The document presents an assignment focusing on the issue of sick industries in Bangladesh, detailing their causes, symptoms, and proposed remedies. It emphasizes the significance of entrepreneurship for economic development and identifies management, financial, technological, and environmental factors contributing to industrial sickness. The authors suggest various measures to address the problem, including government intervention and improved support for entrepreneurs to promote a healthier industrial environment.

1. 1
Surma Tower, Sylhet
An Assignment on
‘’Sick industries: The reasons and remedies for it‘’Sick industries: The reasons and remedies for it‘’Sick industries: The reasons and remedies for it‘’Sick industries: The reasons and remedies for it’’’’’’’’
(A case study in Bangladesh)(A case study in Bangladesh)(A case study in Bangladesh)(A case study in Bangladesh)
Course title: Entrepreneurship
Course code: BUS-330
Submitted to:
Sakufa ChowdhurySakufa ChowdhurySakufa ChowdhurySakufa Chowdhury
Assistant Professor, Department of Business Administration, SUST, Guest
Teacher, Leading University
Prepared by:
Torch Bearer’s
IDIDIDID NameNameNameName
1201010247 Abu Ahmed Shahib
1201010230 Ehsan Ahmed Chowdhury
1201010205 Mahmudul Karim Newaz
1201010248 Syed Ali Hasan
1201010219 Abdul Motin
1201010202 Masum Hussain
Section: E
Semester: 8th
Batch: 30th
Department of Business Administration
Leading University, Sylhet
Date of Submission:Date of Submission:Date of Submission:Date of Submission: 02 September02 September02 September02 September, 2014, 2014, 2014, 2014

2. 2
Acknowledgement
At first, we are grateful to Almighty Allah for creating us in such a beautiful
country like Bangladesh and also for controlling our life. For the mercy of him,
we got such courage to start this assignment on ‘‘Sick industries: The reasons
and remedies for it’’ (A case study in Bangladesh)
After that we want to give thanks to our honorable Head of the Department Dr.
Bashir Ahmed Bhuyian for giving us the opportunity to study in this subject.
We would like to express our thanks to the Librarian of Leading University for all
of his help that we have received.
Our respected parents who gave us mental support and inspiration for our
assignment, there is a special thanks for them.
We also want to give a lot of thanks to our honourable course teacher, Sakufa
Chowdhury for giving us mental support and a clear concept about this
assignment.
Without the help of our friends and classmates it was quite impossible to prepare
such kind of assignment. They gave us some necessary information about this
topic which was unknown to us. So, we would like to give thanks to all of them.

3. 3
Abstract
Small industrial units are the seedbed on industrial development in underdeveloped economy
for its less capital involvement and more employment generation capability. But this sector
cannot contribute expectedly for infection to sickness that ultimately prevents the
entrepreneurial bases of economy. Sickness can be occurred in the inception period, in
operation and /or in macro environment. Without the growth and development of
entrepreneurship the development of country would always be unattained. It is a study through
which we try to analyze the forces behind the spirit of entrepreneurship development. The study
tried to explore the ambitions, compulsions, facilitations and expectations which lead them to
industry, the idea generation process and motivators in that process of entrepreneurships and
also the primary obstacles in entrepreneurships in Industrial estates. In this context an extensive
survey is made and data have been collected from some entrepreneurs in five BSCIC industrial
estate of Sylhet division in Bangladesh. From that study it is revealed that the leading ambition
is making profits, compulsions are dissatisfaction in present job and unemployment and
facilitating factors are technical skill and experience. The main source of idea is the
entrepreneur himself and he is also the motivator in that process. Obstacle in emergence of
entrepreneurship in industrial estates is revealed as the procedural hazards. Therefore it is
suggested that proper counselling in presence of family members and minimizing the
procedural hazards in facilitating supports should be emphasized in entrepreneurial
development program. The problem of industries becoming sick, both in public and private
sectors, has turned to be alarming in Bangladesh in recent years. Although the causes for
closure or divestment might be many but in most of the cases continued loss played a major
role. Thus the problem of industries becoming sick deserves to be treated more seriously at
Government policy level as it is related to the national economy and development.
Occurrence of industrial sickness might come up at various phases of business cycle. Although
"survival of the fittest" is a very much well known proverb, but here in Bangladesh the
industrial sickness problem cannot left over to the market forces as it will bring down adverse
repercussions to the national economy. Moreover, industrial sickness might also become
responsible for many social problems particularly in a developing or underdeveloped country.
The following measures can be considered for combating the Industrial sickness:
1) Elimination or trying to eliminate the causes, which have been described earlier,
2) Cooperation of financial institutions in giving and recovering loans and interest, easier and
acceptable loan disbursing policy and supply of working capital,
3) Favourable government policy with respect to import, export, project appraisal, tariff etc.,
4) Assurance of the uninterrupted power, water and gas supply and raw material supply,
5) Proper market planning through accurate forecasting and customer survey,
6) Controlling some of the environmental factors like labor unrest, strikes, political instability,
7) Conservative government policy to save the national industries, etc.

4. 4
Contents
Subjects pages
1. Introduction 5
2. What is industrial sickness? 6
3. Causes of sickness 6
a. Management related 7
b. Financial 7
c. Technological 7
d. Environmental 8
4. Causes of sickness 8
a. Born Sick 8
b. Become Sick 9
c. Made Sick 9
5. Symptoms to becoming sick 9
6. Impact of technological factors on Sick industries 9
7. Signals of industrial sickness 12
8. Stages of sickness 12
9. Preventive measures and role of concerning agencies 13
a. Term Lending Institutions 14
b. Commercial Banks 15
c. Entrepreneur 17
d. Government 17
10. Analysis and findings 19
11. Corrective Measures 23
12. Conclusion 24
13. References 24

