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INDUSTRIAL POLICY OVER THE YEARS
A brief history of rhetoric
With such inconsistent policies and loose enforcement of law, the private sector has typically considered trading or other clandestine activities to be less risky and more lucrative than setting up industries. The rent-seeking behaviour — culture of bribery, in plain English — has also managed to thwart any sincere intentions to set up manufacturing establishments
Tanim Ahmed
During the early days of the wide-scale nationalisation in 1972, there was a marked divide between the political rhetoric and the actual policy decisions of the government. Even the nationalisation process was riddled with gaping flaws. As a large number of industries were virtually abandoned, due to the mass exodus of non-Bangladeshis, the government assumed responsibility of over 750 establishments. It understandably strained the government resources. Regional management boards were set up for the industries on a temporary basis, later replaced by administrators who often did not have the expertise or education to dispense with such responsibilities.
Their corruption was evident in the fact that a number of them were caught and handed over to the police after the change of the Awami League government. According to a news report of the Holiday, the president of the Dhaka Chamber of Commerce and Industry alleged that roughly Tk 500 crore worth of industrial spare parts and raw material were unaccounted for.
There was no significant criticism of the government move to nationalise the industries since the public perception was that these were set up depriving the general people and symbolised the core reason behind their miseries. The Bengali private sector interests, never much of a consolidated class, were left with no allies in the government and failed to devise any strategy that suited their interests.
However, although the public was ready for almost any radical measures, the government failed to answer the call. Although it had adopted socialism as the guiding principle, the economy was far from taking a compatible pattern and retained a capitalistic model. The state, while establishing control over the industrial process, did not have any control over other means of production, distribution or purchasing power. The Awami League government kept distribution of products from the nationalised industries in private hands, which were often dominated by greedy and dishonest agents.
The government awarded lucrative import licences and distribution permits to their chosen quarters who fully exploited the advantage. Manufactured goods were scarce not only for declining industrial production but also for disrupted trade since independence. It meant that the distributors could exact a high premium from the goods. The state-owned trade corporation also opted for distribution through private operators. Given the overvalued currency, importers reaped undue benefits, from cheap imports and high prices on the local market. According to conservative estimates the ‘scarcity’ margin in domestic cotton, textiles and cigarettes was Tk 300 crore (6 per cent of the GDP) in 1972-73 alone, and all this without increasing the basic output of the economy or making any contributions.
While the government embraced, so to speak, the key industrial sectors, the crucial agricultural sector was largely left outside the purview of the public sector. The 33-acre ceiling on land ownership was retained from the Pakistan regime. Also, there was no effort towards land distribution which would have been prudent, given the large number of landless labourers in rural areas. Although the land policy advocated increasing productivity of small farmers and peasants through cooperative farming, share-cropping was hardly affected and thus continued, perpetuating the very system that exacerbated the misery of the farmers. In the absence of meaningful land reforms, the government move to provide cheap credit and subsidised inputs only succeeded in concentrating further wealth in the hands of the bigger landowners.
The political vision failed to give any specific direction for state policies and often stated in broad terms as the Awami League manifesto of the elections of 1970 reflects. The post-independence government failed to concretise their vision any further. The first five-year plan 1973-1978 also reflects such absence of vision. The plan noted that for a well-formulated socialist plan the basic premise had to be that the government and the ruling party would have the will and determination to transform a society where productivity, discipline and savings were the basic tenets of economic activity. The very process of the planning seemed to have been more of a political process than an economic device. The plan reflects that the planners themselves were doubtful about the commitment of the political leadership.
The industrial policy for 1972-73 aimed to clarify the government’s position regarding the nationalised industries and the role of the private sector. However, the delay in its formulation and announcement virtually stopped the growth of the private sector altogether. According to reports, the moneyed class were not only transferring their funds to foreign banks for fear of nationalisation but had also resorted to illegally transferring their money abroad.
The industrial policy’s development goals included meeting the basic needs of the people, reducing dependence on imports for meeting those needs, proper exploitation of natural resources, creating employment and building a sound industrial base. All this was to be done within a planned socialist framework. The policy recognised a limited role for the private sector. But entrepreneurs were restricted to small- and medium-sized enterprise with an investment ceiling of Tk 25 lakh. The policy also placed a moratorium of 10 years on establishments worth less than Tk 25 lakh. It strived to make foreign investment more attractive in joint ventures, with the state retaining the major share.
Repeated devaluations, rising price level at the domestic and international levels, expensive machinery, land and labour made it difficult for the private sector within the investment constraint. Thus it remained stagnant. The public sector, on the other hand, remained overburdened and failed to lay the foundations of socialism in the industrial sector or anywhere else in the economy. It only succeeded to encourage and promote some capitalist interests, the very idea the government was opposed to, at least in principle.
A new investment policy was introduced in 1974, when the economy collapsed and a large amount of foreign aid was required to recover. The new policy allowed more room for the private sector. The investment ceiling was raised to Tk 3 crore and foreign investment, which was previously reserved for collaboration only with the public sector, was allowed to enter joint ventures with the private sector as well. The moratorium on nationalisation was increased to 15 years from the previous 10. The policy also assured of fair compensation in such an event, whereas earlier it had been left to the discretion of the state. But given its track record, the private sector remained doubtful as to the commitment of the state and refrained from investment.
Within 18 months the subsequent government of Ziaur Rahman brought forth another investment policy raising the ceiling to Tk 10 crore. But the list of 18 sectors, reserved exclusively for the public sector, was retained. The reserved list contained most of the heavy industries that could potentially attract private investment. These included jute, textiles, sugar, paper and newsprint, iron and steel, cement, telecoms, electricity distribution and basic pharmaceuticals. It took the Zia administration sometime to realise the folly and reduce the reserved list to 8 sectors, which still contained jute and textiles.
The revised policy made room for increased private-sector involvement in the economy allowing local and foreign collaborations with the government in the reserved sectors. Although the government would retain the major share, private operators could be contracted for management on considerations of technology and management. There were also incentives and tax holidays for private investment. There were some arrangements to finance small agro-based and export-oriented agriculture establishments.
The moratorium on expropriation was deleted and the policy reiterated that all quarters would be compensated fairly. The government also decided to disinvest industrial units, abandoned by the owners and expropriated by the government, which were placed under public management earlier. Nationalisation stopped with the takeover of the Zia government but even then the political rhetoric and vision was kept broad to accommodate interpretations later on. It still lacked a precise direction.
The two-year plan (1978-80) could not overcome the dichotomy and ambiguity of its predecessor. But it was apparently to provide a platform for the next five-year plan for 1980-85. However, the revised investment plan, as it was called, intended to revise the policies for the ‘mobilisation of investment funds and rapid industrialisation, the private entrepreneurs should be afforded adequate scope and facilities for setting up industrial enterprises’.
The government began disinvesting industrial units and compensating shareholders of the nationalised enterprises. There were 15,377 claims that the government had received until the end of 1977, according to a newspaper report.
The government, in its aim to strengthen the ‘shy’ private sector, also allowed liberal credit facilities from financial institutions for financing industries in the private sector. The Bangladesh Shilpa Bank, according to a review, gave 90 per cent of its loans to private enterprises in 1976-77, which was only 17 per cent in 1974-75 and 20 per cent in 1973-74.
Other facilities to encourage private investment included tax holidays, rebate on imported capital equipment and raw materials, a freeze on payment of accumulated interest, protection for the domestic market against unwarranted competition to ensure profitability of the goods produced locally. Various fees payable to the financial institutions were reduced by 75 per cent.
Although the investment corporation was set up in 1976 to support the stock market, it did not take off. Consequently, there were proposal to disinvest a number of profitable public enterprises. The private sector began to emerge and the public sector decreased gradually. In fact, within a few years of the change in government, the private sector dominated the import of essential commodities. Foreign remittance from expatriate Bangladeshis began playing the crucial role it still does in balance of payments. Under the wage earners’ scheme, Bangladeshis were allowed to import out of the remittance made by non-resident Bangladeshis. Imports under the scheme amounted to Tk 89.6 crore in 1976-77 and Tk 129 crore in 1977-78.
Most of the private sector finances were procured through guaranteed sources of foreign exchange while the public-sector import was financed by overseas assistance in the form of aid, grant and credit. Such facilities indeed led to an upward trend of private investment. It increased from a paltry Tk 8.2 crore in 1973-74 to Tk 120 crore in 1979-80.
