DEV101-- Industrial Sector of Bangladesh--term paper


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brief analysis on the state of Bangladesh's industrial sector.
For Mr. Rehan Ahmed's class

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DEV101-- Industrial Sector of Bangladesh--term paper

  1. 1. BRAC UNIVERSITYIndustrial Sector of BangladeshThis is a research paper on the Industrial Sector of BangladeshMr. Rehan AhmedFacilitatorDEV 101Sec 083/29/2012Samiya Yesmin 11304043 Rubayet Rehan 11222035 Lamisa Manzoor 11304072Protiti Khan 11304018 Rafid Feisal 11236003 D.M. Ashiquzzam 11236004
  2. 2. Industrial Sector of BangladeshGroup IIPage 2Industrial Sector of BangladeshTable of ContentsI. Introduction 3II. Objectives 3III. Methodology 3IV. History of the Industrial Sector 4V.Developments in the pastfour decades5VI.Millennium Development Goalsand the Industrial Sector9VII.Challenges faced by the IndustrialSector11VIII. Recommendation 13IX. Conclusion 13X. References 14
  3. 3. Industrial Sector of BangladeshGroup IIPage 3I. IntroductionWe were assigned this group work on the industrial sector of Bangladesh. We were to find facts,study and analyse the data we could find regarding this topic. We have found out how the industrialsector was before the liberation war from Pakistan in 1947 and how after the war we faced a lot ofchallenges and grew up to be what we are now. This research paper assignment has given us a verypractical insight of the current situation of economical growth related to industrial developments inBangladesh.II. MethodologyWe used secondary source research method to do our investigation. All highly reliable sourceswere used to gather the data. References of our sources are given at the end of the research paper.III. ObjectivesWe did this research with a few objectives in mind. And throughout the study these objectiveshelped remind us, our goals. They are:1. To find out about the history of industrial growth in Bangladesh.2. To find and analyse data about the current situation of the industrial sector.3. To find out future goals and vision.4. To find out the challenges faced and how to overcome themAnd below, you can read about all our findings and analysis regarding them.
  4. 4. Industrial Sector of BangladeshGroup IIPage 4IV. History of the Industrial SectorIn 1947, the Indian subcontinent was divided into two parts. One was India and the other one wasPakistan. Pakistan had two parts. One was West Pakistan and the other one was East Pakistan, which isnow known as Bangladesh. The government of then West Pakistan dominated the people of this country indifferent sectors. In the economic sector, the discrimination was the most. Most of the industries ofPakistan were in this country. However, the profit from them was taken to West Pakistan. The progress injute manufacturing started in that period.Jute manufacturing sector is one of the oldest traditional manufacturing sectors of Bangladesh,which emerged in erstwhile East Pakistan in the early 1950s. During the1960s and 1970s major share ofthe manufacturing sector in national income and manufacturing employment was accounted for by thissector. Exports of jute and jute goods were the two most important sources of foreign exchange ofPakistan during the 1960s. The East were subjugated, as all the revenue went to West Pakistan.In 1971, with the liberation war of 9 months, Bangladesh became independent. As after the war,the country was left in dire states, the industrial development was very slow. However, Ready MadeGarments (RMG) started during this period. And in this sector, Bangladesh could lay claim toconsiderable success. Today garment export is the main source of foreign exchange earnings. Its successwas not necessarily influenced by government policy but essentially by outside forces. It originated in the1970s when the investors of other South East Asian nations ventured to set up garment factories inBangladesh and to work around the export quotas imposed on their native countries by the United States.In the 1980s, the Pharmaceutical Sector made advancement in Bangladesh. It is one of the mostdeveloped hi tech sector which is contributing in the countrys economy. After the circulation of DrugControl Ordinance - 1982, its development accelerated. During the 80s, other sectors like teamanufacturing, leather factories etc also gained importance. In 1990s, sectors like ship breaking, steel,cement and cold storage goods etc developed and gained momentum. From 2000 to 2012, many industriesstarted their journey successfully, and contributed to the economic growth of Bangladesh. Among themare- electronics, glass, aluminium, plastic, cycle, and ceramic etc. industries. To sum up the whole thing,we can say that after 1971, Bangladesh is slowly and steadily turning its attention to develop its economy,through industrial development, moving away from the agricultural sector.