5. 5
Introduction
As envisaged in Vision 2021, Bangladesh will have, by 2021, a dominant industrial sector
where industrial sector will account for at least 40 percent of the gross domestic product (GDP)
with a capacity to absorb 25 percent of the workforce. The goal of the development strategies of
the government is to keep the contribution of the industrial sector to the GDP on increase
gradually. The structure of the industrial sector will be consistent with the comparative
advantage of the economy, which will make the sector globally competitive.
In the face of challenges of global competitive environment, the present government considers,
instead of privatisation, it is important to make the running industries more production-oriented
through a range of reforms. Then identify the sick industries and to allow them exit from the
industrial sector. The Government also considers that establishment of labour-intensive
industries instead of capital-intensive ones should be an overriding priority. In order to reduce
poverty and to generate employment opportunities, the present government is committed to
bring about rapid industrialization. It also aims at establishing a society where there will be
increased management capacity, rapidly developing capital market, good law and order
situation, no grafts and corruption, no bureaucratic complexity and political interference.
Besides, the government is also committed to formulate and implement short, medium and long
term policies and strategies consistent with the aim of ensuring investment-friendly
environment, globally competitive domestic markets, innovative technologies, infrastructural
facilities, and congenial investment climate for the entrepreneurs and expansion of domestic
market. In order to accelerate the pace of industrialization, the draft “Industrial Policy, 2009”
has been formulated. The draft policy has laid special emphasis on modernization of the
economy, infrastructural transformation, diversification of the economic base, accelerated
economic growth by increasing productivity and technological development, employment
generation, income generation and good living standard. The draft policy will be finalized by
undertaking wider consultations with varied groups of stakeholders. The strategies mentioned in
the draft industrial policy are expected to help ensuring planned expansion of industrialisation
in the country and sustainable and continued growth of the industry sector. As a result, a vibrant
and potential base of the economy will be established which will alleviate poverty, reduce
unemployment, create employment opportunity, develop livelihood as well as accelerate the
pace of achieving higher trajectory of economic growth. A vibrant and dynamic private sector
will be the principal actor in Bangladesh's industrial arena and the public sector will there to
provide strategic guidance to ensure maximum efficiency and dynamism of the private sector.
The prominent feature of Bangladesh’s striving towards achieving higher trajectory of
economic growth will be the Public-Private Partnership (PPP). Other prominent features of the
industry sector of the country are - proper development of local industries; establishment of
import-substitute industries, where possible and uninterrupted development of export industries.
Steps have been taken to set up special economic zones in various regions to boost up exports
and establish export-oriented industries. The economic zones will comprise:
(1) Export processing zone,
(2) Domestic processing zone,
(3) Commercial zone,
(4) processing-free zone,
(5) agro-based or service-based zone and
(6) high-tech parks, ICT villages, software technology parks.
Special incentives both fiscal and non-fiscal will be made available to these economic zones.
Government is committed to protect the domestic industries; attract potential Bangladeshi
investors living abroad and to lay emphasis on running the jute industries profitably and
alternate use of jute. Besides this, setting up of environment-friendly renewable energy and
biogas-based industries is also a goal of the Government. In order to offer investors quick and
hassle-free investment-related services, ‘One Stop Services’ will be equipped with modern IT

6. 6
equipment. This will attract the investors to the investment landscape of Bangladesh. To further
strengthen the process of industrialisation, the Government has identified the Small and
Medium Enterprise (SME) as a priority sector. Cottage, small and medium industries will be an
important component of the industrial landscape playing a critical role in decentralized
employment generation, women’s entrepreneurship development and poverty alleviation.
The industrial sector will be environment- friendly and compliant with health, safety and other
standards required under the rules of the World Trade Organization.
What is industrial sickness?
People become sick and industries also become sick. Sick people suffer from various problems
sand if this sickness continues sometimes the life becomes threatened. If proper care is taken,
people can recover. Similar is the case with industries. The term ‘Industrial Sickness’ has
become a buzz-word at present in industrial sectors particularly in underdeveloped or
developing countries. It has become a cause of concern to investors, entrepreneurs and
shareholders, policy makers, government and the society in general. If industries become sick,
money and time are wasted; it brings down adverse effect on economy and social problems of
various dimensions surface. So, national economy of developing or underdeveloped countries
cannot afford large-scale wastage of wealth due to industries turning sick. It is generally said
that an industry is sick if it cannot pull on its normal activities, suffers continuous losses or if
the gradual wiping out of its capital starts. A sick industry is one whose financial viability is
threatened by adverse factors.
Causes of sickness:
Industries might face various problems since its establishment or at early stages of life and
sometimes they persist as the industry moves through the future. Problems of sickness may be
classified as internal or external or can be classified as financial, technological, environmental,
management and marketing related etc. This grouping and sub-grouping of problems can be
extended. Whichever be the root causes, they too differ according to the type, location and
availability of cooperation and non-cooperation of financial, governmental and other related
agencies, organizations or institutions. If the factors of production i.e., man, machine and
material (the famous 3 M’s) and in addition management, money, method and marketing (other
4 M’s) are not properly managed various problems arise. These factors are interrelated and the
very survival of the industry depends on factors related to these. Thus, we can classify causes
as:
1. Management related: (relating to all general management activities, personnel activities,
marketing activities etc.)
a) Improper strategic management policy, lack of proper vision, determination of inappropriate
path to reach goal,
b) Lack of proper training, experience and business outlook of entrepreneurs, investors,
excision makers etc.
c) Improper manpower planning, over employment problems,
d) Improper organizational structure, absence of reorganizing process with business dynamics,
e) Poor managerial or administrative control,
f) Lack of continuous tracking of productivity indices and continuous tracking of forecasted and
actual demands or sales,
g) Inappropriate handling of personnel problems, CBA activities, motivation and labor related
problems,
h) Lack of market planning, market survey, defective or improper sales promotion activities,
defective pricing, and problem with recovery of cost of products sold on credit etc.