The private sector soon began lobbying for disinvestment of the nationalised industries and demanded concessions for their services in purchasing these enterprises. The private sector, once again, pursued the same goal of transferring the liabilities and burden back to the public sector and eventually to the public. With constant lobbying and allegations of the private sector that the nationalised industries had been inefficient and corrupt, and had led to huge losses, the general impression came to be that nationalisation had indeed been bad for the state and disinvestment would be the sole means to forge ahead.
The social costs of the capitalist model, evident during the pre-independence period, were overlooked. Most of the concessions went to sympathisers of the newly formed Bangladesh Nationalist Party and some of those with close ties with the army that still provided the government with its power base. But more importantly there were no state mechanism to ensure fair competition in the private sector or the public sector or between the two. Neither were there any set of regulations that would require the private quarters to satisfy efficiency requirements. The exercise of policy setting and comprehensive analysis for disinvestment was not carried out either.
The BNP government or its preceding army administration — both under Zia — failed to formulate appropriate policies that would harness the potential of the blossoming private sector and address the prevalent inequities. This regime, despite its flaws, managed to increase the proportion of the investment-GDP ratio and industrial growth seemed to be on the verge of a takeoff when the government changed in 1981.
There were two major acts regarding investment, the Private Investment Act and the Export Processing Zones Act, aiming to foster the private sector. Both the acts still form the basis of private investment.
However, in its enthusiasm to increase investment, the government failed to prioritise and sequence liberalisation. Neither act detailed any fruitful performance requirement, including technology transfer or local content requirement that would benefit the economy. It has been pointed out that lack of technological innovation has consistently been one of the reasons behind the beleaguered industrial sector. In effect the two regulations set the foundations of an overly liberalised economy and an investment regime that has virtually rendered the potency of foreign investment ineffective.
The subsequent government of HM Ershad, due to its explicit patronage of corruption, actually saw a decline in private investment, regardless of the industrial policy or the investment regime, although in principle the administration recognised the private sector’s pivotal role in industrial development.
The industrial sector continued to subside and private investment, as a percentage of the GDP, declined through the 1980s from 9.47 per cent in 1980-81 to 6.13 per cent in 1989-90. The overall investment declined from 15.95 per cent of the GDP in 1980-81 to 11.80 per cent in 1989-90.
The Ershad government introduced another industrial policy in 1982 which increased the effective rate of assistance by 30 per cent. Government assistance declined in 1986 by about 13 per cent. The assistance was estimated to be about 17 per cent higher in 1986-88 than it was in 1979-82. The policy was revised in 1986 to no avail.
Despite such encouragement, investment declined through the 1980s as did the GDP growth. In another bid to liberalise the economy further, the import policy went through a significant change. In 1985, the positive list of importable items was changed to a negative list. The negative list of importable items has been through further reduction throughout the years in a bid for continued liberalisation of the economy.
According to Gian Sahota’s survey of industrialists, the main reasons for industrial stagnation are ‘lack of confidence in the stability of policies, bureaucratic sloth and poor implementation of policies, labour code unfavourable to the employer, indiscipline among workers, high cost of electricity…’.
They also mentioned that traders and smugglers have lower risks and higher returns, compared with manufacturers. The industrialists observed that with the continually relaxed import policy and the wage earners’ scheme, the country had become a ‘trader’s paradise’.
The industrial policies evolved from the strictly ‘regulatory’ role in the 1970s to a ‘promotional’ one in the 1980s and assumed a largely ‘facilitating’ role in the 1990s.
The industrial policies of both the BNP and the Awami League governments laid marked emphasis on better coordination between fiscal and monetary measures. They also lay greater importance on promoting investment in basic and intermediate manufacturing and goods that had a potential of high value addition.
The basic tools of the industrial policies during this period included gradual reduction of the negative list of importable items, guaranteeing security of private investment through deletion of the nationalisation provision and increased incentives for export oriented industries.
The industrial policy of 1999 also provided clear definitions of large, medium and small industries. Another aspect of the policies during this period was the emphasis on agro-based industries and agricultural products.
One interesting aspect of the two regimes is that during the BNP regime (between 1990-91 and 1994-95) the industrial sector grew at an average of 7.47 per cent and agriculture at 1.55 per cent. During the Awami League regime (between 1995-96 and 1999-00) agriculture grew at an average of 4.89 per cent and industry at 6.44 per cent. Consequently the respective shares of GDP of the two have also fluctuated during the two periods.
Despite modest growth in most sectors and an improved coordination the governments failed to address certain issues. Several sectors — 16 to be precise — have been identified as what the government calls ‘thrust’ sectors, but the government failed to provide them with the required facilities or targeted incentive packages. These include, for instance, phone connections for software developing firms, or inventive packages for research to strengthen the sericulture and silk industry.
The performance of both the regimes could be said to have been moderately satisfactory in promoting export-oriented industries through reactive measures, such as back-to-back letters of credit. But with relaxed imports and no specific incentives or protection, the private quarters have refrained from investing in enterprises to establish a backward linkage for the garment industry. As a result, a large portion of foreign exchange is spent on importing the raw materials required.
In its bid to promote exports, the governments have maintained cash subsidies for shrimp exporters. The policy move translated into the mushrooming of processing plants. But, due to a lack of any incentive at the farm level, the processing capacity soon outpaced production capacity. Currently, the shrimp processing capacity is roughly three times that of shrimp production. The local market, therefore, is ruled by suppliers who seek to profit from the artificially high price of shrimp arising from the demand.
The remarkable growth of foreign investment has been touted as one of the success stories. But essentially most of these have been resource seeking, or in other words these investments intend to utilise gas as their primary means of production. Besides, there have been no efforts to promote a rural-oriented development strategy, which could generate employment and enhance purchasing power of the rural population largely dependent on agriculture. It would also address the age-old issue of consistent marginalisation of the poorer and deprived sections spreading the effects of growth more evenly.
The policies, while supporting and promoting the export-oriented sectors, do not strive to create a domestic consumer base for these industries. It would guarantee the export-oriented industries or services with some back-up in cases of a deterioration of the global terms of trade or world-wide recession.
Successive governments have failed to be ‘proactive’ in the sense that they have not been able to develop sectors through a planned strategy, which would require analysis, research and appropriate incentives, with a long-term vision.
It has been characteristic of policies failing to serve the purpose. The reasons have largely held true through three decades. There has been an utter lack of predictability, transparency and accountability in the government regimes. Projects of one government are certain to be discontinued by the next government. Thus, any move with a long-term vision would fail to bear fruit. However, that is not to say that different regimes did espouse such long-term policies to develop industries.
With such inconsistent policies and loose enforcement of law, the private sector has typically considered trading or other clandestine activities to be less risky and more lucrative than setting up industries. The rent-seeking behaviour — culture of bribery, in plain English — has also managed to thwart any sincere intentions to set up manufacturing establishments.
Infrastructure and communications have been another problem for increasing industrial activity. Utilities such as electricity, water, telephones continue to be a problem for manufacturing units.
These factors, if addressed sincerely and by consecutive regimes, would prove to be more successful in attracting investment and bolstering the industrial sector than the fiscal incentives of the current liberal regime.
Last, but certainly not the least, technological innovation has remained one of the main drawbacks of the economy. Whatever innovations of indigenous technology there have been have been in agriculture. There are virtually no public funds for directed research and development of any technology relevant to important sectors. Nor are there any specific agencies to ensure technology transfer. On the other hand, there are no such measures of the government that might encourage the private sector to spend heavily on research and development.
As the world moves ahead in an increasingly faster pace, the government should perhaps target not 16 but four or five sectors to develop and catch up with the rest of the world in those sectors.
