Bangladesh should establish Capital Goods Industry with In-house Design and Analysis Centers
A “one-day symposium on the development of capital goods industry in Bangladesh” was held on December 28, 2011 at the board room of Board of Investment (BOI), Dhaka, Bangladesh. The symposium was sponsored by Bangladesh Development Initiative (BDI), a USA-based non-profit non-political think-tank (website: www.bdiusa.org) and hosted by BOI. The objective of the symposium was to discuss the problems and prospects of the domestic production of capital goods as well as to generate interest amongst policy-making bodies, economists, investors and technology experts.
Representatives from local producers and entrepreneurs association such as Bangladesh Engineering Industries Owners Association (BEIOA), Bangladesh government patron agencies such as Bangladesh Industrial Technical Assistance Center (BITAC), capital investment agencies such as Board of Investment (BOI), Foreign Investors Chamber of Commerce and Industry (FICCI), American Chamber of Commerce (AmCham) and A.C. Nielsen (a global company), research and academic institutions such as Center for Policy Dialogue (CPD), North-South University, East-West University, Bangladesh University of Engineering and Technology (BUET), and print media such as The Daily Star, The University Press Limited (UPL), Bdnews24.com and Probashipotro attended the symposium and openly discussed the current problems and the future prospects of the capital goods industry in Bangladesh.
Economists and capital goods industry experts Dr. Farida C Khan (Professor of Economics at University of Wisconsin – Parkside and BDI Secretary), Dr. Zaid Bakht (Research Director of Bangladesh Institute of Development Studies), Dr. Mozammel Huq (Emeritus Professor of Economics at University of Strathclyde, UK), A. F. Mujtahid and Nazrul Islam (formerly at CPD) are saying, the successful establishment of domestic capital goods industry with in-house design & analysis capabilities would result in the creation and retention of formal high-level technical skills in the country and it would ensure the well-being of the country.
This is because the formal production of capital goods with in-house design & analysis requires very complex and sophisticated technical and engineering skills and once this knowledge and experience is mastered through practice in the domestic industry, country’s individual productivity will increase.
According to various reports and research work, the capital and durable goods industries of Bangladesh currently possess a considerable amount of production capacity. But the local producers were unable to sell their products in the domestic market in the past because of unfavorable tariff structure and various other factors. “Unfavorable tariff is no longer a problem for light engineering sector”, the President of BEIOA Mr. Abdur Razzaque told the symposium participants. He said, value addition of this sector is very high and it may compete with any imported light engineering product.
Dr. Khondker Golam Moazzem, Senior Research Fellow of CPD provided valuable insights into tariff and industrial protection and their impact on industrialization.
There was general consensus amongst all participants that Bangladesh must start the domestic production of capital goods with in-house R&D, design and analysis provisions so as to achieve a gross domestic product (GDP) growth rate in the desired range of 7 to 10% per year and thus to increase national per capita income to a respectable level. The participants felt the best way is to produce parts and components of capital and durable goods by partnering with the industrialized countries.
“What we produce makes us who we are, i.e., a nation is known by the goods it produces”, Dr. Ashraf Ali, the symposium organizer and BDI Treasurer, told the audience. “It is not a matter of pride but of pure economics”, he said.
Scope of increasing personal productivity via production of consumer goods is rather limited. Capital goods production with internal design and analysis capabilities dramatically increases personal productivity and nations with higher personal productivity also have higher per capita income, remarked Dr. Ali, the founding President of BDI.
Also present at the symposium, Dr. Syed Saad Andaleeb, an executive member and two-term past President of BDI discussed the possibilities surrounding shipbuilding industry. Dr. Ali, a former Lecturer of BUET Civil Engineering Department, asked the participants if the design and analysis work for the shipbuilding is being performed within Bangladesh.
An expert on shipbuilding and BUET Naval Architecture Professor Dr. Abdur Rahim clarified for the audience that the design and analysis for the ships are being done in the European countries and Bangladeshi workers only assemble these ships.