  5. 5. Industrial Sector of BangladeshGroup IIPage 5V. Developments in the past Four decadesReady-made garments sectorThe ready-made garments industry in Bangladesh (RMG) contains many small to medium garmentfactories, both registered and unregistered, that produce garments providing to foreign buying houses. Theexport finance from this industry is one of the three major sources of economic growth in Bangladesh.Ready-made garments had proved to be a successful sector in Bangladesh. The industry initiated in thelate 1970s, expanded heavily in the 1980s and boomed in the 1990s. (Amusing Ocean, 2011). The foreigntrade of RMG from Bangladesh has shown rapid rates of growth over the last decade, currently makingBangladesh the twelfth largest exporter of garments and it has contributed to about 77% of Bangladesh’sforeign exchange earnings (Guidebook for European Investors in Bangladesh, 2001, pg.13).Number OF factories 4000Number of labour force 3.5 millionProfitability 12.45 billionExport earnings 76%Contribution to GDP 10%Presently there are about 4000 factories for RMG in Bangladesh. The market size of RMG is huge, as canbe seen in the table above. The growth rate is estimated as 21.60% annually. (Amusing Ocean, 2011).Bangladesh is the second largest garments exporter with a $20 billion industry. Our share is 4.5% inworldwide garments export. According to the Export Promotion Bureau (EPB), the contribution of RMGgoods to national export had increased by 1.02% in the fiscal year 2010-2011. During this period, thecontribution of RMG, mainly woven and knitwear, to national export was 78.14% or $17.91 billionwhereas it was 77.12% or $12.50 billion in fiscal year 2009-2010. (The Star, 2011).Bangladesh has now become a significant RMG supplier to North America and Europe. The textiles haveimproved in quality to meet their standards, while still being affordable. The industry has createdsufficient jobs in various support industries, as well as creating job opportunities for women. Therelatively cheap cost of labour in Bangladesh, cheaper technology and machines used and the fact that
  6. 6. Industrial Sector of BangladeshGroup IIPage 6women labour are willing to work at fewer wages than men in this sector has enabled massive growth anddevelopment in this industry.The industry plays a significant role in terms of employment generation. Approximately 2 million workersare directly and above 10 million inhabitants are indirectly associated with RMG industry. Not only is theeconomic contribution apparent, but the expansion of RMG has introduced more than 1.12 million womento the work force. RMG’s contribution in terms of GDP is also highly commendable; it has reached 13%of GDP in present days, which was formerly only 3% in 1991. Ever since, the industry has helped insocial development, women empowerment and poverty alleviation (Amusing Ocean, 2011).Source: Compiled from various sources (Bakht, Z. 2001, Export Promotion Bureau, Ministry of Commerce andBangladesh Bank data).010203040506070801970-1980 1980-1990 1990-2010%offoreignexchangeearningsYearsThe graph shows the growth and decline of the respectiveindustries in Bangladesh:RMG Food Industry Handicrafts Jute Goods Pharmaceuticals
  7. 7. Industrial Sector of BangladeshGroup IIPage 7Food IndustryOne of the other flourishing industry in Bangladesh, is the food industry. It consists of processed, frozenand manufactured foods, which are exported abroad. One of the biggest components of this industry is theexport of frozen fishes and shrimps, which is now renowned worldwide. From the 70s-80s this industrycontributed to 5.6% of Bangladesh’s foreign exchange earnings, later in 80s-90s in grew to 8.3% and hasdoubled to 16.42% in the last decade. This industry shows a lot of promise with its exponential growth.HandicraftsOver the last four decades one of the major growths was in the industry of handicrafts. The fashionindustry of Bangladesh is based on handicrafts. Aarong being one of the pioneers in handicrafts has alsocontributed to the popularity of hand made products and also to its export. During 70’s and 80’s the exportof handicrafts was 8.2%. This increased during 90’s to 17.8%. and now it has reached to 29.4%JuteOne of the largest industries that had once belonged to Bangladesh alone was the jute industry. Jute beinga natural, environment friendly, renewable and bio-degradable fibre has always been in demand all overthe world. This industry was set up in 1971 and it had flourished rapidly. Jute was a major export materialand had brought a lot of foreign currency into our economy even during that period of time with the helpof the erstwhile government of that time. After the liberation war, that particular assistance was lost as thegovernment was giving more effort for the rehabilitation of the country. That was when the decline hadinitiated but the jute industry tackled the situation well by making new policies and still ensured profit.Then in the 80’s some of the jute industries were privatized which led to further decline even though morepolicies were imposed. In the context of recent years, export of jute has fallen drastically due to fall inproduction and inefficient marketing system. We can consider it to be extinct if compared to the amountof profit that they had once contributed with what they provide now. India had taken over the market ofjute with better quality products and better marketing manoeuvres. In conclusion we can say that the jute
  8. 8. Industrial Sector of BangladeshGroup IIPage 8industry should be re-vitalized if possible and the government should take urgent initiatives for thatpurpose as soon as possible. (Rab, 2011, The daily star, pg 7).Pharmaceutical IndustryPharmaceutical sector is one of the most advanced industries of Bangladesh. The Drug Control Ordinance,1982 was one of the major factors resulting in the acceleration of this sector. This ordinance helpedorganize the pharmaceutical sector and reach an international level of acceptance. The professionalknowledge and innovative ideas of the people working under this sector is one of the importantcontributions for its success. It is because of the rapid development of this sector that it is now providing97% of the local medicine requirement. Not only is it fulfilling the requirements locally but alsointernationally, including the European markets (Wikipedia, 2012). It is the second largest industrycontributing to the foreign exchange earning of Bangladesh (Eskayef, 2012). There are two organizations,one government, which is the Directorate of Drug Administration and another one semi-government,Pharmacy Council of Bangladesh which controls the practice of pharmacy in Bangladesh. From the graphabove, we can see the fast growing economical contribution this industry has.
