industrialization in northwest bangladesh - rdrs · industrialization in northwest bangladesh ......

Research Report

Industrialization in Northwest Bangladesh

Md Abdul Wadud Ph.D. (Newcastle, United Kingdom)

2


Md Abdul Wadud, Ph.D. (Newcastle, United Kingdom)

Professor Department of Economics University of Rajshahi, Rajshahi -6205 Bangladesh Email: [email protected]

mailto:[email protected]

3


Acknowledgement

This research gratefully acknowledges the financial support given by North Bengal Institute, RDRS

Bangladesh. Without this support, it was not possible to conduct this research. In particular, I would

like to express my sincerely humble thanks to Jasim Uddin Ferdous and Mahmuda Khander Bithi for

their time-to-time suggestions and good words. Many thanks go to Bithi for providing me a feedback

report which increases the arrangement and quality of this research. Professor Tariq Saiful Islam

deserves thanks for constructive and suggestive review report on this research that greatly helped to

enhance the quality. I would also like to thank data collectors and respondents for this study. I also

feel honour to thank the participants of the workshop on this research organized by RDRS at Rangpur

on June 22, 2008. However, any error and omission remain on the researcher.

4

Executive Summary

Northwest Bangladesh consists of eight districts - Panchagarh, Thakurgaon, Dinajpur,

Nilphamari, Rangpur, Kurigram, Lalmonirhat, and Gaibandha. This region is mainly

characterized by agro-based economy and poverty-ridden with surplus low-cost labour.

Monga affects some parts of this region with no job and no purchasing power during some

time in the year that make difficult for them to maintain livelihood during off peak times.

This labour force can be utilized in other sectors like industry with appropriate training.

The research aims to assess productive performance and identify factors associated with

productive performance based on scientific methods and provide policy implications as to

how industrialization and industrial growth could be facilitated in the Northwest Bangladesh

that could generate substantial amount of employment opportunities. In this regard, we

explore the potentials of Uttora export processing zone (EPZ) and land ports located in this

region that could help industrialisation. The study methodology involves collection of both

quantitative and qualitative data and information. Data have been gathered from both

secondary and primary sources; secondary data have been collected from published and

unpublished documents of relevant agencies and institutions and through field surveys, while

primary data and information have been gathered through field survey. We assess

performance of industries in terms of gross output, value added, employment status and

others. Tabular presentations have been used to evaluate different aspects closely related to

industrialisation. Further, we apply stochastic econometric frontier approach to assess and

estimate productive performance of industrial establishments.

Research reveals that there are no remarkable numbers of large and medium industries except

some small and cottage industries like, rice milling, bidi manufacturing industries, wooden

furniture manufacturing. Average number of industrial establishment and persons engaged,

average amount of gross output, value added are lower than those of the national averages. It

is implied from this analysis that there is scope of establishing industries in this region based

on at least available surplus labour, agro-products and natural resources. Research also shows

that although the economy of the region is agro-based that requires substantial amount of

fertilizer and pesticides, but there is no fertilizer industry in this region. Fertilizer industries

5

could be established in order to absorb some part of labour force and fulfill the demand of

fertilizer in this agro-based region.

Predicting the potentiality of effective industrialization a performance evaluation, that is,

productivity performance assessment of the industries is utmost important. We investigate

efficiency performance of industries using the Cobb-Douglas stochastic frontier model.

Results indicate that stochastic frontier model for the production technology and truncated

normal distributional assumption for the inefficiency effects are representative for the

dataset. We find that there is little opportunity of industry production gain through

improvement of efficiency of industries without resort to technological progress. Given the

level of efficiency performance of industries, this research would suggest introducing

policies that would lead to adoption of new technological progress and improvement of

existing level of technologies. This can provide technically, economically and socially

optimal level of industrialisation in northwest Bangladesh.

There is an EPZ in Nilphamari district called Uttora EPZ (UEPZ) among eight EPZs in

Bangladesh. Among thirteen land ports in Bangladesh, four land ports are located in

northwest Bangladesh. These are (1) Banglabandha in Panchagar, (2) Burimari in

Lalmonirhat, (3) Hili in Dinajpur and (4) Birol in Dinajpur. The Uttora EPZ is established

with a view to achieving employment, income, and hence reducing poverty through setting

up industries and utilizing benefits of land ports, airport and the Jamuna Bridge. There are

264 industries in the EPZs in Bangladesh with investment of US$11,48,986.4727 thousands

and employment of 2,02,752 persons. Unfortunately, UEPZ has only 3 industries with

investment of US$2,773.3209 thousands and employment of 1,430 people. Therefore, we can

say that this EPZ did not become able to keep contribution to the development in the region

because of reasons for not solving the existing problems defined by the industrialists and

entrepreneurs. On the other hand, foreign investors do not show interest to establish

industries if domestic counterparts do not establish. In the Mongla EPZ, all of 10 agro-based

industries are established, but in the UEPZ no such industry is established.

6

Arrangement of connection of natural gas in the EPZ, bringing working mobility in Mongla

sea ports, arrangement of special toll system for Jamuna bridge for EPZ industrialists in order

to reduce import-export cost from Chittagong seaport and airport, taking steps to run cargo

biman from Shyedpur airport, arrangement of border connection from Bangladesh to India,

Nepal and China through development of four land ports, arrangement of direct rail

connection from Shyedpur to Dhaka and Chittagong, encouragement and special benefit to

entrepreneurs to build agro-based industries in this agrarian region could benefit

industrialisation in this region. We would emphasize full operation of the four land ports,

regional and international trade will increase between Bangladesh, India, Nepal and Bhutan.

Foreign investment should be attracted in the EPZs. For this, the government must take

immediate decisions. These will generate employment and income of the people of

Bangladesh and help alleviate poverty. Concerted efforts from all quarters can play a very

significant role.

The government may wish to set up general and sector specific Special Economic Zones in

order to support and facilitate exports. Further the Government may consider to formulate

separate industrial and export policies for this region. Moreover, the government may also

declare Stand-Alone EPZs to enable industries to operate from convenient locations while

enjoying EPZ benefits. This region has achieved a degree of growth in agriculture creating a

potential for export of agro-based products, in recognition of which the government may

declare Agro-Export Processing Zones.

Results further show that most of the respondents suggest to establish agro-based and food

processing industries. Power crises and lack of government initiatives are observed to be two

important problems of industrialization. Parameters like, transportation efficiency, and

efficiency in water and energy supply must be improved substantially. This research also

reveals that different strategies are required for promotion and marketing of different

products depending on the skill intensity, product type and the characteristics of buyers.

Given the available natural resources like coal and hard rock and human resource like labour

force, this area demands establishments of agro-based food processing industry, garments

7

industry, leather industry, shoe industry, carpet industry, power industry, cement industry,

fertilizer industry, ceramic industry, light engineering, machinery parts industry.

Entrepreneurs and Industrialists in Dhaka and Chittagong, NGOs like RDRS, ASA,

PROSHIKA, Grameen Bank would have options to establish industries in this region and

build sales centres in different parts of the country and explore foreign markets as they have

their contact with donors and other agencies. These activities could be viewed as social

responsibility of them. NGOs along with local businessmen and civil society people could

take necessary steps in this regard. This research would emphasize establishing joint venture

industries along with fully foreign and domestic industries so that we can obtain technical

know-how and get help explore foreign markets.

For facilitation and effectiveness of industrialisation, we suggest establishing of Northwest

Export Promotion Council, Market Information Service Centre, Institute of Export

Development and Management, Industrial Growth Centre.

In a nutshell, we can conclude that Northwest Bangladesh possesses most of the resources

and inputs for industrialisation with some constraints. Given resources availability,

government patronization and necessary steps are required to utilize the opportunities for

setting up large, medium, small and cottage industries and hence generate employment and

income and thus reducing poverty in this region.

8

Industrialization in Northwest Bangladesh Contents 1. Industrialization in Northwest Bangladesh

1.1. Background 1.2. Aims and Objectives of the Research 1.3. Econometric Methodology for Data Analysis 1.4. Structure of the Research Report 2. Present Status of Industrial Establishments in Northwest Bangladesh

2.1 Introduction 2.2. Definitions

2.2.1. Establishment 2.2.2. Large scale establishment 2.2.3. Medium Scale establishment 2.2.4. Small Scale Establishment 2.2.5. Manufacturing 2.2.6. Unit

2.3. Product-and District-wise Industrial Establishment and their Performances 2.3.1. Product-and District Industrial Establishment, 1991 - 1992 2.3.2. Performance of Industrial Establishments, 1991 - 1992 2.3.3. Industrial Establishment, 1999-2000 2.3.4. Performance of Industrial Establishments, 1999 – 2000

2.4. Comparison of Performance among Northwest with Administrative Division 2.5. Conclusion 3. Efficiency Performance of Industries in the Northwest: An Econometric Approach

3.1. Introduction 3.2. Efficiency Performance: Some Theoretical Issues 3.3. Stochastic Econometric Frontier and Performance Measurement: Empirical Framework 3.4 Functional Forms of Production Function and Hypothesis Tests

3.4.1. Functional Forms 3.4.2. Hypotheses Testing

3.5. Empirical Results - Industry-specific Technical Efficiency 3.6. Conclusions 4. Uttora Export Processing Zones (EPZ) – Role for Industrialisation

4.1 Introduction 4.2. Uttora EPZ – An Overview 4.3. EPZs in Bangladesh 4.4. Investment and Employment in Industries of EPZs

9

4.5. BEPZA in National Export and Employment 4.6. EPZ in the Northwest and Expectation 4.7 Conclusion and Recommendations

5. Problems and Prospects of Land Ports in Northwest Bangladesh

5.1. Introduction 5.2. Land Ports and Customs Houses

5.2.1. Location of Land Ports 5.2.2. Work Stations of Bangladesh Customs

5.3. Activity of Benapole Land Port 5.4. Potentials and Suggestive Steps

5.4.1. Advantages of Northwest in the Export Market 5.4.2. Relevance of an Export-Import Policy for Northwest Bangladesh 5.4.3. Industrial Policy 5.4.4. Northwest Export Promotion Council

5.4.4.1. Procedural Simplifications 5.4.4.2. Market Information Service

5.4.5. Physical Infrastructure in Land Ports 5.4.6. Institute of Export Development and Management 5.4.7. Industrial Growth Centres 5.4.8. Warehousing and Container Facilities and Air Cargo Facilities 5.4.9. Identification of Export Items 5.4.10. Special Economic Zone and Agro-Economics Zone

5.5. Conclusion 6. Problems and Prospects of Industrial Growth in Northwest Districts – An Analysis

based on Survey

6.1. Introduction 6.2. Definitions

6.2.1. Industrialization 6.2.2. Capital Intensity 6.2.3. Labor Intensity 6.2.4. Primary, Secondary and Tertiary Sector

6.3. Questionnaire Preparation and Data Collection 6.4. Industrial Policy towards Industrialisation in the Northwest 6.5. Components associated with Industrialization

6.5.1. Infrastructure 6.5.2. Energy 6.5.3 Trade Policies

6.6. Problems of Industries 6.6.1. Energy Crisis 6.6.2. Lack of Infrastructure 6.6.3. Lack of Basic Industries 6.6.4. Lack of Government Attention 6.6.5. Lack of Capital 6.6.6. Lack of Forward and Backward Linkage Industries

10

6.6.7. Low Return of Working Capital 6.6.8. Risk 6.6.9. Lack of Insufficient Storage Facility 6.6.10. Transportation Problem 6.6.11. Other Problems

6.7. Prospects of Industrial Development and Growth – A Survey based Analysis 6.7.1. Agro-based Industries 6.7.2. Coal allied Industries 6.7.3. Cement Industry 6.7.4. Medicine Industry 6.7.5. Jute industry and Cotton Industry 6.7.6. Garments industry 6.7.7. Other Industries 6.7.8. Integrated industries (Sugar mill, paper mill and Distillery) 6.7.9. Trade with Neighbouring Countries

6.8. Conclusion

7. Potentials for Development and Expansion of Industries in Northwest

7.1. Introduction 7.2. Resources and Factor Endowments

7.2.1. Availability of Resources 7.2.2. Physical Infrastructure 7.2.3. Institutions 7.2.4 . Labour Resources 7.2.5. Natural Resources Endowments

7.2.5.1. Fulbari and Boropukuria Coal Mine project 7.2.6. Intermediate Inputs 7.2.7. Storage Facilities

7.3. Investment Opportunities 7.3.1. Large and Medium Industries

7.3.1.1. Agro-based Food processing industry 7.3.1.2. Light Engineering Industries 7.3.1.3. Machinery Parts 7.3.1.4. Ceramic Products 7.3.1.5. Leather Industry 7.3.1.6. Natural Gas-based Industries 7.3.1.7. Readymade Garmants and Textile Products

7.3.2. Small and Cottage Industries 7.4. Demand Pattern and Nature of Demand for Industrial Products 7.5 The Need for Differentiated Strategies 7.6. Conclusions 8. Summary, Conclusions and Recommendations 8.1. Introduction 8.2. Summary and Conclusions

8.2.1. Status and Performance of Industries, and Constraints

11

8.2.2. Resource Availability and Demand Pattern 8.2.3. Entrepreneurship 8.2.4. Institutional Development 8.2.5. Supply of Materials 8.2.6. Organization Capacity 8.2.7. Supply of Credits 8.2.8. Training 8.2.9. Marketing 8.2.10. Technological Improvement 8.2.11. Organisation and Planning

8.3. Suggestions, Recommendations and Policy Implications

8. Bibliography

12

1. Industrialization in Northwest Bangladesh

1.1. Background

Northwest Bangladesh consists of eight districts - Panchagarh, Thakurgaon, Dinajpur,

Nilphamari, Rangpur, Kurigram, Lalmonirhat, and Gaibandha. This region can be broadly

classified as greater Dinajpur district consisting of districts - Panchagarh, Thakurgaon,

Dinajpur, and greater Rangpur district consisting of districts - Nilphamari, Rangpur,

Kurigram, Lalmonirhat, and Gaibandha. This region is considered to be the most neglected

and deprived region of the country, excluded from mainstream development. This northwest

region is mainly characterized by agro-based economy and poverty-ridden with surplus low-

cost labour. Some parts of this region are affected by monga with no job and no purchasing

power during some time in the year. This means that there are many unemployed people

and/or labour directly and indirectly and it becomes difficult for them to maintain livelihood

during off peak times in a year. This labour force can be utilized in other sectors like

industry with appropriate training. Many people migrate to Dhaka, Rajshahi and other cities

to maintain their livelihood.

Despite all efforts made in the past in order to alleviate poverty in this region, the incidence

of rural poverty is still significant. At national and international levels literature of poverty

focusing on its nature and causes is available, but unfortunately there is no general theory of

poverty. Different opinions and explanations have been given on nature and causes of

poverty. Among them, researchers exploded the neoclassical explanation of poverty as a

problem of inadequate capital accumulation. In line with the neoclassical explanation, it has

been observed that many of the resources needed are at hand unutilized and underutilized in

rural area in general and in northwest Bangladesh in particular. It is suggested that the

incidence and magnitude of poverty cannot be explained in terms of trends of average

income and food production either. Unequal distribution of income and assets, concentration

of economic surplus, fragmented allocative mechanisms and characteristic of the economic

structure tend to create and reinforce poverty through the process of private investment,

technological innovations and population growth. While there are debates regarding the

nature of the relationships between poverty and the specific factors mentioned, a somewhat

general agreement seems to exist that the problem of poverty is complex where nutrition,

13

health, income, education and fertility are all closely interrelated. In order to understand the

problem of poverty clearly, interactions of these variables vis-à-vis their exogenous

determinants need to be clearly understood.

The state of poverty can be overcome effectively if proper utilization of land, labour and

capital can be ensured and equitable distribution of benefits can be provided to the poorer

sections of the population in this region particularly and in Bangladesh generally. This

requires far reaching changes in policies and institutions that govern processes through which

resources are utilized and benefits distributed in various sectors of the economy. Industrial

sector is one of such sectors which has potentials can be used as an effective vehicle to fight

against poverty, provided that the gradual decay in some of these industries are arrested and

constraints which inhibits the growth of other sector are removed.

There is an EPZ in Nilphamari district, northwest Bangladesh among 8 EPZs in Bangladesh.

This EPZ is established with a view to achieving employment, income, and hence reduce

poverty through setting up industries and utilizing benefits of land ports and airport and the

Jamuna Bridge.

There are four land ports located in the borders of the northwest districts among fourteen

land ports in Bangladesh. Trade between Bangladesh and India, Bangladesh and Nepal,

Bangladesh and Bhutan and perhaps Bangladesh and China can be done with special terms

and conditions. The benefits of the land ports situated in this region can be used to the

process of industrialization. The construction of Jamuna Multi-purpose Bridge has facilitated

the transportation infrastructure, which is one of the important preconditions for industrial

development. With this infrastructural facility, low-cost labour input supply and other

materials, industrialization along with agriculture should be developed properly to solve

unemployment problem, alleviate poverty and have sustainable livelihood.

Traditionally industrial establishments are classified as large-scale establishment, medium

scale establishment and small-scale establishment and cottage industries. Development of all

sorts of industries together can yield a balance development in the northwest Bangladesh.

Subsection 2 gives aims and objectives of this study; Subsection 3 provides econometric

methodology for data analysis and Subsection 4 outlines the organization of the research

report.

Figu

re 1.1: M

ap sho

wing Northwest B

angladesh

&V

&V

&V

&V

&V

&V

&V&V

&V&V

&V&V

&V

&V

&V

&V

&V&V

&V

&V

&V

&V

&V

&V

&V&V&V

&V &V

&V&V&V

&V &V&V

&V

&V

&V

&V

&V

&V

&V

&V

&V&V

&V

&V&V&V

&V

&V

&V

&V&V

&V

&V

%[

%[

%[

%[

%[

%[

%[

ÊÚ

$T

$T

&V

&V

&V

&V

&V

&V

Dinajpur

Habiganj

Rangpur

Kurigram

Maulvibazar

Jamalpur

Gaibandha

Nilphamari

Thakurgaon

Panchagarh

Lalmonirhat

(January 2008)

RDRS WORKING AREA

N

EW

S

$TProgram Head Quarter

RDRS District Office

RDRS Zonal Training Center

ÊÚ% [RDRS Upazila Office

& V

RDRS District boundary

RDRS Upazila boundary

Bangladesh boundary

400

40Kilometers

R&I W

ing, NBI

#

%

RDRS Area in Bangladesh

N

100

0100Kilometers

# %

Districts of Bangladesh

Major Rivers

RDRS Working Area

Rangpur Office

Dhaka Office

District Covered

11

Upazila Covered

59

Union Covered

512

Municipality Covered

21

Total Group

19,929

Total Group member

3,79,409 (76% female)

Total Staff

2479

(24%

female)

RDRS Basic Profile

1.2. Aims and Objectives of the Research

The aim of the research is to assess productive performance and identify factors associated

with productive performance based on scientific methods and provide policy implications as

to how industrialization and industrial growth could be facilitated in the Northwest

Bangladesh. This research works with the following broad objectives:

(i) To gain an understanding and a concrete picture about the present status of

industrialization in the northern districts of Bangladesh;

(ii) to assess productive performance of industrial establishments;

(iii) to identify the mechanisms, bottlenecks, weaknesses, and positive factors of

the sector;

(iv) to obtain present status of the industrial sectors of EPZ located in northwest

Bangladesh and explore potential of this EPZ with appropriate attention;

(v) to assess present status of four land ports and find potentials in promoting

industrialisation in particular and overall development in general;

(vi) to evaluate institutional interventions and policies, and programmes directed

towards upliftment of the sector;

(vii) to ascertain the potential of the industrial sector in the broader context of

national development pursuits; and

(viii) to recommend appropriate policies, institutional arrangement and action

measures on the basis of the research findings to address the issue of poor

industrialization in the region.

1.3. Methodology for Data Analysis

Fruitful research results and policy conclusions based on research results depend on the use

of appropriate approaches and methodology of research. The study methodology, with a

view to fulfill the objectives of the study, involves collection of both quantitative and

qualitative data and information. Quantitative information has been collected from published

2

and unpublished documents of relevant agencies and institutions and through field surveys,

while qualitative information has been gathered through detailed discussions with producers,

traders, consumers, development agents, other relevant persons and from relevant documents.

Table 1.1 describes the type of data, collection method and sources/respondents of data.

Table 1.1: Data Types, Methods of Collection and Sources/Respondents

Types Methods Sources/Respondents

Secondary

data

• Published

documents

• Publications of Bangladesh Bureau of Statistics

• Publications of Ministries (Commerce

/Industry, Finance, Planning etc.)

• Publications of BSCIC, BIDS, USAID

• Publications of RDRS and other NGOs

• Publications of Land Ports Authority

• Publications of BEPZA

• Internet and different libraries

Primary

data

• Face to face

interview through

structured

questionnaires

• group discussion

• Industrialists, entrepreneurs, traders, and

customers.

• Representatives of regulatory organizations

• Teachers, journalists, and civil society

representatives

• Administrators like DCs, UNOs

• Elected representatives like Pourrashava

Chairman, local MPs and others concerned

A survey with structured questionnaires is carried out on to collect data and information. The

survey collects data information on factors, which affect industrial sectors positively

(favorable factors) and negatively (problems).

We conducted a questionnaire to 400 respondents of the study area, 50 from each district.

Among them, entrepreneurs and traders are 39 percents, administrators are 11 percent,

teachers are 28 percents, NGO officials are 7 percent, Civil society persons are 15 percent.

3

We apply stochastic econometric frontier approach to assess and estimate productive

performance of industrial establishments with inefficiency effects model. The Cobb-Douglas

specification of the stochastic frontier is applied. We also assess performance of industries in

terms of gross output, value added, employment status and others. Further, tabular

presentations are also used to evaluate different aspects closely related to industrialisation.

