may be identified for such deplorable state of affairs are as follow:

* non-availability of enough area/sectoral/sub-sectoral studies;
* inadequate background of investors;
* highly corrupt and inefficient administration;
* too weak data base and unreliability of available data;
* because of vagueness of idea about market demand no good projection of demand is possible. (As market analysis is costly, individual project owners avoid it.)
* smuggling;
* absence of technology plan causes victimisation of entrepreneurs by unscrupulous indentors;
* because of demonstration effect a fairly good number of new investors showed undue weakness for pomp and grandeur or wastage;
* too speedy liberalisation of imports.

Industrialisation is a long and arduous task. In developed countries it was achieved through trials and errors. They also had to tackle the problem of sick industries. It may also be admitted that sickness of industries due to domestic policy failures can be remedied through adopting appropriate corrective measures, sickness of industries due to external factors often proves irremediable.

No country, industrialised or semi-industrialised, is free from problems. The problem in Bangladesh is gigantic and serious because a huge government fund in a resource-poor country has been blocked to the great detriment of its economic growth.

In taking steps to rehabilitate the sick industries the government will have to concentrate on the basis of their importance from the economic and social points of view. It is to be seen how many of these industries are labour intensive, how many of these are desireable because of their high value added products, how many of these can contribute to export earnings, how many of these products' have become obsolete, how many of these are directly responsible for disturbing ecological balance. One of the broad strategies of industrial policy 1999 is to undertake development of industrial zones "with a balanced geographical dispersal of the zones with growing potential for the utilization of local resources." Thus it has to be considered as to how useful these industries are to the people of the localities concerned.

A full survey has to be undertaken to understand clearly the present situation of the sick industries. The survey team should be constituted with one representative each from the ministries of finance, commerce, industries, agriculture and environment and Bangladesh Bank. Technical advice to the team may be provided by a body of experts consisting of an economist, a chartered accountant and a good quality experienced mechanical engineer. It must be ensured that no partisan attitude can be traced in the survey report and recommendations. However, political interest of the country cannot be ignored. To elaborate this point it may be stated that the sick industries of northern and western zones deserve greater sympathy than their counterparts in the eastern zone because of their less advantageous situation. The disadvantages of industrialists of western and northern zones are as follows:

(i) As location of their industries are relatively further from the main markets (Dhaka and Chittagong) their transport cost is higher;
(ii) As these industries have to depend on furnace oil because of non-availability of natural gas, the per unit production cost becomes higher compared to eastern zone's:
(iii) The situation of power supply is much more irregular than in eastern zone;
(iv) Easier availability of spare parts of industrial machinery and better facilities for repairwork of these machinery in eastern zone.

Because of lower-level of industrialisation the majority of sick industries of northern and western zones involve relatively in simple manufacturing (such as brick manufacturing, rice husking, simple agricultural tools). Because Khulna is a less developed port even labour intensive simple assembling type of industries (such as readymade garments, leather products, electronics etc.) could not flourish.

Rehabilitation of sick industries may have to be performed in steps. Disjointed efforts such as waiving of interest on the loan or allowing them more working capital or extending them loan facilities for BMR or BMTE may not solve their problems. In identifying the sick industries for rehabilitation the following points may be considered;

* Whether there has been development of overcapacity (such as edible oil);
* Whether the industry is labour-intensive (such industries located in northern and western zones deserve special consideration because of their lower-level of development);
* Whether such industries were born sick;
* Whether the product of such industries have become obsolete;
* Whether such industries have strong possibility of entering export markets (even as suppliers to exporters).

Taking of proper measures for rehabilitation of sick industries has already been delayed. As such a high-level interministerial committee adequately supported by technical advisers may be set up as early as possible. Recommendations of this committee may be placed before the cabinet for appropriate decision. In solving the problem of sick industries we ultimately accelerate the process of industrialisation through creation of confidence among the genuine entrepreneurs, generation of employment, and reduction of flow of rural-urban migration.

The writer is a retired Joint Secretary.