References:
Khan, AR, ‘Bangladesh Economic Policies since Independence’, South Asian Review, Volume 8, 1974
Rahim, AMA, ‘A Review of Industrial Investment Policy in Bangladesh, 1971-77’, Asian Survey, Volume 18, 1978
Rahman, SH, ‘Trade Regime, Exchange Rates and Economic Incentives in Bangladesh Agriculture’, Bangladesh Development Studies, Volume 21, Number 3, 1993
Bakht, Z and Bhattacharya, D, ‘Investment, Employment and Value Added in Bangladesh Manufacturing Sector in 1980s: Evidence and Estimate’, Bangladesh Development Studies, Volume 19, Number 1 & 2, 1991
Sahota, GS, ‘An Assessment of the Impact of Industrial Policies in Bangladesh’, Bangladesh Development Studies, Volume 19, number 1 & 2, 1991
Sobhan, R, ‘An Industrial Strategy for Industrial Policy: Redirecting the Industrial Development of Bangladesh in the 1990s’, Bangladesh Development Studies, Volume 19, Number 1 & 2, 1991
Nationalisation of Industries in Bangladesh by Yusuf, FH, National Institute of Local Government, Dhaka, Bangladesh, 1985
Economic Reform and Trade Performance in South Asia, eds Chowdhury and Geest, Bangladesh Institute of Development Studies and University Press Limited, Dhaka Investment Guide to Bangladesh,UNCTAD and International Chamber of Commerce, 2000
COMPLIANCE, REGULATION AND COMPETITION
Of workers and consumers
Public accountability and a transparent mechanism for the regulations and regulatory bodies are imperative to ensure workers’ rights or consumers’ welfare. Given the current trend, such a system is only a day-dream
Titu Datta Gupta
In late 19th and early 20th centuries, the Indian subcontinent under the British rule saw a wave of industrialization, driven by a sense of nationalism propelled by popular political movement. Young entrepreneurs, hailing from traditionally rich landlord families with western education, ventured on industrial and business projects ranging from textiles to shipping lines.
Of course, profit was not the motive. Enlightened and politically-charged, they were driven by the spirit of patriotism and ready to make sacrifices for the nation and the community. They were pledge-bound to create an alternative production and service base to reduce dependence on goods and services from the ruler — the British kingdom.
Most of the ventures ended up in losses, as inexperienced entrepreneurs failed to compete with products from a highly industrialized country like England.
But the tempo remained as consumers were convinced to give up foreign goods and did not mind using low-quality local products. A shipping line, launched between Kolkata and Khulna with cheaper fares and free meals, could not sustain more than a few months. But over-enthusiastic and stubborn entrepreneurs did not give up. They looked for other options, which, by today’s definition of industry or business, would sound like utter madness.
Still there are industrial units, or their ruins that bear the legacy of a short-lived generation of industrialists who cared for the nation as well as the workers. Usually built in spacious sites, those units had dormitories for workers, schools for the children and pond for water supply.
After the end of the British regime, the Pakistan government encouraged the business families and landlords of the western part to set up industries in the east, now Bangladesh. Most of them focused on jute, then the main cash crop growing abundantly in East Pakistan. A number of big industries were built up. They also took adequate care of workers’ welfare and ensured basic needs of workers within the factory premises.
Bengalis of the eastern parts were initially haunted by a sort of hangover from a great victory in the long-drawn struggle for independence from British rule. When they came to their senses, they found themselves nowhere in the arena of business and industry. A popular campaign was then mobilised against the west Pakistani class of industrialists and businessmen, branded as 22 families (corporate groups). The then red-hot political movement was used as an effective tool for campaigning against those corporate houses. The popular perception was that they were taking money out of the East and amassing wealth in the West; they are exploiters and plunderers.
After independence, the government acquired all those private sector industrial units abandoned by the west Pakistani industrialists. The educational institutions and healthcare centres, formed by some of those houses in addition to their business ventures, which actually bore testimony of their responsibility towards society.
The two episodes of industrialisation — one under British rule, and the other under Pakistani regime — are now non-existent. But they left a common legacy of a benevolent class of entrepreneurs committed to serve the nation and the society, apart from carrying forward their businesses. They cared for the workers and the community much ahead of today’s multinational corporations’ slogan of corporate social responsibility. They ensured minimum facilities for workers even before the factory law was enacted in 1965.
One should not expect the same spirit from today’s entrepreneurs. They are more exposed to competition and risks than their predecessors. They need to make profit to sustain and to pay interest on bank loans. They have to cut cost to remain competitive with foreign products both in price and quality. They are concerned about viability, where there is little room for sentiments like nationalism or patriotism. In most cases, workers’ conditions are given little attention if any at all. The industries take pride in creating jobs, but care little about where the workers live, how they come to work, whether their children go to schools, how they take care of health.
However, some industries, more specifically those in export trade, have of late started paying attention to workers’ conditions. The country’s largest export earner, readymade garment sector has been looking into workers’ standards more seriously than ever before. The industry’s realisation followed concerns raised by global buyers, who value their consumers’ sentiments greatly. Buyers had long been pressing the owners to comply with factory and labour standards.
They also warned that the country would risk losing its market abroad if compliances are ignored when there will be no quota reserved for Bangladesh. Few months ahead of the expiry of global textile quota, the apparel industry started moving faster towards implementation of the compliances issues. Most of the big and medium players, who supply to the brand retailers in USA and Europe, by and large have, meanwhile, met the major compliance issues. But smaller factories find it difficult to respond accordingly because of the costs involved.
Evidently, the move has not come voluntarily. The apparel industry bade farewell to child labour also under pressure from buyers and international organisations. Its delayed responses to factory compliances also followed pressures from abroad.
Still, compliance issues only appear to be stopgap solution in many cases. Accidents like the Spectrum factory collapse prove how hollow the claims of safe workplace are. The latest accident came as a serious blow to the industry that visibly succeeded in reducing fire incidents to some extent.
Global trade unions and social rights groups have also become increasingly vocal about labour standards in the countries of origin. While pressing the owners and the governments of the exporting countries to care more about workers, they are also putting pressures on the buyers of rich countries to share the costs for improving workers’ social conditions. Buyers and brand retailers also benefit from the low labour cost of poor countries, so they should also contribute to labourers’ welfare, goes the argument of rights groups.
The 1965 factory law covers most of the labour standard aspects. International trade unions and social rights groups stress that factories should ensure better working conditions based on the existing law first. Law also provides for upgrading workers’ wage from time to time. There have been a number of agreements reached by the labour unions, owners and the government for revising workers’ minimum wage, which has not been upgraded since 1993. But none of those have been implemented.
A global trade union leader has held the government responsible, for its failure to enforce labour law, responsible for the poor working conditions at many garment factories in Bangladesh.
‘Bangladesh has a plenty of labour laws but these are not properly enforced,’ Neil Kearney, general secretary of the International Textile, Garment and Leather Workers’ Federation, told New Age on June 8 in Dhaka.
He was on a four-day visit to see what steps were taken after the April 11 collapse of a nine-storey factory building of the Spectrum Knitting and Sweater Factory at Savar, which left 64 workers — according to official figures, insiders maintain that the number is much higher — killed.
The leader of the Brussels-based international labour rights organisation believes that the government and the private sector should work together to address unsafe working conditions in the garment industry.
‘Otherwise, the garment industry [in Bangladesh] will have no future,’ warned Kearney, a leader of the global trade union that includes 220 labour organisations in 110 countries representing 10 million members.
Wide media coverage of the Spectrum tragedy has prompted many non-governmental organisations and retailers in Europe to raise questions about working conditions in the Bangladesh garment industry, said Kearney.
‘Many non-governmental organisations in Europe came to us with the plea that we [the federation] should intervene while consumers and shareholders of garment importing companies are pushing for a reconsideration about sourcing garment products from Bangladeshi factories that do not implement compliances and labour rights.’
Kearney accompanied a group of European garment retailers to different factories supplying garments, to find out about the working conditions there.
He said he was disappointed as many factories do not live up to such compliance requirements as proper wages, minimum working hours and health and safety conditions.
‘Such absence of compliances has made us wonder where the government is,’ he said. ‘When a worker steals a piece of cloth, he or she is instantly fired by the employer. However, there is no punishment from the government for the factory owners who break labour laws every day.’
However, Kearney said, the Bangladesh Garment Manufacturers and Exporters Association and other such organisations have become more conscious about labour issues than before. ‘We have found the association more responsible in investigating [industrial accidents], and compensating the dead or covering the cost of medical treatment for the injured.’
Regrettably, he observed, there are no evidences that the ministries concerned discharge their responsibilities properly as far as protecting labour rights are concerned.
The Prime Minister’s Office and government high officials need to address compliance as it has become important to buyers abroad nowadays, said Kearney. ‘A national economic and social development council may be formed to implement labour rights to improve working conditions.’
He also suggested that there should be an office, comprising representatives of the industries, labour, commerce and textile ministries, and other government departments, specifically to monitor labour issues.
A similar demand was repeated by a local trade union group, Bangladesh National Council of Textile, Garment and Leather Workers.
The council demanded that the government should form a high-powered committee to look into factory accidents starting with the latest one at Spectrum.