1.4. Structure of the Research Report

This research report is organized as follows. Section 2 takes a look at number of industrial

establishments in this region. The aim here is to assess performance of industries in terms of

gross output, value added of industries in each district. We provide a comparative analysis of

industrial establishments with performance of industries in Bangladesh on an aggregate basis.

Section 3 gives an econometric analysis of productive performance of industries in northwest

Bangladesh and Bangladesh as well. We detail the stochastic econometric frontier model

with inefficiency effects model to assess efficiency performance. Section 4 tries to find the

opportunity in investing in EPZ situated in northwest region assessing the present status of

the EPZ. We also provide a detailed picture of all EPZs in Bangladesh and compare with the

Uttora EPZ. This section also gives some suggestions on how this EPZ can be involved in the

northwest industrialisation process. Section 5 enlists problems and potentials of land ports.

We find that land ports have great potentials in industrialisation with proper attention from

government and responsible behavior from concerned quarters and civil society. Section 6

provides a description of problems based on survey information. This section also suggests

which industries could be included in the industrialization process in the northwest

depending on resources and factor endowments. Section 7 details development and

expansion potentials of industrialisation in the northwest Bangladesh based on both primary

survey information and secondary information and data. Section 8 gives a detailed summary

and conclusion of our research and a list of suggestions on what could be done by

government policy makers, NGOs and civil society people. We find that, development and

sustainable maintenance of natural resources like forest, mine, hard rock, water resources

along with livestock, poultry and agriculture are important for sustainable development of

industrialisation. Thus this section also identifies some areas of further research on this issue.

4

2. Present Status and Performance of Industrial Establishments in Northwest Bangladesh

2.1 Introduction

Northwest Bangladesh, the northernmost area of the country, is known as greater Rangpur-

Dinajpur districts in Rajshahi Division. This northwest Bangladesh covers 8 of 16 districts in

Rajshahi division. The districts are Dinajpur, Thakurgaon, Panchagarh, Nilphamari,

Kurigram, Rangpur, Lalmonirhat and Gaibandha in the greater Rangpur-Dinajpur region of

Bangladesh. This area extends into the riverine belt to include the islands and sandbars in the

river Brahmaputra. The area is generally very low-lying, and crisscrossed by river systems.

The northwest Bangladesh is historically more neglected and poor. The soil tends to be

sandy-loam.

Bangladesh has flat, fertile alluvial land and sub-tropical monsoon climate. The temperature

in Bangladesh varies between 110 C- 190 C in winter and between 210 C- 360 C in summer.

The annual rainfall varies from about 127 cm to 508 cm.

Greater Rangpur district lies between 25-020 and 26-270 north latitude and 83-110 and 89-540

east longitude. Jolpaiguri and Coochbihar districts of West Bengal, India bounds this greater

district on the north. On the east it is bounded by the Garo hills of Assam, India and the river

Jamuna. On the west lies Dinajpur district and on the south Bogra district. Maximum and

minimum temperatures are about 32 and 100 celcious (Bangladesh Meteorological

Department). The average annual total rainfall is about 2689 millimetre and average annual

relative humidity is about 80 per cent.

Greater Dinajpur district lies between 250-140 and 260-480 north latitude and between 880-050

and 850-180 east longitude. This district is bounded on the north, south and south west by the

Indian districts of Jalpaiguri and West Dinajpur, on the east by the district of Rangpur.

General appearance of this district is flat, sloping gently south-west. The southern and

western parts are classed as old alluvium. The climate resembles more of Bihar that the

eastern district of the country. During the summer it is sometimes almost unbearable.

5

Monsoon stretches from July to early October. Maximum and minimum temperatures are

about 35 and 50 celcious respectively. Variation of rainfall in different parts of the district is

considerable. The average monthly recorded rainfall is about 4.2″. The average annual total

rainfall is 2359 millimeters and average annual relative humidity is about 80 per cent.

This area is vulnerable to frequent natural disasters. People face catastrophe like cyclones

during summer, floods and river-bank erosion in the rainy season, drought in summer and

spring and cold wave in winter. More specifically, Table 2.1 shows disasters in different

periods.

Table 2.1: Disasters in Northwest Bangladesh

January Cold, Drought, Lean Season

April Cyclone, Stroms

July Monsoons, Floods, River erosion, Lean Season October Drought, Cold, Lean Season

We present a detailed account of number of sector-wise and district-wise industrial

establishments of northwest districts. We also present an account of persons engaged,

industrial costs, performance of industries in terms of gross output and value added of

industries in northwest districts. We provide a comparison of average values of these

values with national average. We collect data from two sources - Report on

Bangladesh Census of Manufacturing Industries, 1991-92 (Bangladesh Bureau of

Statistics, 1997) and 1999-2000 (Bangladesh Bureau of Statistics, 2004). We

contacted different statistical offices like district and upazilla statistical offices,

BSCIC offices and Ministry of Industries but they fail to provide us as they do not

maintain any book of accounts. We faced considerable amount of difficulties in

obtaining these data and information.

This section is organized as follows. Subsection 2 provides some definitions used in

this research. Subsection 3 furnishes product-and district-wise list of industrial

establishments in this region. We also discuss performance of industrial

establishments along with national values. Subsection 4 concludes the section.

6

2.2. Definitions

Definitions used in this research are given in below (Bangladesh Bureau of Statistics,

2004, Report on Bangladesh Census of Manufacturing Industries, 1999– 2000).

2.2.1. Establishment An establishment is defined in operational terms as a unit combining activities and resources

directed by a single owning or controlling entity towards the production of a homogeneous

group of goods and services at a single physical location.

2.2.2. Large scale establishment Large scale establishment means and includes those establishments which has more than 49

workers.

2.2.3. Medium Scale establishment Medium scale establishment means and includes those establishments which have more than

9 workers and less than 50 workers.

2.2.4. Small Scale Establishment Scale scale establishment means and includes those establishments, which have fewer than

10 workers.

2.2.5. Manufacturing Manufacturing is defined as the mechanical or chemical transformation of organic or

inorganic substances into new products, whether the work is performed by power driven

machines or by hand, whether it is done in a factory or in a premise based location and

whether the products are sold wholesale or retail.

2.2.6. Unit A unit or a reporting unit is an establishment where production of goods and services take

place.

7

2.3. Product-and District-wise Industrial Establishment and their Performances

2.3.1. Product-and District Industrial Establishment, 1991 - 1992

We need to have an account of product or sector wise industrial establishments to find which

industrial establishments are working and which are not. This will help find reasons for not

working industries and set up policies for action. Table 2.2 to 2.10 shows the number of

sector-wise industrial establishments located in the northwest districts in Bangladesh. These

tables are constructed based on information Report on Bangladesh Census of Manufacturing

Industries (CMI) 1991 – 1992, Bangladesh Bureau of Statistics, 1997. Tables show that,

except Lalmonirhat and Gaibandha, all other northwest districts have highest number of rice

milling establishments. Dinajpur has the highest number of rice milling establishments

followed by Thakurgaon. According to this Census, Saw and Planning Mills establishments

stand second in the northwest districts. Dinajpur has the highest number of industrial

establishments followed by Rangpur. Lalmonirhat has the lower number of industrial

establishments.

Table 2.2: Sector-wise Industrial Establishments in Panchagarh Districts, 1991-1992

Serial No. Name of Establishments No. of Units

1 Rice Milling 28

2 Dist. Rectified Spirits 1

3 Jute Textiles 1

4 Bricks, Tiles and Clay Products 1

5 Electrical Apparatus 14

6 Wood, Bamboo Handicrafts 1

Total 46

Source: Bangladesh Bureau of Statistics, 1997, Report on Bangladesh Census of Manufacturing Industries (CMI) 1991-92.

8

Table 2.3: Sector-wise Industrial Establishments in Thakurgaon Districts, 1991-1992


1 Rice Milling 60

2 Silk, Synthetic Textiles 1

3 Saw and Planing Mills 28

4 Wooden Furniture Manufacturings 28

5 Bricks, Tiles, Clay Products 1

Total 118

Source: Bangladesh Bureau of Statistics, 1997, Report on Bangladesh Census of Manufacturing Industries (CMI) 1991-92. Table 2.4: Sector-wise Industrial Establishments in Dinajpur Districts, 1991-1992


1 Grain Milling 1

2 Rice Milling 473

3 Bakery Products 28

4 Misc. Food Products 14

5 Bidies Manufacturing 1

6 Cotton Textiles 1

7 Silk, Synthetic Textiles 1

8 Jute pressing and Baling 1


10 Printing of Book, Map etc. 14

11 Allopathic and Medicines 1

12 Ayure-Vedic Medicines 1


14 Furnitures and Fixtures 28

15 Bolts, Nuts and Rivets 7

Total 606 Source: Report on Bangladesh Census of Manufacturing Industries (CMI) 1991-92, Bangladesh Bureau of Statistics, 1997.

9

Table 2.5: Sector-wise Industrial Establishments in Nilphamari Districts, 1991-1992


1 Rice Milling 28

2 Tobacoo Steww, Redrying 3

3 Tobacoo Manufacturing N.E.C. 1

4 Cotton Textiles 1



7 Railroad Equipment Manufacturing 1

Total 63 Source: Bangladesh Bureau of Statistics, 1997, Report on Bangladesh Census of Manufacturing Industries (CMI) 1991-92. Table 2.6: Sector-wise Industrial Establishments in Rangpur Districts, 1991-1992

Serial No. Name of Establishment No. of Units 1 Hydrigebated Vegetable Oil 1 2 Rice Milling 47 3 Bakery Products 7 4 Sugar Factory 1 5 Dist. Rectified Spirits 1 6 Bidies Manufacturing 63 7 Tobacoo Steww, Redrying 4 8 Silk, Synthetic Textiles 7 9 Saw and Planing Mills 28 10 Structural Products of Bamboo 1 11 Wooden Furniture Manufacturings 14 12 Ayure-Vedic Medicines 1 13 Polythene Products Manufacturing 3 14 Bricks, Tiles, Clay Products 9 15 Iron and Steel Foundries 1 16 Bolts, Nuts and Rivets 14 17 Agricultural Machinery Equipment 1 18 Electrical Appliances 1

Total 204


10

Table 2.7: Sector-wise Industrial Establishments in Kurigram Districts, 1991-1992


1 Rice Milling 28


Total 32


Table 2.8: Sector-wise Industrial Establishments in Lalmonirhat Districts, 1991-1992

Serial No. Name of Establishment No. of Units


2 Readymade Garments 1

3 Jewellery, Precious Metals 14

Total 22


Table 2.9: Sector-wise Industrial Establishments in Gaibandha Districts, 1991-1992


1 Sugar Factories 1


3 Manufacturings of Earthenwares 57


5 Metal, Trunks Manufacturing 3

Total 65


11

Table 2.10: Sector-wise Industrial Establishment of Northwest Bangladesh,1991-1992

Sl. No. No of Establishments

Panchagarh

Thakurgaon

Dinajpur

Nilphamari

Rangpur

Kurigram

Lalmonirhat

Gaibandha

Total

1 Agricultural Machenary Equipment 1 1 2 Allopathic and Medicines 1 1 3 Ayure-Vedic Medicines 1 1 2 4 Bakery Products 28 7 35 5 Bidies Manufacturing 1 63 7 3 74 6 Bolts, Nuts and Rivets 7 14 21 7 Bricks, Tiles, Clay Products 1 1 7 1 9 4 1 24 8 Cotton Textiles 1 1 2

9 Dist. Rectified Spirits 1 1 2 10 Electrical Apparatus 14 1 15 11 Furniture and Fixtures 28 28 12 Grain Milling 1 1

13 Hydrigebated Vegetable Oil 1 1 14 Iron and Steel Foundries 1 1 15 Jewellery, Precious Metals 14 14 16 Jute pressing and Baling 1 1 17 Jute Textiles 1 1 18 Manufacturings of Earthenwares 57 57 19 Metal, Trunks Manufacrurings 3 3 20 Misc. Food Products 14 14

21 Polythene Products Manufacturing 3 3 22 Printing of Book, Map etc. 14 14 23 Railroad Equipment Manufacturing 1 1 24 Readymade Garments 1 1 25 Rice Milling 28 60 473 28 47 28 664 26 Saw and Planing Mills 28 28 28 28 112 27 Silk, Synthetic Textiles 1 1 7 9 28 Structural Products of Bamboo 1 1 29 Sugar Factory 1 1 2 30 Tobacoo Steww, Redrying 3 4 7 31 Tobacoo Manufacturing N.E.C. 1 1 32 Wood, Bamboo Handicrafts 1 1 33 Wooden Furniture Manufacturings 28 14 42

Total 46 118 606 63 204 32 22 65 1156


12

Tables show that this region does not possess those sort of industries which employs huge

number of labour force and hence flourish industrialisation. Neither fertilizer nor power

industry is recorded by this Census. Majority of establishments are rice milling

establishments which do not run the entire year and do not give permanent employment of

labourers. Except some bakery, there is no agro-based or food processing industry recorded.

This implies that this region is a neglected region and is excluded from mainstream

development of the country. Moreover, perhaps civil society people, businessmen and non-

government organizations were not also so active to look at effectively.

2.3.2. Performance of Industrial Establishments, 1991 - 1992

In general, the growth of the industrial sector in the northwest Bangladesh is constrained by

the lack of infrastructure, low entrepreneurship knowledge and facility, credit facilities,

technology, capital, corruption, lack of political commitment, political instability, etc. The

industrial policies of Bangladesh have not given any particular emphasis on the industrial

development in this area. A picture of performance of industrial sector is inevitable to

provide policy suggestions to the policy makers.

Table 2.11 – 2.13 analyze performance of industrial establishments prevailing in northwest

districts in Bangladesh in terms of employment, assets, gross output and value added. Table

2.11 specifically provides number of establishment, persons engaged and present an average

comparison of establishments of northwest region with those of Bangladesh on an average

basis. This table is drawn based on the information given in Report on Bangladesh Census

Manufacturing Industries, 1991-92. It shows that average number of industrial establishment

in northwest districts is 145 whereas the national average of it is 413 industries. This implies

that average number of establishments in the northwest region is less than half of national

average. These eight districts possess only 4.37 percent of industrial establishments. This

table also tells that the average employment in eight districts is 7,009 that is slightly above

the one-third of the national average of employment of 20,381 persons. This indicates that

this region employs only 4.30 percent of persons engaged in all industrial establishments in

Bangladesh.

13

Table 2.11: Status of the Industrial Establishment, 1991 – 1992

Districts No of

Establishment

% of

Establishment

No. of Persons

engaged

% of Persons

Engaged

Panchagarh 46 0.17 5858 0.45

Thakurgaon 118 0.45 1802 0.14

Dinajpur 606 2.29 13715 1.05

Nilphamari 63 0.24 6,518 0.50

Rangpur 204 0.77 21,103 1.62

Kurigram 32 0.12 608 0.05

Lalmonirhat 22 0.08 3,418 0.26

Gaibandha 65 0.25 3,047 0.23

Total 1,156 4.37 56,069 4.30

Average 145 7009

Rajshahi Div. 7,765 29.36 222,128 17.03

Average 485 13,883

Bangladesh 26,446 100.00 1304,397 100.00

Average 413 20,381

Source: Bangladesh Census of Manufacturing Industries, 1991– 92. Bangladesh Bureau of Statistics, 1997.

We prepare an account of assets, input cost, gross output and value added of industrial

establishments in Table 2.12 and 2.13. Assets and input cost of industrial establishments

show the bigness of these establishments. Assets also contribute to improvement of output of

industries. Total fixed asset of industrial establishments in northwest districts are tk.

44,14,785 thousands whereas in Bangladesh it is tk. 10,24,15,191 thousands. Thus assets of

northwest industrial establishments are more than 23-fold lower than total assets of

Bangladesh industrial establishments in 1991-1992 (BSS, 1997).

14

Table 2.12: Assets, Wages and Costs of Industrial Establishments, 1991 – 1992

Fixed Assets

Wages, salaries and

others Input cost

Non-industrial cost and

indirect tax

Panchagarh 9,12,377 1,31,406 3,57,655 33,538

Thakurgaon 44,785 20,603 1,89,234 2,015

Dinajpur 6,91,951 1,50,413 15,15,321 16,495

Nilphamari 22,46,405 1,69,183 1,91,344 7,350

Rangpur 4,85,462 1,92,532 8,35,457 1,78,891

Kurigram 4,998 4,898 1,24,026 573

Lalmonirhat 2,206 4,224 10,581 4,073

Gaibandha 26,574 60,973 1,93,658 80,850

Total 44,14,758 7,34,232 34,17,276 3,23,785

Average 5,51,844.8 91,,779 4,27,159.5 40,473.13

Bangladesh 10,24,15,191 2,76,54,856 14,96,18,561 2,21,58,633

National average 16,00,237 4,32,107.1 23,37,790 3,46,228.6

Source: Report on Bangladesh Census of Manufacturing Industries, 1991-1992. Bangladesh Bureau of Statistics, 1997. Figures are in thousands taka. We get the picture of gross output, value added of industries based on Report on Bangladesh

Census of Manufacturing industries, 1991-1992 in Table 2.13 (BSS, 1997). Gross output,

value added of industries indicate the magnitude and strength of industrial establishments.

The table gives an average estimate of gross output of industries in northwest 8 districts of tk.

614896 thousands and an average estimate of gross output of industries in Bangladesh of tk.

3482307 thousands. This estimates that average gross output of northwest districts is 5.66-

fold lower than that of 64 districts in Bangladesh. We get an almost similar picture for gross

value added and value added at factor cost. Both are about 5-fold lower than those of national

averages.

15

Table 2.13: Gross Output, Value Added of Industrial Establishments, 1991 – 1992

Gross output Gross Value Added Value added at factor cost

Panchagarh 4,50,322 92,667 59,129

Thakurgaon 2,14,662 25,428 23,413

Dinajpur 18,97,958 3,82,637 3,66,142

Nilphamari 3,98,034 2,06,690 1,99,340

Rangpur 15,16,719 6,81,262 5,02,371

Kurigram 1,31,519 7,493 6,920

Lalmonirhat 22,431 11,850 7,777

Gaibandha 2,87,523 93,865 13,015

Total 49,19,168 15,01,892 11,78,107

Average 6,14,896 1,87,736.5 1,47,263.4

Bangladesh 22,28,67,636 7,32,49,075 5,10,90,442

National average 34,82,307 11,44,517 7,98,288.2

Source: Report on Bangladesh Census of Manufacturing Industries, 1991-1992. Bangladesh Bureau of Statistics, 1997.

2.3.3. Industrial Establishment, 1999-2000

Table 2.14 to 2.22 are prepared based on information contained in Report on Bangladesh

Census of Manufacturing Industries (CMI) 1999-2000, Bangladesh Bureau of Statistics,

2004. These tables also show number of industrial establishments arranged sector-wise in

northwest districts during this period. Tables exhibit that the largest number of industrial

establishments is located in Dinajpur district followed by Rangpur and Thakurgaon and the

lowest number of establishments is located in Nilphamari district. According to this census

report, Dinajpur has the largest number of rice milling industrial establishments followed by

Rangpur and Thakurgaon. Among all districts, Rangpur has the highest number of Bricks,

Tiles and Clay Products establishments and bidi manufacturing establishments.

16

Table 2.14: Sector-wise Industrial Establishment of Panchagarh District, 1999-2000

Serial No. Name of Establishments No of Establishments

1 Cotton Textiles except hand loom 8

2 Rice Milling 2

3 Sugar Factory 2

Total 12 Source: Bangladesh Bureau of Statistics, 2004, Report on Bangladesh Census of Manufacturing Industries (CMI) 1999-2000.

Table 2.15: Sector-wise Industrial Establishment of Thakurgaon District, 1999-2000


1 Bricks, Tiles and Clay Products 21

2 Rice Milling 88

3 Wooden Furniture Manufacturings 120

4 Manufacture of Knitwear 1


Table 2.16: Sector-wise Industrial Establishment of Dinajpur District, 1999-2000



2 Bolts, Nuts, Rivets and Wash 10


4 Cotton Textiles except hand loom 1

5 Misc. Food Products (other food) 30

6 Rice Milling 555

7 Sugar Factory 2

8 Mfg of cutleries 8

Total 631


Table 2.17: Sector-wise Industrial Establishment of Nilphamari District, 1999-2000

17


1 Tobacoo Stemming, Redrying 2

2 Tobacoo Manufacturing N.E.C. 7

Total 9

Source: Bangladesh Bureau of Statistics, 2004, Report on Bangladesh Census of Manufacturing Industries (CMI) 1999-2000. Table 2.18: Sector-wise Industrial Establishment of Rangpur District, 1999-2000


1 Agricultural Machenary Equipment 1

2 Bakery Products 16



5 Dist. Rectified Spirits 2

6 Electrical Apparatus 2

7 Polythene Products Manufacturing 15

8 Rice Milling 92


10 Structural Products of Bamboo 2

11 Tobacoo Stemming, Redrying 33

12 Cigarette Manufacturing 2

13 Mfg. of soap and detergents 10


Table 2.19: Sector-wise Industrial Establishment of Kurigram District, 1999-2000


1 Bidies Manufacturing 6 2 Bricks, Tiles, Clay Products 22 3 Cotton Textiles except hand loom 2 4 Rice Milling 43


Table 2.20: Sector-wise Industrial Establishment of Lalmonirhat District, 1999-2000

18


1 Bidies Manufacturing 6 Total 6 Source: Bangladesh Bureau of Statistics, 2004, Report on Bangladesh Census of Manufacturing Industries (CMI) 1999-2000.

Table 2.21: Sector-wise Industrial Establishment of Gaibandha District, 1999-2000


1 Bidies Manufacturing 8 2 Manufacturings of Earthenwares 27

Total 35 Source: Bangladesh Bureau of Statistics, 2004, Report on Bangladesh Census of Manufacturing Industries (CMI) 1999-2000. This Census does not record any fertilizer and power industries, although this region

possesses an agrarian economy and requires huge amount of fertilizer, and power is the

deriving force of industries and modern agriculture. In spite of a labour force surplus region,

according to the Census, there is not readymade garments industry recorded which is known

to be labour-intensive in nature.

