Bangladesh plans to revive jute sector in PPP. But stakeholders happen to be wary

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The government's plans to revitalise the flagging jute sector through public-private partnerships have been met with scepticism from stakeholders in the market.

It came after the government announced the decision to shut production in all state-owned jute mills and transition to the PPP unit in a bid to modernise the sector.

However, many exporters and traders believe the industry's fortunes could have been switched around without closing the mills down. Others explained the ideas to perform the mills under PPPs are unlikely to reach your goals in today's climate.

Even if the maneuver ends up getting the desired impact, the process will be lengthy and cumbersome, that could see the nation lose its competitiveness in the global marketplace.

Some also remarked that the state-owned jute mills were mired in ‘corruption' and  'profligacy' alongside ageing infrastructure. Under the circumstances, it really is doubtful that the private sector could suddenly part of and invert the rut.

“The government is now promising to reopen the jute mills in half a year time. But who from the individual sector would be ready to take charge of those? These factories are already dilapidated and built with machinery that is up to 60 years old,” stated Lutfur Rahman, senior vice chairman of Bangladesh Jute Goods Exports Association.

“Also if someone is ready to dominate a mill, it will take considerable time and expense. They might have to find out what expenditure would come from the federal government and banking institutions, their liabilities and the status of loans... the process could have up to year. The authorities will float the tender and from then on maybe they'll be able to assume control."

The 26 jute mills beneath the Bangladesh Jute Mills Company have already been incurring losses for a long time, turning profits in just four of the previous 44 years. These incurred a cumulative lack of Tk 106.74 billion as the government supplied subsidies worth Tk 106.74 billion in this sector during the last 48 years, regarding to official data.  The move to turn off the mills may also send about 25,000 workers at 26 jute mills into early pension under a scheme, euphemistically named a golden handshake.

Textiles and Jute Minister Golam Dastagir Gazi is hopeful that the state-owned jute mills will be ready to go soon with modern equipment under the PPP model.

But the past experience of privately-run jute mills are also not so promising, with many having closed down because of heavy financial losses.

In 2017, the government took over 4 jute mills from non-public owners for breach of contract.

It will be vital that you see how the public and exclusive sectors incorporate their mentalities, said Lutfur. Nonetheless it might take ‘more than two years’ to modernise and restart the mills, according to him.

“We must survive on natural jute exports alone if the shutdown continues while our competitor countries could have established a foothold in the jute products industry.”

The government can modernise the state-owned jute mills without bringing them beneath the purview of PPP, according to Abdul Barik Khan, secretary-general of Bangladesh Jute Mills Association.

“The mills already are in operation. They can just upgrade the machinery in half a year.”

“There would still be buyers if the mills were functioning. This is the time of year for jute but no-one will buy it if the mills will be closed now. The purchase price will hop from Tk 1,500 to Tk 2,500 per maund. Also, the raw jute will perish. As a result, the federal government could have placed the mills running while thinking about switching to PPP or BMRE (Balancing, Modernisation, Rehabilitation and Expansion).”

Khan believes that even if the individual sector entrepreneurs dominate the jute mills through PPP, they will not be willing to undertake the preexisting liabilities.

"The government could retain a 49 percent stake in the mills while providing 51 percent to the private sector. But that must be free from any liability,” he stated.

“The Indian government has provided a 20 percent incentive to the private sector and asked them to market off the old machinery and purchase new ones. But we don’t have any federal government investment in the private sector. Why should we accept the older liability then?”

Bangladesh Jute Spinners Association General Secretary Shahidul Karim suggested establishing latest industries instead of jute mills as the demand for jute goods is certainly diminishing quite fast.

“We have to decide 1st if there’s a demand for jute products. Before, the jute mills were privatised beneath the condition they can make only jute products. Today with the dropping demand, where shall we sell the jute products?”

“Look at Adamjee. Following the hue and cry, the jute mill was substituted with an EPZ, rendering employment to numerous workers and adding to the national market. We need to take into account the demand and industry first, and about the PPP later on. I don’t believe the government will achieve success with this course of action,” he said.

Nevertheless, Prof Akhtaruzzaman, secretary-standard of Bangladesh Krishi Orthonitibid Samity, believes the federal government has made the proper call simply by bringing the state-possessed jute mills beneath the private-public partnership model.

“In a free-market overall economy, it really is hard for the federal government to control everything by itself. The non-public sector must come ahead as well. Only then will the exclusive sector play a significant role throughout the market,” he told bdnews24.com.

“There is a huge demand for the merchandise in the international market but we were unable to meet up it with the supply. Also, the profit margin should be thought to be. The overall circumstances express that the government was struggling to bear the losses.”

The PPP process may need two to three a long time to fruition, he said.

“The government may face a transition amount of two to three years, where they should manage the international market through financial diplomacy and ensure the multifaceted make use of jute products.”
Source: https://bdnews24.com

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