‘The committee will find out the reasons, identify the persons responsible and follow up the actions taken by the factory owners,’ Roy Ramesh Chandra, general secretary of the council, told a press conference in Dhaka on June 20.
The council also suggested creation of a welfare fund for garment workers, which would be raised through contribution from government, owners and workers.
Looking back at the private industrial units set up before or during the ’60s. Back then, the entrepreneurs ensured more facilities for workers than the pressure groups ask for today.
Now industries must realize that they can no longer afford to ignore workers’ welfare and safety. They cannot just end lobbying for greater access to export markets or put pressure on government for tax rebates and convince themselves to have served their social responsibility in monetary terms. They must include workers in their plans.
While factory owners seek land from government for building multi-storey complex of the association, they should also think about a separate industrial estate for apparel sector with workers’ accommodation, schooling for their children and healthcare centres.
Stray initiatives by a few large companies are not even nearly enough. If the industry as a whole is to survive, it must think collectively. The trade associations concerned must take the lead and create a fund to develop such an estate, instead of crying for government help. The apparel and shrimp sectors together earn more than $5 billion a year as export revenues, which is completely free form income tax.
A small percentage of this money could be saved every year to create a fund for developing an industrial park with minimum facilities for workers, mainly women, who add real value to the factory output that is eventually exported.
Compliments like ‘biggest export earner’ and ‘largest employer of manufacturing workforce’ can not be an excuse for paying little to workers or ignoring their due rights.
This is true also for the frozen food sector, the second biggest export revenue earner. While the shrimp processors and exporters care much about their product quality and spend increasingly on laboratory and factory instruments under pressure from hygiene-conscious buyers, they also need to pay attention to their workers, mostly women.
During a visit to the shrimp processing zone of Khulna in June, the head of delegation of the European Commission in Dhaka, Esko Kentrschynskyj, appreciated the emphasis put by the industry on complying with European health and hygiene standards. At the same time, he also reminded the industry of EU’s seriousness about labour and environment standards as well.
‘And these issues should be looked into by the industry voluntarily, not just because we want it,’ said the envoy.
Danushka Jayakody, a Sri Lankan business strategist, felt that businesses, if they want to survive in the era of globalisation, would have to pay due attention to workers and customers. ‘Otherwise, they would risk losing out,’ he warned.
Jayakody, the country manager of MTI Consulting that recently launched its operation in Bangladesh, said his firm, apart from helping companies restructure their business and marketing strategy for better profitability, will also take care of consumer services.
There is no alternative to strict enforcement of laws to ensure not only workers’ rights, but also quality services and products at a reasonable price. But when laws are not enforced effectively, regulatory bodies remain only paper tigers, consumers are not aware about their rights either. With no pressure from these quarters concerned — government, regulatory bodies, consumers groups or workers — there is virtually no compulsion for the corporations to safeguard workers’ rights, environment standards or consumers’ welfare.
Practice shows that private companies do not bother about quality and prices until and unless they are dragged into stiff competition. Take the case of the mobile phone sector for instance. Price of a mobile connection package began with Tk 1.5 lakh. With increasing competition, the prices decreased to about Tk 3,000 in 10 years.
Subscribers began to see generous and lucrative offers from cell phone companies only after the market became competitive with the arrival of new operators announcing lucrative packages backed up by their large investment plans. It is competition that forced the mobile companies to lower tariff rates, offer better services to clients who suffered from CityCell’s monopoly in the early 1990s.
But government regulation could also have made sure that the mobile companies did not exploit the scarcity premium of the mobile technology. As with other sectors the telecommunications regulatory act was formed in 1999, about five years after the technology was allowed in the market and by the time four private operators had entered the market. The regulatory commission, supposed to be the watchdog in this sector, started its operation even later, but remained mostly inactive although it was supposedly autonomous.
The telecom regulatory body, headed by — as many have later claimed — a thorough bureaucrat extremely averse to risk could hardly take any firm stance contrary to the interest of the vested quarters. Consequently, although he unofficially admitted a number of times that the contracts of the four mobile operators were not the same, it took him several years to streamline them. During all this time one of the companies, solely because of a favourable contract, could evade paying up to Tk 10 crore to the exchequer per annum.
The commission’s hands were further tied as three of its five commissioners were former chairmen of the state-run Bangladesh Telegraph and Telephone Board, another operator in the field as far as the commission is concerned. But the commission had a natural bias towards the board whenever it came to serving the interest of the private sector hurting the board’s interests. In such a situation it could never be able to ensure a ‘level playing field’ among all competitors in the market.
The commission has also, till date, failed to compel the mobile operators to reduce their call charges or to reveal their tariff structure so that the government had some idea about the amount of their profits. As many quarters hold the rates are still exorbitant. Besides in its initial days the commission had been heavily influenced by vested quarters.
It become evident that the government, no matter which one, forms its regulations much later than it should have and almost always allows activity in virgin sectors without a proper set of guidelines. More often than not, the government compromises to satisfy its close quarters, as was the case in the mobile phone sector with one company enjoying a monopoly, awarding them undue privileges at the cost of public welfare. Such attitude also thwarts any move towards healthy competition in the market. All this put together increases the opportunities for rent seeking behaviour for the relevant authorities.
Public accountability and a transparent mechanism for the regulations and regulatory bodies are imperative to ensure workers’ rights or consumers’ welfare. Given the current trend, such a system is only a day-dream.
‘Grabbing’ in the name of reforms
Anu Muhammad
During the last three decades Bangladesh experienced several ‘reforms’ which have made the country more privatised, more market oriented, more ‘connected’, more open and highly integrated with the global economy. The reforms and coordinated supplementary policies have increased international trade manifold, although more import than export.
Export oriented manufacturing units and activities have grown as a direct result of incentives and supports although many productive units faced closure or downsizing. Urbanisation expanded and skyline of Dhaka shone with big billboards and high rise buildings, roads become overflowed with beautiful imported cars. Expensive private schools-universities, clinics have taken a over larger area in Dhaka. Moreover, glittering supermarkets full of imported goods, mobile-computer-food shops, parties, shows, fairs have given the Dhaka life a globalised look.
But at the same time Dhaka remains a city of millions of people who sleep under the sky or a sheet of polythene. All statistics confirm that despite several changes Bangladesh remains a poverty stricken country. It experiences erosion in big and basic manufacturing units, the dismantling of public institutions including providers of health and education services make people vulnerable to the market, increasing pollution and environmental degradation. All this has put the masses in dire straits.
Growth of the super rich and uprooted people is taking place simultaneously. Dominant process of resource and power accumulation has increased crime and corruption to grow at an unprecedented scale, the ‘primitive accumulation of capital’ has become the main mode. Violence and grabbing of common properties have risen with the rise of GDP growth.
From different direct and indirect estimates we have the idea that, illegal money and assets make the single largest sector in Bangladesh today, size of which (known as black, i.e. economy based on crime and corruption) has grown to nearly 50 per cent of the economy. It is not difficult to realise its influence and assertion on the economy and peoples lives. Violence and insecurity is inseparable in such an economy.
It is therefore important to look at the nature of reforms and development that produces and reproduces ‘poverty crime corruption environment degradation’ trap.
‘Reform’ and the Twin Power
In fact the present market friendly concept of reform has lost human meaning and has been gradually reduced to policy prescriptions of the global and regional funding agencies wrongly known as ‘donor’ agencies. Media, academics, experts and think-tanks now simply sugar coat these policy prescriptions as reform programmes. The present exercises attempt to erase the rich and multidimensional ideas on reforms, i.e. reform to unlock the potential of productive forces through changes in ownership and administrative system, to expand education and health opportunities, to curb and suppress economic and political power of rent-seekers and above all to carry the vision and planning to develop human society.
The World Bank, after initial humiliation, managed to reappear in Bangladesh in late 1972 as an integral part of its development process. Relationship with the International Monetary Fund is closely linked with that of the World Bank. Bangladesh became a member of the IMF before that of the WB. It was ‘in 1973 when Bangladesh had its first experience with policy dialogue with the IMF’. The World Bank, in any request for loan or grant, was likely to see the results of the negotiations with the IMF. This cross conditionality became stronger since 1974, the twin powers, became the ‘friend, philosopher and guide’ of successive regimes.