Rice milling, Bidi manufacturing, wooden furniture manufacturing, Bricks, Tiles and Clay

manufacturing establishments are increased in number. Most of these establishments are

small and cottage industries in nature. Some industries like, Rice milling, Bricks

manufacturing does not provide employment the entire year. This happens perhaps that there

were no effective policies and steps for industrialisation from government or private or non-

government institutions.

19

Table 2.22: Sector-wise Industrial Establishment of Northwest Bangladesh, 1999-2000

Sl. No. No of Establishments Panchagarh

Thaku

rgaon

Dinajpu

r

Nilp

hamari

Rangp

ur

Kurigram

Lalmon

irhat

Gaiband

ha

Total

1 Agricultural Machenary Equipment 1 1 2 Allopathic and Medicines 3 Ayure-Vedic Medicines 4 Bakery Products 16 16 5 Bidies Manufacturing 4 68 6 6 8 92 6 Bolts, Nuts, Rivets and Wash 10 10 7 Bricks, Tiles, Clay Products 21 21 84 22 148 8 Cotton Textiles except hand loom 8 1 2 11

9 Dist. Rectified Spirits 2 2 10 Electrical Apparatus 2 2 11 Furnitures and Fixtures 12 Grain Milling

13 Hydrigebated Vegetable Oil 14 Iron and Steel Foundries 15 Jewellery, Precious Metals 16 Jute pressing and Baling 17 Jute Textiles 18 Manufacturings of Earthenwares 27 27 19 Metal, Trunks Manufacrurings 20 Misc. Food Products (other food) 30 30

21 Polythene Products Manufacturing 15 15 22 Printing of Book, Map etc. 23 Railroad Equipment Manufacturing 24 Readymade Garments 25 Rice Milling 2 88 555 92 43 780 26 Saw and Planing Mills 40 40 27 Silk, Synthetic Textiles 28 Structural Products of Bamboo 2 2 29 Sugar Factory 2 2 4 30 Tobacoo Stemming, Redrying 2 33 35 31 Tobacoo Manufacturing N.E.C. 7 7 32 Wood, Bamboo Handicrafts 33 Wooden Furniture Manufacturings 120 120 34 Cigarette Manufacturing 2 2 35 Mfg. of soap and detergents 10 10 36 Manufacture of Knitwear 1 1 37 Mfg of cutleries 8 8

Total 12 230 631 9 367 73 6 35 1963 39Source: Bangladesh Bureau of Statistics, 2004. Report on Bangladesh Census of Manufacturing Industries, 1999-2000.

20

2.3.4. Performance of Industrial Establishments, 1999 – 2000

Table 2.23 provides the status of industrial establishments based on the information

contained in Report on Bangladesh Census of Manufacturing Industries, 1999-2000. This

table shows that although average number of industrial establishments has increased but the

average number of employment has gone down to about half. The northwest districts employ

only 2.2 percent of employed people in 1999-2000 as against 4.3 percent in 1991-1992.

While national average of industrial establishments has gone down from 413 in 1991-1992 to

386.75 in 1999-2000, average employment has gone up from 20381 to 40836.94 persons.

This implies that national average employment has gone double almost.

Table 2.23: Status of the Industrial Establishments, 1999-2000

Districts No of

Establishment % of

Establishment No of Person Engaged

% of Persons Engaged

Panchagarh 12 0.05 2,932 0.11

Thakurgaon 230 0.93 6,133 0.23

Dinajpur 631 2.55 22,341 0.85

Nilphamari 9 0.04 259 0.01

Rangpur 367 1.48 20,798 0.80

Kurigram 73 0.29 3,522 0.13

Lalmonirhat 6 0.02 327 0.01

Gaibandha 35 0.14 1,275 0.05

Total 1363 5.51 57,587 2.20

Average 170.375 3,599.188

Rajahshi 6569 26.54 3,48,161 13.32

Average 410.56 1.66

Bangladesh 24752 100 26,13,564 100

Average 386.75 40,836.94

Source: Bangladesh Census of Manufacturing Industries, 1999– 2000.

21

Table 2.24: Assets and Cost of Industrial Establishments, 1999 - 2000

Fixed Assets Wages, salaries

and others Input cost Non-industrial cost and

indirect tax Panchagarh 1,91,646 6,43,389 4,46,681 78,115

Thakurgaon 1,08,983 1,34,136 15,91,726 68,200

Dinajpur 15,45,352 4,46,146 27,03,886 1,03,776

Nilphamari 7,199 2,800 13,163 455

Rangpur 2,78,954 2,50,489 7,71,832 3,03,516

Kurigram 2,00,632 62,353 43,195 10,237

Lalmonirhat 4,633 2,556 4,858 5,242

Gaibandha 2,493 6,553 14,185 15,160

Total 23,39,892 15,48,422 55,89,526 5,84,701

Average 2,92,486.5 1,93,552.75 6,98,690.75 73,087.63

Bangladesh 24,38,04,966 7,22,84,450 40,37,77,567 7,96,22,999

National Average 38,09,452.60 11,29,444.531 63,09,024.484 12,44,109

Source: Report on Bangladesh Census of Manufacturing Industries, 1999-2000. Bangladesh Bureau of Statistics, 2004.

Assets and cost information of industrial establishments in northwest districts along with

national averages of these are given in Table 2.24 which is constructed based on information

contained in Reports on Bangladesh Census of Manufacturing Industries, 1999-2000.

Average fixed asset of industries in northwest districts is tk.292486.5 thousands whereas

average value of fixed asset in Bangladesh districts is tk.3809452.60 thousands which is

more than 13-fold larger. Table also reveals that although average asset is 13-fold larger but

average input cost is 9-fold greater than the value of average input cost of northwest districts

in Bangladesh.

Table 2.25 gives an account of gross output and value added of industrial establishments in

northwest districts based on information given in Report on Bangladesh Census of

Manufacturing Industries, 1999-2000. It also provides an estimate of national averages of

gross output and value added. It shows that where average gross output in each district in

22

Bangladesh is tk.9987818.45 thousands, the average gross output in each district of

northwest is tk.968677.50 thousands which is 10-fold lower than that of national average.

Similarly, average gross value added in northwest district is more than 13-fold lower than

that of national average of Bangladesh. This definitely expresses the lower output and

income generation capacity of industrial establishments in northwest Bangladesh.

Table 2.25: Gross Output and Value Added of Industrial Establishments, 1999 - 2000

Gross output Gross Value Added Value added at factor cost

Panchagarh 7,65,102 3,18,422 2,40,307

Thakurgaon 19,03,649 3,11,923 2,43,722

Dinajpur 34,57,475 7,53,589 6,49,813

Nilphamari 17,816 4,653 4,198

Rangpur 14,63,031 691,198 3,87,682

Kurigram 89,392 46,197 35,961

Lalmonirhat 13,644 8,786 3,543

Gaibandha 39,311 25,127 9,967

Total 77,49,420 21,59,895 15,75,193

Average 9,68,677.50 2,69,986.88 1,96,899.13

Bangladesh 63,92,20,381 23,54,42,813 15,58,19,815

National Average 99,87,818.45 36,78,793.95 24,34,684.61

Source: Bangladesh Bureau of Statistics, 2004. Report on Bangladesh Census of Manufacturing Industries, 1999-2000. Values are in thousand taka.

2.4. Comparison of Performance among Northwest with Administrative Division

Table 2.26 provides a comparative statistics of number of establishments, persons engaged,

gross output and value of northwest districts with other administrative divisions in

Bangladesh. Table shows that 16 districts of Rajshahi division possess 6570 industrial

establishments. Among this, 8 northwest districts possess only 1363 establishments, which

are about one-fifth of industrial establishments in Rajshahi division. Although the number of

establishments in Chittagong division is smaller than Rajshahi division total persons

23

employed, gross output and gross value added in Chittagong division are much greater than

Rajshahi division. Even Sylhet division has only 404 establishments which are about one-

third of industrial establishments in northwest districts, yet gross output and value added of

establishments of this division are greater those of northwest districts. It is evident from this

table that employment and income generation capacity of industrial establishments in

northwest districts are lower than those of other divisions.

Table 2.26: No. of Establishments, Persons Engaged, Gross Output and Value Added by Administrative Divisions

No of

Establishment Total Persons

Engaged Gross Output

Gross Value Added

Value Added Factor Cost

Chittagong 3,831 4,92,229 1,24,027 48,979 38,229

Dhaka 11,588 15,66,379 4,38,247 1,63,420 1,02,336

Khulna 2,314 1,46,316 32,278 10,487 5,553

Rajshahi 6,570 3,48,161 35,636 9,437 7,422

Barisal 45 6,622 661 359 173

Sylhet 404 53,858 8,372 2,761 2,107

Northwest Bangladesh 1,363 57,587 7,749.42 2,159.90 1,575

Bangladesh 24,752 26,13,564 6,39,220 2,35,443 1,55,820

Source: Bangladesh Bureau of Statistics, 2004. Report on Bangladesh Census of Manufacturing Industries, 1999-2000. Output and value added are in million taka.

2.5. Conclusion

We present in this section number of industrial establishments, amount of employment, value

added by industrial establishments, assets and costs of industrial establishments in northwest

districts - Dinajpur, Thakurgaon, Panchagarh, Nilphamari, Kurigram, Rangpur, Lalmonirhat

and Gaibandha in the greater Rangpur-Dinajpur region of Bangladesh. Research reveals that

average number of industrial establishment and persons engaged in these districts are lower

than the national averages. Furthermore, average amount of gross output, value added are

also lower. There are no remarkable number of large and medium industries except some

small and cottage industries like, rice milling, bidi manufacturing industries, wooden

24

furnitures manufacturing. It is implied from this analysis that there is scope of establishing

industries in this region based on at least available surplus labour, agro-products and others.

Employment generation and value added creation, performances of industrial establishments

are lower than those of other industries in Bangladesh. The economy of the region is agro-

based that requires substantial amount of fertilizer and pesticides. There is neither fertilizer

industry nor leather product industries in this region. Labour-intensive garments industry did

not grow here to absorb the prevailing unemployed labour force. Poverty and monga are

regular picture in this region.

3. Efficiency Performance of Industries in the Northwest: An Econometric

Approach

3.1. Introduction

Predicting the potentiality of effective industrialization a performance evaluation, that is,

productivity performance assessment of the industries is utmost important. Productivity

performance is called success indicator. Further, it is also very important to identify and

quantity the factors which affect favourably and unfavourable the performance of the

industries. Measuring productivity, and separating its effects from the effect of the

production environment, can we explore hypotheses concerning the sources of productivity

differentials. Identification of sources is essential to the institutions of public and private

policies designed to improve performance. Moreover, macro performance depends on micro

performance. The ability to quantify productivity performance provides management with a

control mechanism with which to monitor the performance of production units under its

control.

Productivity advancement can be obtained through technological improvement and

efficiency advancement, which industries have achieved. Technological advancement

involves the introduction of new inputs like machinery, new production techniques, etc.

Efficiency enhancement implies the improvement of capability of an industry so that it best

utilizes available resources to produce maximum levels of potential outputs. Thus it implies

25

the ability of the producers to utilize the factor inputs properly. Ability can be improved

through training, learning by doing, etc. Variations in output among industries can be

explained through differences in technology and efficiency.

Therefore productive performance of an industry has technical change and efficiency

improvement component. With a view to quantify and estimate the efficiency component of

productive performance of industries, we apply stochastic econometric frontier model. This

will give an estimate of how much output could be increased if inputs and material, which

are in the production process, could be utilized properly in a cost-efficient way. These

results provide performance of the industries that will lead to suggestions for technically,

economically, socially optimum industrialization in this area.

The section is organized as the following subsections. Subsection 3.2 provides theoretical

issues of measuring efficiency performance of industries; Subsection 3.3 details the empirical

framework – the stochastic frontier model – of assessing technical efficiency performance of

industries; Subsection 3.4 describes functional form of the stochastic frontier model and

hypothesis tests; Subsection 3.5 gives efficiency results based on the stochastic frontier

model; we present a conclusion in Subsection 3.6.

3.2. Efficiency Performance: Some Theoretical Issues

This section discusses production functions and some related concepts, which form the basis

of measuring the efficiency of industries. The measurement of efficiency begins with Farrell

(1957). The failure to produce the maximum output from a given input mix at minimum cost

results in inefficiency. Inefficiency is explained by, inter alia, restricted access to technology,

a lack of knowledge, restricted access to extension services, an inappropriate scale of

production and sub-optimal allocation of resources. The efficiency of an industry consists of

two components: technical and allocative efficiency. Technical efficiency concerns the

26

ability of an industry to produce maximum output from a given set of inputs using existing

technology.

To explain diagrammatically the concept of technical efficiency consider the production

activity of an industry, following Kopp and Diewert (1982). In Figure 3.1, assume that the

industry uses two inputs 1x and 2x to produce a single output y, and that the production

technology is summarized by a linearly homogeneous production function following Farrell.

The frontier unit isoquant for this technology and an inefficient production activity are

depicted by I ′ I and B respectively. Along the ray OB , the production activity, denoted by T

and defined by the intersection of line segment OB with the isoquant I ′ I , represents a

technically efficient input combination as it lies on the frontier isoquant. The technical

inefficiency of the industry producing at point B is represented by the distance TB because

this is the amount by which both inputs could be proportionally reduced producing the same

level of output. In percentage terms, this is usually written as the ratio TB OB .

Figure 3.1: Measures of Technical Efficiency

yx2

•

P

O yx1

A or

P′

( )B2

B1

B x,xx ≡

( )T2

T1

T x,xx ≡

B or

T or • •

•

( )A2

A1

A x,xx ≡

I

I ′

27

The technical efficiency of the industry operating at point B is expressed as:

TE =OTOB

= 1 −TBOB

= 1 - Technical inefficiency (0 ≤ TE ≤1).

The industry operating at point T is fully technically efficient industry because it is located

on the efficient and frontier isoquant and TE = 1 .

Farrell's radial measures of efficiency are originally characterized by constant returns to scale

and these measures have been generalized to less restrictive technologies by Fare and Lovell

(1978) and Forsund and Hjalmarsson (1979).

3.3. Stochastic Econometric Frontier and Performance Measurement: Empirical

Framework

This section aims to specify the empirical framework for this research project with a

comprehensive review of literature. The seminal paper of Farrell (1957) on efficiency

pioneered the development of different approaches to efficiency measurement. The stochastic

econometric frontiers is one of the two main methods of measuring efficiency. The

econometric approach includes both the stochastic econometric frontier (SF) and the

deterministic frontier. The deterministic frontier approach does not allow for a stochastic

random error component in the error term and hence is subject to the criticism that all

deviations from the frontier are attributed to inefficiency. Accordingly, this section focuses

on the stochastic econometric frontier approach to measuring efficiency.

28

Production function models estimated by OLS assume that industries maximize expected

profit so that a stochastic error term, with zero mean, accounts for the difference between

observed and expected output and are ascribed to factors outside the control of the farmers

(Zellner et al., 1966). Thus, all industries are equally efficient. However, it is unlikely that all

industries are equally efficient. Productivity differs because of differences in technology, the

efficiency of the production process, and the environment in which production process

happens (Lovell, 1993), and managerial ability (Dawson and Lingard, 1982). A frontier

production function relaxes the assumption of equal efficiency and hence relaxes the

assumption of stochastic error terms with zero means.

The approaches to the measurement of efficiency and the analysis of productivity stem from

Farrell (1957) who measured technical efficiency by estimating a fully-efficient frontier

production model using linear programming. The general stochastic frontier production

function model, independently proposed by Aigner et al. (1977) and Meeusen and van den

Broeck (1977), decomposes the composed error term into two components: a stochastic

random error component and a technical inefficiency component. This approach is closer to

the theoretical production function, which gives the maximum output from a given input

mix, than the average production function and is more realistic than the deterministic

frontiers of Farrell (1957) and Aigner and Chu (1968).

The stochastic approach attempts to distinguish the effects of stochastic noise from the

effects of inefficiency. Addressing the stochastic noise problem associated with the

deterministic frontier, and statistical hypothesis testing are the main strengths of the

stochastic frontier approach; assumptions regarding the parametric functional form for the

frontier technology and the distributional assumptions for the technical inefficiency term are

its major drawbacks. Coelli (1995) provides a review and critique of the recent developments

29

and applications of frontier techniques of efficiency measurement. Comprehensive reviews

of the various stochastic frontier functions and econometric estimation of frontiers are

provided also by Førsund et al. (1980), Schmidt (1985), Bauer (1990), Battese (1992),

Brevo-Ureta and Pinheiro (1993), Fried et al. (1993), and Greene (1993).

Most empirical applications of stochastic frontiers have investigated the sources of technical

inefficiency of industries using a two-stage approach (for example, Tadesse and

Krishnamoorthy, 1997; Hallam and Machado, 1996; Parikh and Shah, 1994). The first stage

estimates a stochastic frontier by maximum likelihood techniques and calculates the technical

efficiency for each industry under the assumption that these inefficiency effects are

identically distributed. It ignores the fact that the technical inefficiency is a function of

industry-specific variables. Once technical inefficiency is estimated, it is further regressed in

the second stage on a set of industry-specific factors that may explain differences in

technical inefficiency among industries using OLS. The OLS results in the second step

contradict the assumption of identically distributed inefficiency effects in the stochastic

frontier model since the technical inefficiency - the dependent variable - is one sided

(Kumbhakar et al., 1991). Thus, in the second stage, the estimated technical inefficiency

effects are modelled as a function of some industry-specific characteristics which imply that

inefficiency effects are not identically distributed unless the coefficients of the industry-

specific factors are simultaneously equal to zero (Coelli et al. 1998). This two-stage

approach, using a stochastic frontier, has been applied by Kalirajan (1981) and Pitt and Lee

(1981) and by Heshmati and Kumbhakar (1997) for pseudo panel data, and Sharma et al.

(1999) for cross sectional data. Timmer (1970) was one of the first to apply this approach

albeit using covariance analysis in stage one.

The problems of this two-stage method can be addressed using a one-stage formulation. This

specifies the technical inefficiency effects (Kumbhakar et al., 1991) and estimates the

30

stochastic frontier and the inefficiency effects simultaneously, given appropriate

distributional assumptions (Battese and Coelli, 1995). The simultaneous estimation of the

stochastic production frontiers and models of technical inefficiency using maximum

likelihood techniques has been proposed by Kumbhakar et al. (1991), Reifschneider and

Stevenson (1991), Huang and Lui (1994), Battese and Coelli (1995). This one-stage approach

is statistically consistent and leads to more efficient inference with respect to the parameters

(Coelli and Battese, 1996). The approach has been applied empirically by, among others,

Coelli and Battese (1996), Coelli (1996), Battese and Broca (1997), Ajibefun et al. (1996),

Seyoum et al. (1998), Wadud and White (2000) and Wadud (2003).

The general stochastic frontier production model is defined as:

yi = f xi ;β( )eui (3.1)

ui = ξ i − ζi , i =1,2,3, .. .,q , −∞ ≤ ξ i ≤ ∞ and ζi ≥ 0 .

where yi represents the output of the ith industry, xi denotes a vector of q inputs, and β

denotes the parameters. The error term, ui , is decomposed into a stochastic random

disturbance and an asymmetric non-negative random error term. The stochastic random

disturbances, ξ i , the symmetric random errors, take account of measurement error and

capture exogenous shocks and other factors not under the control of the farmers; ξ i can take

any real value and when added to the deterministic frontier, f xi ;β( ), gives rise to the

stochastic frontier. The asymmetric non-negative random errors, ζi , which are called

technical inefficiency effects, account for technical inefficiency in production. When ζi = 0 ,

the production function is the best-practice frontier, which yields the maximum output given

the inputs; and when ζi > 0 , output is less than this maximum due to technical inefficiency.

The greater the quantity by which the actual output falls short of the stochastic frontier

31

output, the higher the level of technical inefficiency. The observed differences in output can

be attributed to either technical inefficiency or stochastic disturbances or both. A model

without ζi is the average frontier model criticized by Farrell (1957). Further, a model without

the random component, ξ i results in a deterministic or full frontier model and can be

estimated by linear programming techniques.

Assuming a probability density function for both ξ i and ζi , we can estimate (3.1) by

maximum likelihood methods. This approach yields a means by which we can statistically

examine the sources of differences between the farmer's output and the frontier output by

calculating the variance parameters which relate the variance of ξ i to the composed variance

of ui (Kalirajan, 1981).

The variance parameters are expressed as:

σu2 = σξ

2 + σζ2 , γ = σζ

2 σu2 and 0 ≤ γ ≤1 (3.2)

Battese and Corra (1977) define γ as the total variation of output from the production

frontier which can be attributed to technical efficiency. If γ → 0 then σζ2 → 0 and

σξ2 → σu

2 , which implies that the symmetric error term ξ i dominates the composed error

term and output differs from the frontier output mainly due to measurement errors and the

effect of other external factors on production. If γ → 1 then σξ2 → 0 and σζ

2 → σu2 which

indicates that the asymmetric non-negative error term ζi dominates the composed error and

the differences between output and frontier output can be attributed to differences in

technical efficiency.