7. 7
i) Conservative attitude of managers: new managers do not try, in many cases, to take initiative
to deviate from what was in the past, i.e., they try not to test anything new,
j) Improper (of course in some cases) delegation of authority and absence of accountability,
k) Non-availability of skilled labor force and management personnel, etc.
l) Absence of well developed organizational culture, etc.
2) Financial: (relating to money)
a) Poor financial (capital management) management policies,
b) Poor working capital management
c) Improper managing of accounts,
d) Lack of timely decisions form government, banks, financial institutions,
e) High interest rate on loans,
f) Improper tracking of financial positions, time delay of adjusting to changed local, global
economy and business environment prevailing outside,
g) Improper analysis or time delay in taking decision with respect to product diversification,
divestment, etc.
h) Improper financial analysis (in some cases) for investment, replacement of plants and
machineries, etc.
3) Technological: (relating to production)
a) Defective project planning, location, layout and material handing systems,
b) Use of defective forecasting data, use of inappropriate forecasting method,
c) Improper capacity planning,
d) Improper inventory management and management of supply chain,
e) Absence of application of Technology Management principles,
f) Inadequate quality control and delay in adaptation to Total Quality Management (TQM) and
Quality Assurance programs,
g) Absence of use of scientific methods in scheduling (determination of Master Production
Schedule (MPS)) and in production planning and control, etc.
h) Improper or non-application of decision and optimization theories, etc.,
i) Improper process planning, absence of application of motion and time study, and ergonomic
principles
j) Non-application of ‘Reengineering’ principles so as to adjust to the changed situation, etc.
4) Environmental:
a) Change of local and global economic conditions, changes in money exchange rates, etc,
b) Lack of coordination between various ministries and government departments and delay in
getting decisions,
c) Frequent changes in government policies with respect to investment criteria, tax
determination, import and export policies,
d) Non-availability or irregular supply of required energy (electrical energy, gas), raw
materials, labor force, etc.,
e) Strikes, hartals and other working day losses due to political and social problems,
f) Occurrence of Natural calamities like cyclone, flood, tornado etc.,
g) Attitude of mass media, etc,
h) Change of Technology and its lifecycle time.
Although many factors have been listed above, and even the list can be extended further, in
actual situation a few but not all play the main role in turning an industry to become sick. It is
said that Chittagong Steel Mills became sick due to the liberalization of import policy,
continuance of excess manpower even when production declined, failing to compete in market
although there might have many more important factors for the bad condition that occurred.

8. 8
Causes of sickness:
Undoubtedly, the nature and causes of sickness differs from industry to industry, area to area,
size to size – small, medium and large units, and because of a host of other factors. Sickness of
an industry, generally, starts with the gradual erosion of its liquidity due to cash losses on
continuing basis, and thereby deterioration in debt, equity and current ratios. The root cause is
poor management and the resultant cause in finance. The worsening liquidity position and
deteriorating standards of maintenance accelerate the wear and tear of the existing assets,
leading the unit to a state of operational thrombosis. The unit is then considered sick. If this
process is allowed to continue, it may take the unit to ultimate death, i.e., insolvency and
liquidation. A successful entrepreneur has to keep his eye open on the entire gamut of the unit
operation so that a tiny rash may not grow into a tumor. So long as sickness is sporadic, it does
not cause any social concern. However, its widespread incidence of an epidemic nature
becomes a threat to the national economic health. Broadly speaking, the cause of sickness may
be classified as under: As per nature of sick unit, it can be categorized under three group’s viz.,
Born Sick, Become Sick and Made Sick.
1. Born Sick
Sickness is not always a post-implementation feature. Some industrial projects are born sick
from the very inception owing to ill-conceived projects, bad planning and poor appraisal, wrong
choice of location and product selection, inadequate market surveys, false fixed investment
decisions and one customer – one product, type situation etc.
Mostly the units established by the government under social welfare scheme come in this
category.
2. Become Sick
Some industrial projects may become sick due to internal causes. In such circumstances,
sickness starts at last stage of project implementation as a result of poor management and
deliberate diversion of funds. The factors like wrong recruitment and faulty management
policies are responsible for this.
3. Made Sick
In this category, sickness is thrust upon them due to external causes beyond the control of the
management, mostly attributed to environmental factors such as sudden changes in government
policies, technological changes, and macro – political, social and economic problems. It is a
product of malafide inheritor or weak management policy of entrepreneur.
The causes responsible for the sickness in any unit can be termed as:
a) Internal, i.e., Avoidable (Mostly, under control)
b) External, i.e., Unavoidable (Mostly, not under control)
Symptoms to becoming sick
Some industries grow born sick, some are made sick and some can be classified as thrust sick.
Born sick industries are those, which are established with unclear vision, inaccurate forecasting
of market, defective appraisal and implementation, and planning. Industries are made sick by
the inefficient management, lack of dynamism, absence of effective monitoring, and delay in
adopting preventive measures to avoid sickness. Environmental factors produce thrust sick
industries whatever be the causes of sickness, some of the symptoms of industrial sickness are
as follows:
1) Reduced working capital, fall in sales / profit, rapid increase of debtors, frequent liquidity
problems, wiping out of capital reserve,
2) High managerial and labor turnover, labor unrest,

9. 9
3) Rise in complaints from staffs and customers,
4) Unfavorable market development,
5) Rise in finished product inventory,
6) Decline in productivity,
7) Difficulty in paying salaries, bills, loans, taxes, bank interests, etc.
Impact of technological factors on Sick industries
It is sometimes possible to solve many of the management, financial related problems if proper
care is taken and proper planning is done. On environmental factors the industry has either no
control or limited control. We think, technological factors play a major role in industries
becoming sick. Many of the technological factors can be solved if the problems are given due
importance. Qualified technical persons should be entrusted with the job of solving the
technological problems using standard and established methods. The concept of F.W. Taylor's
scientific management theory should not be forgotten. Continuous loss, decline in production
and profit and problem of working capital management are some of the main symptoms of
industries growing sick. If inventory management or supply chain management system is not
properly practiced, then sizable portion of the working capital becomes blocked. If production
planning and control system is inefficient, then production cost increases and thus loss
increases, profit and also productivity declines. Effective capacity and manpower planning,
efficient Master Production Schedule, efficient process design etc. should be given enough
importance to overcome problems and to minimize loss. In most of the papers on Sick
Industries, management, marketing, environmental and finance related problems have been
discussed. But the real horse behind the scene, the efficient and effective production methods,
has been given less importance. In the following the effects of some of the important factors
related to application of technology are discussed.
Location, Layout and Material Handling:
Selection of proper location, Layout and use of efficient material handling system is directly
related to the cost of the product. If products become expensive with relation to those of
competitors, it is difficult to survive in the market for long time. Chittagong steel mills
experienced that. It is said that sometimes-material handling cost go even up to 30 % of the cost
of production. Design of best layout and material handling system reduces production cost and
proper location reduces transportation cost, ensures availability of manpower and other factors
of production.
Inventory and Supply Chain Management:
Inventory eats up the working capital. Excess inventory does not allow surfacing the problems
related to production. The supply chain is the network of organizations that are connected
through upstream and downstream linkages, in the different processes and activities that
produce value in the form of products and services to the ultimate customers. Effective use of
supply chain reduces uncertainties of supply of quality raw materials for production as well as
in delivery of final products to the users. The concept though not very old, can be used to
reduce the possible causes of sickness due to procurement and supply of products.
Technology Management:
Every technology has its own life cycle. Before making investment in an industry and even
after establishment, technology forecast is vital as it is correlated to the very survival of the
industry. In this age of competition if any industry wants to survive, it must recognize the
dynamic process of change of technology.
Total Quality Control (TQM) and Quality Assurance:

