With continued erosion of competitiveness of jute mills in Bangladesh, it has been news worthy update that the government has taken a large project to upgrade production technology of jute mills under $350 million foreign loan. But, how much technology value will be added from local sources in making such upgradation is a question for us. Bangladesh's industrial policy of balancing, modernising, rehabilitating and expanding (BMRE) with 100 per cent import of foreign capital machinery is highly detrimental to the growth of local technology value addition capacity. Domestic market is the key to enable local technology value addition capacity to grow. State-owned jute mills are one of the key areas to support the growth of technology value addition in capital machinery. In the absence of building the capacity of technology value addition to capital machinery, Bangladesh's dream of becoming middle-income country will likely remain unmet. Despite having growing number of unemployed or underemployed science and engineering graduates, why is the government still pursuing 100 per cent import-oriented capital machinery policy?
This is an anti-development policy and it should change for making Bangladesh a prosperous nation. Moreover, is it a sustainable solution? Will it place our jute mills on the path of acquiring the capability of continuously delivering higher quality products at lower cost to keep getting stronger?
If petroleum or automobile producers can improve the quality and lower the cost of production by taking the advantage from technology and innovation, why cannot Bangladesh's jute industry follow the same path? Instead of giving subsidy and blaming the market, it's time to focus on continuous improvement of quality and reduction of cost by taking the advantage from product and process innovations, gained from on-job learning, emerging technology and local innovation capacity.
Headlines like "Jute goods losing export market", "State-run jute mills run out of steam" and "Jute sector in deep trouble" have become commonplace headlines in the Bangladesh media. The conventional root cause analysis to such situations has been blaming corruption, overstaff, lack of demand in the international market and so on. The solutions have been waiving bank interest, giving cash subsidy, providing additional loan, importing technology, and imposing duty on raw jute export to force farmers sell their produce at low price.
Let's make an assumption that jute mills are corruption-free and excess staff members are released. Of course, the situation will improve. But will such improvement ensure sustainable competitive advantage to these mills to keep increasing volume of revenue and profit-to-revenue ratio? The likely answer is NO. What else we should address to develop the capacity of continuously improving the competitiveness of these mills? What are the crucial missing building blocks for these mills to keep acquiring the capability for producing better quality products at lesser cost, while paying more salary to employees, growing dividend to investors and higher taxes to the government?
Despite the availability of the cheapest manufacturing labour, locally grown raw material, and growing global consciousness of environment, the news of closure of mills for producing environment-friendly products is a growing concern. It has been reported that in the recent past around 20 jute mills were shut down. Twenty-five out of 97 jute spinning mills are already closed. Even 21 jute mills out of 35 that were privatised before are now closed. Moreover, operational jute mills are now running at less than 50 per cent capacity.
The obvious question: why have we been facing this situation? Whenever the situation reaches to crisis level, the government comes up with projects to shoulder the liability. Like in the past, the ministry has come up with Tk 7.0 billion project in the name of manufacturing diversified products, and $350 million for technology upgradation with import.
The root cause of ill health of the jute goods manufacturing sector appears to be at the culture and core belief. The conventional belief is that mills will be producing conventional products with the available imported technology and labour. If consumers do not respond to buy those products resulting in losses, the government will come up with subsidy to cover up the loss. Instead of focusing on quality and cost of production, the strategy has been the best effort outputs, expecting that market will respond to produce profitable revenue.
In the globally connected industrial economy, success does not just rely on the best effort delivery. Rather, conscious steps to produce outputs of higher quality at lower cost are the key to success. In the absence of such core competence, even being blessed with natural advantages, Bangladesh's jute industry has been withering. Instead of blaming the market, it's time to draw lesson from other segments of the industrial economy to bring a change in the core culture of jute goods production. The historic low price of petroleum products is due to the fact that with the aid of technology breakthrough known as hydraulic fracture, oil companies are producing more oil from the same reservoirs at lower cost than ever before.
Instead of blaming the market and taking one after another mega subsidy projects in the name of BMRE or product diversification, it's time to perform an audit on the jute manufacturing sector to assess its progress over the last three decades in two key performance indicators: quality and cost.
Turning on-the-job learning into improvement of quality and reduction of cost through product and process innovation is the core competence to succeed in industrial economy. Although we are busy to pump in staggering amounts for infrastructure and subsidies to maintain competitiveness, unfortunately, hardly there has been any focus to address core competence: offer better products at lower cost by taking advantage of learning and local innovation. It's time to focus on the root cause of stagnant or decaying quality and rising costs due to the failure to take advantage from learning and local innovation to address the chronic ill health of jute manufacturing sector. Such approach will also create high-paying jobs for the growing number of science and engineering graduates - the key area to focus on for avoiding premature income saturation and deindustrialisation.
M Rokonuzzaman Ph.D, academic, researcher and activist on Technology, Innovation and Policy, is Professor, Department of Electrical and Computer Engineering, North South University, Bangladesh. [email protected]