Figure 3.2 shows the stochastic frontier production function in which the activities of two

industries, denoted by i and j, are illustrated following Battese (1992). The inputs are

32

presented on the horizontal axis and the output is on the vertical axis. The frontier output,

production function and observed outputs are also shown. The deterministic component of

the frontier model is y = f xi ;β( ). Industry i utilizes inputs xi to produce output yi . The

frontier output, yi* , of this industry exceeds the deterministic production output f xi ;β( )

because the systematic random error is associated with favourable firming conditions, i.e.,

ξ i > 0 . Industry j obtains output yj using inputs x j . The stochastic frontier output of this

industry yj* is less than the corresponding deterministic output f xi ;β( ) because of

unfavourable firming conditions and the systematic error component, ξ i < 0 . For both

industries, the observed outputs are less than the corresponding frontier outputs, but the

Figure 3.2: Stochastic Frontier and Technical Efficiency

O

y

yj

yi

xj

Stochastic frontier output *jy if 0<jξ

Stochastic frontier output *iy if 0>iξ

Deterministic production function: ( )β;xfy =

xi x

×

×

×

×

×

×

×

×

Observed input-output values

33

(unobservable) frontier outputs lie around the deterministic production function. The

stochastic frontier outputs are of course not observed because the random errors are not

observed. The observed outputs may be higher than the deterministic part of the frontier if

the random errors are higher than inefficiency term. 1

The technical efficiency of the ith industry is defined as the ratio of the observed output to

the corresponding frontier output, given the levels of the inputs. The industry-specific

technical efficiency, ϕi , can be measured as:

ϕi =yiyi*

( ) ( )

( ) i

ii

exfexf

i

iξ

ζξ

ββ,

, −

= = ie ζ− 10 ≤≤ iϕ

Alternatively, ϕi is defined as the ratio of the mean of production (given xi and ζi ) to the

corresponding mean of production if there is no technical inefficiency (Battese and Coelli

1988):

ϕ i =E yi xi ,ζ i( )

E yi xi ,ζi = 0( )

Again the systematic random error, ξ i , is assumed to be independently and identically

distributed with mean zero and variance, σξ2 . The probability density function of the

symmetric random error, ξ i , is defined as:

( )2

22

1

21 i

ef i

ξσ

πσξ

−=

We can assume that the technical inefficiency term is half-normally distributed, a special

case of the truncated normal distribution, so that: 1 If ,ii ζξ > both the observed and frontier values of output, iy and ( ) ie;xfy i

* ξβ= , would lie above the

corresponding value of the deterministic production function which can be easily shown.

34

f ζ i( )=1

σζ12

πe

−1

2σ ζ2

ζ i2

The industry-specific technical efficiencies and mean technical efficiency are obtained

respectively as:

ϕi = E e−ζiu

i

= 1− Φ σi

*( )e12

σ i*2

and

ϕ i =1 − Φ σ*( )e12

σ *2

(Jondrow et al., 1982).

Again the systematic random error, ξ i , is assumed to be independently and identically

distributed with mean zero and variance, σξ2 ; and ζi are non-negative truncations of the

( )2,N ζσµ distribution,

where: µ = ziδi (3.3)

and zi is a k ×1( ) vector of variables which may influence efficiency and δ i is an 1 × k( )

vector of parameters.

Measurements of the industry-specific efficiency, ie ζ− , depends upon the decomposition of

ui , which is derived from the conditional expectation of ie ζ− given ui . Thus the technical

efficiency of each industry is given by

35

∴

( ) ( )

+−

−−

−−=

2*i

*i 2

1

*i

*i

*i

*i

*i

i e1

1 σµ

σµΦ

σµσΦϕ (3.4)

which produces the measure of technical efficiency given the specification of the frontier

production function model and the inefficiency effects model. Technical inefficiency is estimated by ii ueE1 ζ−− . The mean technical efficiency of all industries in the sample, ϕ ,

is obtained as:

( ) ( )

+−

−−

−−=

2**

21

**

***e

1

1 σµ

σµΦ

σµσΦϕ .

The Frontier 4.1 program (Coelli, 1996) calculates the maximum likelihood estimator of the

predictor for the technical efficiency that is based on the conditional expectation of e−ζ i

given the composed error term of the stochastic frontier production model (Battese and

Coelli, 1988). The parameters of the coefficients of stochastic frontier model, β , and the

technical inefficiency effects model, δ i , along with the variance parameters are also

estimated.

The log-likelihood function for the sample observations is:

L Ω* ,y( )= ln 1− Φ −µ i* σ iζ

*( )[ ]−12

y i − f xi ;β( ) ′yi − f x i ;β( ) σξ

2

i=1

n

∑i=1

n

∑ −12n µ σζ( )2

+12

µ i* σ iζ

*( )2i=1

n

∑ ( ) ( )22ln21

2ln21

ξζ σσπ +−− nn −nln 1 − Φ −µ σζ( )[ ]

where Ω* ≡ ′ β ,σξ2,σζ

2 ,µ( )′

36

The principal drawbacks of this approach are assumptions about the distributions of technical

inefficiency and the random term and the nonexistence of an a priori justification of

choosing the distributional form of the random noise (Coelli, 1995).

3.4 Functional Forms of Production Function and Hypothesis Tests

3.4.1. Functional Forms

Cobb-Douglas Production Function: Several specifications of the production function, e.g.,

Cobb-Douglas, CES, translog, etc. have been developed. The Cobb-Douglas production

function has been widely used in econometric analysis. We use the Cobb-Douglas production

approach in our analysis:

ln yi = β0 + βii=1

q

∑ ln xi (3.5)

where yi = output, β0 is an "efficiency parameter", i.e., an indicator of the state of

technology, xi = inputs of production, ln = natural logarithm, βi i = 1,2,3,.. .,q( ) are the

output elasticities with respect each input and the production function is homogeneous of

degree ∑=

n

ii

1

β . Differentiating (3.5) yields the marginal product for input i, for example:

i

ii

i xy

xy β

∂∂

=

which is strictly positive for xi > 0 . The marginal rate of technical substitution is:

MRTSi, j =∂yi ∂xi∂yi ∂x j

=βiβ j

x jxi

37

The elasticity of substitution is σ = 1 for any input combination and all levels of output,

which restricts the flexibility of this functional form. The returns to scale is βii=1

n

∑ .

3.4.2. Hypotheses Testing

The standard OLS function assumes that all industries operate on the technical efficient

frontier and non-negative technical inefficiency effects are zero (Coelli, 1996). We test the

hypothesis of no productive inefficiency effects against the alternative hypothesis as:

Ho: = no technical inefficiency exists (3.6)

HA : = technical inefficiency exists

If the null hypothesis is not rejected, the technical inefficiency error term, ζi , is removed

from the stochastic frontier production model in (1). This is equivalent to imposing the

restriction that δ i = 0 (i = 0,1,2,3,. ..,n) in (3.3) and γ = 0 in (3.2) and shows that the

average production function (standard OLS function) is an adequate representative for the

data. This joint hypothesis test also tests if both random and deterministic components of the

inefficiency error term are not significant and specifies if the inefficiency effects are non-

stochastic.

We test the hypothesis about the distribution of the random variable associated with the

existence of technical inefficiency. The technical inefficiency component requires a

distributional assumption for estimation. The most commonly used distributional forms are

half-normal and truncated normal. The generalization of the half-normal distribution is the

truncated normal distribution, which is derived by the truncation at zero of the normal

distribution with mean µ and variance σ 2 . If the normal distribution is truncated at µ = 0,

then it is a half-normal distribution. Given the specifications of truncated normal or half-

38

normal distribution for the technical inefficiency effects, half-normality of the technical

inefficiency effects is tested by formulating the null and alternative hypotheses as:

Ho: µ = 0 (3.7)

HA : µ ≠ 0.

If the null hypothesis is not accepted, the half-normal distributional assumption is an

inadequate representation for the technical inefficiency effects term.

The null hypotheses are tested using the generalized likelihood ratio (LR) statistic. This test

requires the estimation of the model under both the null and alternative hypotheses and is

defined as:

LR = −2 ln L H0( ) L HA( )[ ]

where L H0( ) and L HA( ) are the values of the likelihood function under the null and

alternative hypotheses respectively. If the null hypothesis is true, then LR has an asymptotic

χ2 - distribution with degrees of freedom equal to the number of restrictions imposed under

the null hypothesis (Coelli, 1996).

3.5. Empirical Results

3.5.1. Hypothesis Testing Results

Results show that average production technology and normal distributional assumption for

inefficiency effects are not representative for the dataset. Rather, the stochastic frontier

model for the production technology and truncated normal distributional assumption for the

inefficiency effects are representative for the dataset of this northwest region.

3.5.2. Industry-specific Technical Efficiency

39

The predicted technical efficiencies show substantial variability among industries ranging

between 0.6683 and 0.9998 for the Cobb-Douglas frontier model with the mean technical

efficiency of 0.8812 and standard deviation of 0.1371 for the data set 1991 - 1992.

Variability in efficiencies of industries is also observed for the data set 1999 – 2000.

Efficiencies for this set range between 0.8984 and 0.9979 with the mean efficiency of 0.9583

and standard deviation of 0.0338. The frequency distributions of the predicted technical

efficiencies and the summary statistics for the efficiencies are presented in Table 3.1. It is

evident from Table 3.1 that range of efficiency in 1991-1992 is larger than range of

efficiency in 1999-2000. Mean efficiency of industrial establishments is also higher in 1999-

2000. This also implies that there is still a room for increasing industry revenue and welfare

through efficiency improvement and industry could reduce about 10 per cent of production

costs if they could operate at full technical efficiency levels. Table 3.1: Technical Efficiency Estimates of Industrial Establishments in Northwest Districts

Districts Efficiency scores, 1991 - 1992 Efficiency scores, 1999 - 2000 Panchagarh 0.6683 0.9802 Thakurgaon 0.8387 0.9426 Dinajpur 0.9811 0.9979 Nilphamari 0.956 0.9522 Rangpur 0.9985 0.8984 Kurigram 0.9998 0.9766 Lalmonirhat 0.9243 0.9294 Gaibandha 0.6832 0.9888 Mean 0.8812 0.9583 Standard deviation 0.1371 0.0338 Minimum 0.6683 0.8984 Maximum 0.9998 0.9979 Northwest total 0.8675 0.9086 Bangladesh 0.9048 0.9879 Mean Efficiency 0.8822 0.9563 The overall mean efficiency performance of industrial sector in Bangladesh is 0.8822 in 199-

1992 and 0.9563 in 1999-2000. These values are almost same with overall mean efficiency

40

values of industrial establishments. On an average in Bangladesh, the industrial sector has an

opportunity of increasing production about 5 to 11 percent if they could operate at full

technical efficiency levels without resort to technological progress, given the available

factors of production. This suggests that policies should be taken to improvement of level of

technological progress and quality of existing technological progress so that production of

industrial sector could be increased significantly.

3.6. Conclusions

We investigate the level of efficiency performance of industries in northwest Bangladesh

using the Cobb-Douglas stochastic frontier model. The model is estimated with the

specification of the technical inefficiency effects model in a single stage estimation method

applying the maximum likelihood estimation technique using data set for two periods. One

set is for the period 1991 – 1992 and the other set is for the period 1999 – 2000. For both

periods, we found an opportunity of industry production gain through improvement of

efficiency of industries without resort to technological progress. Given the level of technical

efficiency of industries, this research would humbly suggest introducing policies that would

lead to adoption of new technological progress and improvement of existing level of

technologies. This can provide technically, economically and socially optimal level of

industrialisation in northwest Bangladesh. 4. Uttora Export Processing Zones (EPZ) – Role for Industrialisation 4.2 Introduction

Export Processing Zones (EPZs) are areas in which various only export-oriented industries

are allowed to establish with some benefits to investors so that export commodities are

produced and processed. Foreign importers could visit EPZs and choose products to buy.

Export processing Zones are established with aims and objectives to attract and

develop foreign capital investment, develop labour management and generate

41

employment, use foreign and modern technology in production, increase and diversify

exports, establish and expand backward linkage industries, develop marketing in

foreign markets, increase foreign earnings through rise in exports. Thus EPZs can play

significant part in export arena and contribute to national income and employment and hence

reduce poverty. This section describes the present status of all EPZs in Bangladesh with

special focus on UEPZ and tries to find ways how to establish increased number of industries

in EPZ area in northwest Bangladesh. The objectives also include assessment of

problems and prospects of the Uttora EPZ, situated in northwest Bangladesh, and

provide some policy conclusions on how to reduce problems in this EPZ.

Industries located in the EPZs enjoy the following facilities:

a) Income tax exemption for 10 years and 50 percent income tax rebate on export

earning after that period.

b) b) Duty-free import of raw materials, machinery, construction materials and other

materials used in manufacturing process.

c) Income tax exemption, subject to existing conditions on salaries of foreign

technicians, for three years.

d) Tax exemption on interest on foreign loans.

e) Tax exemption on royalties, technical know-how and technical assistance fees.

f) Tax exemption on profits on account of transfer of shares by foreign companies listed

with the stock exchange. Relocation of running manufacturing units from EPZs

abroad.

g) Permission to units in the EPZs to supply linkage materials for manufacture of

exportable items to industries operating in domestic tariff area, through bonded

warehouse and/or back to back L/C.

h) Off-shore banking facilities.

i) Establishment of backward linkage industries for supplying inputs in EPZs.

However trade union activities are prohibited to avoid any unrest in the industries located in

the EPZs.

42

This section is structured as follows. Subsection 2 gives a description of UEPZ; Subsection 3

provides number of EPZ-wise, product-wise and country-wise industrial units with special

emphasis on UEPZ; Subsection 4 describes investment and employment in EPZs including

UEPZ; Subsection 5 delineates contribution of EPZ to total export earnings; Subsection 6

accounts expectations of UEPZ in northwest Bangladesh; and finally Subsection 7 concludes

this section.

4.2. Uttora EPZ – An Overview

Rajshahi division, which consists of 16 districts among 64 districts in Bangladesh, is the

largest division of Bangladesh with an area of about 34,500 square kilometers.

Unfortunately, lack of government commitment and geonatural location, this area has lagged

behind industrialisation. In particular, the northwest region, consisting 8 of 16 districts in

Rajshahi division and 64 districts in Bangladesh, lacks industrialisation. This region is

labour-surplus. Amount of production remains almost the same although excess labour force

is employed. Many parts of this region are plagued with flood, draught, river erosion

and cyclone, and severity of these has caused the Monga, which weakens the economy in

this area. Lack of other sources of income, lack of employment, low productivity etc. except

seasonal agricultural employment in this poverty-ridden region accelerate the miseries of the

Monga. People in this region lead to deplorable life. Establishment of an Export

Processing Zone (EPZ) is quite rational because of the availability of raw material and labour

force and the positive effects of the infrastructural development – the Jamuna Bridge.

An EPZ is established in the Shongalshi at Shyedpur thana of Nilphamari district in July 01,

2001. This EPZ is known as the Uttora EPZ (henceforth UEPZ). It is situated 10 kilometers

away from Nilphamari by road, 18 kilometers away from Shyedpur air port, 360 kilometer

away from Dhaka and 640 kilometers away from the Chittagong Sea Port. It is connected

with Dhaka, and Chittagong seaport by road, rail and air directly and indirectly. This EPZ is

established for domestic and foreign investors covering an area of about 230 acres with a

view to creation of employment of about 35,000 labourers. Interaction of UEPZ with land

ports and Mongla Sea Port can affect industrialisation positively in this region.

43

It starts its journey with 155 industrial plots. Table 4.1 provides a brief account of these

industries. Figure 4.1 shows the location of UEPZ.

Table 4.1: Uttara EPZ – Entreprises, Country, Products, Investment and Employment Sl No

Name of Enterprises

Country Products Investment (000'US$)

Employment

Proposed Actual Proposed Actual Local Foreign Local Foreign

Type- A (100% Foreign) 1 Uttara Sweater

Manufacturing Company

Hong Kong Knitting & other Textile

4000 716.3209 1588 54 1186 7

Total 4000 716.3209 1588 54 1186 7 Type- B (Join Venture)

2 Kapric Electronics (BD) Ltd.

INDIA Electronics and Electrical

1744 950 167 -- 32 1

Total 1744 950 167 -- 32 1 Type- C (100% Local)

3 Quest Accessories Bangladesh Garment

Accessories 1900 485 80 -- 53 --

Total 1900 485 80 -- 53 --

Grand Total 7644 2151.3209 1835 54 1271 8

Source: BEPZA Bulletin (Internet versions), July 2007.

Table 4.1 shows that there are only 3 industries established so far in UEPZs. Among

these, Uttara Sweater Manufacturing Company, which produces knitting and other

textile products, is 100 percent foreign run by Hong Kong. There is only one joint

venture industry with India that produces electronic and electrical products.

Bangladesh has only one industry in this UEPZ that produces garments accessories.

Proposed investments have not been achieved in these three industries. Except the

joint venture industry in which about half of the proposed investment is realized,

realization of investments of other two industries is much lower which is about one-

fifth of proposed investment. Hence employment target is not achieved. Uttara

Sweater Manufacturing Company invests only US$716.3209 against an investment

target of US$4,000.00 thousands and employs only 1,193 persons (both local and

foreign) against a proposed employment target of 1,642. There is room for realizing

the proposed investment and hence employment in these industries in operation.

44

Figure 4.1: Map of Bangladesh Showing Uttara EPZ

Districts Nilphamari UEPZ

Legends

45

Profile of Uttara Export Processing Zone Location

Shongalshi, Nilphamari. 18 kms from Syedpur Airport, 360 kms from Dhaka, 460 kms from

Chittagong Port.

Profile Of Zone

Zone area: 107.18 hectares (264.99 acres)

Number of industrial plots : 221 (first phase)

Size of each plot : 2000 sqm.

Tariff: US $ 1.00 / sqm / year.

Space of Standard Factory Building: 18000 sqm.

Tariff: US $ 1.25 /sqm /month.

Utility Services

Water Supply: Own water supply system.

Tariff: Tk. 17.71 / cm.

Gas Supply: Gas Transmission Company Ltd.

(Western Zone Project, Proposed).

Tariff: Tk. 5.43 / cm.

Power Supply: 11 kv, 3 phase, 50 cycles/sec. Tariff :

Tk. 4.18 / kwh.

Although there was a great possibility of establishing garments industry, lather industry etc.

including agri-based industries using the infrastructural facilities of Jamuna bridge, and

Shyedpur domestic airport, but that did not materialize in this UEPZ.

4.3. EPZs in Bangladesh

Table 4.2 provides us total number of industries and EPZ-wise number of industries, which

are in operation. Location of EPZs in Bangladesh is shown in Figure 4.2. Table 4.2 is

important in that it gives a comparative picture of industries of UEPZ with other EPZs in

Bangladesh. As is evident in Table 4.2, there are 264 industries in 8 EPZs in Bangladesh.

Among these, 156 industries are owned and run by foreign investors, 42 industries are joint

venture and 66 industries are owned and run by domestic investors. Among 8 EPZs, except

46

Karnaphuli EPZ, which is established later than other EPZs, UEPZ has the lowest number of

industries. This is unexpected. In Adamjee EPZ, three industries are in operation. On the

other hand, in Karnafuli EPZ, only one industry is in production. Where there are only 3

industries in UEPZ.

Table 4.2: Number of Industries in Operation in EPZs in Bangladesh

Serial Number Zones

Unit

Type - A Type - B Type - C Total

1 Chittagong-EPZ 81 20 34 135

2 Dhaka-EPZ 57 14 20 91

3 Mongla-EPZ 7 2 3 12

4 Ishwardi-EPZ 1 1 1 3

5 Comilla-EPZ 6 4 6 16

6 Uttara-EPZ 1 1 1 3

7 Adamjee-EPZ 3 0 0 3

8 Karnaphuli-EPZ 0 0 1 1

TOTAL 156 42 66 264

Source: BEPZA Bulletin (Internet versions), July 2007..

The government could give special eye to increase the number and scale of industries

to raise the level of investment and generate income considering the poverty-and

monga-ridden status of this region. The government and non-government

organizations would encourage domestic and foreign investors to invest in this UEPZ.

We find the number of industrial units in EPZs invested by countries and want to find why

countries are not investing in UEPZs. Table 4.3 gives an account of country-wise industrial

units in EPZs of Bangladesh.

47

Table 4.3: Country Wise Industrial Units in EPZs Serial No.

Country

EPZ-CTG

EPZ-DAK

EPZ-MON

EPZ-COM

EPZ-UTR

EPZ- ADM

EPZ-KAR

EPZ-ISD

Total

1 Australia -- -- -- -- -- -- -- 2 Bangladesh 34 20 3 1 6 1 66 3 Belgium -- 1 -- -- -- -- 1 4 Br. Virgin. Is -- -- -- -- 1 -- 2 5 Canada 2 -- -- -- -- -- 3 6 China 3 4 -- 1 1 -- 9

7 Denmark 1 -- -- -- -- -- 1 8 France 1 -- -- -- -- -- 1 9 Germany -- 4 -- -- -- -- 4 10 Hong Kong 7 9 -- -- 1 1 18 11 India 1 3 8 1 1 1 16 12 Indonesia -- 1 -- -- -- -- 1

13 Ireland 1 -- -- -- -- -- 1 14 Italy -- 2 -- -- -- -- 2 15 Japan 19 4 -- -- 1 -- 24 16 Malaysia 5 2 -- -- 1 -- 8 17 Nepal -- -- 1 -- -- -- 1 18 Netherland -- 3 -- -- -- -- 3

19 Pakistan 5 1 -- -- -- -- 6 20 Panama -- 1 -- -- -- -- 1 21 S. Korea 37 22 -- -- 1 -- 60 22 Singapore -- 2 -- -- -- -- 2 23 Spain -- -- -- -- -- -- -- 24 Srilanka -- -- -- -- -- -- --

25 Sweden -- 1 -- -- -- -- 1 26 Switzerland -- 1 -- -- -- -- 1 27 Taiwan 2 4 -- -- 3 -- 9 28 Thailand 1 -- -- -- -- -- 1 29 U.S.A. 11 1 -- -- -- -- 12 30 United Kingdom 5 5 -- -- -- -- 10

Total 135 91 12 3 16 3 264 Source: BEPZA Bulletin (Internet versions), July 2007.