10. 10
The philosophical concept of involving everybody, in the organization and in the supply chain
with an aim to improve the quality by trying to accommodate all types of opinions, helps in
quality improvement, which ultimately ensures customers’ satisfaction. TQM concept brings
the concept of elimination of all types of wastes through the implementation of just in time
[JIT] philosophy. TQM with quality assurance program like ISO certification decreases the loss
of customers.
Re-engineering:
Any established method of production, layout and other planning and control activities, might
not remain good or appropriate for long with the dynamic characteristics of various activities,
technology change, new invention etc. Thus forgetting about conservative idea of not taking
risk, appropriate changes are to be made wherever necessary to remain in competition.
Ergonomics and Motion and Time study:
Products and processes are to be designed by considering the users’ characteristics, health and
safety measures. Many, health related, problems of workers are related to ill design of product
or process. Nonconformities in man-machine system, give rise to health problems, accidents
and even bigger catastrophe. This ultimately increases the cost of health insurance, health
service and compensation. Costs are also increased through high labor turnover ratio. Motion
and time study is required to find the best method and time of doing a job. As product cost is
directly related to time involved, this is to be made optimum by using best method and using
ergonomic principles.
Capacity and manpower requirement Planning:
Capacity planning is central to the long-term success of the organization. Too much capacity
can be as agonizing as too little. Managers face problems of deciding: should we have one large
facility or several small ones? Manpower, one of the 3 M’s of production, is to be planned so as
to keep the level at optimum level. Manpower requirement declines if sales declines and vice-
versa. Keeping constant number of manpower involves money, increases production and other
related costs. In USA hire and fire system is well known. It is difficult to be applied here
especially in government owned industries. American companies adjust manpower as per
requirement although this is not true in the case of Japan where utilization of excess manpower
is being used to do other jobs if production declines. Even in USA, through reorganizing
process, sometimes levels in organization are reduced; departments are merged to bring back
efficiency and dynamism, resulting in decrease in manpower. Although it is difficult to
implement, for the very survival of the industry, this requires to be practiced if necessary. Both
BMFT and Chittagong Steel Mills suffered from over manpower problem before their closure.
Scheduling and production planning:
Determination of Master Production Schedule (MPS) and adjustment of schedule with the
change of orders received, play an important role in determining the target supply date. So
appropriate scheduling and production planning are related to better performance of industries.
Optimization Principles:
Various optimization principles were developed during World War II. Use of the optimization
principles brought benefits in war planning and ultimately saved money and time. Use of these
decision-making tools will help managers in managing the affairs in more effective ways.
Productivity Analysis and Planning:

11. 11
Productivity is related to the performance of the industry. In a word, increase in productivity
means better performance of the industry. Many factors: technology related, man related,
product related, and production related, affect productivity. Continuous improvement of
productivity is to be tried through continuous analysis and monitoring for the very survival of
the firm. In the above, an attempt has been made to show the relationship of production
planning and control activities with time and cost. Industries start to become sick when its
productivity declines, part of working capital is blocked, and various other problems arise.
Proper use of the methods described above will definitely solve at least some of the industrial
sickness problems.
Signals of industrial sickness:
Sickness is not happened overnight- it is the matter of numbers of years. Different signs and
signals of sickness are available along these years. The important signals are:
a. Capacity utilization declines.
b. The short term obligations cannot be meet for shortage of liquid fund.
c. Inventories become excessive for declining sales.
d. Non submission of data to bank and other financial institutions
e. Irregularity in bank account
f. Frequent breakdowns in plants and equipments and ultimate disruption in production
g. The quality of product and services is declined.
h. Inability to pay the statutory reserve like the interest of loan, utility bills, tax and other
charges.
i. Unavailability of necessary technology
j. Frequent turnover of workers and managers for lack of sufficient compensation and working
environment.
Stages of sickness
The process of sickness can be discussed in following different Stage of Sickness:
Stage I (Normal/Healthy)
According to Bidani & Mitra,3 "A unit is called normal when all its functional areas like
production, marking, finance and personnel are functioning efficiently”. Initially, a healthy unit
may show good cash profit and positive value of net working capital and net worth as well. To
sum up, a normal or healthy unit may have the followings features:
1. All functional areas viz, production, marketing, finance and personnel are normal and
efficient.
2. Generating good cash profit.
3. Positive value of net working capital or current ratio more than one.
4. Positive value of net worth.
5. Satisfactory debt equity ratio.
Stage II (Tending Towards Sickness)
As the industrial unit tends towards the stage of sickness, initial aberration in any functional
area begins, or may face external constraints. Due to this reason, the cash profit begins to
decline in comparison to last year's, and may firms estimate cash loss, too, in the current year.
Although, the unit may have positive values of net working capital and net worth and may not
have listed as defaulter in the records of banks and financial institution. This stage conveys first
warning signal which should be taken cautiously, and preventive measures with close
monitoring and follow up actions should be launched promptly by the management and the
other associated agencies, this stage may have the following features:-
1. Decline in profit during last year.