Mere assembly program without the design and analysis work such as the Maquiladora assembly program near US-Mexico border is not expected to increase personal productivity by sufficient degree. Bangladesh is known to assemble capital & durable goods from imported parts & components. Bangladesh also imports value-packed intermediate products such as advanced chemical fibers, medicinal chemical powers to assemble antibiotics & other medicines, furniture & other goods. Higher GDP growth rate can only be secured by establishing domestic design and analysis skills and not by assembly work alone, Dr. Ali emphasized.
Dr. Syed A Samad, Executive Chairman of BOI, who formally opened the symposium on Capital Goods as a host, reminded the audience of the progress Bangladesh has already made over the last forty years. Mr. A Gafur, Executive Director of American Chamber of Commerce echoed the same sentiment.
As part of one of his presentations at the symposium ‘Why Capital Goods’ Dr. Ashraf Ali reminded everyone present there that Bangladesh ranks at the bottom 12.5 percent in national per capita income, while the world average per capita income stands at US $10000 and around 48 percent countries of the world earn more than US $5000 per person (year 2010).
The symposium focused on these five specific sub-topics of the capital goods industry: (1) Tariff & Protection of Capital Goods Industry, (2) Connecting Capital Goods Industry with Technical Academia, (3) Bangladesh as a Junior Partner of Industrialized Nations, (4) Inputs to Capital Goods Industry, and (5) Infrastructure Development.
The discussion on the topic “Inputs to Capital Goods Industry” was led by Masum Taluckder, a consultant of BEIOA. Mr. Taluckder said the majority of light engineering enterprises currently run on a small industry scale. These enterprises use backdated technology. As a result, light engineering products are not upto international standard. This industry is in need of quick technology upgrade. To this end, this sector would require an industrial park, easy access to finance and access to skill needed to operationalize modern technology, Mr. Taluckder commented.
Bangladesh should join the advanced countries by initiating genuine industrialization but may face difficulty in doing so as a latecomer because she will have to make it work staying within the competition-based free-market environment. Dr. Ali characterized the situation as “the asymmetry in world industrialization scene”.
The success of South-East Asian countries such as first & second generation NICs (Newly Industrialized Countries) can however be considered as a resource of hope & inspiration, opening the door for the possibility of economic symbiosis between Bangladesh and world’s industrialized nations. Bangladesh can thus work as a junior partner of industrialized nations, including India & Asian NICs, Dr. Ali said.
The collaboration between government outfit BITAC and light engineering factory owners’ association BEIOA was also a subject of discussion at the symposium. Pressed by BEIOA President Mr. Abdur Razzaque and BEIOA consultant Mr. Masum Taluckder, Dr. Ihsanul Karim, additional director of BITAC, pointed to both short-term and long-term training and technical support programs of BITAC, geared towards assisting Dholaikhal and Valuka area workers, including head treat, computer aided design and computer numerical control (CNC) machine.
Mr. Taluckder requested the Bangladesh government to initially set up one modern foundry factory at BITAC. BITAC would in turn help the light engineering industries by providing training on how to set up and run modern foundry factory.
According to news reports, in the last couple of years 2009 and 2010, a number of organizations from USA, Canada and Japan asked BITAC whether they can get automotive parts produced by the machinery manufacturing factories in Dholakhal & Valuka areas. Dr. Ali asked whether this possibility can be formalized and what steps must be taken to institutionalize the relationship.
President of BEIOA Mr. Abdur Razzaque emphasized that the government should create dedicated Light Engineering Park where vendors and original equipment manufacturers would establish their factories and grow. The light engineering sector should be given access to Equity Entrepreneurship Fund (EEF) of Bangladesh Bank, he remarked. Some participants of the symposium expressed the opinion that dedicated Small Medium Enterprises (SME) Bank, like Bangladesh Agriculture Bank, should be established for the light engineering sector.