48

It is shown in Table 4.3 that among foreign countries, South Korea has invested in 60

industrial units, the highest number followed by Japan, 24 industries and Hong Kong, in 18

industrial units. Unfortunately, there are about 66 domestic industrial units in EPZs. Our

policy is to encourage these countries to invest in UEPZ as well. Investigation on why these

countries are not encouraged to invest in UEPZ is important but this is beyond the scope of

this research. Because of increased production cost and increase in wages many

countries in Asia are discouraged in investing in foreign capital markets. So

availability of low wage labour in Bangladesh can attract new foreign capital

investment.

Table 4.4 gives an account of industries in EPZs in Bangladesh and products which are

produced in EPZs. Table 4.4 exhibits that 58, the highest number of industries, are garments

industries. Among 58 industries, 33 are located in Dhaka EPZ and 23 are in Chittagong EPZ

and only 2 are in Comilla EPZ. There is no garments industries in Uttora EPZ. There are

about 32 garment accessories industries in EPZs, but Uttora EPZ has only one.

Although this region is agro-based, unfortunately there is no agro-product industry

established in this EPZ. Neither is the fertilizer industry, although fertilizer is an important

input of agricultural production. All 10 agro-product industries are located in Mongla EPZ.

The government could take initiatives to establish agro-based industries which could

contribute to both agricultural and industrial development and generate employment and

income. This in turn helps reduce poverty and effect of monga on rural economy of the

region.

49

Table 4.4: Product -wise Number of Emtreprises (industry in operation) Sl no. Name of Category EPZ-

CTG EPZ-DAK

EPZ-MON

EPZ-ISD

EPZ-COM

EPZ-UTR

Total

1 Agro Poducts 10 10

2 Caps 3 3 6

3 Chemical & Fertilizer 1 1

4 Electronics & Electrical goods 12 2 1 1 16

5 Fishing Reel & Golf 1 1

6 Footwear & Leather goods 8 4 12

7 Furniture

8 Garment Accessories 11 17 1 2 1 32

9 Garments 31 23 2 58

10 Knitting & other Textile pdt. 9 6 7 1 25

11 Metal Products 8 2 1 11

12 Miscellaneous 8 10 1 1 2 22

13 Paper Products 1 1 2

14 Plastic goods 7 6 1 14

15 Power Industry

16 Ropes 2 2

17 Service Oriented Industries 2 1 3

18 Tent 5 5

19 Terry towel 16 16

20 Textile 11 15 2 28

Total 135 91 12 3 16 3 264


50

Figure 4.2: Location of EPZs in Bangladesh Map

Uttora EPZ

Ishwardi EPZ

Dhaka EPZ

Comilla EPZ

Chittagong EPZ

Mongla EPZ

Karnafuli EPZ

51

An analysis of which country has invested how much on what sectors can perhaps

help us find a policy direction which could be of help to policy makers. This may

predict the comparative advantage of a country to produce here in Bangladesh than in

other countries. It can also be found which industries could be established in UEPZ.

Table 4.5 to 4.10 show countries which invested in our EPZ and their product. It is

evident from 4.8 that South Korea has the highest number of industries in EPZ and

among 60 industries, 17 industries are garments. It is South Korea which has the

highest number of 7 textile industries in EPZs of Bangladesh. Unfortunately, this

country neither has any Garments nor any Textile industries in the UEPZ.

Table 4.5: Product- and Country-wise Industries in EPZs

Bangladesh Belgium Br. Virgin Island Canada China

Agro Poducts 2

Chemical & Fertilizer 1

Electronics & Electrical goods 1

Footwear & Leather goods 6

Garment Accessories 12 1

Garments 12 1 2

Knitting & other Textile pdt. 5 2 1 1

Metal Products 1

Miscellaneous 8 3

Paper Products 2

Plastic goods 2 1

Service Oriented Industries 1

Terrytowel 5 1

Textile 9 1

Total 66 1 2 3 9



52

Denmark France Germany Hong Kong India

Agro Poducts 7

Caps 2

Electronics & Electrical goods 2

Garments 1 1 2 8 3

Knitting & other Textile pdt. 6

Metal Products 2

Miscellaneous 2

Plastic goods 2

Textile 2

Total 1 1 4 18 16



Indonesia Ireland Italy Japan Malaysia

Caps 1


Garment Accessories 1 4 2

Garments 6 3


Metal Products 1

Miscellaneous 1

Plastic goods 2 1


Tent 1

Terrytowel 3

Textile 1 3 1

Total 1 1 2 24 8


53


Nepal Netherlands Pakistan Panama S. Korea

Agro Poducts 1

Caps 4

Chemical & Fertilizer

Electronics & Electrical

goods

1



Garments 1 1 17


Metal Products 1

Miscellaneous 6

Plastic goods 5

Tent 4

Terrytowel 4

Textile 1 7

Total 1 3 6 1 60



Singapore Sweden Switzerland Taiwan Thailand


Garment Accessories 2 1 2

Garments 1 1


Plastic goods 1 1

Textile 2

Total 2 1 1 9 1


54


U.S.A U.K.


Garments 2 3


Miscellaneous 1

Plastic goods 1


Tent 1

Terrytowel 5 1

Textile 2 1

Total 12 10


4.4. Investment and Employment in Industries of EPZs

All the rich countries in the world are industrially developed. Unfortunately,

Bangladesh has lagged behind industrialisation in spite of having huge possibilities.

Different geographical potentials like, seaports, land ports, available naval

communication, road transport system, huge cheap labourers can play positive role in

industrialisation. With these facilities, EPZs are established to attract domestic and

foreign investment in order to reduce poverty through creation of employment and

generation of income. In particular, in northwest Bangladesh the main strategy should

be to invest capital in order to create employment and source of income rather than

moving people from the monga-ridden area. For this, new industries should be

established; old industries should be modernized, with proper credit facilities, tax

rebate, and various investment facilities. Besides taking development activities in all parts

of the problem-ridden area, these activities should be run in some suitable places through

improving investment facilities and hence develop the whole area.

Bangladesh Export Processing Zone Authority has evolved as an independent autonomous

institution through the ‘Bangladesh Exports Processing Zone Authority Act -1980 with a

55

view to attract and accelerate investment. Here we shall give an analysis of investment and

employment in various ways.

Table 4.11 gives an estimate of investment and employment in EPZs with a comparative

picture of UEPZ and other EPZs. Number of people employed is 2,02,752. Most of

labourers employed are female.

Table 4.11: Zone-wise Investment and Employment (industry in operation) Serial

No.

Zone Industries in

Operation

Investment.

(000 US$)

Employment

(Local.)

Employment

(Foreign.)

1 Chittagong-EPZ 135 5,41,437 1,17,740 480

2 Dhaka-EPZ 91 5,19,775.90411 74,750 625

3 Mongla-EPZ 12 3,320.42 286 6

4 Ishwardi-EPZ 3 824.439 47 1

5 Comilla-EPZ 16 64,835.29352 6,420 23

6 Uttara-EPZ 3 2,773.32094 1,422 8

7 Adamjee-EPZ 3 13,139.71879 1,933 12

8 Karnaphuli-EPZ 1 2,880.37629 154 --

Total 264 11,48,986.4726

5 2,02,752 1,155


If we look at Table 4.11, we find that, except Ishwardi EPZ which has equal number of

industries of UEPZ, UEPZ has lower amount of investment of US$ 2,773.3209 thousands.

This is about 0.24 percent of total investment of US$ 11,48,986.47265 thousands.

Employment is also very low.

Table 4.12: Country-wise Investment and Employment (industry in operation) Serial Country No of Investment (000 US$) Employment Employment

56

No. Unit Total Average Total Local Average Foreign

1 Bangladesh 66 197360.8 2990.315 40577 614.80 52

2 Belgium 1 1170.398 1170.398 192 192 --

3 Br. Virgin. Is 2 8253.182 4126.591 689 344.5 7

4 Canada 3 13258.2 4419.4 708 236 8

5 China 9 20940.71 2326.746 5923 658.11 35

6 Denmark 1 1030 1030 243 243 7

7 France 1 803.42 803.42 170 170 --

8 Germany 4 14500.6 3625.15 5489 1372.25 48

9 Hongkong 18 118214 6567.444 29692 1649.56 321

10 India 16 6991.501 436.97 2073 129.56 11

11 Indonesia 1 3592.497 3592.497 2078 2078 15

12 Ireland 1 27 27 25 25 1

13 Italy 2 16769.4 8384.7 1131 565.5 6

14 Japan 24 161821.5 6742.563 6355 264.79 37

15 Malaysia 8 75572.73 9446.591 6674 834.25 178

16 Nepal 1 50 50

17 Netherland 3 12941.7 4313.9 841 280.33 12

18 Pakistan 6 4247.062 707.8437 2958 493 1

19 Panama 1 2714.477 2714.477 2324 2324 17

20 S. Korea 60 295703.3 4928.388 65541 1092.35 199

21 Singapore 2 3321.683 1660.842 163 81.5 6

22 Srilanka 1488.736 70

23 Sweden 1 6956.368 6956.368 4564 4564 24

24 Switzerland 1 2043.263 2043.263 10 10 --

25 Taiwan 9 50022.77 5558.086 4587 509.67 55

26 Thailand 1 513.2 513.2

27 U.S.A. 12 44134.35 3677.863 9492 791 61

28 Untd Kingdom 10 30285.05 3028.505 10183 1018.3 54

Local Investment (B Type) 54258.54

Total 264 1148986 4352.22 202752 768 1155 Source: BEPZA Bulletin (Internet versions), July 2007.

Table 4.12 estimates how much different countries have invested in our EPZs. Table

4.12 shows that Malaysia has the highest amount of investment in Bangladesh

57

followed by Italy’s investment, then by Sweden and Japan. Average amount of

investment by industries in EZPs is US$4,352.22 thousands. Average investment of

Malaysia, Italy, Sweden, Japan, Hong Kong, Taiwan, S. Korea, Canada is above the average

investment of US$4,352.22 thousands and other countries have investment below the

average investment. Nepal has the lowest amount of investment and India has an

average investment of US$436.97 thousands. Unfortunately, Malaysia, country with

the highest investment is not convinced to invest in UEPZ. Neither are Japan, Hong

Kong, and other countries.

Although Malaysia’s average in Bangladesh EPZs is the highest but it does not

provide with highest average amount of employment. The highest average amount of

employment is provided by Sweden. This amount is 4,564. The average amount of

employment provided by industries in Bangladesh EPZs is 768 persons.

Table 4.13: Type Wise Investment and Employment Type Industries

in Operation

Investment (000 US$)

Average Investment

Employment Local Average

Local Foreign

A 156 8,45,119.73158 5,417.43418 1,43,896 922.41 1,045

B 42 1,06,505.95789 2,535.85614 18,279 435.21 58

C 66 1,97,360.78318 2,990.3149 40,577 614.80 52

Total 264 11,48,986.47265 4,352.22149 2,02,752 768 1,155


Table 4.13 shows investment and employment by ownership. As we know that Type A

industries are 100 foreign, Type B industries are joint venture industries and Type C

industries are owned by domestic entrepreneurs. Table 4.13 exhibits that average investment

in foreign industries is larger than both the average investment of joint venture and local

industries. Per industry employment rate is also higher than that of both joint venture and

domestically owned industries. Both average rate of investment and employment of joint

venture industries are lower than both foreign owned and domestically owned industries.

This warrants an analysis or investigation on reasons of low average investment and

58

employment in domestically owned and joint venture industries that foreign-owned

industries.

Table 4.14: Product wise Employment and Investment

Sl no. Name of Products

No of Unit

Investment (000 US$) Employment

Total Average

Total Local

Average Local

Foreign 1 Agro Poducts 10 2972.028 297.2028 158 16 4

2 Caps 6 40791.77 6798.628 8811 1469 69

3 Chemical & Fertilizer 1 410.0071 410.0071 -- - --

4 Electronics & Electrical 16 52688.84 3293.053 3227 202 19

5 Fishing Reel & Golf Equipment 1 31480 31480 626 626 1

6 Footwear & Leather goods 12 53068.03 4422.336 6234 520 15

7 Furniture -- -- -- -- - --

8 Garment Accessories 32 130458.5 4076.828 7743 242 87

9 Garments 58 292927.9 5050.481 113517 1957 406

10 Knitting & other Textile pdt. 25 114377.2 4575.088 22984 919 192

11 Metal Products 11 21256.23 1932.385 889 81 15

12 Miscellaneous 22 28653.32 1302.424 4192 191 14

13 Paper Products 2 837.1699 418.585 124 62 --

14 Plastic goods

14 21443.63 1531.688 855 61 7

15 Power Industry -- -- -- -- - --

16 Ropes 2 6134 3067 375 188 2

17 Service Oriented Industries 3 5693.292 1897.764 477 159 2

18 Tent 5 23623 4724.6 4856 971 26

19 Terrytowel 16 38555 2409.688 5720 358 16

20 Textile 28 283616.6 10129.16 21964 784 280

Total 264 1148986 4352.224352.22 768 768


Table 4.14 gives an account of product-wise number of industries, investment and

employment of EPZs in Bangladesh. It is evident from Table 4.14 that the largest

59

amount of investment, US$292927.9 thousands, is in garments industries followed by

textile industries and garments accessories. Average number of employment is larger

in Garments industries, followed by Cap industries; although Textile industries have

the highest amount of investment, followed by Cap industries, Garments industries,

Knitting and Other Textile Product industries, Footwear and Leather Product

industries and Garments Accessories industries respectively.

But EPZs has not become able to achieve its full potentials. Investors are more

encouraged to invest in Chittagong and Dhaka EPZ because of their locational

benefits and other facilities.

Government and non-government organization, like RDRS, ASA, PROSHIKA,

Grameen Bank etc can establish in the UEPZ as outside the EPZ on non-profitable

basis at least on humanitarian ground to create ample amount of employment and

reduce the severity of poverty in this region. These products can fulfill local demand

and can be exported. Foreign donars are expending huge amount of money on

humanitarian grounds. People want employment and they can help in investing and

generating employment and income.

4.5. BEPZA in National Export and Employment

Despite different difficulties, BEPZA tries to attract foreign investment that is

praiseworthy.

Table 4.15: Export Contribution of BEPZA in National Export (million US$) Financial Year Total Export Export from EPZ Contribution of BEPZA

60

1999-2000 5752 891 15.49

2000-2001 6467 1068 16.51

2001-2002 5986 1077 18.00

2002-2003 6548 1200 18.33

2003-2004 7603 1354 17.80

2004-2005 4655 1546 17.90

2005-2006 10052 1836 17.44

Source: BEPZA Bulletin, various issues.

It is evident from Table 4.15 that the share of exports earnings from EPZ is gradually

increasing but the total volume of exports is greater than the volume of exports from

EPZs.

4.6. EPZ in the Northwest and Expectation

Export Processing Zone can create an opportunity of generating income through

creation of employment in this economically backward region in Bangladesh and

hence can contribute to reduction of poverty.

Plot rate and tariff are kept 50 per cent lower than other EPZs to attract investors, but still

there is no remarkable response from investors, although there are facilities of Jamuna

bridge, train and road communication, and cheap labourers.

There is no gas supply in UEPZ. Majority of local industrialists mention that agro-based

industries, leather product industries and garments industries could be most advantageous in

this region because of availability of agricultural commodities and huge cheap labourers,

provided that prevailing problems in EPZ are solved.

We identify the following problems as major problems of UEPZ consulting

Industrialialists and others concerned.

61

1. Lack of gas connection and distance of seaport from UEPZ. The former

increases costs of production while the latter rises the carrying costs because of

increased diesel price.

2. Insufficient uncongenial airport facilities to send commodities to foreign

buyers with special emphasis.

3. Inappropriate transport facility as well as no direct rail connection to seaports.

4. Lack of government patronisation, and lack of fair and congenial transaction

with foreign buyers.

Therefore foreign investors do not feel encouraged to establish industries in this

UEPZ.

Agro-based industries, garments, textiles industries, lather and lather products are in

advantageous positions according to entrepreneurs in this region.

4.7. Conclusion and Recommendations

During the regime of the British and Pakistani government, the governments managed to

undertake development activities in certain places in the country for their own interests.

During the last three decades after independence the same tradition of development remains

active. Disparity in regional development has been increasing, that is, disparity is mainly

centered in development.

UEPZ is established in order to make employment of the mass population through

industrialisation along with agricultural development in the neglected northwest region of the

country. Unfortunately, after five years of establishment of the UEPZ, it did not become able

to keep contribution to the development in the region because of reasons for not solving the

existing problems in the UEPZ defined by the industrialists and entrepreneurs. On the other

hand, foreign investors do not show interest to establish industries if domestic counterparts

do not establish.

62

Establishment of industries in a region happens mainly based on the availability of raw

materials (Smith, 1970). From this viewpoint, it was expected that industries based on

agriculture would be established in this agrarian region. Unfortunately, in the Mongla EPZ,

all of 10 agriculture-based industries are established, but in the UEPZ no such industry is

established. We would like to provide following suggestions in order to bring mobility in this

EPZ:

1. Arrangement of connection of natural gas in the EPZ

2. Making different industrial planning in this region

3. Bringing working mobility in Mongla sea ports

4. Arrangement of special toll system for Jamuna bridge for EPZ industrialists in order

to reduce import-export cost from Chittagong seaport and airport.

5. Taking steps to run cargo biman from Shyedpur

6. Arrangement of border connection from Bangladesh to India, Nepal and China

through development of four land ports in this region.

7. Arrangement of direct rail connection from Shyedpur to Dhaka and Chittagong.

8. Encouragement and special benefit to entrepreneurs to build agro-based industries in

this agrarian region.

9. Establishment of joint stock enterprises and coordination of local entrepreneurs with

foreign importers.

Northwest Bangladesh includes Monga-ridden areas where Monga is created because of

mainly lack of employment during lean agricultural seasons. Establishments of productive

entrepreneurs in this region can generate employment, provide income and hence reduce the

severity of Monga. A concerted effort from government, private organizations and donars is

a must to reduce this problem through effective measure.

Foreign investment should be attracted in the EPZs. For this, the government must take

immediate decisions. There must have clear directives to the government officialts regarding

63

this. There should have awarding options to the active officials. Trade and foreign investment

are best ways to generate employment in this area and thus reduce poverty. The process of

taking decision should be accelerated.

Export-oriented small and medium industries can be also established along with large

industries because these industries can produce commodities employing people that can

fulfill local demand for commodities in the area also as large industries requires large amount

of funds and decisions.

We find out problems associated with industrialisation. The special characteristics, problems

and constraints faced by large, medium and small and cottage industries are not discussed

separately in detail in the performance analysis section.

The government may wish to set up general and sector specific Special Economic Zones in

order to support and facilitate exports from the northwest Bangladesh. Further the

Government may consider it necessary to formulate a separate industrial and export policy

for this region.

Stand-Alone EPZs

These are industries on which EPZ status is conferred wherever they locate to accommodate

resource-based activities. This is a highly flexible tool enabling industries to operate from

convenient locations while enjoying EPZ benefits.

5. Problems and Prospects of Land Ports in Northwest Bangladesh 5.1. Introduction The Government of the People’s Republic of Bangladesh has established Bangladesh Land

Port Authority vide S.R.O.-166-Act/2001 dated: 16-06-2001 (Act no-20 of 2001) to develop,

manage, run, extend and maintain cargo handling at land ports in order to ease movement of

import and export items through land ports. It is also expected that trade and commercial

64

activities between Bangladesh and neighbouring countries will increase manifold through

land ports.

This section is arranged as follows. Subsection 2 points out locations of land ports with

possible trade between Bangladesh and neighbouring countries and location of customs

houses; Subsection 3 gives a brief description of activities of Benapole land port with

comparison of northwest ports; Subsection 4 provides trade potentials with neighbouring

SAARC countries and some suggestive steps so that trade through land ports becomes

facilitated; Subsection 5 gives concluding remarks.

5.2. Land Ports and Customs Houses

5.2.1. Location of Land Ports

There are 13 land ports in Bangladesh. Among these four land ports are located in northwest

Bangladesh. The northwest shares land boundaries with India. These are (1) Banglabandha in

Panchagar, (2) Burimari in Lalmonirhat, (3) Hili in Dinajpur and (4) Birol in Dinajpur.

There are some other land ports in Bangladesh. These are (1) Sonamasjid in

Chapainawabganj, (2) Darsana in Chuadanga, (3) Bhomra in Satkhira, (4) Haluaghat in

Mymensingh, (5) Tamabil in Sylhet, (6) Akhaura in Brahmanbaria (7) Bibir Bazar in

Comilla, (8) Benapole in Shatkhira, and (9) Teknaf in Cox’s Bazar. Bangladesh Land Port

Authority has decided to develop and operate land ports at border points by private sector.

Table 5.1 lists the land ports situated in northwest districts in Bangladesh and possible trade

with neighbouring countries.

Table 5.1: List of Land Ports in Northwest Districts

Name of Land Port District Trade with Banglabandha Panchagar India, Bhutan, Nepal and perhaps China

Hili Dinajpur India, Bhutan, Nepal and perhaps China

Birol Dinajpur India, Bhutan, Nepal and perhaps China

Burimari Lalmonirhat India, Bhutan, Nepal and perhaps China

Table 5.1 shows that there is great possibility of Bangladesh to trade with India, Bhutan, Nepal and perhaps

China. While the sea ports at Chittagong and Mongla and Zia International Airport are playing an important role

65

to the growth of exports, the border trade through different land ports may become crucially important in

promoting exports to the neighbouring countries viz. India, Nepal and Bhutan.

Banglabandha land port in Panchagar has been established in September 01, 1997 with transit

between Bangladesh and Nepal to expand bilateral trade between Nepal and Bangladesh.

Because of the easy communication of Nepal, Bhutan and China with Bangladesh, the

government of Bangladesh and Land Port Authority arranged warehouse, track parking, yard

and HBB road, office bhaban, police barak, Sonali Bank branch, customs branch,

immigration, telephone exchange, electricity and water supply and sanitation facilities in the

port arena. In May 22, 2004, ‘soft opening’ starts and it is told that the activities of the port

will start in full swing with trades between Bangladesh, Nepal, India and Bhutan.