12. 12
2. Losses estimated in the current year.
Stage III (Incipient Sickness)
As sickness grows gradually it enters into incipient stage of sickness for a very short period.
Incipient stage of sickness comes when an industrial unit incurs cash loss but imbalance in
financial structure may or may not appear. In other words, two or more financial indicators may
become negative and its value may show warning signal of sickness. At this stage, major
financing and other agencies along with the management should collectively review the overall
performance, and with joint concentration take suitable remedial measures to prevent the unit
from becoming sick. This stage may have following features:
1. Cash losses incurred in last year are expected in current year also.
2. Deterioration anticipated in current year although current ratio was more than 1 during last
year.
3. Deterioration anticipated in debt equity ratio during current year.
Stage IV (Final Stage)
When the suitable remedial measures are either not taken or are inadequate at the incipient
stage of sickness and adverse factors continuously effect the production, finance, marketing and
personal areas, the unit, finally, become sick. At this stage all the financial indicators, such as
cash profit/loss, net working capital, and net worth depict negative results. The industrial unit
may work below 20% utilization of its installed capacity or below its B.E.P. level. As per
Diagnostic Survey Report of Development
Commissioner (Small Scale Industries)4, "A unit is categorized actually sick on the basis of the
following criteria:-
1. Erosion of net worth by 50% and more.
2. Units being closed for a total period of 6 months and more during the past year.
3. Default in payment of loan installment.
Such a unit will require a comprehensive rehabilitation programme for revival and intensive
care for a certain period of time in case it is potentially viable. It is generally, observed that the
remedial measures are taken too late. Consequently, it becomes as expensive affair to bring the
sick unit back to a healthy state. If the sickness is not arrested timely, incidence of sickness
leads to incidence of closure ultimately.
Preventive measures and role of concerning agencies
The prevention of sickness cannot be the sole responsibility of any one agency. It is to be
checked at various stages by developing close and continuous dialogue with each other through
effective communication. The preventive measures can be taken individually or jointly by
having discussions and consultations. In preventing the sickness, therefore, the role of the
following agencies has been identified with respective distinction
1. Term Lending Institutions
2. Commercial Banks
3. Entrepreneur
4. Government
These agencies can effectively stem the sickness if they make use of signals and symptoms that
are generated by the industrial unit in its working and by using information and reporting
system of important key parameters of the industrial enterprise.
1. Role of Term Lending Institutions

13. 13
The task of the term lending institutions to avert sickness commences with the identification of
the sick unit. Many industrial projects are born sick because either proper appraisal has not been
done, or market survey has not been carried out while sanctioning term loan to an entrepreneur.
The role of term lending institutions in the prevention of sickness may be discussed as under:
Appraisal of Management
The terms lender can forestall more than fifty percent chances of sickness, if he evaluates
properly the management of the project. A competent and vigilant management can be expected
not only to find solutions to the day to day problems of the unit, but also to anticipate the
problems to be and take timely steps to avoid them. Management evaluation is a difficult task
but with experience, a term lender would develop the sixth sense to differentiate between a
desirable and undesirable entrepreneur. The term lender can always obtain reports of the
prospective borrowers from bankers and other known sources, particularly regarding his
antecedents and business reputation.
Banning Industries Not Having Scope
There are certain industries which are on the decline, irrespective of the state of economy. The
sound manufacturers with a vision may take measures well in advance, to avert any disaster
through diversification or modernization as the situation may require. Others, either oblivious
about the likely change or unresponsive to it, with the result that sooner or later the industrial
undertakings develop sickness. In such a case, the term lending institutions can render timely
help by identifying those industries or industrial products, where sickness seems to be emerging
due to decline in demand, or where supply has outstripped demand perceptibly, and to publicize
this information, they can help in two ways,
First, to forewarn and dissuade potential entrepreneurs from stepping into these industries, or
impose ban on industries not having scope by putting them on banned list, second, avoiding
creation of additional capacities. Whenever an entrepreneur markets only one product for a
particular customer, the unit runs into problems because customers change their demand in
midstream. In such a case, market survey can be conducted by the term lending institutions and
prevent the potential entrepreneurs not to establish those unit, or change the line of production
in case of established unit.
Machinery & Equipment
At times, the project is based on second hand machinery. Such a project can easily become sick
if the reconditioning of the second-hand equipment is not satisfactorily done or the technicians
to install the equipment are not available at required time.
Extra efforts has, therefore, to be exercised by the financing institutions to ensure that the
second-hand equipment would have a reasonable long life after reconditioning, and in case of
any deficiency in the equipment, ready assistance from the sellers would be available.
Satisfactory Implementation
Time element is all important in the implementation of a project and the term lender has to
ensure that all avoidable delays at the appraisal stage and during the disbursement of the
sanctioned assistance are eschewed scrupulously. Prompts action during these stages would not
only result in the implementation of the project without overruns and on schedule, but would
also establish proper rapport between the term lender and the entrepreneur, it is so essential for
the term lender while monitoring the project later. It must be emphasized that promptness is not
to be achieved at the cost of proper appraisal of the project, or by making disbursements