  9. 9. Industrial Sector of BangladeshGroup IIPage 9VI. Millennium Development Goals and the Industrial SectorThe Millennium Development goals (MDGs) are eight international development goals that all the193 United Nations member states and at least 23 international countries, including Bangladesh, haveagreed to achieve by the year 2015.The goals are as follows:Eradicate extreme poverty and hungerAchieve universal primary educationPromote gender equality and empower womenReduce child moralityImprove maternal healthCombat HIV/AIDS, malaria and other diseasesEnsure environmental sustainabilityDevelop global partnership or developmentThe industrial sector of Bangladesh has come a long way since the last four decades. The economicgrowth and GDP per capita has increased a lot due to the industrial sector of Bangladesh. The maincontributors are jute, ready -made garments (RMG), tobacco, pharmaceuticals, ship building and shipbreaking, food, shrimp and fisheries industries. Increased employment opportunities offered by theseindustries helps to achieve goal number one which is eradication poverty and hunger.Ready-made Garments Industry (RMG)The garments industry plays a vital role for the industrial sector of Bangladesh. Most of the exportrevenue comes from this industry. It has also helped us in achieving the Millennium DevelopmentGoals, such as goal one and three. This sector employs directly and indirectly a large number ofpeople. In 1999, the number was 1.4 million, further 200,000 were employed indirectly. 80% of theworkers are female which has led to empowerment of women.Jute Industry
  10. 10. Industrial Sector of BangladeshGroup IIPage 10In the first two decades jute mills played a major role in the industry of Bangladesh. There was ahigh demand for Bangladeshi jute around the world during the 70s and 80s. Adamjee jute mill was thebiggest among them all. These industries employed a number of people. So if we relate it with goalnumber one of the MDG it helped to reduce poverty by employing people. However, in the 90s whenthe demand for jute started to fall, most of the mills were shut down including Adamjee. The closureof the mills acted as an obstacle in achieving the MDGs due to the unemployment.Pharmaceuticals IndustryThe pharmaceutical industry started booming from 1982 and till now it plays a crucial role for theindustrial sector. If we relate it with the MDGs it has helped to achieve goal number one, three, four,five and six. The industry employs a significant number of people, a large portion of which arewomen, thus also resulting into women empowerment. Additionally, this industry produces almost allthe medicines required in Bangladesh at a cheaper cost, therefore improving the health sector bycombating diseases, reducing infant and maternal mortality rate.Tobacco IndustryBangladesh now not only produces tobacco but also locally manufactures cigarettes. This industryalso employs a lot of people which helps us to achieve goal number one of the MDG. But on the otherhand, it acts as a drawback as well, because smoking is injurious for our health.Food, Shrimp and Fisheries IndustriesThis industry helps us to eradicate poverty and hunger by direct means which is goal one of theMDG.Ship-building and breaking IndustryThe upcoming industry of Bangladesh is ship- building and ship breaking industry. It also helps usto achieve goal one by employing people.The industries are helping us to achieve the MDGs in a number of ways as mentioned above. Theyhave also been working towards ensuring environmental sustainability by reducing pollution and usingenvironmental friendly equipment, such as ETP.
