A growing Industrial sector is a prerequisite for growth, employment creation and improvement in people’s living standard. Ministry of Industries is formulating policies and strategies as well as providing necessary facilities and assistance to establish and expand industries in the country. Industrial policy encourages the entrepreneurs to take decision on where to locate and how to coordinate production activities. In other words, Policy space provides governments with some leverage in guiding economic activities and influencing development outcomes. On the other hand, policy risks have the potential to adversely affect the outcomes. This study focuses on how industrial policies in Bangladesh assist to promote industrialization in the country. This paper argues that the effectiveness of government policies in maximizing the gains from GVC participation depends not only on policy design, but also on policy consistency and coherence, effective implementation, and coordination.
Industrialization is an important per-requisite for rapid and sustained economic growth of a country. Structural transformation of the economy and higher standard of living of the people are the universally recognized dynamic benefits arising from industrial development. Industrialization is thus pursued as an overarching development objective in its own right. Industrial development is eventually the transformation of the structure of the socioeconomic progress of the country through introducing diversification’s of productions and export basket as well as increasing the uniqueness of individual products. Government of Bangladesh has been pursuing to build a happy and prosperous Sonar Bangla and for that announces National Industrial Policy from 1973 to 2016.New Industrial Policy 2022 is in the pipeline to be announced by the government.
The Government of Bangladesh needs to make a paradigm shift in its industrial development strategy. To do that government has taken initiative to collaborate extensively with all the stakeholders— the industry players, service providers and training institutions. A strong eclectic industrial policy initiative can bring forth expected change. Together they have to spur most emphasis in on hand practical technical education and training, ensure decent and quality employment for the industry workers, and create organizational structures and processes that would ‘professionalize’ the system of industrial development to enable the Bangladeshi industries to compete in the ever expanding and highly competitive global market. There are three main pillars of the new policies that worth mention-able herewith.
First, the government has taken effort to make for a new generation industrial policy which will be based on the emerging realities like embracing fourth industrial revolution and successful accession of graduating from the least developed country (LDC) category by 2026. To that end, the new industrial policy 2022has vowed to coordinate with other relevant polices such as financial, trade, and investment policies. The industrial strategic policy initiatives will be made more consistent with global policy regimes, particularly in the context of the World Trade Organization (WTO).
Second, in line with the changing global demand, the new policy has proposed to diversify manufacturing products, especially export oriented high value added products. This requires large investments in the more modern sectors. The policy also advocates improvement of overall investment climate. In an attempt to reduce infrastructural deficiency, the government has undertaken several large projects. The Padma multipurpose bridge is one of these initiatives, which is expected to enhance the efficiency of our economy in many ways. The improvement in the power and energy sector is also noteworthy. The government’s efforts towards setting up 100 Special Economic Zones (SEZs) are expected to remove investment-related shortcomings in a significant way. Speedy completion of the SEZs is the time demanding necessity to attract foreign investment.
Third, the policy also reiterates adequate supply of skilled and smart human resources who can really finish the job on the ground as per industry requirement. New industrialization depends on the supply of quality of human resources. Investment comes where there is a sufficient flow of skilled people. Higher investment on education and capacity development is duly emphasized in the new policy. At the same time, human resources have to be re-skilled and up skilled so that they can benefit from large-scale industrialization. At the same time, new policy ushers that start-ups should also be provided with financial, technological and other related support for self-employment through investing in small-scale industrialization. This will create new jobs and eventually help eradicate poverty.
Industry is now the second largest sector in terms of contribution to the GDP. This contribution of the industrial sector is increasing day by day. Present development strategies of the country comprise of the following elements: driving up industrial investment, maximizing utilization of the installed capacity of the existing industries, making export-oriented industries more competitive through its diversified expansion. Before the new National Industrial Policy 2022, the country has published 11 industrial policies to ensure coordinated progress of the sectors that offer significant chances of development, that is, to diversify and to upgrade the economy. These are Industrial Investment Policy, 1973. New Industrial Investment Policy, 1974. Revised Investment Policy, 1975. New Industrial Policy 1982. Revised Industrial Policy 1986. Industrial Policy, 1991. Revised Industrial Policy 1992, National Industrial Policy, 1999. National Industrial Policy 2005, National Industrial Policy 2010 and National Industrial Policy 2016.
