Published in The Daily Star on 6 September 2020
The government closed down 25 jute mills operated under the Bangladesh Jute Mills Corporation (BJMC) on July 1. It was one of the difficult political decisions taken by the ruling party since it formed the government in 2009. Such a decision hints at the major political shift of the ruling party – from promoting state-owned enterprise development towards private sector led enterprise development.
A high-powered ‘Policy-making Committee’ led by jute and textiles minister has been formed, which will suggest about the future of the establishments of BJMC jute mills. Till date, a number of decisions have been made which have created confusion about the future of enterprise development under the private sector in those lands.
More importantly, those decisions may futile the whole process of transforming those into private sector led enterprises.
In this backdrop, it is highly important to take forward-looking decisions which will facilitate private sector-led enterprise development. Most importantly, the government’s decision should not create a precedence of another faulty privatisation initiative which had been done in 1980s and 1990s. The jute ministry and the Prime Minister’s Office should give due attention to the following issues and take appropriate decisions.
Clearing all liabilities and dues of BJMC
At first, the jute ministry should clear all liabilities and dues of different parties of the BJMC. This is highly important since any future initiative under the private sector would be futile if the existing liabilities BJMC are passed on to their shoulders. To complete the process, a proper financial audit and valuation of assets of BJMC entities are required. This should be done by any of the big four international audit firms—Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers—who are currently in operation in the country.
Such an audit will help the ministry to understand its current state of assets and liabilities, based on which future initiatives could be taken properly. There is a vested quarter within the BJMC at the mill and even outside the mill who are not interested to have a proper financial audit and valuation of assets.
An early audit and valuation is most important particularly to clear the dues of the 25,000 workers as well as to initiate the next course of action on industrialisation in those establishments.
The government should allocate necessary fund to clear the dues.
Scaling down the BJMC into a small unit under the ministry
There is no need for operating the BJMC under such a large organogram with staffs at the head offices and the mill offices. In this context, the government’s decision to scale down two-thirds of its 2,955 staff members is a positive move. However, the decision is linked with the future operation of the mills.
Even one-third of the staff would not be required to materialise the goal of the PMO to go for private sector led operation in those mills. Very few of the staff members will be required if these lands are handed over to the Bangladesh Export Processing Zones Authority or Bangladesh Economic Zones Authority, which are more experienced in operating economic zones.
Overall, the operation of BJMC could be ably done by a small unit under the ministry — no big office and staff is needed for that. Hence, the government should allocate necessary funds to pay the unnecessary staff who are posted in the head office and mill offices of BJMC.
Refraining from allowing long-term leases to single parties
There is no need to lease these precious lands to a small number of big private sector entities who may create pressure through different channels both within and outside the government. These lands should be made available mainly to local small and medium enterprises and foreign investors who often struggle to purchase and take land on lease.
All mills are well-positioned with ready-to-use infrastructure such as ready land, electricity and gas supply and available workforce, which could attract both local and foreign investors to set up both medium and large scale enterprises.
Out of these 25 mills, nine are located in Chattogram, seven in Khulna, two each in Dhaka, Jessore and Narshingdi and one each in Narayanganj, Sirajganj and Rajshahi.
In terms of location and infrastructure, mills located in Chattogram, Dhaka, Narshingdi and Narayanganj are well-positioned to attract local and foreign investors.
Mills, which are located in major jute and agro-based zones such as Jessore, Khulna and Sirajganj, would promote jute and other agro-based industries. In this context, the planning committee’s decision of using these lands only for jute sector is a faulty proposition. Rather these lands should be made open for private investment in different industrial enterprises.
Promoting small and medium scale jute mills
Jute goods need a captive market at the local level. A proper enforcement of the mandatory packaging act would significantly increase use of jute goods in domestic market.
According to the Centre for Policy Dialogue (CPD) 2010, proper enforcement of mandatory packaging act would create a local demand for 80 per cent worth of export jute products.
Similarly, the government may amend the public procurement guideline for construction and rehabilitation of upazila and zila roads by making it mandatory to use hessian cloths as a cover over bitumen based carpeting. Such changes in public procurement would create huge demand for hessian cloths in the construction of roads.
Overall, future jute sector of Bangladesh should be led by small and medium scale private sector jute mills. In that case, interested private sector investors could purchase machineries from the closed public jute mills to set up small and medium scale jute mills across the country.
Similar example was found when Adamjee was closed and later a good number of small scale enterprises were established. Most of those are in operation at present.
Handing over the lands and establishments to the Bepza and Beza
The Bepza is in dire need of land for expansion of export-oriented industries. The lands which are available in Chattogram-based nine jute mills could attract businesses to invest in different industries through nearby seaport. The Beza would be interested to take land available at jute mills located in Dhaka and neighbouring areas for local-market based consumer products.
Similar interest would be there for lands available in Khulna and Jessore. Some of these areas could be developed exclusively for investors of particular countries such as China, Germany and Japan.
In this context, handing over the Adamjee Jute Mills to Bepza and establishing Adamjee EPZ in 2006 was a good example for transforming state-owned jute mills into private sector led industrial economic zone.
Adamjee EPZ has a total land area of 245.12 acres with a total of 229 industrial plots. Till 2019, a total of $521.5 million worth of investment has been made in different types of manufacturing industries.
The investors include UK, Singapore, Mauritius, China, Canada, Germany, India, Malaysia, Japan, South Korea, Romania and Bangladesh. The EPZ has so far exported $4.5 billion worth of local products and employed 62,200 workers.
Export and employment generation have maintained noticeable positive growth in recent years. It is important to note here that Adamjee jute mill while it was closed in 2002 employed 25,000 workers and its accumulated loss was Tk 1,200 crore.
It is expected that the jute ministry and the PMO will come out from its ministry-centric restructuring approach of state-owned jute mill lands towards more broad-based restructuring by handing over those lands to the competent authorities who have shown exemplary evidence in private sector led industrialisation in the country.
Dr Khondaker Golam Moazzem, Research Director, Centre for Policy Dialogue (CPD).