14. 14
without observing the usual precautions. In fact, a good appraisal is the other important step
that a term lender has to take to forestall sickness in the unit.
2. Role of Commercial Banks
A commercial bank is of vital importance to an industrial unit as it provides to the unit liquid
resources needed to keep the unit going. Their everyday dealing with sick units enables them to
be closer to the operation of the unit and read their pulse. Thus, commercial banks can detect
early warning signal of sickness and, thus take, like suitable and timely action to prevent the
incidence of sickness. The main elements of the sickness prevention system at the bank level
are as following:
Careful Proper Appraisal
A careful proper appraisal of the project ensures not only its success but the banker's interest is
also safeguarded. With the shift from security oriented lending to purpose – oriented lending,
the study of the viability has become more vital while financing a project. It is, sometimes,
found that the credit appraisal capabilities of branch managers have been absolutely inadequate
because of rapid expanding branches of commercial banks. Mostly they apply a conservative
and traditional approach while assessing the requirement of working capital finance. As a
result, units are under financed and are, therefore, forced to operate at sub optimum level.
Moreover, the technical and marketing feasibility of the project are taken for granted without
doing analytical study at their own level. Banks should refuse to finance those projects which
are not viable, and assessment of working capital requirement should be done with the co-
operation of term lending institutions. There should be continuous training programme for
branch managers to upgrade their appraisal capability. The efforts should be made to appraise
the project on merits alone and in a very objective manner, without accepting any external
influence.
Timely disbursement
Banks have to ensure that working capital finance should be available in time as far as possible
to avoid overruns in project cost. Though, it is observed that sometimes the delay may occur
due to the entrepreneur who fails to fulfill all the formalities such as submitting all the required
documents and replying to the queries of the branch manager in time, yet it has been noticed
that the fault lies with the banker who has to obtain the permission of and appraisal from
different authorities, and lays stress more on acceptance of security as the second charge from
term lending institutions on fixed assets, or personal guarantee against personal assets. Any
delay in disbursement may invite several other difficulties except increase in project cost, such
as the entry of new competitors, the non-availability of scarce raw materials, delay in supply of
final product in time.
Feedback from Commercial Banks
It may go a long way in detection/prevention of incipient sickness if the term lender and the
commercial banker realize that they are the two wheels on which the project cart has to proceed
to success and that success can be achieved only if both of them function in unison. If one of
them tries to strengthen its position at the cost of the other, or keeps away any information
about adverse developments in the unit, eventually both will suffer as also the unit itself. There
is a dire need for co-operation between the two lenders from the very inception of the project,
and it has to be continued throughout the life of the project.

15. 15
Warning Signals
If the drawings in the account exceed the permissible drawing power continuously over a
period, the banker can safely conclude that the customer is short of funds. If the account runs
consistently in excess of the sanctioned limit, the customer might be indulging in over-trading.
If the bills drawn by the seller on his buyers are retuned unpaid, it may be pointer to the
unacceptability of the end- products of the unit in the market. It can as well be said that a good
look at the ledger account of a customer (bank's) by an experienced banker can throw a flood of
light on the state of the business of the customer-at least, reveal enough for the banker to knit
his eye-brows.
Market Intelligence
The apprehensions raised by the scrutiny of the ledger account can be counter – checked by the
banker with market intelligence, which he has perforce to build in his system of working. Only
when and if the market reports corroborate the banker's earlier apprehensions raised by the
ledger account, the banker need commence action to arrest impending sickness. An innocuous
visit to the unit by the banker might help in crystallizing the picture further.
Stemming Sickness
Discussions with the entrepreneur could be the first step in the desired direction provided the
intention is to help the entrepreneur to come out the difficulties. Any undue pressure at this
stage to recover even a part of the banker's dues and/or to strengthen the security is bound to
complicate the existing unsatisfactory situation and also prompt the customer to keep bank the
information regarding adverse developments. Normally, provision of additional finance/credit,
reduction in the prescribed margin and some latitude in repayment of the over dues would help
in remedying incipient sickness.
3. The Role of the Entrepreneur
In a way, it should be the sole responsibility of the entrepreneur, who commences implements
and manages the project, to avert sickness in the unit set up by him. This can normally be done
if the entrepreneur does his homework properly while drawing up the project, if he pays
adequate attention to the deficiencies pointed out by the appraising officers of the financial
institutions, if he selects the suppliers of machinery and process carefully, if he appoints the
financial and other staff in time, if he affects economy to keep the project cost within the
original estimates and implements the same according to the time schedule. The main elements
of the sickness prevention system at the entrepreneur level are as follows:
Management Board
The industry should have a board with competent persons from all disciplines needed to run the
unit successfully, appoint a dynamic chief executive to implement the policies formulated by
the board and ensure a proper second line of defense by appointing professional go-getters. And
above all, at the first sign of any adverse development in the unit, he should take his banker and
term lender into confidence.
Fortunately, the old thinking of the bankers to "put on the heat" when the borrowers are in
difficulties, is being gradually replaced by a desire to understand the problems of the
entrepreneur when he faces crisis and to find solutions so that the unit function smoothly.
Partners in Enterprise
The term lenders consider themselves as partners in the enterprises (as shown below) being
managed by the entrepreneur and are fully conscious that the recovery of their lent funds
depend on the capability of the unit to generate surpluses.

16. 16
• Solvency of Individual
• Security of Collateral
• Profitability & Viability of Project
• Entrepreneurial Capabilities
• Partnership
• Responsibilities
• Awareness Sickness Warning
In the circumstances, the entrepreneur can freely confine his problems to the lenders and make
use of their expert advice in averting sickness before it is too late.
4. The Role of the Government
The Government can help in controlling sickness by not making sudden and frequent changes
in the industrial policies. It has to be appreciated that setting up of an industrial unit is an
investment decision, which has to take into account further returns.
Sudden changes in industrial policy
When several changes are made successively in the industrial policy by the government, it not
only may discourage new investment but also upsets further plans causing sickness in the
established units. Withdrawal of subsidies can also result in sickness. It would be only in the
fitness of things if the term lenders, who are expected to know the pulse of each industry
financed by them, are taken into confidence by the government, before effecting any major
modifications in the industrial policy. The financial institutions and the representatives of
industry can also be prompted to come together occasionally with or without government
participation with a view to discussing the problems of the industry in general or of any
particular industry and evolving solutions including recommendations to the government to
modify its existing policies.
Resistance to change
The law as it stands today does not empower the term lenders to make changes in the
management of an assisted unit even when they are convinced that incipient sickness in the unit
is entirely due to the incompetence and/or dishonesty of the existing management and it is
apparent to them that without a change in management, the unit would soon become chronically
sick. Strangely enough, when the management is efficient and honest, any changes suggested in
the management by the lenders are readily accepted but a management which is not above
board usually resists management changes.
Power to change
It would be a greater help if the apex term lenders are vested by the government with powers to
make management changes in units assisted by the public financial institution when it is proved
to its satisfaction that sickness in a unit has set in and the same can be attributed entirely/mainly
to deficient management. In particular, term lenders may be authorized to appoint in units
suffering from incipient sickness whole time financial, technical and marketing directors. Such
directors, of course, would have to be empowered to report to the financial institutions and also
given immunity from penalties for acts done in good faith. Term lenders can be required to
prepare a panel of experienced persons, who could take up such challenging assignments, while
retired officers from the public and private sector with adequate background could be one
source for building up such a panel.