The two phases of reform packages provided by these institutions are well known — first, the Structural Adjustment Programme in the 80s, and second, the Poverty Reduction Strategy Paper since 1999. Two points are important to note here. Number one, different reform programmes, pursued prior to formulating the adjustment programme, were common with SAP in essence; and number two, the PRSP is fundamentally a continuity of structural adjustment programme. Therefore we have been going through a linear reform bundle, past present future, periodically appearing as ‘new initiative’.
Recalling own experiences during early 70s, Nurul Islam, the first deputy chairman of the Planning Commission said, ‘At that time there were no structural adjustment loans from the Bank or the Fund, but there were loans, both bilateral and multilateral, tied to domestic policy reforms. For example, commodity or sector loans from the Bank and drawings on IMF credit tranches were linked to policy reforms, as well as pricing policies or subsidies bearing not only on agricultural outputs/inputs but also consumer goods such as edible oils and sugar or intermediate inputs like fuel. Sayeduzzaman, former secretary and finance minister, pointed out several reform measures sponsored by the agencies long before the SAP, which included liberalisation of imports, gradual reduction in subsidy on food grains and agricultural inputs, abolition of minimum prices of jute and privatisation.
Adjustment with What?
The Structural Adjustment Programme, the term coined by the WB president Robert McNamara, also known as ‘Washington Consensus’ the term coined by John Williamson of the Bank, has been a package programme for redirection of public expenditure, tax reform, interest rate liberalisation, money devaluation, trade liberalisation, liberalisation of FDI inflows, privatisation etc.
In addition to its own funding business the World Bank also plays the role of a ‘functional catalyst’ by virtue of its position of the coordinator of ‘aid consortium’, that influences other bilateral loans, it also influences foreign direct investment through, the International Finance Corporation and Multilateral Investment Guarantee Agency.
‘Bangladesh had been one of the first countries (among 36) to resort to the Structural Adjustment Facilities set up by the International Monetary Fund’. Debapriya Bhattacharya, local think tank organiser further notes, ‘Bangladesh was also among the forerunners (among 29 countries) to make use of the Enhanced Structural Adjustment Facility launched by the IMF in December 1987. Under the two sets of three successive annual programs, during the last seven years (1986/87-1992/93), the country’s economy was subordinated to the guidelines and targets laid down in the Policy Framework Paper prepared by the IMF and the World Bank.’
Since 1992 World Bank has used the Country Assistance Strategy process to set ‘lending levels for a country and periodically reassess them on a well-reasoned basis.’ The strategy was followed by Policy Framework Paper and finally Poverty Reduction Strategy Paper.
Privatisation: ‘Briberaisation’ or ‘Lootpatisation’?
The reform agenda of the World Bank, IMF, ADB and like agencies always put emphasis on two actions of the governments. These are, import liberalisation and privatization (or downsizing or closure) of public sector enterprises (regardless of its social necessity or economic rationale). The Bank, therefore, from the very beginning has been emphasising policies to ensure expansion of import. According to Sayeduzzaman, the Bank ‘had been supporting Bangladesh with an annual import programme credit since 1973...The IPCs, under decision of the International Development Agency’s board, were related to various types of policy reforms which, in fact, meant sectorial adjustment policies...IPCs XII and XIII made it obligatory for the government to send a Development Policy Letter to the president of the World Bank like the letter of intent sent to the managing director of IMF in connection with stand-by agreements. The development policy letter was meant for putting the government’s policy reform commitments on record. There was thus, a qualitative change in processing of import programme credits, reflecting the strong emphasis affected by the World Bank on structural adjustment measures.’
In the peripheral countries like Bangladesh, the Bank consistently advocates and pressures for privatisation in almost all sectors. The local elite, big business and bureaucrats, ministers, after building their fortunes through the loss making procedure and then dismantling public enterprises and finally seizing public resources, hide behind the shield of the global agencies. The governments take loans and approve development projects to operate, reform to privatise in favour of powerful corporations and to deprive people.
How government policies, development projects and reform programmes of the agencies ruin big and basic industrial units of the country have been well described in events with the closure of the Bangladesh Machine Tools Factory, Chittagong Steel Mills and Adamjee Jute Mills. The beneficiaries of these programmes consist of local and foreign parties, some of whom were also the beneficiaries of loss making or system loss process.
Joseph Stiglitz, a professor of economics at Columbia University, was an insider in both the White House (as economic adviser to the US president) and in the World Bank (as its chief economist) termed the wholesale privatisation programme ‘bribarization’. In Bangladesh, from our experiences, we can call it lootpatization. Stiglitz from his own experiences, indicated the the host country ministers and bureaucrats as active in the process, whose ‘eyes got widened at the prospect of 10 per cent commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets’. We find more.
Stiglitz also termed ‘free trade’ compulsion introduced under the banner ‘reform’ a new form of Opium War strategy of the mid 19th century, kicking down barriers to sales in Asia Latin America and Africa while keeping the colonial centre well protected. During the opium wars the colonial powers used military means to ensure their access and domination. Now it is ‘reform’ package.
FDI and global grabbing
Constructing the appropriate platform for super profit making foreign direct investment has always been a priority of the agencies. In the line with the ‘reforms’ described above, all subsequent governments of Bangladesh have given multiple benefits, cash and other subsidies, different forms of supports to attract foreign investment. World Bank in particular, categorically advocates dismantling state agencies to provide the space for international corporate bodies in oil, gas, power, telecommunication and water sector in particular.
The step by step policy study of the World Bank et al in this regard can enlighten us about the process how assets become liability for the people, how potential becomes garbage and how so-called development partners become masters in a country like Bangladesh.
This also shows that the FDI per se cannot ensure productive investment. Due to space problem it is not possible to go into details. Let me mention a segment of only one case, the production sharing contracts in oil and gas with the multinational companies. After PSCs and power projects started giving results, fiscal deficit increased and foreign reserves became threatened, World Bank ‘realised’ that the nature of FDI in Bangladesh ‘has implied little augmentation of foreign exchange reserves’ and have also badly affected the fiscal deficit. In order to solve the problem it recommended for routinely raising price of gas and it also prescribed for gas exports to earn foreign currency. It is important to note that, initially the PSCs, supported by the agencies, have created a mess, forcing the state agency to buy the country’s own gas by the price three times of local price and also with foreign currency, and in order to overcome that mess, suggestions have come to raise prices and exporting gas! The consequences for the people of Bangladesh are nothing but a more costly life and economy, to see turning asset into liability.
Ignoring or hiding past resultsare the rules of the game
Facing increasing agitation against the devastating effects of the Structural Adjustment Programmes the World Bank agreed to participate in reviewing the whole programme in the late 90s. The Bank essentially tried to pacify critiques with a programme to review its projects in different countries. This global review programme, Structural Adjustment Program Review Initiative, also had a Bangladesh chapter, which looked into mostly SAP experience and consequence in various sectors of the.
The World Bank, however, did not endorse the findings, that showed devastating results of the reforms. Findings of the study include: stagnation in industrial growth and in some cases de-industrialisation, sharp reduction of industrial employment, declining terms of trade, increasing trade deficit, rising incentive to trade and service compared to agriculture and manufacturing, concentration of bank resources in few hands (largest 1 percent borrowers got 76 percent of total advances), increase of bank default, increase in landless people, nearly 2,00,000 workers lost their jobs because of reforms, where 42 per cent were skilled and 22.5 per cent were semi-skilled.
Ignoring the effects of ‘reforms’, without revising the essence, the ‘global-local combine’ attempted to continue the same programmes with a new name.
Locking the Potential
PRSP is the generic name of a policy-product marketed by the twin powers as the latest reform package. Its birth year is 1999. The years before were not friendly for the global marketing-management-lobbying agencies representing corporate interests, since global protests were rising against them. IMF-World Bank were badly looking for a new banner to hide their old selves because of worldwide criticism, opposition and exposure of their ‘reform’ programmes under the SAP.
They were looking for new banner also to advance the old programmes at a faster rate to mould economies according to the needs of the big corporate interests. That is PRSP. Bangladesh became a forerunner in this phase also.
Prepared by Bangladeshi consultants, the brand name for the Bangladesh PRSP is ‘Unlocking the Potential: National Strategy for Accelerated Poverty Reduction’. But if we go by the text and experiences, we realise certain things. First of all, it is not national — it is only called national because the agencies want it. They are to formulate the essence of the strategy, they are to monitor its implementation, they make the avenues to use the document to manipulate things but they do not want to own it because of their experience with the SAP, its disaster and peoples anger all over the world. It is a strategy to pick the fruits without owning up to the responsibility.