  11. 11. Industrial Sector of BangladeshGroup IIPage 11VII. Challenges faced by the Industrial SectorThe challenges the industry sector of Bangladesh is facing are numerous and handling some ofthem should be set as a priority. Challenges are faced by various sectors such the garment industry,shrimp and fisheries, tobacco and so on.Shrimp industry: Salim (2008) mentions that the shrimp industry of Bangladesh has got severalchallenges. The main concern about this particular industry is the working environment i.e. where theshrimp is being produced and also the environmental impacts as well. Thus, higher ethical standards aredemanded. According to “The True Cost of Shrimp”, published by a US based NGO- the SolidarityCentre- the labour conditions are indecent and not appropriate. Another problem which this industryfaces is that most of the shrimps are not resistant to diseases and this eventually leads to a decline in theyield. Another concern is the sustainability of shrimp production.Pharmaceutical industry: The major challenge faced by this particular blooming industry is thatthe demand of foreign medication is higher than the local ones. Oversee markets are quiteoverpowering and thus people tend to buy foreign medicines. In Bangladesh we dont have anyrecognized government organisation or contractual research organisation like universities or privateinstitutions to conduct bioequivalence study or clinical trials. Hence, this does not allow ourpharmaceutical products to be recognized abroad.Tobacco industry: The main challenge the tobacco industry faces is the awareness of the healthimpacts of cigarette smoking. This eventually leads to a decline in demand of tobacco and cigarettes.After planting a large amount of tobacco plants in a particular area the top soil gets damaged. As aresult, many people get reluctant to grow tobacco and this creates a problem for the tobacco industry asit causes a decline in tobacco production.
  12. 12. Industrial Sector of BangladeshGroup IIPage 12RMG sector: The main challenge this sector faces is the labour unrest and poor infrastructurewhich is related to lack of electricity.Let us now consider the challenges faced by the industry sector in general.Corruption: The most vital drawback of our country is corruption. If one has to establish a newindustry or firm then he or she has to pay the government officials a certain amount of money just toinitiate construction. Once completed, the bribe needs to continue otherwise the officials would hamperthe whole production process and thus result in closing of that firm. This is a major problem because ahuge capital is required to start a business. Paying bribes also causes a fall in the owner’s profit.Labour: There is a lack of trained workers in this country. Thus, there is a decline in theefficiency of the company. This is because most of the people of our country are illiterate. Thecompanies also need to provide training (apprenticeship) to these labourers and hence quite an amountof money and time is spent on them. This challenge is faced by every company or firm in Bangladesh.Political instability: This is a major hindrance towards the advancement of the industry sectorof Bangladesh. Frequent strikes result in disruption of daily business. . This hampers the smoothrunning of industries, they are unable to procure raw materials in time hence their production and eventransportation is delayed. The politicians only think about themselves. As such, our industry cannotprogress and compete with the outside world.Shortage of electricity: without power industrial units cannot operate properly. In order tocontinue production, factories opt for own power generation which is expensive.
  13. 13. Industrial Sector of BangladeshGroup IIPage 13VIII. RecommendationIndustry sector is one of the major sectors for income source in Bangladesh. There were lots offlaws in this sector but Bangladesh could come up with phenomenal results for the enrolment of peopleand to come out Bangladesh from poverty though this Industry sector. Government had taken lots ofsteps for building up the Industry sector; they even thought to build up a city only for the industries, sothat the people can easily get into the job site easily. Even after the tremendous and drastic growth ofBangladesh in different fields of industries Bangladesh is still witnessing some deficiency which isproving as an obstacle for the further growth of Bangladesh industries. Those include non-professionally trained employees, corruption, and of course poor governance such as lack ofaccountability, transparency, predictability and proper public participation. Apart from that due to theovertime spend on garment industries people are not socializing and hence creating a rift amongst theknown people. If these all problems could be solved through our participation then Bangladesh couldbecome one of the leading industrialized countries. So we all have to be aware of taking every step tobuild this sector and to help us for our betterment to increase the GDP in order to achieve MDG.IX. ConclusionBangladesh is a river based country. The culture and the language they bear is one significantamong the world. The evolution they are bringing among the world is phenomenal. The industrialsector in Bangladesh is a huge contributor for the country’s economic growth and is also becoming arole model for the world. The labour cost in our country is one of the least in the world. That is whymaximum companies have given us offer to make their products and in this way we are increasing ourGDP growth. We all have to work hard and let our Bangladesh to make beautiful in every aspect. Andthis research paper assignment has given us a very practical insight of the current situation ofeconomical growth related to industrial developments in Bangladesh. And has made us very proud tocall it our country.
  14. 14. Industrial Sector of BangladeshGroup IIPage 14X. References1. http:// www.infor National Policy Forum, Dhaka: 20-22 August, 20013. Moazzem, K.G., Rahman, Tariqur and Sobhan, Abdus (2009), “Jute ManufacturingSector of Bangladesh”, Centre for Policy Dialogue5. Bangladesh Board of Statistics