17. 17
In order to get rid of the disease of industrial sickness and restore the health of the affected
units, there is an imperative need that the government and the related agencies should come
forward to meet the challenge. They should adopt strategic and pragmatic approach. As far as
possible, stern legal and economic measures should be adopted to check further spread of
sickness and assist the unit in their rehabilitation bid. Modernization and rationalization should
be commonly used. These units should be pressurized and persuaded to utilize sophisticated
machinery and innovative technology. Besides, banks the financial institutions, should also
come forward to rescue these units through their liberal loan policies. These institutions should
keep a watch over the ways of the utilization of awarded loan facilities. Banks should also
assess the progress of such units, which are facing crisis, from time to time. It is presumed that
if such a state of affair is not checked and timely action is not taken the increasing incidence of
industrial sickness will further aggravate the situation and hamper the growth of industrial
sector.
Analysis and findings:
The magnitude of industrial sickness can be understood by measuring the statistics of
bankruptcy, ratio of sick unit to total unit, number of sick units, the sign of sickness in
industrially developed site and also in industrially backward site, the growth of total small scale
industries and sick SSI both in advanced and backward area.
It is natural that inefficient units would be replaced by more efficient units but the
consequences of sickness affect the entrepreneurial spirit of a nation. To study the intensity of
sickness in remittance and natural resource rich and industrially backward Sylhet division,
apparently due to lack of entrepreneurial efforts, it is logical to study the density of industrial
sickness in that division. From the data of 5268 industrial units of BSCIC industrial estates, the
researchers found the division wise estates areas, total industrial units, active units and sick
units’ ratio as follows:
Table 1:Division wise sick units in Industrial Estates:
Source:
MIS 2012
From the table 1; it is found that the percentage of sick units to total industrial units in
Percentage
Divisions Area Population Estate
Area
Total
Industrial
Unit
Active
Units
Sick/
Closed
Barishal 13297 8147000 185 192 .58 0.20
Chittagong 33771 28079000 340 880 .72 0.07
Dhaka 31120 46729000 714 2668 .42 0.03
Khulna 22272 15563000 170 368 .71 0.11
Rajshahi 34514 33994000 450 907 .83 0.04
Sylhet 12596 9807000 98 253 .64 0.10

18. 18
Sylhet division is 10%, where the highest ratio is found in Barishal and Khulna division
(20% and 11%). Considering the estate area and total industrial units, Dhaka division is in
better position where the proportion of sick units is only 3.00%. Industrially advanced
Chittagong region has also a greater percentage of sick units i.e. 7% whereas industrially
not so advanced Rajshahi has lower sick units (only 4%). So, it can be concluded that
more entrepreneurial efforts give birth to more sick or closed units.
To get more insight to the density of sick units in Sylhet division, the district wise analysis
nears significance. The table blow shows the district wise intensity of sick units in Sylhet
division:
Table 2: Districts wise sick unit in industrial estates of Sylhet Division
District Area Population Density Estate
Area
Indus
-trial
Plot
Indus
trial
Unit
On
Produc
tion
Under
Constr
uction
Sick
or
Closed
Hobigonj 2,636.58 2,059,000 780.94 15.00 70 59 35 17 2
MaulviBazar 2,799.39 1,902,000 679.43 14.59 101 64 29 10 7
Sunamganj 3,669.58 2,443,000 665.74 25.52 116 21 7 7 0
Sylhet 3,490.40 3,404,000 975.25 25.76 255 150 130 6 13
Total 12,595.9
5
9,807,000 778.58 81 542 294 201 40 22
Source: MIS 2012
From the above table, the highest numbers (13) of sick units are found on two BSCIC industrial
estates of Sylhet division, the lowest in Sunamgonj (o). In Sunamgonj district the industrial
activities in industrial estates area is very insignificant (only seven active units) so the sickness
is zero here. Moulvibazar has 7 sick units out of 29 active units and Hoibigonj has two units out
of 59 where active units are 35. It is also established in Sylhet division that more industrial
activities creates more sick units.
Industry Wise Sick Units:
It is also important to study the industry wise sickness in order to get more insights into the
problems of sick units. In the table3, the industry wise sickness in Sylhet division is shown:
Sylhet Sick units
Number of
Active Units
Sick/Closed
Unit
Proportion
Number of
Sick Units
Sick/Closed
Unit
Proportion
to Total
Chemical &
Pharmaceuticals
12 0.09 0 0.00
Cloth 14 0.11 6 0.46
Engineering 28 0.22 2 0.15

19. 19
Table
3:
Industry wise sick units in Sylhet division
Source: MIS 2012 and Field survey
The table shows maximum involvement of entrepreneurs in food processing industry that
creates 31% (4) of total sick units (13). This is due to the stiff competition in the market and
management failure to cope with that competition. The highest number of sick units is created
by cloth industry because of non-availability of raw materials, labor, and repairing facilities of
machinery locally. Further the marketing of cloth is conducted by traders of Narayangonj and
Dhaka. So then carrying cost of raw materials and also of finished goods destroys the firm’s
competitiveness and makes it sick. Two engineering units are sick for managerial problems.
One leather producing unit is sick due to impractical planning in inception period and this
region is not suitable for producing and marketing leather goods for in availability of raw
materials, skilled labor, and also traders.
Causes of Sickness:
To find out the causes of sickness and stages of sickness the researchers tabled the information
gathered as below:
Table 4: Causes and Categories of Sickness
Food 64 0.49 4 0.31
Forest 1 0.01 0 0.00
Jute 0 0.00 0 0.00
Leather 1 0.01 1 0.08
Paper 5 0.04 0 0.00
Other 5 0.04 0 0.00
Total 130 1.00 13 1.00
Category Causes No of units Industry
Born Sick Vision, forecasting,
Appraisal, Planning
07 Cloth, Leather
Make sick Managerial problem 06 Food, engineering