Secondly, no explanation is given how it is superior to the national five year plans, why the plan process was replaced by the PRSP and what were the causes behind the emergency shift. Poverty reduction had always been the declared objective of the plan documents full with projects sponsored by global agencies. The same and similar process is continuing with the same objective! How can the results be different?
Thirdly, for reasons quite understandable, this strategy package does not demand evaluation of the past experiences of the projects, programmes, plans and promises formulated or supported by the same agencies. The Bangladesh chapter is apparently quite ‘happy’ with its past performance. Anybody can guess the future.
Kumirer chana
If people’s collective initiatives do not rise to bring all this drama before trial, the same thing will soon repeat. After some years of implementation, i.e. grabbing, waste, leakage, the poverty reduction strategy will be abandoned, the beneficiaries at home and abroad will appear again on the stage with a new programme. The local parties of the game will extend their heartiest welscome at the sight of the old kumirer chana under a new mask. Another drama of development reform will begin. Systematic destruction will continue.
Divestment proves no panacea
for sick units
The sick state of the divested SOEs is
reflected in separate reports mainly prepared by the Ministry of Industries and the Ministry of Jute and Textiles. One of the reports show that 27 out of the 56 SOEs surveyed had been troubled as their production activities were hampered - fully
or partially
Khawaza Main Uddin
Almost 50 per cent of the state owned enterprises privatised since 1993 still remain sick units, according to estimates of the ministries that once ran the units. The government has disinvested 61 of its enterprises since 1993. In many cases, the enterprises, under private ownership, have kept their production suspended and in other cases, they are operating merely for the sake of it, but not on a commercial basis that would lead to profits or generate employment.
This plight of former SOEs, according to officials concerned, is due to a lack of genuine vision and entrepreneurship. Most of these enterprises came under the state’s ownership as a result of wholesale nationalisation under a socialist economic order immediately after the country’s independence.
The statutory regulatory body responsible for divesting the enterprises — the Privatisation Commission — does not know exactly how many of these concerns are in operation and how many remain closed.
It was supposed to be one of the major duties of the commission to monitor post-privatisation stage of the SOEs. But the commission fails to remain updated about the situation of these industries. Constituted as a board in 1993, the commission is looking for financial assistance from the World Bank and the Asian Development Bank to take up a scheme to assess the latest status of the disinvested industrial units.
The indiscriminate privatisation was initiated during the economic liberalisation in the early 1990s under the diktat of the multilateral lending agencies. Before that, some industrial units were also returned to the original owners — Bangladeshi nationals.
The Bangladesh Nationalist Party government led by the prime minister, Khaleda Zia, during its previous tenure, between 1991 and 1996, privatised seven enterprises through outright sales and offloaded shares of five more concerns — national and multinational companies.
The Awami League regime led by its prime minister, Sheikh Hasina, during its tenure between 1996 and 2001, sold off 10 more SOEs and offloaded government shares of 10 other enterprises. The AL government also handed over eight SOEs to the workers and employees.
The BNP-led four-party alliance government, currently in power, has disinvested 17 SOEs so far and offloaded government shares of four companies. Moreover, a letter of intent has been issued for selling out eight more SOEs awaiting handover to private parties.
Outside the purview of privatisation as such, the biggest shock in the state’s industrial sector in recent times was shutting down the Adamjee Jute Mills in July 2002 — a huge industrial unit on some 300 acres that is yet to be utilised for any industrial purpose despite the government’s pledges to turn it into a textile park or industrial park earlier and an export processing zone of more recently.
A number of huge industrial units including the Khulna Newsprint Mills and North Bengal Paper Mills in Pabna remained closed after repeated attempts to resume production or to contract their management due to the lacklustre approach of the authorities concerned.
Some of the privatised SOEs barely manage to show their nominal existence while a few others are waiting to be finally shutdown. Also, some state-run losing concerns in other parts of the country, especially those in the Khulna region, have either kept their operation suspended or are heading for closure, said sources close to the industries there.
The debacle, in SOEs in the region and also in Tongi, has exposed the state’s inability to handle those enterprises both in public and private sectors. ‘It was an imprudent decision in 1972 to join the spree of wholesale nationalisation and these days it is again a whimsical approach to get rid of SOEs in any way,’ said an official of the Privatisation Commission about the state of SOEs before and after disinvestment.
The government is undecided about at least 17 SOEs, whether to privatise them or continue to run them. The commission and the ministries concerned had a tug of war following a decision by the Cabinet Committee on Economic Affairs in April 2003 to run or liquidate over 40 such units delisting from the commission dossier. The government has also had a ‘ready-made decision’ to liquidate 21 ailing public sector textile mills, most of which are run on contractual basis for producing yarn only. But the decision was not implemented only on political consideration. Accordingly, the government took back three such jute mills — Star, Eastern and the People’s — in Kulna from the disinvestment list of the commission only to avoid a possible political repercussions for lay-off or closure after lawmakers from the region demanded that the mills remain in operation in the interest of workers.
However, faced with the pressure of the lending agencies the government decided to divest some other units, including a gigantic Rangpur Sugar Mills — on some 1,800 acres. Another large state owned financial institution, Rupali Bank, is in the process of disinvestment as part of the government’s move to privatise the nationalised commercial banks, again, as per prescriptions of the — the International Monetary Fund and the Word Bank.
Asked about the state of privatised entities, the chairman of the Privatisation Commission, Enam Ahmed Chaudhury, said, ‘It is not bad. The objective of privatisation, was and still is to save the sick or losing SOEs, especially when there is a scarcity of land and other facilities for setting up new industrial units.’
He also argued that, had the condition of the disinvested enterprises been ‘so bad’ there was likelihood of labour unrest and other social tensions. Enam, however, admitted that the commission itself had no assessment of the latest situation in the privatised enterprises. Terming the nationalisation move in 1972 an unfortunate one, he felt that the post-privatisation stage of industries should also be properly monitored so that none could abuse the policy or use the lands in purpose other than industrial activities.
The sick state of the divested SOEs is reflected in separate reports mainly prepared by the Ministry of Industries and the Ministry of Jute and Textiles. A compiled version of the reports, preserved by the Privatisation Commission, was sent to the Prime Minister’s Office after she inquired about the divested units.
It was shown in the report that 27 out of the 56 SOEs considered in this particular report had been troubled as their production activities were hampered — fully or partially. Major SOEs including the National Iron and Steel Industries, Chittagong, Metalex Corporation, Mymensingh Jute Mills, Kaliachapra Sugar Mills, Bawa Jute Mills, Narayanganj, Noakhali Textile Mills and Lira Industrial Enterprise were yet to resume production according to the report.
The report, however, did not mention how the rest of the units fared under private entrepreneurship. But, the report pointed out that many of the divested entities run either under private owners or under the workers’ management had not paid back their arrears to the government as well as the liabilities and long-term loans.
Furthermore, government agencies concerned, told New Age that many of the workers and suppliers of the former SOEs were yet to be paid their dues. One such defaulter is the Bangladesh Jute Mills Corporation which is yet to pay many of its outstanding amounts on the plea that money is yet to be disbursed by the Jute and Textiles Ministry, which, again, points its finger to the Ministry of Finance for not allocating the funds. The finance ministry is also blamed for not allocating funds required for infusing capital into the ailing SOEs to give them a new lease on life.
Another report of the Privatisation Commission, on privatisation of 61 SOEs, shows that the government received Tk 305.11 crore from 49 SOEs (excluding eight SOEs that had been handed over to the workers and employees) against accumulated long-term liabilities of Tk 239.47 crore (excluding shares of 15 national and multilateral companies that have no liabilities).
After certain changes in policy, the government has finally decided to bear the liabilities of the SOEs meant for privatisation. New Age investigation also reveals that the government suspended operations of many SOEs much before privatisation either to reduce amounts of liabilities involved with operational costs at the cost of the existence of the industries or to justify the move to disinvest those SOEs.
Nishat Jute Mills, Tongi, was closed before it was privatised. It has now been transformed into a number of industrial units, inclusive of garments, printing and washing, in place of a mere jute unit on 20 acres.
Taken over by the Hamim Group in 2003, the jute mill still produces its traditional products of jute bags and sacks that, according to the authorities, are ‘hundred per cent export-oriented’. They have also made another expansion for producing twines.