Bangladesh uses eleven categories of classified industrial policy instrument in the National Industrial Policy from 1973 to 2016; and these are:
(1) Fiscal incentives
(2) Investment attraction programs
(3) Skill policies
(4) Infrastructure support
(5) Trade measures
(6) Public procurement
(7) Financial mechanisms,
(8) Industrial restructuring schemes
(9) Diversify Potential Sector to Expand Export Basket
(10) Greening of Industries
11) Productivity and quality enhancement.
1. Fiscal incentives: In the 1982s
National Industrial Policy, Government of Bangladesh offered preferential tax credits and other concessions to manufacturing exporters and allowed exporting firms to retain foreign exchange earnings for import purchases. Preferential export credits were used in the 1990s to promote exports from the rapidly developing Ready Made Garments industries. Fiscal incentives were to attract foreign direct investment for promoted sectors and to meet specific objectives. For example, tax holidays were given to firms awarded pioneer status and special zones with duty free imports were developed to promote exports that were dependent upon imported components.
2. Investment attraction programs: In the 1985 National Industrial Policy, the government of Bangladesh introduced the benefits of EPZ ((special export- oriented industrial zone) in Bangladesh, offering qualified labor and improved infrastructure to facilitate exporting. Government created High tech parks as part of policy support, 2009 onward, a specialized zone to attract high- technology foreign direct investment. Hi-Tech park is full of opportunities to invest in Hi-Tech industry and promote business which are knowledge and capital-based. Information technology, Software Technology, Bio-Technology, Renewable Energy, Green Technology, IT Hardware, IT Enabled Services and R&D etc. are major areas of investment in Hi Tech industry in Bangladesh. Bangladesh National Quality Policy for Goods and Services. 2015 and National Innovation and Intellectual Property Rights Policy are formulated to attract and provide congenial milieu to local and foreign investors.
3. Environment Friendly Industrialization: Greening of Industry is a method to attain sustainable economic growth and promote sustainable economies. It includes policy making, improved industrial production processes and resource-efficient productivity.
4. Infrastructure support: From 1973s onward Government established a number of industrial complexes with modern facilities and energy infrastructure. The cities that flourished around these complexes became synonymous with particular manufactured goods such as Jamdani or Sotronchi. Industrial complexes differ from special export promotion zones as their primary objective is to develop the domestic supply chains of specific industries. Similarly, special economic zones are created to spur growth in manufacturing and services. They are actively pursuing growth from 2010 onward. SME Policy 2019 vows a steady development of the largest sector of the industry. In order to ensure effective development of SME Sector and entrepreneurs, SME policy 2019 advocates development strategies those been designed around three elements: 1) Supportive policies and appropriate environment; 2) Sustainable and effective organizations; and 3) Opportunities to provide financial and business support services to prospective and disadvantaged entrepreneurs. To ensure the aforesaid benefits, the formulation of effective SME development strategy depends on three issues namely (1) supportive policies and conducive environment (2) sustainable and effective institutions, and (3) access to financial and business related services of destitute and underprivileged but potential entrepreneurs. Considering the above mentioned three issues, emphasis has been given on policy implementing strategies in SME Policy 2019 to create a conducive environment for SME development.
5. Tariff Facilities: Industrial Policies 1982 onward special initiatives has been taken to stimulate exports, the government of the Bangladesh set export targets that influenced firm behavior, with successful exporters receiving awards from the government. Asymmetric import tariffs were also used—very high tariffs for consumer goods for export and low tariffs for capital goods needed by export industries.
6. Protecting Domestic Industries: Some government circulars are issued to provide locally manufactured products to the government organization which offered firms a measure of revenue stability. The New Automobile Industry Development Policy 2021 has given special importance on such initiative.
7. Financial mechanisms: To promote SMEs as a potential growth engine, several financial support facilities were developed in Bangladesh with assistance from industry, academia and research institutes. A glaring example can be Credit guarantee Scheme has been promised to be executed under SME Policy 2019.
8. Industrial restructuring Program: During the 1980s World Bank’s Structural Adjustment Program compelled the government to release many of the nationalized industries that were already under strain from mismanagement. The government was forced to close down less competitive firms and sold them to private sectors. Recently Government has formulated number of sectorial policy. National Handicrafts Policy 2015 was published to revive the national heritage. National Automobile Industry Development Policy 2021 to promote this sector recognizing the pivotal role of the Automobile sector in development of industry and its contribution to the socioeconomic development of the country. Similarly, government has published Ship Building Industry Development Policy 2021 to encourage the ship building industry to procure new technologies and management systems to increase efficiency and productivity; providing quality products to local and global consumers at competitive price.
