Published in The Independent on Sunday, 12 August 2018
Untapped potential of light engineering
SHARIF AHMED
The light engineering sector is considered the ‘mother of all sectors’ in Bangladesh. It meets about 30 per cent of the total domestic demand and acts as a backward linkage for the food processing, railway, shipping, garments, capital machinery, cement, paper, jute, textile and sugar industries.
This sector now contributes 2 per cent of the gross domestic product (GDP) and can play a significant role in the economy.
Describing the market size, Abdur Razzaque, president of the Bangladesh Engineering Industry Owners’ Association (BEIOA), told The Independent yesterday that around 40,000 light engineering workshops or enterprises were located in major cities and towns with a local market size of approximately Tk. 30,000 crore.
When asked about local production, Razzaque said that light engineering products, worth around Tk. 9,000 crore, were being produced with local technology by small entrepreneurs. This sector had grown steadily over the years, with one of the major contributing factors being the growing market demand, he added.
According to the BEIOA, most of the raw materials are extracted from ship scraps supplied by the shipbreaking industry. Rest of the items are imported to meet the local demand. Bicycles parts, for instance, are imported from countries like Turkey, China and those of Europe.
Experts, however, say that the light engineering industry’s current turnover can be increased 10-12 times if the sector gets government support.
Despite various obstacles, domestic demand has helped it grow and become sustainable. The price and quality of the products are quite logical in this sector. Challenges lie ahead because of competition from foreign companies who have been offering a greater variety and quality than the Bangladesh ones.
According to BEIOA, the light engineering industry of Bangladesh is presently producing nearly 3,900 types of quality machinery, spares and accessories. These include automobile spare parts, railway engine and rail line spare parts, bicycle and cycle rickshaw, 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 spare parts.
Light engineering factories are located in Gazipur, Kishorganj, Dhaka, Chattogram, Narayangonj, Bogra, and other places across the country.
It is estimated that around 80 lakh technically educated and skilled people and innovative entrepreneurs are actively engaged in the sector.
Bangladesh imported light-quality engineering products from India, Thailand, Japan, Singapore, Malaysia and China, said Razzaque.
Describing the challenges facing this industry, Razzaque also said: “We’ve five challenges that need to be addressed. These are access to finance, technological upgrading, long-term policy support, training programmes for skill development, and land availability.”
He thanked the government, saying it had been working on to resolve these issues and that three of these had already been addressed.
Long-term policy support was an ongoing process and the government was working on it, he said.
Another important initiative taken by the government was the Skills for Employment Investment Programme (SEIP), he noted.
He said the SEIP had trained about 10,000 fresh people in last three years. Among them, 80 per cent got jobs in different workshops.
The BEIOA has 4,000 SME members engaged in the production and marketing of light engineering products. Its principle objective is to contribute continuously towards the development of the country’s light engineering sector.
Talking about land availability, Razzaque said that the Bangladesh Small and Cottage Industries Corporation (BSCIC) allotted 50 acres of land to set up an industrial park to host light engineering workshops. The land acquisition work was in progress, he added.
“Access to finance and technological upgrading are challenges that should be addressed. Technological improvement will be possible once we get the land because only then will we be able to import machinery from abroad,” he said.
About the hurdles in getting bank loans, Razzaque said the central bank got loans worth Tk. 500 crore from Japan at an interest rate of 0.01 per cent. But the leasing and financing institutions took it from the central bank at an interest of 5 per cent and lent it out to light engineering manufacturers at an interest rate of 18 per cent.
Such high interest rates were definitely an obstacle to sustainable development, he added.
He said light engeering was an untapped field in Bangladesh. “Its global market size is nearly USD 6 trillion. If we are unable to modernise our engineering factories within a short time, then sophisticated foreign products would dominate the domestic market within cheaper prices,” he added.
Some foreign brands were coming to Bangladesh to sell their products at affordable prices, he said.
Light engineering firms are operating separately at various clusters in different districts. No single common facility centre (CFC) has been established yet. “Establishment of CFCs is essential to upgrade the technological edge of the light engineering sector,” said Razzaque.
According to the Small and Medium Enterprise (SME) Foundation, there are 31 light engineering clusters in 18 districts. Light engineering enterprises are dispersed across the country, creating job opportunities in a wide area.
Light engineering was an important industrial sub-industry providing services to a huge range of sectors including power, consumer goods and manufacturing, said Razzaque.
Dr Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), told The Independent that the various types of industries were growing fast in Bangladesh. So, it was difficult to meet the existing demand or requirements of new machinery with local capital, he noted,
On the other hand, it had not been possible to raise the quality and productivity of local products to global standards in the absence of modern technology, he said.
Moazzem also said that knowledge, technical know-how, capital, product designs and research labs needed for machinery development were lacking in this sector in Bangladesh. Joint-venture initiatives could help the Bangladesh light engineering sector grow, he added.
Foreign investors must collaborate with local investors so that local investors could upgrade the light engineering industry with their foreign know-how, he suggested.
The light engineering sector in Bangladesh comprises three segments—domestic manufacturing, domestic servicing and export-oriented manufacturing. The proportion of domestic manufacturing segment is the biggest among them.