Originally posted in The Business Standard on 22 March 2022
The kind of industrial structure that we now have in our country can lead to problems if we focus our incentives on import substituting industries.
Incentives for domestic industries may be a result of the imposition of higher tariffs on imported goods. If this happens, importers will be in trouble.
If industries are set up with the domestic market in mind, the export potential of entrepreneurs will not be realised.
“Import substituting industrialisation” was a term made prominent in the 1960s and ’70s. In recent times, this has become a challenge.
Take the example of Sri Lanka. It has imposed tariffs on foreign products and given incentives to domestic companies to protect local industries. As a result, entrepreneurs there are not getting raw materials at competitive prices.
Earlier, there was an initiative to formulate such a policy in Bangladesh as well. But, such policies often result in irregularities and corruption. Some people use the incentives to produce what is already being produced, while others fail to give any return on the incentives received.
Keeping these in mind, it is best to give such incentives to industries as a whole, instead of reserving it only for import substituting ones. It can be for domestic market producers and exporters alike.
The subsidy can be given only where there is potential in the overall industrial sector.
Even if the subsidy is given, incentives can be given not only for setting up industries but also for all sectors, including supply chain maintenance, raw material procurement, intermediate products and finished products.
Dr Khondaker Golam Moazzem spoke to TBS Senior Reporter Abbas Uddin Noyon over the phone.