Let there be more light

Staff Correspondent
Wednesday, August 9th, 2017


 

Bangladesh’s light engineering sector can go a long way, if guided right

 

Light Engineering (LE) is an important industry in Bangladesh in terms of its contribution to growth and poverty reduction. LE enterprises have potentials to make significant contribution towards technological advancement and economic development along with wide opportunities for employment generation. The sector has been fueling the growth of many other industries by supplying various types of machineries and spare parts and by providing repairing services. About 40,000 small scale light engineering enterprises exist all over the country, of which half a million and six million people are employed directly and indirectly (respectively.)

 

Experts claim that this industry is growing at a steady rate of 30%, example of which can be last year, when Tk. 2263 crore worth of goods and machineries were exported overseas. The growth of LE enterprises requires an enabling policy environment and infrastructural support. Bangladeshi products have earned recognition overseas by now, yet the domestic production still does not match the demand so far. The annual domestic demand from this sector is worth $6.6 billion. Even though $2.2 billion is met through local production, the rest of the amount still has to be imported from abroad. Experts opine that with proper supervision and foresight, the local demand can be met, with enough to eye for exports.

 

World-class machineries made locally

 

Industries those benefit from spare parts produced by light engineering include cement factories, paper mills, jute mills, textile mills, sugar mills, food processing industry, plastic industry, printing industry, fertilizer factories, railway, shipping, marine transport, automobiles, construction machinery, and pharmaceutical industry. Because of such role in the economy, LE sector has received special attention in government policies. For example, Industrial Policy, 2009 and Industrial Policy 2005 –both have considered this sector to be a thrust sector for development. This has also been considered a priority sector in Export Policy 2006-09 and Export Policy 2009-12.

 

Of the 1 lakh fishing trawlers that are used to catch fish, 90% of the vehicles are assembled locally, previously bought from Taiwan and Japan. With respect to handloom, production increased significantly with the introduction of power loom. Md. Ibrahim Khalil, proprietor of M/S Fatema Engineering at Dholaikhaal says that they have been successfully manufacturing blister packing machines which are used in the pharmaceutical industry. ‘It is used to pack medicines and capsules. It is better than the Chinese ones,’ he claims. He added that Ibna Sina and some other major pharmaceutical companies use 140 of their machines.

 

But he laments by saying that they are not receiving any scope for further investments. The vehicles and rollers used to renovate roads are now produced at Dholaikhaal. Mafizul Haq, owner of M/S Mamun Engineering, says that these vehicles are of international standard and cheaper as well. ‘Even the concrete cement mixers are made and sold here at $8.5 million, whereas an imported mixer would cost around $15 million,’ he added. But he also cited the lack of proper manpower as a potential challenge. Once the workers become semi-skilled, they try their luck abroad, after which they come back with experience and open up their own workshops.

 

Bangladesh as the new investment destination

 

The leading countries for light engineering are China, Japan, Germany, South Korea, Taiwan, etc. Now the demand for labour-intensive work is decreasing rapidly, with more and more calls for white-collar jobs. As the labour wages in the West have gone up, companies are now looking at new destinations through outsourcing. According to Bangladesh Industrial Technical Assistance Centre (BITAC,) the Indian conglomerate Tata has bought Kaliachapra Sugar Mill at Kishoregonj, where an effort for establishing a light engineering industrial park is in the process. This can generate employment for over 2000 people. Experts say that proper infrastructural facilities are required for this to become a well-oiled machine.

 

Acceptance

 

The recent Industrial Policy 2010 acknowledged this industry as a full-fledged sector, after which it has received 10% monetary incentive every year. But the need for an industrial park solely for light engineering has been voiced time and again. Multiple investors are willing to dish out the required capital, but the lack of land space is hindering the progress.

 

The mirage known as Dholaikhaal

 

The strongest case for light engineering industry is Dholaikhaal, where thousands of factories and plants have set up over the years, over 5000 to be precise. People jokingly used to call this place as the second Japan, but that is only because it lives up to the hype. The workers here can actually replicate international standard products and machineries, which is now at rivaling positions. The entrepreneurs in the cluster, however, are less educated and only a few of them are formally trained. Most of the machines they use are age-old machines imported from India and Pakistan. A few entrepreneurs are trying to produce high-quality homogeneous products in a large quantity by employing computerised and numerically controlled (CNC) lathes and hiring designers and engineers from India to run the CNC machines, as skilled labour is quite scarce in Bangladesh to operate sophisticated machines. Recently, a few machinists have been successful in selling their products to the government and large private companies by competing with large importers.

 

Bogra compensates 60% of agro machineries

 

Tk. 1 crore worth of agricultural machineries are bought during the harvesting season. Locals credit the creation of locally-made shallow machine liners, pistons, nozzles, tube-wells and other machineries as their fortune-openers. Local BSCIC officials informed Dhaka Courier that the workers from this region can manufacture the machines without any sort of prior academic education or training. Not only that, but they are also cheaper and more pristine than the ones sold abroad, enticing buyers from all over the country. But these businesses need to be sustained, with external help. At least five foundries including Farida Engineering and GR Casting were forced to shut down due to higher raw material prices, high bank interests, higher rate of government taxes and shortage of running capital, said Abdul Malek, vice president of Foundry Owners Association of Bangladesh, the Bogra-based national organisation. ‘One year ago the rate of pig iron was Tk. 32,000 per tonne in local market which is now Tk. 85,000’ said Malek. The price of hard cook, a kind of fuel, doubled to Tk. 80,000 per tonne in the last 12 months, he added. Owner of Madina Traders on the same organisation said although he sold locally made water pump at Tk. 900-Tk. 1,000 each a few months ago; he hardly can make any profit by selling the same pump at Tk. 1,600 to Tk. 1,800 now.

 

In conclusion

 

The local market of the LE Sector in Bangladesh is big and unsaturated enough; thus this sector has huge potential to grow. This is a sector which has strong forward linkage as well as backward linkage. There is sufficient demand within the various manufacturing concerns such as textile mills, railways, jute mills, shoe manufacturers, sugar mills, RMG, washing plants etc. This sector has also potential for producing import substituting goods if proper support is given. Moreover export potential of light engineering products is also rising as the cost of production, especially labour cost is low. At these backdrops the government should come forward for the development of this sector.

 

Bangladesh Engineering Industry Owners Association (BEIOA) president Abdur Razzaque said that ‘Our home made light engineering products have a colossal demand in the US market as the US importers have already expressed keen interest in importing light engineering products from Bangladesh.’

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