9. Productivity and Quality Enhancement: Such policy works as an effective and elemental tool to accomplish an organization’s goals and objectives to provide a higher performance and productivity for an organization and filling the gap for improving employee productivity. The government has taken a 10 years long program, The Productivity Master Plan 2020-30, to enhance productivity improvement that will build up a pool of skilled workers catering the need of industries by exploiting best of their skills, knowledge, attitudes, creativity and innovation and to ensure company’s competitive advantage can be achieved in the business world.
10. Skill Policies: The 90’s onward industry policy drive required developing a technological base. Through the policy instrument, the country upgraded its vocational schools, technical education and engineering based on the Indian model. To develop human capital, the government instituted requirements for sectors receiving support that included skills training. In the 2016’s National Industrial Policy, a special Chapter has been introduced to expedite skills policy in the country. The following figure shows how the training module helps to create a relationship cycle between employee and productivity.
Furthermore, through the skill policy government efforts to create archetypal model of professional and personal development that a positive relation between effective learning and employee performance management so that an organization can build up a positive commitment to achieve its mission, vision and goals. The following figure indicates how our training activities will enhance the performance management of an organization:
11. Diversify Manufacturing Base: The economic gains of a country depend on the productive activities taking place in its jurisdiction and their linkages to the domestic economy. We can say that Bangladesh has been performing a significant role through industrial restructuring and welcoming diversification’s of product orientation to generate new industries that correspond to higher value- added, and providing conducive environment to aiding activities in new industries. With the rise of new products and new industries, Bangladesh will emerge into high value- added manufacturing industries as the new policies are determined to ensure strategies for providing policy support to encourage production of high quality higher value added products in near future.
As a direct consequence of these policies and other initiatives of the government, the country achieved the average GDP growth rate of 8.15 per cent in FY19; public investment rose to 8.2 per cent from 4.3 per cent; per capita income increased from US$242 to US$2503 (2022). Inflation declined from 42.3 per cent (1973) to 4.2 per cent (2019), revenue-GDP ratio rose to 10.9 per cent in 2018. The size of budget grew to Tk. Tk 603,681 crore in 2021; annual export registered an increase to US$39.4 billion. Annual import stood at US$47.0 billion the Forex reserve increased to US$44.2 billion 2021 (September). As per the finance division’s projection, the size of the Bangladesh economy would be $510 billion in fiscal 2022-23 after growing at 10.7 percent.
The Government of Bangladesh pledges its full support by enacting this Policy for the purposes of: restructuring the industry on a new paradigm conforming to international standards and practices; creating an enabling and conducive environment to consolidate existing investments and to attract new investments. It is worth mention-able that these policy ventures have been taken to improve performance on job environment, motivation, decision-making, efficiency and effectiveness and support the employee to improve company’s performance such as profitability, effectiveness, productivity, operating revenue, quality and quantity, social capital, cost reducing, employee turnover and reputation. The direct influence of policy support can be exhibited under Quantum Index of industrial production (QIIP). It showed a growth of 15.8 percent in FY18 which was higher than the growth of 11.2 percent in the preceding year 2017. Production of manufacture of leather and related products and manufacture of machinery and equipment grew significantly (50.5 and 35.0 percent) in FY18. Production of manufacture of food products, manufacture of tobacco products, manufacture of wearing apparels, manufacture of rubber and plastic products, manufacture of basic metals, manufacture of other transport equipment and manufacture of furniture registered higher growth in FY18.
However, major industry group’s production also increased except manufacture of beverages, manufacture of textile, manufacture of wood and products of wood and cork, manufacture of paper and paper products, printing and reproduction of recorded media, manufacture of coke and refined petroleum products, manufacture of chemicals and chemical products, manufacture of pharmaceuticals and medicinal chemical, manufacture of other non-metallic mineral products, manufacture of fabricated metal products except machinery, manufacture of computer, electronic and optical products, manufacture of electrical equipment and manufacture of motor vehicles, trailers and semi-trailers in FY18. It is hoped that the New Industrial Policy 2022 will take major actions to activate these lagging sectors.