Unfortunately, the activities have not yet been started fully. Still in 2006-2007 fiscal year,

one crore taka import revenue is obtained from this port and commodities worth 36 crores

and 23 lacs taka have been exported through this port. Trucks with commodities cannot enter

into Bangladesh because of lack of bilateral treaty between India and Nepal.

If the ports were fully operated, employment facilities would be increased. Imports of inputs

and exports of products could be traded between Bangladesh and India, Bangladesh and

Nepal, Bangladesh and China, Bangladesh and Bhutan. Commodities could be moved easily

at a relatively cheap cost. Because Banglabandha is located at a very advantageous and

profitable position in case of trade and business with India, Nepal and Bhutan. Industries

could also be established and worked fully and hence poverty could be reduced in the

Northwest region of Bangladesh.

Effective diplomatic efforts from the part of the government are imperative to bring the ports into full work.

Transit treaty with India should be done to bring mobility of these ports.

Figure 5.1 shows the locations of land ports situated in northwest districts. The land ports here are

Banglabandha (Tetulia), Burimari, Birol and Hili.

5.2.2. Work Stations of Bangladesh Customs

There are four Custom houses and thirty active land customs stations for import and export activities and for passenger movement

across Bangladesh. Chittagong Custom house is the biggest station in terms of revenue and volume of cargo. Chittagong and Mongla

custom house deals with sea cargo where as Benapole custom house deals with cargo carried by truck. Dhaka custom house deals

66

only air freight cargo. Besides cargo handling a significant number of passengers is also handled by these custom houses and stations.

There is no customs house in northwest districts in Bangladesh.

Figure 5.1: Land Ports, Custom Houses and Stations in Northwest Bangladesh and Others

67

5.3. Activity of Benapole Land Port

Benapole land port is operated at present by Bangladesh Land Port Authority. It has got

about 45 acres of land which has 30 godowns having capacity of receiving 21,500 metric

tons of cargo. It has a Truck-Terminal, which can keep 1000 trucks. Loading and unloading

of cargo from 100 trucks at a time could be done at the transhipment yard.

68

Table 5.2: Cargo Handling at Benapole Land Port

Year Goods received

Goods delivered

Total (Metric tons)

Income (Taka) (Provisional)

2002-2003 8,58,694 8,65,329 17,24,023 9,55,23,351.02

2003-2004 9,09,081 9,00,974 18,10,055 10,10,28,563.60

July’04-Feb.’05 8,74,595 8,70,908 17,45,503 7,18,26,389.77

We present this table of activity of Benapole land port in order to have a comparison of the

performance of this port with northwest land ports. Northwest has four land ports and

possibility of trade connection with Bhutan and China with existing land trade relation with

India and Nepal. But still the performances of these ports are not as good as performance of

the Benapole land port.

5.4. Potentials and Suggestive Steps 5.4.1. Advantages of Northwest in the Export Market The northwest Bangladesh has distinct advantages in its geographical location in terms of

export potential. It is flanked by Bangladesh’s SAARC neighbors viz. India, Nepal and

Bhutan. Its potential is strengthened due to its proximity to the large markets of the South-

West Asian countries. With South Asia Preferential Trade Area becoming a reality and

South Asia Free Trade Area on the anvil in 2003, northwest districts are prospective gateway

for Bangladesh to expand trade with India, Nepal and Bhutan. The possibility of land trade

with China may offer new opportunities for export growth. Northwest could serve as the

main trading hub and land ports as the satellite for Bangladesh’s trade with these neighbors.

Moreover, availability of infrastructure, skilled labour and raw materials for manufacture of

exportable commodities can be used to create a permanent base for exports from northwest

Bangladesh.

5.4.2. Relevance of an Export-Import Policy for Northwest Bangladesh Export-Import Policy is a subject in the domain of industrial development. It lays out

specific provisions that are meant to promote exports and provide certain benefits to which

69

exporters are entitled. Therefore, the government can provide exporters with necessary

infrastructure and appropriate support in order to give a boost to exports both directly and

indirectly. Most importantly, the government would perform the role of a facilitator for

exports. Based on global export trends and in recognition of the importance of exports as an

engine of economic growth, the government should see exports as a priority area for

development. With a view to achieving the objectives of land ports and EPZs, the

government could take the following steps:

(i) To take necessary and effective steps in coordination with the Government

Departments, Chambers of Commerce & Industries, Export Promotion Bureaus,

Commodity Boards, Land Port and EPZ authorities to create a favourable

environment for export growth using facilities of land ports and UEPZ in this

region;

(ii) To monitor the status, problems and prospects of traditional and non-traditional

exportable items and to ensure that the problems regarding exports are solved at the

local levels;

(iii) To take up issues concerning exports with the concerned authorities;

(iv) To formulate export plans where export possibilities remain untapped;

(v) To create appropriate infrastructure with modern facilities for promotion of exports

through land ports particularly.

(vi) To promote scientific research and development in industries and land ports with

export potential;

(vii) To disseminate information regarding export and import policies and prospects on

the export front;

(viii) To collect and disseminate information on trade in goods, trade in services, trade

related investment measures and trade related intellectual property rights.

70

(ix) Entrepreneurs who have industries in Dhaka and Chittagong EPZs could be

encouraged to establish at least a same type of industry like other EPZs in UEPZ.

This could be viewed as corporate social responsibility.

5.4.3. Industrial Policy In order to compete favourably in the global market, export units need to improve quality,

adopt new technology and undertake skill upgradation, diversification etc. which will have a

significant impact in the overall industrial climate.

Against this backdrop, the Government sees exports as a priority area and in recognition of

the export potential the Government would announce “Northwest Export Policy”. However,

the Policy may be amended as and when needed within its period of validity.

5.4.4. Northwest Export Promotion Council A Northwest Export Promotion Council would be set up in the Directorate of Industries,

with the participation of Commodity Boards, Export Promotion Bureau, Chambers of

Commerce and Industry, Land Port and EPZ in order to provide a forum for exchange of

views, information sharing and removing hindrances and obstacles faced by exporters. This

council will take care of problems of land ports and coordinate with all other agencies related

to this so that smooth trade through northwest land ports with neighbouring countries could

be performed without any hurdles.

Northwest Export Promotion Council would like to introduce award for exporters for their

excellence in exports, viz., Best Exporter Award, Award for Quality and Best Exporter.

Member of Parliaments (MPs) can play an effective role in this regard.

5.4.4.1. Procedural Simplifications

Procedural formalities could be reduced for export transactions by way of faster processing

of export related documents by different agencies of the government, and speedy redressal of

exporters’ grievances etc. through the northwest Export Promotion Council.

5.4.4.2. Market Information Service

71

In order to obtain comprehensive and up-to-date information about international markets,

prices of inputs and outputs, foreign visits, trade fare, variety of products, etc. market

information service centre could be established so that prospective entrepreneurs and

industrialists feel encouraged. Further, the government must also provide cooperation to

collect information so that entrepreneurs and industrialists can easily visit foreign industrial

establishments, participate in the foreign trade fare.

5.4.5. Physical Infrastructure in Land Ports

Improvement of physical infrastructure in the land ports in northwest districts is very

important for export-import transaction through these ports. This could be done through

interaction with the concerned ministries of the government and other related agencies.

Emphasis will be given to the integrated development of the land ports at Bandarbandh,

Burimai, Birol and Hili with the emerging possibilities of trade with India, Nepal, Bhutan

and China.

5.4.6. Institute of Export Development and Management We would like to suggest establishing an institute of export development and management,

which will offer courses on how export quality, quantity and diversification, can be enhanced

and exports can be management in a cost-effective way. The institute will also provide

research facilities for product development and packaging and delivery.

5.4.7. Industrial Growth Centres Industrial growth centres could be set up in places where growth potential exists. Export

units would be given preference in allotment of land in these growth centres.

5.4.8. Warehousing and Container Facilities and Air Cargo Facilities Warehousing and Container Facilities and Air Cargo Facilities could be properly improved

so that there are no difficulties in cargo storage, customs clearance and container availability

at these locations.

72

5.4.9. Identification of Export Items Potential specific export items could be identified for special focus based on an analysis of

the import baskets of major importing countries of the world and possibilities of exports to

the neighbouring countries. Identified potential items can be grouped into subsectors, like,

agro-based industries; Food processing industries, Leather and Leather Products; Gems &

Jewellery; Garments; Chemicals & Plastics etc.

5.4.10. Special Economic Zone and Agro-Economics Zone Based on subsectors above, the Council could suggest announcing a policy for setting up

Special Economic Zones and Agro-Economic Zones as a part of the EXIM Policy. Policy

could be also taken to convert UEPZ into an Special Economic Zone (SEZ).

5.5. Conclusion

As and when all the four land ports will be fully operated, regional and international trade will increase between Bangladesh, India, Nepal and Bhutan. This will generate employment and income of the people of Bangladesh and help alleviate poverty. Moreover, if ports are developed, growth will be higher to the national economy. Concerted efforts from all quarters can play a very significant role. The northwest Bangladesh has a large scope for exports particularly in view of its

geographical and locational advantages and good connectivity with India, Nepal, Bhutan and

China. This region has a large and diversified industrial base producing a number of

commodities those can be converted into exportable items.

It has achieved a high degree of growth in agriculture creating a potential for export of agro-

based products, in recognition of which the government may declare Agri-Export Processing

Zones.

6. Problems and Prospects of Industrial Growth in Northwest Districts – An Analysis based on Survey

6.1. Introduction Bangladesh is an agrarian country and hence its economy is mainly based on agriculture. Per capita cultivable

land is decreasing because of population growth. Contribution of industrial sector to national economy is

increasing. In order to obtain sustainability in development and economic growth, industrialisation is

73

indispensable. Both agricultural and industrial improvement together could bring economic development, create

employment, generate income and reduce poverty in northwest Bangladesh. In order to survive as a nation, and

to prosper in the 21st century, Bangladesh will have to shift from an agrarian economy to an industrial

economy. Consequently, the power generation will have to increase drastically to achieve that goal.

Industrialization is a process of social and economic change whereby a human society is transformed from a

pre-industrial (an economy where the amount of capital accumulated is low) to an industrial state (see Pre-

industrial society). This social and economic change is closely intertwined with technological innovation,

particularly the development of large-scale energy production and metallurgy. Industrialization is also related to

some form of philosophical change, or to a different attitude in the perception of nature, though whether these

philosophical changes are caused by industrialization or vice-versa is subject to debate.

Northwest region of Bangladesh possesses few large-scale industries and their contribution to creation of

employment, generation of income, improvement of socioeconomic condition of the people is not significant as

is seen in Section 2. This region produces a lot of agricultural products, which could be used for industrial

production. No effective steps had been taken to utilize primary agricultural products and available human

capital either by the private sector or the public sector.

A link between agriculture and industry could flourish a strong industrial base that could bring overall economic

growth and development with improvement of quality of life. Without industrial growth the manpower could

not be utilized, and the unemployment problem could not be eliminated. This region produces rice, sugarcane,

tea, jute, cotton tobacco, spice, ginger, garlic, onion, potato, chilly and turmeric as agricultural products, and

mango, banana, water-melon and various types of fruits. With appropriate policy initiatives those products

could be brought in utilization in industrial production.

Industrialization starts with basic industries and mining. Infrastructural development, essential consumer goods

industries have to be established simultaneously in order to have fair industrial development in a region

(Shrivastava 1998). Labour quality and quantity, transport and communication, site and premises, government

aid, environmental factors are general factors that affect industrialisation in a region (Glasson, 1974). Presence

of basic industries in a region is important to attract other large, medium and small industries (Field and

MacGeorge, 1992).

Literature documents that lack of capital, lack of technology, lack of energy, political clash and corruption, lack

of planning, dependence on imported raw materials, lack of development of backward linkage industries,

inadequate infrastructure and supported services, lack of capacity building, weak and inadequate government

apparatus are major causes of industrial backwardness of Bangladesh in general and northwest in particular.

74

The objective of this section is to discuss problems and constraints for development of

industrialisation in northwest district and identify possible industries to be established with

some policy recommendations and implications.

This section is organized as follows. Subsection 2 give some useful definitions used;

Subsection 3 gives a brief idea about questionnaire design and data collection; Subsection 4

talks about industrial polices towards industrialization; Subsection 5 describes components

associated with industrialization; Section 6 give an to problems of industries in this region;

Subsection 7 prospects of industrialization; and Subsection 8 concludes the section.

6.2. Definitions

6.2.1. Industrialization Industrialisation is a process of social and economic change whereby a human group is

transformed from a pre-industrial society (an economy where the amount of capital

accumulated per capita is low) to an industrial one (a fully developed capitalist economy). It

is a part of wider modernisation process, where this social and economic change is closely

related with technological innovation, particularly the development of large-scale energy and

metallurgy production. The lack of a large industry sector is widely seen as a major handicap

in a country's economy, pushing many governments to encourage or enforce industrialisation

through artificial means. The world's industrialisation starts with the Industrial Revolution in

the 18th century in northwest England.

6.2.2. Capital Intensity Capital intensity is the term in economics for the amount of fixed or real capital present in relation to other

factors of production, especially labor. Since the use of tools and machinery makes labor more effective, rising

capital intensity (or "capital deepening") pushes up the productivity of labor, so a society that is more capital

intensive tends to have a higher standard of living over the long run than one with low capital intensity. The

degree of capital intensity can be measure in nominal terms. It is simply the ratio of the total money value of

capital equipment to the total amount of labor hired.

6.2.3. Labor Intensity Labor intensity is the relative proportion of labor (compared to capital) used in a process. The term labor

intensive can be used when proposing the amount of work that is assigned to each worker/employee (labor),

http://en.wikipedia.org/wiki/Social

http://en.wikipedia.org/wiki/Economic

http://en.wikipedia.org/wiki/Pre-industrial_society

http://en.wikipedia.org/wiki/Industry

http://en.wikipedia.org/wiki/Capitalist_economy

http://en.wikipedia.org/wiki/Modernization

http://en.wikipedia.org/wiki/Technology

http://en.wikipedia.org/wiki/Betterment

http://en.wikipedia.org/wiki/Energy

http://en.wikipedia.org/wiki/Metallurgy

http://en.wikipedia.org/wiki/Government

http://en.wikipedia.org/wiki/Industrial_Revolution

http://en.wikipedia.org/wiki/18th_century

http://en.wikipedia.org/wiki/England

http://en.wikipedia.org/wiki/Economics

http://en.wikipedia.org/wiki/Capital_%28economics%29

http://en.wikipedia.org/wiki/Capital_deepening

http://en.wikipedia.org/wiki/Productivity_%28economics%29

75

emphasizing on the skill involved in the respective line of work. By the labor-intensive technology or low

capital-output ratio criterion indicates that investment criterion should be chosen which utilizes the human

power optimally. If labor-intensive technology is developed on widespread pattern, the urban centers develop.

Under the labor-intensive technology the capital consumption, waste and depreciation rates is low.

6.2.4. Primary, Secondary and Tertiary Sector

Joint development of primary, secondary and tertiary indicates the level of development in a region. Primary

sector refers to the agricultural sector; secondary sector the industrial sector and tertiary sector the business and

service sector. Simultaneous improvement of these three sectors can ensure employment, income and welfare of

the people.

6.3. Questionnaire Preparation and Data Collection For collecting primary data questionnaire preparation is an important. At first, we prepare a draft questionnaire.

According to the objectives of this research, the questionnaire focuses on the following issues:

(1) The questionnaire highlights the industrial activity.

(2) It picks up problems of industries.

(3) It is designed in such way that it can pick up prospects of industrialization.

We apply purposive sampling technique to gather information. We collect information from each district of the

northwest. Primary and secondary source are used to gather data.

6.4. Industrial Policy towards Industrialisation in the Northwest

An evaluation of industrial policies reveal that Industrial policy of 1973 – 1991 does not adopt any policy

towards industrialisation in northwest Bangladesh. The policy of 1999 first takes initiatives to develop the

country on regional basis, but it does not have any clear indication of developing infrastructures which are

preconditions for economic development (MoF, Various industrial policies).

This policy selects 16 sectors, which are to be specially emphasized. These are agro-based industries, freezing

food, jute related products, computer software and information, electronics, jewelry, lather, oil and gas,

garments, tourism, gifts goods and artificial flower and others. In order to reduce regional imbalance, this policy

provides special incentives like 7 year tax remission if industries are set up in this region. Unfortunately, no

fruitful responses were observed.

6.5. Components associated with Industrialization Main components, which facilitate industrialization, are, among other, infrastructure, energy and trade policies.

Let us now talk about these.

6.5.1. Infrastructure

76

Infrastructural deficiencies are primary deterrent to industrialisation and economic growth. Long years of under-

investment has taken a toll and resulted in poor access to basic infrastructure for this large part of Bangladesh’s

population. Since Bangladesh opened its gas and power sectors for private investment, there has been a strong

response from international energy developers. Bangladesh is now in the process of conducting international

procurement for large power plants and gas development concessions. Interest in water, transportation, and

telecommunications projects is also growing and investment opportunities in the sectors are likely to develop

faster in open economic policy.

6.5.2. Energy Sources of energy for industries are mainly electricity and gas. Unfortunately, we do not have gas supply in

northwest Bangladesh. This hinders establishment of certain industries. This area receives energy from

electricity. Gas can be used in producing electricity and fertilizer etc. Lack of proper, mature and effective

infrastructural development creates constraints to industrialisation.

6.5.3 Trade Policies Bangladesh has made significant progress in liberalizing its trade regime. Customs duty rates have been

compressed to a range of 0.0-40.0%. The 2.5% import permit fee is the only other protective instrument for

most imports (a trade neutral 15% value-added tax is also applied). The import permit system is now automatic.

The cumbersome procedure for opening letters of credit has been simplified.

Customs duties are levied on all imports except raw cotton, textile machinery, certain machinery used in

irrigation and agriculture, animal feeds used by the poultry and dairy industries, and certain drugs and medical

equipment. Northwest Bangladesh should have special package of trade policy.

6.6. Problems of Industries Sugar mill, Rice mill, Flour mill, saw mill, ice factory, oil mill, match factory, Bidi factory, cold storage, Soap

factory, Iron and Equipment factory, Biscuit factory, Milk processing factory, Handicraft are some of industries

in operation in northwest districts. Most of medium and small-scale industries are agro-based industries. Those

industries create lot of employment. To find problems of those industries, explore prospects and provide policy

suggestions, specialized research on this issue is required to be conducted.

An analysis based on questionnaire survey and interview reveals the following problems, which are more or less

responsible for low industrial development.

6.6.1. Energy Crisis Energy is the main problem that inhibits the industrial growth. Industries in Dhaka and Chittagong use two

sources of energy - gas and electricity - where industries in these districts use electricity only. Electricity

77

dependent industries incur higher production cost and hence price of these product go up. As a result, electricity

dependent industries do not become able to contest with industries in Dhaka and Chittagong. Crises of

electricity supply make people find alternative sources of power, which increases cost, and discourage people to

invest. Irregular flow of electricity is also a problem of those industries. Industries requiring cooling facility

suffer from irregular flow of electricity. Availability of spare parts and high prices also increase costs.

In sum, supply of gas in Dhaka and Chittagong has made production cost low and lack of its supply made

products expensive in northwest region. Thus northwest region is comparatively not in a good position.

6.6.2. Lack of Infrastructure

Lack of infrastructure is another problem, which inhibits the industrial growth of the region.

6.6.3. Lack of Basic Industries Industrial growth of an area depends on the basic industry. A basic industry performs the major role to

industrial development. A basic industry influences the growth of non-basic industry within its buffer area.

Basic industry creates demand for various types of products to meet the demand various types of non-basic

industries setup.

6.6.4. Lack of Government Attention Traditionally this region lacks government attention. Lack of government attention is one of the major problems

of industrial growth of the area. For example, appropriate government attention could bring natural gas in this

region that could provide basis of industrialization in this region.

6.6.5. Lack of Capital Industrial development depends on the capital. To setup an industry needs lot of capital support. Most of the

rich people live in Dhaka and invest there.

6.6.6. Lack of Forward and Backward Linkage Industries Forward and backward linkage among the industries may ensure the industrialization of an area. If forward and

backward linkage is established among the industries of an area, then product of an industry use as a raw

materials of another industry. In this way one industry may be sustained by others. After processing of each

stage value adds with products. This area lacks proper forward and backward linkages of industries.

6.6.7. Low Return of Working Capital When any entrepreneur invests in industrial sector then he requires waiting for return. But if he invests in trade

or business then the return rate is fast than that of industry. In the term of economics the gestation period is long

in industries than in trade and business. These problems create pressure on industrialists specially those who

78

established industries taking loan from bank or financial institutions. Sometimes they need to pay loan

installment before starting production. For that the entrepreneurs do not prefer investing in industrial sector.

6.6.8. Risk Risk is a problem of industrialisation. Industrial investment is a risky investment compared to trade or stock

business. People of middle income prefer trade and stock business to industrial investment. Failure of market

may collapse industry. Potential entrepreneurs do not feel encouraged to invest.

6.6.9. Lack of Sufficient Storage Facility Industries based on wheat and maize require storage facilities at peak season when storage of commodities can

be done. They are not able to continue production over the year. If the storage capacity is ensured then

industries could be run over the year.

6.6.10. Transportation Problem Local road network system has not yet developed properly. Collection of inputs from rural area and distribution

of final products to local markets become difficult. Specially small and cottage industries located at thana and

village levels faces transportation problem.

6.6.11. Other Problems Survey results show that the following problems also prohibit the process industrialisation and industrial

growth.