Working in the mill are about 800 people, including 500 workers, a number that is far less than that employed when it was a public enterprise as abandoned property of the erstwhile Pakistani entrepreneurs. ‘Certainly many workers and their leaders took salaries without working when it was in the public sector. Now, we are reasonably paid and there is more pressure at work than earlier,’ said an employee at the mill gate.
Zeenat Textile Mills, an SOE disinvested during the last regime, managed to continue its operation as a spinning mill, said insiders. ‘It is yet to make that much profit and it has remained an ailing industry as it was under government ownership,’ said an official. He added that the private owner had to sell some ‘very old’ machinery as scraps.
Now owned by the Ananda Group of Industries, Zeenat, renamed as Zerina Textile Mills, is currently undergoing balancing, modernisation, rehabilitation and expansion with a plan to inject Tk 150 crore new investments. This would apparently make it an enterprise of international standard. ‘Till date, we are not so developed,’ said a worker.
Located in Zeenat’s immediate neighbourhood, the Olympia Textile Mills is still counting its days to resume production since it was handed over to the workers and employees during the previous government. Some workers said the benefit of making the workers the owners of the unit, is being exploited by a handful of people in the mill. ‘This is basically contracted out to some people other than workers. The workers do not run it in reality and they are paying the price of years of negligence,’ said a man who has transactions with the mill, which has long-term liabilities of over Tk 16 crore. Another such mill is Monno Textile Mills, also partially operational. In both the cases, their operations are not sustainable, according to industry insiders in Tongi.
Labour laws, implementation
and reality
After the collapse of Spectrum Sweater Limited in Savar, a high-level delegation of top apparel buyers and labour organisations visited Bangladesh and cautioned that the country might face a major decline in orders if working environment in the industry did not improve
Abul Kalam Azad
Forty-one of the 65 garment factories in the capital recently inspected by the department of inspection for factories and establishments were found to be below standard in terms of labour laws of the country. The factories were inspected with special sincerity when the parliamentary standing committee on labour and manpower wanted to know the real condition of the factories situated within the capital, in the aftermath of the April building collapse tragedy in Savar. The committee asked each of the 13 inspectors of the department’s Dhaka office to carry out a thorough inspection of five garment factories each; they did it and came up with a grim picture of the factories that hardly follow the minimum level of standard. Now, the question is, if this is the situation of factories in the heart of the capital then how worse is it for the ones outside? Relevant to mention that, 4000 garment factories are housed in Dhaka, its suburban districts and away in Chittagong.
The scenario is much more appalling for other factories, establishments and shops; presently there are around 45,000 different types of small and large size factories (including 4000 garment factories), 30 lakh shops and trading establishments, 170 tea gardens, 1.5 lakh transport and railway establishments and 70 ship breaking yards in the country. In addition, there are several lakh workers in the country’s two ports. As per labour laws, these factories, shops, establishments, yards and organisations are yet to be
properly inspected and re-inspected every year for ensuring a congenial working environment and rights for workers. Obviously, proper and adequate inspection is necessary to probe into the terms of reference of the service and appointment of such a huge number of workers, their wages, overtime, holiday, leave, health security, welfare, service records, compensation and above all the working environment; and the department of inspection for factories and establishments is responsible to ensure these rights through inspection and implementation of existing labour laws of the country. Needles to say that, this will benefit both the workers and the owners and play an important role in improving production. But, the situation on the ground is very frustrating because the department has only 110 inspectors in different tiers to do the job. In addition, it also lacks the required transports and inspection equipment that not only hampers inspection but also exposes how nonchalant the government is in running an important sector.
In its Dhaka head office, 47 officers and employees are responsible for the capital and its surrounding 16 administrative districts. In Dhaka division, there are about 3500 garment factories, 10,000 other factories and 4 lakh shops and establishments where over 25 lakh
workers are employed and the application and implementation of labour laws are not possible at all with this meager manpower. In a proposal to turn the department into directorate, the department brought forward the logical grounds stating why it should be developed and expanded with sufficient manpower and logistics.
The proposal suggests two divisional head quarters to be set up in Gazipur and Narayanganj to control some seven and nine administrative districts respectively situated in the north and south of the capital. Thousands of factories have been set up from Tongi to Gazipur sadar, Sripur, Konabari BISIC area and Kalikoir and besides the factories there are several lakh shops and institutions established in other districts. Similarly, there are thousands of factories and shops in Fatullah, Siddhirganj, Rupganj, Sonargaon and Norsinghdi and other adjoining districts. If two departments were set up in Gazipur and Narayanganj, it would not only reduce the pressure of the Dhaka office but would also expand the inspection net.
Manpower in the divisional offices of Chittagong, Rajshahi and Khulna is also very low. In Chittagong division, there are 6.20 lakh shops and establishments, including 12,000 factories while there are 5.5 lakh shops and establishments, including 8,000 factories in Rajshahi and 4.1 lakh shops and establishments, including 2500 factories in Khulna.
Each of the four regional offices having a labour inspector is not practical at all with the increasing number of industrialisation over the years. BISIC industrial area has been set up in each district and handloom and Bidi industries, engineering workshops and rice mills have been set up across the country. Unfortunately, no change has been made to the regional offices established 35 years ago. The department thinks that at least 11 more regional offices are required to look after the rights of the workers, working environment, health and safety measures in their workplace.
The department has also proposed to set up branch offices in 32 administrative districts. Important to note that, each of the districts has about 20,000 shops and establishments and at least 50,000 workers but there is no one to verify a proper working environment or rights of the workers. A fact sheet of the department says that with limited number of manpower, it inspected 38,137 factories and establishments in 11 months till May this year. The number was 44,179 in the previous 2003-2004 and 47,186 in 2002-2003 respectively. During this period, incidents of law breaking were 44,570, 56,171 and 49,968 respectively. The department fined Tk 19,59,212 in 11 months till May, Tk 27,33,895 in 2003-2004 and Tk. 22,97,125 in 2002-2003.
The department officials in Dhaka say that usually they assign an inspector to look after 15 to 20 factories or establishments a month. With this equation, one can easily make assumptions on how many factories or establishments are inspected and how many still remain without inspection. The department says that it is not possible for an inspector to visit more than 20 factories or establishment as the process involves a lot of formalities. If there is any fault or violation, the owners are warned twice, fined and finally cases are filed against them; all this is time consuming. ‘If you want to apply and implement the laws properly in a factory you need to inspect it twice or thrice, but due to severe scarcity of manpower and logistics the ultimate task remains unfulfilled,’ says Dr ASM Seraj Uddin, chief inspector of the department.
The department, established in 1970 as per the recommendation of the International Labour Organisation Convention has as many as 44 different laws and ordinances and these laws and ordinances are rich and pragmatic enough to create a healthy, peaceful and a safe working environment. But sheer indifference of the owners to implement the laws and ordinances has left the life of lakhs of workers at stake; while the government hardly has any moves to properly implement the laws and ordinances the owners are taking advantage of the situation, showing highest level of negligence to the working atmosphere and safety measures of the workers. Understandably, in a situation, where basic rules are not followed, other rights slip away into oblivion.
Another regrettable fact is that no real step has been taken so far to extend and strengthen the department despite the significant rise in the number of factories and establishments after independence. Though a couple of moves in this regard were initiated years ago, they now remain shelved. In this line, a sub-committee was formed by the parliamentary standing committee on labour and employment in 1990 on how to make the department an effective one and the committee agreed that it should be turned into a directorate for its expansion of activities.
On April 24 this year, the parliamentary standing committee of the ministry of labour and employment also endorsed the recommendations of the sub-committee emphasising on the implementation of laws for ensuring a healthy working environment, security as well as welfare for the workers at factories and establishments.
The department has also sent a proposal to the ministry regarding its expansion and development in which it says that the government does not need any additional expenditure for expansion of the department and increased manpower and logistics. It further says that Tk11 crore is needed for expansion and development but it would earn Tk40 crore if there is the option of registering shops and establishments and providing license fees for factories. Despite the proposal being a practical one nobody in the department of inspection for factories and establishments could say how and when it would be implemented. Officials also said that the ministry showed little interest in taking the proposal forward. ‘You must understand the emergency of the situation and act accordingly, otherwise the situation will remain the same,’ said the chief inspector, urging the government to take the sector seriously. ‘This should be done not only to ensure rights of lakhs of workers but also to avoid potential accidents resulting from loopholes.’
