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Professor Mustafizur Rahman on industries and development

Published in The Financial Express on Tuesday, 28 July 2015.

Dhaka diary
Bad time for public sector jute mills

Sayed Kamaluddin

Bad time for the country’s jute industry has staged a comeback after some years to haunt the nation. Historically, jute has been a vital sector for the country’s economy. It remains so even today, maintains the chairman of the Bangladesh Jute Mills Corporation (BJMC). He said about 45 million people of the country depend directly or indirectly on jute farming, trading and employment in jute manufacturing.

According to reports available, the government-owned BJMC has lost Tk 4.5 billion (Tk 450 crore) during FY2014-15. This is larger than the losses incurred by it in the two previous years (FY2012-13 and 2013-14) which totalled Tk 3.26 billion (Tk 326 crore).

This is not all; wages for BJMC’s 4000 employees and 67,000 factory workers have not been paid for the last two months. Besides, wages and gratuities for its 5,700 retired employees and workers have also not been settled yet. This alone comes to Tk 3.5 billion (Tk 350 core).

There are reasons for this unseemly situation. Economist Dr. Mustafizur Rahman of the country’s well-known think-tank Centre for Policy Dialogue (CPD) says that for lack of proper planning, this important sector (jute farming, marketing and manufacturing) has been suffering for decades. He told a Bengali daily that when the government had decided earlier in 2011 to reopen five large jute mills earlier closed, CPD was critical of the way jute mills workers were being recruited in large numbers without any proper contingency planning and warned that it could backfire. This has now proved correct.

It may be mentioned that in 2011, the government had decided to reopen five closed jute mills and provided Tk 1.05 billion (Tk 105 crore) for the purpose and recruited 35,000 permanent workers through the BJMC. In a recent report to the finance and jute ministries, BJMC says that the government’s fund was spent for reopening only three jute mills and it spent Tk 700 million of its own fund to reopen the other two jute mills.

BJMC’s report said, out of the 35,000 newly recruited workers in 2011, 22,520 are without any work. About 90 per cent of BJMC’s 67,000 workers’ jobs in its 26 mills were made permanent by the government and these mills use only a third of their production capacity and the rest remain idle. This is happening because of fund constraints for timely raw jute purchase and shrinkage of global market for jute products. The BJMC is spending Tk 2.5 billion annually for meeting the workers’ wages.

Explaining the reasons for its losses, the BJMC report says it can’t purchase raw jute on time because of fund constraints and the government’s delay in releasing the required funds. As a result, it incurs losses to the tune of Tk 700-800 million every year.

Timely purchase of raw jute is essential for the profitability of the mills. Before Bangladesh became independent, the then Adamjee Jute Mills (AJM) General Manager, Mr. Currim, once told this writer that his chief expertise lies in the purchase of raw jute and he does oversee all the purchases himself. He said, if one can buy a maund of raw jute a taka cheaper – and in case of Adamjee Jute Mills – it would account for tens of millions of taka. And AJM never lost money because it prudently followed this policy of timely raw jute purchase when the prices were the lowest which reflected in the balance sheet.

But BJMC’s case is different. For example, BJMC asked for Tk 5.0 billion for raw jute purchase from the ministry in March 2014 which was approved in June but actually disbursed in late July. By that time, the buying season was nearly over (it continues until August) and raw jute prices were on the rise. For FY2015-16, BJMC planned to purchase raw jute worth Tk 10 billion (Tk 1,000 crore) but the government provided only Taka 1.0 billion just before the Eid-ul-Fitr and said not to expect any more funds. So, they can’t clear the arrear of Tk 1.0 billion due to small raw jute traders and will once again have to purchase raw jute on loans. All this adds up to the cost and reflect in the company’s balance sheet.

There are, of course, other important things that the BJMC report did not bother to mention. One of the vital ones is the purchase mechanism. In Bangladesh these days, nobody has any control over raw jute purchase and no accountability exists. Wet raw jute is purchased deliberately to add extra weight and price manipulation is also part of the game. Unless strict monitoring and accountability is ensured, one can forget about profitability of the BJMC mills.


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