(1) Weak urban economy does not influence the industrial growth

(2) Lack of skill manpower

(3) Political clash

(4) Lack of knowledge of the entrepreneur

(5) Corruption process in the boarder area in imported goods

(6) Dependency on the natural production

(7) Corruption in production of the industries

(8) Difficult to contract with the foreign buyers

(9) Marketing problem

(10) Lack of government incentives

6.7. Prospects of Industrial Development and Growth – A Survey based Analysis

79

There is availability of natural resource that could be used in industrialization of this area. This could influence

future industrial growth if energy and other problem are eliminated. Various types probable industries that could

be established. Survey results suggest that there are opportunities to establish agro-based and food-processing

industries on high priority based on availability of raw material and human capital. Those are:

6.7.1. Agro-based Industries Northwest districts produce lot of agricultural products. But no large-scale agro-based industry is located. As a

result, these agricultural products are sold without adding any value. Various types of agro-based industries like

Jam, Jelly, Automatic biscuits, Chips and other types of industries could be setup with existing industries

properly utilized.

6.7.2. Coal allied Industries Fulbari and Boropukuria of Dinajpur possess coal mines. Power industry could be established using coal, which

will lead to the basis of industrialisation.

6.7.3. Cement Industry

Northwest possesses hard rock mine. At present, hard rock is imported from India. Thus possibilities of cement

industries are very bright along with other facilities from government. Process of urbanization leads to increase

in demand for cement. Establishment of cement industry will be able to meet domestic demand, and cement can

also be exported through land ports located in northwest.

6.7.4. Medicine Industry

Northwest districts also possess some medicinal products that could be used in medicine industry. There is

potential for establishing medicine industries with proper arrangements. Cheap labor could be used in these

industries with appropriate training.

6.7.5. Jute industry and Cotton Industry Large amount of jute and cotton is produced in this region but no industry is located in the area. Jute and cotton

processing industries and cotton-allied industry along with backward linkage industries could be setup that will

create employment. Cotton and jute are also used as inputs in textile and garments industries.

6.7.6. Garments industry Garments industry is labor-intensive industry and cheap labours are available in northwest. Living expenses in

this regioin is comparatively lower than those in Dhaka and Chittagong. Establishing garments industries in this

area would lead to generation of employment and income and provide a better life to the people in this area.

6.7.7. Other Industries

80

Handicraft, soap factory, cloth industries, paper mill and various types of industries could be

setup. Availability of resources will support all types of industries.

6.7.8. Integrated industries (Sugar mill, paper mill and Distillery)

Sugar mills located in northwest can properly be utilized as integrated industry. Sugar mills produce sugar,

paper and distillery products. Sugarcane is used as inputs to produce sugar, husk used to produce paper,

chittagur to produce distillery products. Sufficient production of sugarcane and efficient use of sugar mills can

yield these joint products.

6.7.9. Trade with Neighbouring Countries Northwest districts possess four land ports, which can be infrastructured for trade with neighbouring countries.

This region is flanked by neighbouring India, Nepal and Bhutan. If proper transit facilities are achieved from

India, trade between Bangladesh and Nepal and Bangladesh and Bhutan could be happened with existing trade

Bangladesh and India. Further, possibility of trade Bangladesh and China could be explored. This could lead to

establishment of trade-oriented industries through importing inputs and exporting outputs. Figure 7.1 shows

locations of neighbouring countries India, Nepal and Bhutan.

Figure 7.1: Map Showing Location of Neighbouring Countries

81

6.8. Conclusion This section presents a survey-based analysis of problems of industrialization in northwest. It also identifies

sectors on which new industries could be established or existing industries could be improved to have benefit in

a socially and economically efficient manner. We conduct survey on identification of problems of

industrialization in each district. Most of the respondents suggest to establish agro-based and food processing

industries. Power crises and lack of government are observed to be two important problems of industrialization

in this region. Industrial development depends on some parameters, which help to enhance successful

industrialization. Parameters like, transportation efficiency, and efficiency in water and energy supply must be

improved substantially.

Every developed country has gone through a specific process of development. W.W. Rostow’s theory of

development has classified the process into five stages. Among the stages we are at the third stage, which is

called “Take-off” stage. In order to cross the stage and reach the next, mass level of industrialization is

important. Emphasis on the industrialization is not only important for employment creation but also for reaching

the fourth stage, which is called “Drive to Maturity”. Northwest region could be an industrial zone if

infrastructural conditions are improved and energy crisis is solved and investment would be strengthened by

82

local and outer entrepreneurs. In this process this area would flourish as an industrial area. In order to get

balanced development, regional imbalance should be removed.

7. Potentials for Development and Expansion of Industries in Northwest

7.1. Introduction

Opportunities of productive investment in any area depend mainly on availability of

resources and pattern of demand. Compatible with prevailing demand and supply conditions

is imperative for investments in industries in order to be financially viable. This section

presents a profile of resource availability, demand pattern and investment opportunities in the

northwest Bangladesh consisting of Panchagarh, Thakurgaon, Dinajpur, Nilphamari,

Rangpur, Kurigram, Lalmonirhat, and Gaibandha. We use data on the pattern of resource

availability mainly from secondary sources.

This section follows the structure below. Subsection 2 discusses resources and factor

endowments in northwest Bangladesh in particular and Bangladesh in general; Subsection 3

talks about investment potentials of large, medium, small and cottage industries in northwest

Bangladesh; Subsections 4 and 6 discuss demand pattern and nature of demand and need for

differentiated products respectively and Subsection 7 concludes the section.

7.2. Resources and Factor Endowments

7.2.1. Availability of Resources

Being the term resource very broad, depending on the purpose of analysis it can be defined in

different ways. For industrialisation in general, the availability of physical and institutional

infrastructures, factors of production particularly labour, capital and entrepreneurship and

intermediate inputs, that is, unprocessed and semi-processed materials are relevant and

important as determinants of investment opportunities. Although different scale of industries,

viz., large scale industrial establishments, medium scale establishments, small and cottage

industries require different levels of resources endowments. The northwest has UEPZ, coal

83

mine, hard rock resources and agro-based cash crops, food crops, vegetables and spices. This

area possesses substantial amount of livestock and poultry resources as well.

4.2.2. Physical Infrastructure

Among physical infrastructure, transportation network is the most important. Resource

mobility and access of producers and consumers to various markets depend on this

infrastructure. In northwest districts in Bangladesh, the transportation infrastructure is not yet

well developed. It is hard to believe that these districts are not directly connected by rail,

airport to the Chittagong and Mongla seaports. In northwest districts, transport systems are

fragmentary and districts do not have good network of road and rail connections. Poor

infrastructure of road and rail impedes speed and hence increases the cost of transportation in

terms of time as well as money. This area has infrastructure like, airport, EPZ and land ports.

Implementation of effective interaction between airports, EPZ and land ports can lead to

facilitation of export-oriented industrialisation.

7.2.3. Institutions

Local level institutions, both government and non-government are important to facilitate

need identification, local level planning and implementation of development projects. Lack

of these can lead to failure of policies and project of rural industrial development. This is as

much true for policies adopted to develop industries as it is true for agriculture. Viable local

institutions can act as vehicles for introducing new physical, social technologies, people

participation and training, resources mobilization, planning and goal setting and facilitating

provisions of services. Field visits and discussion with local people find out that this region

possesses colleges, university, renowned NGOs, youth development and training centre

although there are no effective specialized government or non-government training

institutions for industries in the northwest districts to serve above purposes.

7.2.4 . Labour Resources

For expansion of all types of industries - large, medium and small and cottage industries –

physical capital plays a critical role among the factors of production along with tools and

84

equipments to industrialisation and development. Achievement of desired growth of

industries would require labour along with capital. It is therefore important to assess the

magnitude of surplus labour that exists in an area for a planned expansion of industrial

activities. Reliable and latest data are yet to be available for private research. Not much can

be inferred from data except that the extent of participation in economic activities.

Data on pattern of labour force is available from Agricultural Census 1977, which classifies

labour occupation into agriculture, nonagriculture and nongainfully employed. All activities

related to cultivation such as planning farm work, supervising the agricultural workers,

keeping livestock records, rearing and feeding of poultry birds etc. are classified as

‘agriculture’. The category ‘nonagriculture’ includes service, business etc. and the

‘nongainful’ category includes students, housewives, etc. Agriculture employs the largest

proportion of labor force.

Survey results indicate that substantial amount of surplus human resources exists in the

northwest districts with some seasonal variations. Even during the Kharif season, there are

some disguised labour unemployment. However, during the rabi season, a surplus larger than

the national average is available in these districts. Industrial production activities are not

likely to face any labour shortage problem in a quantitative sense in any of these districts.

7.2.5. Natural Resources Endowments

7.2.5.1. Fulbari and Boropukuria Coal Mine project 1

Fulbari and Boropukuria Coal Mine projects are located in the northwest districts. These

mine industries can provide a basis for energy source. Energy is the main power of

industrialisation and agricultural development. The Boropukuria Coal Mine starts its journey

in 1994. With many ups and downs, the commercial production of coal starts after twelve

years in September 2005. Target of exploiting coal per year is ten lakh tones.

1 The five-year project implementation contract was signed with the Chinese contract institution, China National Machinery Import and Export Corporation in 1994. The project implementation cost was Tk. 1600 crores against a fixed budget of Tk. 900 crores. Mentionable that there happened an accident on September 23, 2006 that stopped production of this mine because 80 lakh dollars valued machinery was under clay of the mine.

85

The two-unit Boropukuria power station (electricity generating center) of 250 megawatt is

established with a view that the coal of the Boropukuria Coal Mine would be used in this

station as fuel. The daily requirement of coal to run these units is more than two thousands

tones. Unfortunately, from the one of the two wells now gives only one thousand to one

thousand and three hundreds coal every day. According to the contract, Bangladesh would

take the responsibility of production and administration of the mine after three months of

successful commercial production of coal. For that, there is a provision of training the

manpower. But because of the inability of producing trained manpower a contractor is

appointed for production, management and maintenance.

This research would find that efficient management and proper utilization of this resource

with trained human capital could lead to generation of infrastructures that could help flourish

large, medium, small and cottage industries in this region. This would also attract domestic

and foreign investors to build industries.

7.2.6. Intermediate Inputs

Successfulness of any industrialisation programme depends on availability of raw material.

Natural resources endowments and production structure of an economy determine the pattern

of raw material availability. Agriculture is the major form of production activity in all the

northwest districts. Paddy dominates within agricultural production. Other crops such wheat,

jute, cotton, tobacco, sugarcane, pulses, fruits etc. are important as potential source of supply

of raw materials for crop based rural industries.

Permanent crops, livestock and fisheries apart from agricultural crops, also constitute

important source of raw materials. There are few rural tanning industries in Dinajpur and

Rangpur. Capacity utilization of these is found to be not satisfactory. Moreover available raw

materials from livestock are not likely to be fully utilized. Establishment of new industrial

units and development and expansion of existing units should not therefore face any raw

material constraints.

86

Fuller utilization of beels, hoars, ponds, rivers and canals would be ensured to make available

fish based raw materials that would create employment opportunity and help alleviate

poverty. Policies as well as strong and efficient local institutions are important in this regard.

7.2.7. Storage Facilities Storage facilities in this region are mentionable. There are 51 cold storages located in

northwest districts among 336 cold storages in Bangladesh. Average number of cold storage

is about 6, which is larger than the national average of 5 cold storages. Table 7.1 shows the

number of cold storages and their capacity.

Table 7.1: Number of Cold Storage and their Capacity, 2003-04

Number Capacity (Metric tons)

Panchagarh 1 5,000

Thakurgaon 6 22,000

Dinajpur 6 37,080

Nilphamari 8 35,300

Rangpur 4 30,600

Kurigram 23 1,72,055

Lalmonirhat 2 19,000

Gaibandha 1 4,500

Total 51 3,25,535

Northwest 6.375 40,691.88

Bangladesh 336 18,58,965

Average 5.25 29,046.33

Source: Bangladesh Bureau of Statistics, 2005, Compendium of Environmental Statistics of Bangladesh, 2005.

Capacity of cold storages in the northwest region is on an average about 40692 metric tones,

national average of cold storages is about 29046 metric tones. It shows that capacity of

storages in northwest is greater than national storages on an average. These facilities can be

expanded and utilized to industrialisation in this low-industrially developed region in

Bangladesh.

7.3. Investment Opportunities

87

7.3.1. Large and Medium Industries

7.3.1.1. Agro-based Food processing industry

Northwest in particular is mainly an agrarian region. Besides, food grains like rice, wheat and

barley, and cash crops like sugarcane, cotton, tobacco and jute, this region produce various

kinds of fruits like mango, pineapple, guava, jack-fruits, banana, coconut, papaya, and

vegetables like potato, tomato and beans. This reveals that food-processing industry has great

prospects and potential. Unfortunately, this industry has not yet developed sufficiently,

perhaps due to lack of technology, training and investment fund. Food processing industries

in this region are mainly rice husking mills, flour mills, dairy farms, poultry, bakery and

confectionery, sweet making, cheese making and handmade pickles industry. These

industries produce goods mainly for the local markets. Agro-based products with high levels

and specialized training that can occupy domestic and international markets are not yet

produced. Investment interests in this line are highly encouraged.

Northwest districts have supply of raw materials for the agro-based industry. Production

fruits and vegetable has increased significantly in recent years. Subject to regular and

specialized training programs in creating skilled manpower for this industry by government

and non-government institutions, we suggest to invest in industries to canned juice, dairy and

poultry to occupy foreign market and attract domestic affluent customers. It appears that

there is a substantial demand supply gap in the agro-based food products.

Moreover, this region has basic attributes for agro-based industries, namely, rich alluvial soil,

year-round frost-free environment, adequate water supply and abundance of cheap labour.

Cultivation of vegetables, spices and tropical fruits can supply raw materials to local agro-

processing industries for both domestic and export markets.

Sugarcane is the input of sugar industry. Exiting sugar industries not fully utilized in a profit-

maximizing way. Survey results indicate that utilization of existing industries and

establishment of new sugar industries can not face input constraints. Jute products can be

used to set up industries to produce caps, carpet, bags etc. in EPZ and outside EPZ. Export-

88

oriented cigarette industries can be built in and Textile industries could be established to

fulfill local and foreign demand.

Improvement of quality and expansion of production of these industries can be implemented

through progressive agricultural practices and extension services, improved marketing

technique and modern processing technology, facilities and training.

7.3.1.2. Light Engineering Industries Light industries in Bangladesh produce a multitude of labour intensive goods including toys,

consumer items, small tools and paper products for the domestic market. Further

development for these industries offers various investment opportunities. Export-oriented

products in light industries have gained momentum in the past few years. Entrepreneurs from

Hong Kong, Japan and Korea are taking advantage of Bangladesh's cheap and easily

trainable labour and its infrastructure facilities to manufacture products for the export market.

Given cheap labour resources, there is great potential of setting up light engineering

industries.

7.3.1.3. Machinery Parts

A growing and increasingly affluent middle class creates demand for consumer durables.

There are some industries engaged in simple electronic goods. Export-oriented machinery

parts in light industries can be set up in this region.

7.3.1.4. Ceramic Products Ceramic products includes, among others, tableware, sanitaryware, insulator. Tableware

industry is labor-intensive and even after spending billions of dollars on automation,

developed countries could not reduce the number of workforce according to their

expectations. As a result, the cost of production will always remain extremely high in

developed countries and the premium brands are only surviving because they are charging

huge price to the consumers for their brand equity (BoI, 2007).

89

Northwest Bangladesh, being a gas-rich and low-labor-cost economy, could offer to be a

strategic partner in production and supply of ceramic products. Investment interests in this

sector are strongly welcomed.

Figure 7.1 shows the growth of export earnings from ceramic tableware exports. With

urbanization demand for sanitarywares and insulators are increasing in domestic and other

foreign markets. Northwest is a potential place to invest and produce these goods.

Figure 7.1: Growth and projection of Ceramic Tableware Exports from Bangladesh -

1995-96 to 2002-2003 (in million US$)

Source: Board of Investment (November, 2007), Government of the People’s Republic of Bangladesh. Web: www.boibd.org. 7.3.1.5. Leather Industry

Leather Industry includes finished leather and leather goods. The labor-intensive leather

industry is well suited to northwest Bangladesh having cheap and abundant labor.

Bangladesh has a domestic supply of good quality raw material, as hides and skins are by-

products of large livestock industry. Adequate government support in the form of tax

holidays, duty free imports of raw materials and machinery for export-oriented leather

market will lead to improvement of this industry. The industry lacks domestic technology

and expertise and local support industries such as chemicals are still under-developed.

Domestic technology and expertise and local support industries such as chemicals must be

improved properly in order to run this labour-intensive industry efficiently.

http://www.boibd.org/

90

The leather includes some ready-made garments and footwear. Footwear is more important

in terms of value addition. This is the fast growing sector for leather products.. Presently

Bangladesh produces between 2 and 3 percent of the world's leather market. Most of the

livestock base for this production is domestic which is estimated as comprising 1.8 percent of

the world's cattle stock and 3.7 percent of the goat stock. The hides and skins (average annual

output is 150 million sq.ft.) have a good international reputation. Foreign direct investment

(FDI) in this sector along with the production of tanning chemicals appears to be highly

rewarding.

Northwest Bangladesh could be a potential off shore location for leather and leather products

manufacturing with low cost but quality products, having the basic raw materials for leather

goods as well as for the production of leather shoe, a large pool of low cost but trainable

labour force together with tariff concession facility to major importing countries.

Northwest Leather Zone could be set up relocating existing industry sites to an well-

organized place. New FDI inflow is highly encouraged and foreign investors are welcome to

have the opportunity.

7.3.1.6. Natural Gas-based Industries Electricity, fertilizer, and petro-chemicals can be produced using natural gas. Bangladesh has

a substantial amount of gas reserve of about 20 trillion cubic feet (BoI, 2007). There is a

huge demand for fertilizer in northwest Bangladesh in particular and Bangladesh in general

as the agriculture is the principal sector of the economy.

The private sector power generation policy is announced in 1996 under which private power

companies are exempt from income tax for 15 years. Several barge-mounted power plants are

in operation. But an extensive demand gap for electricity is crucial. Opportunities exist in

developing new plants (barge-mounted and other, large, small and mini), constructing

transmission and distribution system, rehabilitating or upgrading existing plants and

supplying a variety of support services. Northwest Bangladesh can be potential place to

invest in these fertilizer, electricity and petro-chemical industries if natural gas can be made

available.

7.3.1.7. Readymade Garmants and Textile Products

91

Readymade garments and Textile industry are fastest growing industry in Bangladesh

accounting for more than 75% of total exports. Bangladesh is best placed for garments and

textiles because of cheap labor and trade status with the EU. Government incentives for the

spinning and weaving industries include a 15% cash subsidy of the fabric cost to exporters

sourcing fabrics locally. There is a huge fabric demand-supply gap in the RMG industry,

which is being met by imports. Thus the potential for backward linkage industry is enormous.

The phenomenal growth in RMG is experienced in the last decade. With about 2,600

factories and a workforce of 1.4 million, RMG jointly with knitwear accounted for more than

70% of total investments in the manufacturing sector during the first half of the 1990's.

Figure 7.2 exhibits the growth trend of readymade garments industry in Bangladesh.

Figure 7.2: Growth of RMG Exports from Bangladesh (1980-81 to 1999-2000)

In million US$

Source: Board of Investment (November, 2007), Government of the People’s Republic of Bangladesh. Web: www.boibd.org.

It is evident from Figure 7.2 that starting from 1980-81 its growth performance is

encouraging. Therefore we would strongly suggest that some rules and regulations could be

made regarding investment in northwest districts in that entrepreneurs who have a substantial

amount of RMG share in Bangladesh must invest in this poverty-ridden and monga-ridden

areas, in particular in UEPZ.

92

7.3.2. Small and Cottage Industries

Resource availability and demand patter in this region conclude that opportunities for

investment in small and cottage industries do exist in all the districts in varying degrees.

Prospect of small and cottage industries in processing different primary materials produced in

these districts are substantive in view of unemployed labour, particularly during the off-peak

seasons. Fisheries resources management and processing of raw materials and wastages from

livestock and permanent crops can offer opportunities in investing small and cottage

industries. Agricultural raw materials and their wastage processing in small and cottage

industries can provide opportunity in employment and income generation, given the

comparatively low land man ratio in small and cottage industries. Opportunities perceived by

Local people for Small and Cottage Industries are given in Table 7.1.

Table 7.1: Potential Investment Opportunities of Small and Cottage Industries Perceived by Local People

Supply based Potentials Demand based Potentials

Panchagarh Thakurgaon and Dinajpur

Grain and paddy processing, oil milling, poultry, duckery, cattle rising, bakery, sweetmeats and confectionary, handloom, weaving and dyeing, jute products, fish net making, bamboo, cane, grass and reed products, bidi making.

Bakery and sweetmeats, rice processing, mustard oil, cheera, muri, etc., cloth, soap, wood products, plough threshers, spray, spade, power pumps, deep tube wells, bicycle, motor cycle, radio, rickshaw, TV and watch repairing services.

Nilphamari Rangpur Kurigram Lalmonirhat and Gaibandha

Bamboo, cane, grass and reed products, bidi, handloom, weaving and dyeing, jute rope and twine, fish net making, bakery, sweetmeat, confectionery, grain and paddy processing, oil milling, poultry, duckery and cattle rising, carpentering, wood products.

Cloth, soap, bidi, rice products, oil, bakery, hosiery, pottery, cartwheel, plough, spade, carpentary, and wood products, cycle repairing, radio repairing, motor cycle repairing, Electronics Products

7.4. Demand Pattern and Nature of Demand for Industrial Products

93

Expansions of industries, apart from the supply of raw materials, depend on the demand

pattern of industrial products. The lacks of demand sometimes act as a major constraint to

development and expansion of industries.