The department has chalked out a training project of Tk1.97 crore to improve working atmosphere, health and safety in factories while a three-year project titled ‘Safe and Environment Friendly Ship Recycling’ is being implemented to ensure professional safety, health service, improved working atmosphere and reduced environment pollution at the Sitakunda ship breaking industry in Chittagong. Accident in factories, shops or establishments has been a regular feature these days and if the government does not wake up in implementing labour laws and ordinances, mishaps will continue to happen.
According to the department, a total 888 accidents took place in the last 11 months till May.
After the collapse of Spectrum Sweater Limited in Savar, a high-level delegation of top apparel buyers and labour organisations visited Bangladesh and cautioned that the country might face a major decline in orders if working environment in the industry did not improve. Lakshmi Bhatiya, a representative of US buyer, GAP, based in Bangkok warned that they would buy garment products from China, Cambodia and Vietnam if Bangladesh garment industry owners did not improve working conditions.
The general secretary of International Textile, Garment and Leather Workers
Federation, Neil Kearney, said that the infrastructure of factories, records on workers, health and safety and working hours in Bangladesh are ‘appalling.’ Kearney, who led a four-day mission in Bangladesh to see what was needed to be done in the aftermath of the Savar accident said that the incident and government indifference to the victims of the garments factory accident damaged the image of Bangladesh abroad; he also expressed dissatisfaction over the governments lassitude to address the problems surrounding working conditions and poor infrastructure and also feared that 90 per cent factories could disappear and buyers may shift their business to other countries if the working environment remained unchanged. Saying that the April collapse was not a unique incident he apprehended that many other factories may face the same disaster.
The Spectrum building collapse which killed 76 workers and maimed hundreds follows a long line of tragedies at garment factories in the country where failure to implement safety measures has contributed to conditions that ultimately resulted in barbaric deaths of workers. With the Savar casualty, the figure of such deaths rose to about 400 in 15 years and though it may seem ghastly, the accepted norm has become that workers will die in the production of cheap sweaters for western consumer markets.
Whenever an industrial accident takes place, the relevant authorities put forth personnel and logistic constraints as an excuse for their monitoring and enforcement failure and though several probe bodies are formed to investigate one cannot but wonder why the government has not cared to equip the department with adequate inspectors and logistics.
On the other hand, The Rajdhani Unnayan Kartripakkha probe body identified faulty design, faulty construction, bad workmanship, sub-standard building materials and excessive load as being the main reasons behind the collapse of the nine-storey Spectrum Sweater building; the five-member committee formed to identify the reason for the collapse of the building submitted its report to the RAJUK Chairman with 9 recommendations aimed to check the repetition of such an incident but surprisingly, made no recommendation for the punishment of those who were responsible for the tragic incident.
The recommendations include, approval of the layout plan before constructing a multi storey building; adherence to the Bangladesh National Building Code while constructing a multi-storey building, enactment of a law by BNBC that would make the developers, engineers, owners and concerned persons responsible for faulty construction of a building and strengthening the monitoring of the concerned authorities after giving approval to the construction of a building.
Though such recommendations were made by the previous probe committees too they remained unimplemented due to sheer negligence by the authorities resulting in the continuation of accidents and loss of lives of poor workers.
STATE INTERVENTION
Free market…with regulation
There are a few caveats that the free market operates on the basis of perfect distribution of information, which is not at all the case in Bangladesh. In the perfect market, there is also fair competition, which completely ignores the established fact that some enterprises are natural monopolies, or oligopolies at most, and inclined towards becoming a cartel
Asjadul Kibria
With rapid trade liberalisation and gradual deregulation of the economy, the role of the state appears to have become obsolete on the grounds that it has nothing to do with market fundamentals.
People are also adjusting, not without difficulty, to a free market where they believe consumers’ welfare will be ensured, not by the state, but through the automatic pursuit of the market towards ‘equilibrium’ with all the parties engaged in perfect competition.
Led by the neo-liberalist agenda of the international financial institutions, policymakers, ignoring the reality, opened the economy for private enterprise without ensuring effective regulatory provisions.
Then, there is the added pressure from both the World Bank and International Monetary Fund that are pressing for further liberalisation and further deregulation of the financial sector.
Under the poverty reduction growth facility agreement with the Fund, the government has promised massive deregulation programmes implying that the state has to withdraw its functions and roles making room for a profit-driven private sector.
The most common argument in its support is that public entities have failed to deliver necessary services to the people and instead of facilitating the lives of the people they have created chaos and rendered it hazardous.
The policymakers, however, completely ignored the correction mechanism and adopted privatisation and deregulation as the only means to get rid of problems. Regrettably, the people end up paying for such ignorance as the private enterprises appear burdensome in many cases.
There are a few caveats that the free market operates on the basis of perfect distribution of information, which is not at all the case in Bangladesh. In the perfect market, there is also fair competition, which completely ignores the established fact that some enterprises are natural monopolies, or oligopolies at most, and inclined towards becoming a cartel.
The most evident, in this regard, is the transport sector. The people are hostages to the private-sector bus service as the government has withdrawn the services of the Bangladesh Road Transport Corporation. In fact, the corporation was forced to withdraw almost all of its services as the government bowed to the pressure of private bus owners.
The vicious circle of criminal-miscreants in collusion with unscrupulous government officials and of course the politicians, an evil trinity of sorts, have also forced the railway service to become ineffective. Thus, land transportation is now fully dominated by the private sector that charges exorbitant fares with negligible services in most cases.
Despite paying for the services, the commuters have no say as they are wholly dependent on the private bus services. This has become one of the most powerful sectors and is in a position to put the government under pressure for any undue advantage. By calling a day-long strike, they can halt the lives of people life hurting not only the economy for even the lives of many.
Now, if the state-run bus service had been operational and if the railway service had improved, the government could be in a position to take a tough stance against this cartel and could have demanded that public welfare be ensured.
In fact, any government cannot and should not tolerate anti-people behaviour of the corporate or the private sector. Besides providing all necessary facilities for the corporations, it also needs to keep regulatory provisions to check unfair practices by unscrupulous corporate bodies. The cell phone companies in Bangladesh have created another cartel driven mainly by a high rate of profit.
They bother little about high call charges the people pay through their noses. And the tariff structure remains due to weak regulations. Strict implementation of a proper regulatory regime is the only means to compel these companies to behave fairly with consumers.
The government does not need to instruct the companies but it can ensure that the companies face proper competition. The strategy should be to allow more mobile companies or several fixed-line phone companies in the private sector. Even if the BTTB launches its massive plan to provide millions of fixed phone lines, the mobile companies will forced to reconsider their oblivious attitude towards the customers.
But the state is also required to intervene not only to regulate but also to create markets and ensuring growth and blossoming of certain sectors, especially during their nascent stages.
The software sector could be a good point of example. Although marked as a ‘thrust’ sector — whatever that means — software has been slapped with a value added tax but the government has so far done nothing to ensure a domestic market through its regulations. The financial institutions, public or private, along with all government offices could be directed to only use applications/software developed by Bangladeshi companies. That in itself would ensure that a number of software developers have confirmed customers in addition to their overseas clients.
This is of course, assuming that there are sufficient software developing firms already in operation as well as an abundance of the required human resources. The state could play a role there too, with targeted incentives and infrastructure facilities for such companies and low-cost but quality training for individuals to ensure a good ‘supply’ of personnel for the companies.
A brief analysis of any of the east Asian ‘tigers’ as they are called, especially Korea, Taiwan, Malaysia and of course Japan would testify to the necessity of state intervention, which the neo-liberalists find rather convenient to overlook.
Thus, it is imperative of the state to intervene in the market, not only to safeguard the society from anti-social effects of capitalism, from atomising and a destructive impact of market economy but also to give it direction and facilitate growth of new sectors of commerce.
Market economy has an inherent tendency toward periodic recessions or depressions and the attempt to prevent them has become part of the state’s function.
In fact, necessity of intervention by state is very much visible during any crisis when markets fail or market agents are not willing to act due to the low possibility of profit maximisation.
During the devastating flood in 1998 and 2004, it was neither the corporate sector, nor the market that responded to the peoples need. It was the state that responded.
It is and will remain the responsibility of the state to act for the welfare of the people.
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New Age
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A brief history of rhetoric
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Of workers and consumers
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‘Grabbing’ in the name of reforms
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Labour laws, implementation and reality
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Free market…with regulation
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Notes from Dhaka’s ‘historical underground’
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