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Ensuring effectiveness of industrial cluster development

Md Joynal Abdin | Published: May 20, 2019 21:25:18 | Updated: May 24, 2019 21:17:18


Over the past couple of decades, the economy of Bangladesh has been transitioning from agricultural economy to industrial economy. Contribution of agriculture to the gross domestic product (GDP) is reducing day-by-day while at the same time contribution of industries is increasing. It does not mean that, agricultural production is declining. It is because GDP size is increasing rapidly than that of the increasing trend of agriculture sector.

Agricultural production has the highest threshold against each acres of land. Therefore value addition in agricultural products or agro processing is important to transform agri-products into industrial goods. Most of the consumer items and essential commodities are mainly primary or secondary products of agriculture. Industrial movement started with agro processing sectors in almost every developing economy. Of course, there are some exceptions where some economies started off with service sector, infrastructural or geopolitical advantages.

Industries sector needs utilities and logistics support to grow. Ensuring industrial logistics and utilities from one corner of a country to the other is not possible for any new economy like post-liberation war Bangladesh. A dedicated government agency is required to facilitate industrial utilities and logistics for existing and upcoming entrepreneurs of the country. To facilitate industrialisation in the then-East Pakistan, Small and Cottage Industries Corporation Act, 1957 was enacted by the Minister for Labour, Commerce and Industry Bangabandhu Sheikh Mujibur Rahman. He established East Pakistan Small and Cottage Industries Corporation (PSCIC). Following independence, this institute was transformed into Bangladesh Small and Cottage Industries Corporation (BSCIC). Since then, the BSCIC has played a pivotal role in the development of industrial estate in the country. Notable activities of BSCIC are entrepreneurship development through counselling and training; providing infrastructural facilities by establishing industrial estates; extending credit facilities to the entrepreneurs from its own funds and also through banks and financial institutions; preparation of project profile and project appraisal proposal; providing technical and consultancy services for establishing new industrial units and quality improvement of small cottage industry products; registration of small and cottage industrial unit and recommending exemption of duties and taxes for the small industrial raw materials and product etc. Till date, BSCIC has developed around 94 industrial estates around the country. BSCIC industrial estates are the first official forms of industrial clusters in Bangladesh.

Bangladesh Export Processing Zones Authority (BEPZA) Act, 1980 was passed in the Parliament and established BEPZA for creation, development, operation and management of Export Processing Zones (EPZ). BEPZA is engaged in attracting and facilitating foreign and local investment in the EPZs of Bangladesh. BEPZA established its first EPZ in Chattogram in 1983. Later on, it established EPZs in Dhaka, Mongla, Cumilla, Ishwardi, Uttara (Nilphamari), Adamjee and Karnaphuli. EPZs are also a type of industrial estate or cluster. EPZ played a significant role in boosting up exports and attracting foreign investment.

The Small & Medium Enterprise Foundation, widely known as SME Foundation, was created by the Ministry of Industries in November 2006 as a company limited by guarantee and licensed by the Ministry of Commerce as a not for profit organization and registered under the Companies Act (Act XXVIII) of 1994. It is running under the guideline as stated in the Memorandum and Articles of Association. Government provided an endowment fund to it so that it can cater towards the development needs of the small and medium enterprises of the country. One of the flagship activities of SME Foundation is to identify, map and implement development initiatives of 177 naturally grown SME clusters throughout the country. SME clusters are naturally grown industrial clusters comprising of at least 50 homogeneous manufacturing or service units of micro, small and medium enterprises.

Bangladesh Economic Zones Authority (BEZA) came along through the Bangladesh Economic Zones Act, 2010. BEZA was officially instituted by the government on November 09, 2010. BEZA aims to establish economic zones in all potential areas in Bangladesh including backward and underdeveloped regions with a view to encouraging rapid economic development through increase and diversification of industry, employment, production and export'. Around this time, the Prime Minister Sheikh Hasina announced a target of developing 100 Special Economic Zones by 2030. BEZA has already identified locations for establishing 88 SEZ including 29 private economic zones. These economic zones are a different form of industrial cluster.

Industries sector experts and economists are of the opinion that Bangladesh has the opportunity to exploit untapped potential that can open up through the development of economic corridor. Better utilisation of the country's strategic geopolitical location could be possible through economic corridor development/establishment. The government can consider the establishment of another agency named 'Bangladesh Economic Corridor Development Authority (BECDA)', similar to BEPZA & BEZA. 

From the history of industrial cluster development in the country, it is very clear that the government is willing to develop industrial areas, estates, processing zones, economic zones and more, to boost industrialisation in Bangladesh. All of the agencies like BSCIC, BEPZA, SME Foundation and BEZA are working hard for the development of industrial clusters. Slight differentiation can be identified based on nature of job or reporting authority of these institutions. But the ultimate target is industrial cluster development for promoting investment, export earnings, entrepreneurship development etc.

All the agencies could be merged into a single platform called Bangladesh Cluster Development Authority (BCDA). Currently, more resources are being deployed from these different platforms to achieve one goal. Under a single platform, the number of resources will not be wasted. Also, there will be a stronger focus.

In such a way, uniform cluster development approach should be considered and implemented to ensure greater return by investing limited amount of resources.

Views expressed here are not from the organisation that the author represents.

Md Joynal Abdin is Executive Director, DCCI Business Institute (DBI).

mdjoynal@gmail.com

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