20. 20
Source: Field survey
From the above table it is apparent that, the sick units of cloth industry are due to weakness in
planning, faulty project appraisals and lack of vision. That is, these units are born to be sick. No
attempts are taken to revive them except in one unit where the entrepreneurs tried to change the
product and target market twice but failed. The single unit of leather industry faced similar
problem of born to be sick, but there were scope to revive the unit by producing specialized
product with specialized techniques. The financing organizations did not co-operate the
entrepreneur to think in that way. The food processing industry faced stiff competition from
the market and due to huge number of local, national and international competitors; the
management of those units tried their best but could not survive. From the record of the estates
it is found that in 2005 there were 19 sick units in four industrial estates. But the estate
authority suggested the entrepreneurs to sell those units to other entrepreneurs and with the help
of the estate authority 6 units were transferred to other entrepreneurs and now running swiftly
with good management of the new entrepreneurs. The Unique food of Khadimanager was
transferred to Modhubhan foods, the best Food to Sylhet printing and Packaging, one printing
and packaging unit to foam producing unit, one bakery to Pran group for bakery producing
unit, one cloth unit of Gutatiker to another printing and packaging unit. The new enterprises are
running very well now. So the estate authority should think about transferring the sick units to
interested entrepreneurs with good track record or good planning.
Lack of inputs 00
Problems Industrial
Relation
00 -
Technical/Operational
problem
00 -
Thrust to be sick
Change in technology 00 -
Change in market 00 -
Change in Policy 00 -

21. 21
Corrective Measures
After analyzing the industry type, sickness, causes of sickness and stage of sickness
held, the corrective actions that can be recommended to prevent sickness andto
provide the treatment of sickness are as follows:
At Planning Stage:
Keeping the causes of sickness in the planning of any project makes the project born
sick. So, preventive measures can be taken to remove the causes of sickness in the
project planning. The preventive measures include scientific and systematic selection
of project, proper evaluation and implementation by taking the help of experts in
every stage. Specifically the location selection, layout and material handing plan
should be given proper importance, in every stages of capital budgeting the Chamber
of Commerce and Industries may be involved for their more practical outlook.
At The Operation Stages of Normal Units:
To prevent the ‘make sickness’ of industrial units it is important to routine check up
the operation of units by various technical methods like implementing inventory
and supply chain management, implementing TQM and quality cycle in significant
stages of production, reengineering when necessary and routine checkup of financial
reports and keep it at standard level.
For Units Tending to Be Sick:
Regular check up of the managerial practices and removing the deficiency in finance,
marketing, human relation, operation & infrastructure are important to prevent the
sickness for the units that tend to be sick.
For Units of Incipient Sick:
Identification and detection of sickness at the incipient stage of sickness are most
important for effective decision making. In order to do that, banks and other financial
institutions should periodically review the accounts of borrowers to arrest the
sickness in incipient stage and cooperate the entrepreneurs to provide effective
treatment to remove sickness. It needs integration of diverse viewpoints of
management, financial institutions and labor union to come on the unified decision to
treat the sickness.
For Sick Units:
To make effective decision regarding the sick units there must be effective division in
authority to treat those units. Not only financial measures can treat sick units, other
measures must need to rehabilitate those units. The actions of rehabilitation should be
started with no delay. Above all in industrial policy of Govt. there must be necessary
conservative ways to keep the domestic industrial units alive from liberalization of
trade worldwide. The strategies to great sick units must include the strategy to close
some units, revive some and combine some with other industrial units and other
measures also.

22. 22
Conclusion
Occurrence of industrial sickness might come up at various phases of business cycle.
Although "survival of the fittest" is a very much well known proverb, but here in
Bangladesh the industrial sickness problem cannot left over to the market forces as it
will bring down adverse repercussions to the national economy. Moreover, industrial
sickness might also become responsible for many social problems particularly in a
developing or underdeveloped country. The proposed approach also provides a basic
framework for a computational approach to deal with industrial sickness which shall
be a reliable mechanism for decision makers and planners. It will not be over-
emphasized to say that industrialization and development of a country are closely
related. Industries are established with a view to produce surplus. But there are many
instances of industries becoming sick at some point of their life cycle. Although, such
examples are many in underdeveloped and developing countries, it cannot be said that
no such examples are found in developed countries. In this paper an attempt has been
made to identify the causes of industrial sickness and to show how far the application
of the theories and principles of Production and Operations Management and
Technology management play a role in the prevention of industries becoming sick.
Industrial development of any country depends on the efforts of entrepreneurs. The
entrepreneurs are afraid of industrial sickness as it involves the loss of invested
capital, career and huge opportunity cost of intelligent entrepreneurs nowadays. The
concern authority should come forward with different measures to reduce the risks by
removing the causes of sickness as much as possible in industrial units. Along with
cooperation of authorities, the proper training of entrepreneurs and flow of necessary
information is also important to prevent sickness.

23. 23
References
1) Report submitted by the “Sick Industries and Rehabilitation and Revival cell”,
Ministry of Industries, Government of Bangladesh, 1992.
2) Dey Ranjit kumar: “Introduction of new elements of cost to the method of
Industrial prices in
Bangladesh”, Chittagong University Studies, Commerce-Vol. – 5, 1989, Page 327.
3) Decision: Special Issue on Industrial Sickness, Journal of Indian Institute of
Management, Vol. 6, No. 1, January, 1979.
4) Alam, S.M. Jahirul:” Industrial Rehabilitation Strategy Paper, Bangladesh”,
Prepared for the
Ministry of Industries, August, 2003.
5) MIS Report, BSEC, 1998-99, '99-2000,2000-01.
6) M. Anwarul Azim ,"Technology Management and Development of Nations", UGC,
Bangladesh.