Jute - product innovation and growth issues

In Bangladesh, jute has a long history, fondly dubbed 'golden fibre'. Once this biodegradable fibre used to be the main source of earning foreign currency for the country. Due to the substitution effect, primarily originating from synthetic materials, the demand for environmentally friendly products produced from jute started facing erosion in 1980s. To revitalise the glory of jute, there have been diverse initiatives. The most prominent one is the scientific discovery in completing the genome sequence of the popular verities of jute.

 It is being reported that the number of products produced from jute has increased from 135 to 240 over a span of one year. Despite such progress in product diversification, the government needs to provide various fiscal incentives, including cash subsidy to manufacturers. Moreover, to ensure low price of raw materials, farmers are often restricted to export raw jute. Despite having such a large number of jute products, export earning during the last seven months (July 2017-Jan 2018) reached just about $660 million. Moreover, the use of genome sequencing in inventing technology and innovating solution whether in the form of higher yield seed or improved processing means to enhance the quality and reduce the cost of jute products which is yet to be materialised.

 It has been claimed that there is a huge demand for jute products in around 60 countries. According to Bangladesh Jute Mills Corporation (BJMC), as reported in the media, there are 22 jute mills in operation under public sector while the number of jute mills in the private sector is around 200. Despite the growth of revenue from jute export, the amount of revenue appears to be insignificant to total export revenue earned by Bangladesh. Moreover, the sustainability of such export revenue is also questionable if cash subsidy is withdrawn. According to a media report, despite the growth of products by almost 80 per cent from 135 to 240, export revenue only grew by 17 per cent. Moreover, the estimated per product export revenue over a year appears to be around $4.7 million. Despite huge demand, such a very low export volume happens to be discouraging. It appears that due to very low volume of export of each item, the industry is failing to benefit from economies of scale, automation and job-specific specialisation. Moreover,  engagement of about 15 million farmers, 1.2 million acres of land and 156,000 factory workers (according to BJMC data) in generating such export revenue of just little over a billion dollar a year is also a matter of concern. It has also been stated that almost 80 per cent of produced jute goods are meant for export.

There is no denying that one of the challenges for the jute industry is to find diversified usage of jute products. The increase of number of jute products from 135 to 240 in just a year indicates that there is high potential of multifaceted usage of jute. However, a more important challenge is to add high value to those products and to generate large profitable revenues.

In this globally competitive world, acquiring the capability of continuously improving the quality and reducing the cost appears to be the critical factor to meet this growth challenge. From the export data, it appears that although jute products have demand in 60 countries, per product revenue is still very low. Bangladesh needs to find ways to increase per product revenue and also value addition. Very low per product revenue indicates that the number of customers willing to pay for Bangladeshi jute products is relatively low.

There is no denying the fact that every innovative product at the beginning attracts a very small number of customers ready to pay. Often subsidy is required to penetrate the market. But the challenge is to keep increasing the quality and reducing the cost in an incremental manner so that higher willingness to pay is created among growing number of customers. Do we have options to pursue product and process innovation so that we can attain a situation to increase the quality and reduce the cost of jute products simultaneously? The threat caused by the development of bio-plastics and biodegradable plastics as a new force of substitution to jute products should also be taken into consideration to assess the future competitive market scenario.

 Some of the jute products that Bangladesh is producing were once a target of disruption by substitution like synthetic material, produced from hydrocarbon. Due to growing concern about the environment, biodegradable jute products are getting popularity. But to benefit from the scale, these jute products should grow in quality and cost to cause disruption to products produced by synthetic materials. Do we see the potential that we have access to technology to enable jute products to cause such disruption to competing products? In the absence of such potential, how can jute products grow to generate large revenue to justify the engagement of large labour force and huge land?

Due to the recent oil price plunge, the substitution of jute got the added advantage to be a cheaper alternative. It's expected that oil price will remain low, and even it could be lower in future due to shale oil technology effect and the growth of renewable energy. How our jute products will face competition from such low priced alternatives is a question to be seriously looked into. Moreover, implementation of mandatory use of jute bags for packaging goods is also a concern. Often goods like rice, sugar and flour packaged in jute bags suffer from quality degradation. Is it worth of losing the value of goods packaged in jute bag for the sake of creating demand for jute?

 Bangladesh is set to graduate from the least developed country status. To meet the aspiration of being a middle-income country by 2030, the challenge for Bangladesh is not only to produce, but produce higher value-added output. In order to enable jute products to support growth aspiration of Bangladesh, we must find much higher value-added opportunities than before. Are we seeing the prospect of emerging technologies to improve both yield and quality of jute fibre? Are we up for a far higher value-added product innovation opportunity?

Despite the increase of  number of jute products and also export revenue, the historical growth pattern of value added per person engaged in the sector does not appear to be encouraging in terms of meaningful contribution to Bangladesh's growth aspiration. Should we use jute as the target industry to create high-tech productive knowledge in the area of science, technology, and design, so that such productive knowledge empowers Bangladesh to enter into high value-added innovation economy in diverse areas?

It's time we looked into the prospect of value addition of jute products through innovation and increased global marketing to accelerate economic growth of the country. Not only we should get rid of the subsidy culture in the jute sector and regulated demand creation for jute products, but we must also turn the huge workforce and land used by this sector to increasingly higher value-added outputs. It's time for stakeholders to take a serious look into the exploitable latent potential of jute to decide about the future course of actions.

M Rokonuzzaman Ph.D is academic, researcher and activist on technology, innovation and policy.  zaman.rokon.bd@gmail.com