Products of large, medium, small and cottage industries comprise of a large variety of items

whose production needs various levels of skill. In order to show the type of products and

their market ramification, skill-based classification of these products is useful. Products can

be classified into four categories in terms of skill:

a) Commodities produced with primary skill by family labour without any formal

training;

b) Commodities produced with secondary skill which is obtained through family or

general training;

c) Commodities produced with higher level of skill which is acquired through

formal general or specialized training; and

d) Commodities produced with specialized skill, which is obtained through

specialized training.

In general, goods produced with primary skill are demanded and sold in local markets.

Secondary skill based commodities are sold in markets of urban towns and metropolitan

cities. Products of high levels of skill and specialized skill are exported and demanded by

affluent people. All these four categories products have their demand locally and

internationally.

7.5 The Need for Differentiated Strategies

Production and marketing of industry utility products serving rural local markets do not

require much skill, as these do not face any real competition from modern industries and

imports. These goods are slow moving items sold to individual consumers. These include

articles made from grasses, leaves, reeds and fibres like mates, baskets, boxes, bags etc. The

handicraft commodities, which are also utilitarian in nature, however cater primarily to the

urban markets. These include cane, bamboo, willow products, jamdani, bell and brass works,

94

jute products, products of sericulture and some items of coir and pottery products. Skill

requirement for both production and marketing of these products may be substantial.

Quality and design tend to become very important for the type of handicraft products

mentioned above because they command wide and expanding markets where they have to

compete effectively with products of large firms. The artistic commodities of high unit value

are produced mainly for foreign markets. Their production requires sophisticated skill.

Marketing is thus complicated because quality, technology, design, shape and finish of the

product assume great importance. However, these products are generally not in direct

competition with products of large industrial units. The product in this category are ethnic

crafts of items like Nakshi kantha, Sitalpati, Satranjee, handwoven carpets, wall hanging

made of jute or coir, glazed pottery and leather products.

It may also be recalled that there exist some production clusters specializing in particular

products in Rangpur and Dinajpur districts. Satranjees and Jute bags are produced in Rangpur

and Dinajpur. This type of production concentration facilitates input and service delivery,

supervision of quality, design and cost and helps in the marketing of specialized products.

7.6. Conclusions We can therefore conclude that different strategies are required for promotion and marketing

of different products depending on the skill intensity, product type and the characteristics of

buyers. Failure to make this distinction and adoption of a uniform strategy may lead to the

neglect of market for some commodities. It is not surprising in Bangladesh to find a situation

where the government emporium, export houses and traders put too much emphasis on the

marketing of high value artistic commodities and neglect to push traditional goods of

utilitarian character in the market.

Northwest Bangladesh possesses most of the resources and inputs for industrialisation with

some constraints. Given resources availability and government patronization and necessary

steps there are opportunities for setting up large, medium, small and cottage industries.

8. Summary, Conclusions and Recommendations

95

8.1. Introduction

Northwest Bangladesh, most neglected and deprived region of the country, lacks

industrialization. This region is characterized by agrarian economy, poverty and monga with

surplus labour force and it has a variety of agricultural cash, food crops, vegetables and

spices. The region also possesses four coal mines and three hard rock mines along with EPZ

and land ports. This research discusses status and performances of industrial sectors, role of

EPZ and land ports to industrialization, and identifies problems of industrialisation and

prospects for development. The objective of this section is to present conclusion and advance

some recommendations for industrialisation and industrial development. Development

experience indicates that industrialization must begin from developing and strengthening an

industrial base compatible to domestic physical and human resource endowments, physical

infrastructure, domestic and foreign markets and foreign exchange position. This section

follows this organisation. Subsection 2 gives summary and conclusion; and Subsection 3

gives some suggestion and recommendation.

8.2. Summary and Conclusions

8.2.1. Status and Performance of Industries, and Constraints

Number of industrial establishments and persons employed are on average lower in

northwest districts than national averages. Economic performance of existing industries is

measured in terms of gross output and value added. Results show that average values of gross

output and value added are lower than national values. Analysis of value added and

efficiency performance excludes demand and prices of other outputs and inputs and many

other structural and institutional constraints that may affect performance of industries.

Availability of raw materials in time and in right quantity, high price of raw material,

shortage of working capital, machinery and tools, lack of organized markets, competition

from imported and mill made goods and low selling prices relative to costs are some of

factors that constraint performance of industries. Among these, rising input prices and

shortage of working capital appear to be the major constraint on capacity utilization and

performance. Marketing of products of small and cottage industries and price support system

96

on the input and output sides and credit facilities must be included in any programs for

development of industries. Moreover, proper policies could be taken to upgrade skills of

labour and technology used in production.

8.2.2. Resource Availability and Demand Pattern Analysis of existing resource endowments and production pattern in the districts revealed as

expected that raw materials for food processing industries in the districts are locally

available. There exists considerable potential of utilizing agricultural and livestock waste

materials if efficient organizational mechanisms can be devised for their collection, storage

and distribution. The northwest has the particular advantage of a relatively developed

transport and communication infrastructure linking it closely with the capital city of Dhaka

and port city of Chittagong. Labour force in all the districts appear to be substantially

underutilized indicating that labour availability from a quantitative point of view may not be

a constraint on expansion of industries. However, availability of skilled labour force in these

districts in particular may be a limiting factor on expansion of skill intensive products. These

two districts however have potentials for improving the supply and quality of livestock.

Demand conditions appear to be particularly favourable for industrial commodities. There

exist considerable demand for fertilizer and textile products, which presently are being met

by suppliers form outside in all the districts. Raw materials for this product group is not fully

available locally and there may be short of supply of skilled workers. Chemical products also

seem to have some prospects though to a limited extent. Importance of these products in the

consumption basket of local people will perhaps increase with increase in income levels.

Although existing demand pattern appears to be particularly conducive for consumption

goods, capital goods like agricultural implements may also find a ready market given the

dominance of agriculture in all districts. These sort of items need to be emphasized much

more than what has traditionally been done because of their forward linkage effects which

would feedback upon industries in a positive manner by increasing agricultural productivity

and income which in turn would increase raw materials supply as well as demand for

industry products. However, lack of knowledge about alternative product types that are

functionally more efficient than the existing ones and are within the means of small farms in

97

terms of price and lack of access to technical and financial facilities for producing items that

are being used now may sap initiatives for setting up industries of this kind.

8.2.3. Entrepreneurship Available literature on the nature and determinants of entrepreneurship indicate that both

demand and supply factors are important. On the demand side, it appears that special policy

interventions are necessary to insulate entrepreneurs in rural industries from the inhibitive

effects of the product, factor market imperfections, and ensure a favourable cost-price

structure as economic incentive for entrepreneurial growth. On the supply side, it is

necessary to identify specific groups of individuals on the basis of particular socio-

demographic, psycho-cultural and economic characteristics determining entrepreneurship

potential. The literature provides some evidence with respect to the possibility that

entrepreneurship potential is higher in people who are relatively young male with moderate

education and have trading/business experience and access to family labour. Additional

weightage may be put on people who possess some, relatively scarce, resources such as small

amount of saving, membership in social institutions such as cooperatives and some technical,

administrative, financial and marketing capabilities.

Various efforts undertaken in Bangladesh in the past did not make any conscious attempt to

approach the task of entrepreneurship development systematically keeping in view the multi-

dimensional nature of the problem. Some programmes emphasized only training, some on

credit while some others took a many sided and a relatively comprehensive approach failed

to identify correctly the target groups and make appropriate assessments of their needs.

Another problem has been management of institutions engaged in promoting rural

entrepreneurship.

What is therefore needed is a complete package consisting of training, information, financial,

technical, and administrative support and appropriate macro-economic policies to ensure the

survival and growth of entrepreneurship in large, medium, small and cottage industries.

8.2.4. Institutional Development

98

The role of institutional development is to be viewed mainly from the perspective of aiding

and accelerating the process of development by removing some of the structural inadequacies

of the subsector.

8.2.5. Supply of Materials For all the districts there is need for improving productivity of the existing industries.

Industries, which are doing relatively, better can be expanded further. As pointed out these

industries in general need assistance in respect of constraints arising from both factor and

product markets. Regularity of supplies and prices of raw materials along with provision of

credit are identified as major problems on the supply side. Raw materials consumed by these

industries are mostly locally available (agro-based or natural resources like clay). Others

such as chemicals, weaving and fishnet making, meta works, cycles and radio repairing and

tailoring units, however, use materials procured from outside the locality. In supplying these

raw materials to industries middlemen extract significant margins which raises the cost of

these materials to the enterprises. Being weak in bargaining, final prices paid by the units are

usually higher than what they should be. In these circumstances, we recommend setting up of

some institutional arrangement to procure, store and supply essential raw materials to

selected industries in all the districts. Logistics, however, will pose to be as difficult tasks.

For raw materials procured from outside the locality storage facility needs to be arranged. In

this respect, facilities already developed by BRDP, BADC and food department may be

shared with suitable arrangements by entrepreneurs. Since the guiding principle in providing

logistics is regularity of supply with minimum cost of distribution other alternatives such as

utilizing the existing wholeselling and retailing outlets may also be examined for supplying

some of the materials to some of industries. Upazilla complexes developed as facilitating

centers for rural industries may be used to provide logistical support in respect of raw

materials for small and cottage industries specially. For locally available raw materials such

services need to be arranged at respective union levels where there are concentrations of

certain small and cottage industries like paddy and other food grain processing, oil seed

crushing, jute products, wood works and pottery. Once again the physical facilities that are

being developed by other agencies at union level may be shared by entrepreneurs. This of

99

course, raises an important issue on the changing role of active participation in procurement,

production and distribution related functions.

8.2.6. Organization Capacity For growth and development of industries, users organization would receive delivery of

supplies and other services. They can act as contact point between public officials and their

member units for receiving inputs and output related assistances. They can contribute to

improvement of technological base of industries along with upgradation of skill of workers

and quality of their products. On the supply side, besides raw material, supply of equipment

and spare parts, in particular, new ones has to be ensured by institutional arrangement.

8.2.7. Supply of Credits Credit constraint is identified as a constraint for all sorts of industries. There are specialized

banks – Bangladesh Shilpa Bank to provide credit for large and medium industries and

BSCIS has been established to take care of small and cottage industries. These institutions

provide procurement, storage and marketing credit to industries under different terms and

conditions. For developing physical facilities and acquiring transport equipments, funds

might be obtained from aid-giving agencies and countries. Misuse of credit, although

rampant, and has become a sensitive issue in Bangladesh.

8.2.8. Training On the input side, for skill development, which is linked with development of technology

training is important. We can aim at improving upon traditional methods of production,

processing, packaging and preservation, and some of the managerial skills relating to

accounting and costing, pricing and marketing at the levels of users organization through

skill development efforts. Physical facilities for training that are available (BDB, local govt.

and schools) at Thana level can be used for organizing training programmes. Ministry of

LGRD and Cooperative, Ministry of Women’s affairs, Ministry of Youth Development and

Ministry of Commerce and other voluntary and charitable organizations may adopt integrated

steps for Skill development programmes. Non-government organizations may be given a

greater role to play in medium, small and cottage industries.

100

8.2.9. Marketing

Marketing support for selling output of industries is probably more acute. It is needed,

therefore, to set up some organizational arrangement to procure, store and distribute products

of industries in northwest districts. In fact, the best strategy will be to provide inputs and

marketing assistance under the same administrative set up so that there is coordination

between the functions and economy in providing those services.

Prices charged for inputs and paid for outputs should be reasonable to encourage production

and sales and thereby help generate revenue surplus for the enterprises so that progressively

they can acquire improved technologies for these industries. For maintaining employment

around the year for those who are now partly engaged in most of these industries and to

create new off-farm employment opportunities in rural areas input-output price subsidies to

some of the industries may have to be provided. Given the overall shortage of non-

agricultural employment opportunities, subsidizing rural industries may be desirable from the

point of view holding down the rate of migration to urban areas. The question of price

support may be important only for some of the industries.

Besides procurement, storage and distribution of industry products, assistance in improving

the design, quality and packing of products through research and development activities is

required especially for small and cottage industries. Once the supply of production and

distribution networks are established through the proposed organizational setup attempt, may

be made to enter into subcontracting deals with various government and semi-government

and private organizations to supply some of their requirements manufactured by industries

utilizing available materials and skills.

8.10. Technological Improvement

With rising input and other costs, production of industrial section must be increased.

Improvement in technological base is very important to increase productivity and production

of various industries as we observe that efficiency performance of industrial establishments

can not be increased much. For this, we should first take initiative to conduct research and

101

development to identify and choose suitable technological options for large, medium, small

and cottage industries and encourage their planned adoption. Second, identification of

products to be manufactured which have sufficient domestic and international market

demand and which will contribute to development in agriculture, rural transport and other

rural economic activities should be carefully implemented. It is argued that technological

advancement may be taken spontaneously by entrepreneurs if a relative price of input and

output is set right. Technological improvements will not take place in industries of northwest

districts in particular and Bangladesh in general without proper institutional support given the

imperfect market and other conditions in which industries operate. Government and other

institutions could take up to date initiatives in this regard.

8.2.11. Organisation and Planning

Organizations are poorly equipped with technological set-up and know-how. Organizational

capability of manager will have to be raised to recommend suitable plans and policy projects

appropriate for rural industrialisation. Bureaucratic hindrances must be eliminated so that

activities under a program of developing large, medium, small and cottage industries can be

pursued speedily. Official procedures must be placed by a system of managerial control

based on sound information system.

8.3. Suggestions, Recommendations and Policy Implications

In this research we assess productivity performance of industries in Northwest Bangladesh

applying econometric model – the stochastic frontier approach using secondary data. As

productivity performance is success indicator. The model estimates quantitatively the

contributions of efficiency improvement to industrial output. This helps us predict how much

productivity gain could be obtained if industries were run efficiently in a cost-minimizing

way. In other words, we could predict how much production cost could be reduced if we

could run industries efficiently in a cost-minimizing way. Results indicate that efficiency

performance of industrial establishments is about 95 per cent. This implies that we can not

increase output much through improvement of efficiency of industries. Therefore we have to

adopt technological progress.

102

Coal Mine: Energy as an input of production acts as the basis of industrial establishments

and development. Required availability of energy and low-cost energy supply reduce

production costs, attract domestic and foreign investments and thus facilitates

industrialisation in a region. Northwest Bangladesh is fortunate having natural resources -

Fulbari Coal Mine and Boropukuria Coal Mine, Dighipara Coal Mine and Khalaspir Coal

Mine. These resources can be utilized properly to the development process of

industrialisation in the northwest. Coal fields should not be leased out to any foreign

company. Bangladesh should maintain its sole ownership and its products to get optimum use

of it.

Hard rock: Maddhapara in the Dinajpur district possesses an unlimited reserve of hard rock

consisting of granodiorite, quartzdiorite and gneiss of the Pre-Cambrian. Hard rock deposits

are also recorded in Ranipukur and Pirganj in Rangpur district (Rahman, 1997). Besides

these, there are surface deposits of construction materials such as boulders, gravels etc. at

Tetulia-Panchagarh in Dinajpur district. As there is a huge deposit of hard rock, it is expected

that it will be possible to extract this rock for about 64–70 years at the rate of 2.0 million tons

of stone per year. These projects can provide more than 30,000 new jobs opportunities both

at mine sites and later on in industrial sectors which can help alleviate poverty and monga in

the northwest and give substantial benefit to the economy of northwest and to the national

economy. The discovery of such huge deposits of coal and hard rock is a blessing, and proper

development of these resources will open a new era for the country to enter the industrial

world. In the modern world, the sustainable economic conditions of any nation depend on

how developed that country's industrial sector is, especially in the field of mineral resources.

So, minerals based industries are an important factor for accelerating the economic growth of

a country. Now, northwest has an opportunity to build up mineral-based industries as this

region has sufficient mineral resources on which industries can develop. All these together

will accelerate the country's economic development (Akhtar, 2000).

Hard rock can be used as construction materials to build housing apartments, bridges, roads,

highways, dams, embankments, to control flooding and river erosion and will also be used as

railway ballast, decoration pieces, tiles, etc.

103

Gas for fertilizer: Northwest is an agrarian region. Agriculture is the main source of income

and way of livelihood of people. Proper fertilizer application is very important in order to

sustain and increase agricultural production. Agricultural products provide among other

inputs of production of agro-based and food processing industries. This region suffers from

fertilizer crisis also. Therefore this region demands establishment of fertilizer industries at

least to ensure required supply of fertilizer in this region to obtain maximum benefit form

agriculture. For that, gas supply must be ensured.

Textile and Garments: Textile industry is a demanding industry in this region. This is

required for both meeting demand for cloth and employment. People could be encouraged to

use locally produced textiles products. Establishment of readymade garments industries can

get comparative advantage of cheap labour and has both domestic and international markets.

NGOs can play a vital role to encouraging foreign partners and donars to invest in this region

and finding market for these products. I wonder if NGOs, Banks, and other financial

institutions can directly invest in this sector of this region.

Investment in UEPZ: EPZ provides a great opportunity and infrastructure of investment.

Proper investment can provide employment of thousands and help alleviate poverty and

reduce the severity of monga.

What to do: Local civil society people, business community, government institutions and

non-government organizations devoted to development this area must always remain alert

about proper utilization of these resources. Resources should be prohibited to be taken away.

They should also make people aware of the proper utilization of these resources. People are

the owner and at the same time protector of resources.

The government should come forward to taking necessary steps first. Government can act as

facilitator in this regard. A powerful commission can be formed to look at every aspect of

industrialization. We would like to suggest that the government and donor agencies could

give proper attention to coal, hard rock available in this region and to bring gas here which

could give the basis of industries and help develop industrialisation. We would like to

104

emphasize that people do not want cash help or help in kind from the government or any

other agencies. They want honourable job and position, they want to live on their own, they

want to stand on themselves. The government or donors in time of crises help people in kind

or in cash or the government run the food for work program. These do not provide them

sustainable employment.

Non-government organizations along with civil society and business community devoted to

development like RDRS should also come forward to taking initiatives to proper utilisation

of these resources under the privatization policy of the government.

Entrepreneurs and Industrialists who have substantial amount of investment in industries

such as, garments, textile, etc. at Dhaka and Chittagong could be encouraged to invest in

northwest Bangladesh. NGOs can play a vital role to encouraging foreign partners and donars

to invest in this region and finding market for these products Even I wonder if NGOs like

RDRS, ASA, PROSHIKA, Grameen Bank would have options to establish industries and

build sales centres in different parts of the country and explore foreign markets as they have

their contact with donor and other agencies. These activities could be viewed as social

responsibility of them. NGOs along with local businessmen and civil society people could

take necessary steps in this regard.

Research and development are closely related to each other. Research should be continued by

research institutions and NGOs on socio-economic and environmental issues. Environment

is associated with development. Drought, floods, river erosion and deforestation are some of

environmental factors, which affect productivity negatively. Utilisation of natural resources

requires a proper account of these resources. This region possesses beel, haor, rivers, forest

etc. Farm power, farm production, livestock, fisheries etc. are some of the factors

development of which is related to development of industrial sector. Comprehensive research

requires to be conducted on these issues. Along with their usual programs, NGOs like RDRS,

ASA, PROSHIKA, Grameen Bank etc. must keep some research component in their program

lists. We should remember that balance development requires not only credit but also

research to find relationship between development and other socioeconomic, environmental

and natural resources factors.

105

References

Aigner, D.J. and Chu S.F. 1968, On Estimating the Industry Production Function, American

Economic Review, 58, 826 - 839.

Aigner, D.J., Lovell, C.A.K., Schmidt, P., 1977. Formulation and Estimation of Stochastic

Frontier Production Function Models, Journal of Econometrics, 6, 21-37.

Ajibefun, I.A., Battese, G.E., Daramola, A.G., 1996. Investigation of Factors Influencing the

Technical Efficiencies of Smallholder Croppers in Nigeria, CEPA Working Papers, No.

10/96, Department of Econometrics, University of New England, Armidale, pp. 19.

Akhthar, A., 2000, Coal and Hard Rock Resources in Bangladesh, Geological Survey of

Bangladesh, Dhaka.

Ali, M. and Choudhry, M.A. 1990, Inter-regional Farm Efficiency in Pakistan's Punjab: A

Frontier Production Function Study, Journal of Agricultural Economics, 41, 62 - 74.

Ali, M., Flinn, J.C., 1989, Profit Efficiency among Basmati Rice Producers in Pakistan

Punjab, American Journal of Agricultural Economics, 71, 303-310.

B.B.S., 1997, Bangladesh Bureau of Statistics, Report on Bangladesh Census of

Manufacturing Industries (CMI) 1991-1992.

B.B.S., 2004, Bangladesh Bureau of Statistics, Report on Bangladesh Census of

Manufacturing Industries (CMI) 1999-2000.

Bakht, Z., M.A. Latif, D. Bhattcharya, and P. Paul, 1988, Sericulture Industry in Bangladesh:

Analysis of Production Performance, Constraints and Growth Potentials, Bangladesh

Institute of Development Studies, Dhaka.

Battese, G.E. and Coelli, T.J. 1995, A Model for Technical Inefficiency Effects in a

Stochastic Frontier Production Function for Panel Data, Empirical Economics, 20, 325 - 332.

Battese, G.E., 1992, Frontier Production Functions and Technical Efficiency: A Survey of

Empirical Applications in Agricultural Economics, Agricultural Economics, 7, 185-208.

106

Bauer, P.W., 1990, Recent Developments in the Econometric Estimation of Frontiers,

Journal of Econometrics, 46, 39-56.

BBS, 2002, Population Census of Bangladesh 2001, Planning Division, Ministry of planning.

Dhaka, Bangladesh.

BBS, 2006, Statistical year book of Bangladesh 2004. Planning commission, Government of

Bangladesh. Dhaka.

BEPZA, 2007, Bangladesh Export Processing Zone Authority, bulletin (various issues),

Bangladesh.

Board of Investment, 2007, Ministry of Finance, Government of the Peoples Republic of

Bangladesh.

Bravo-Ureta, B.E. and Pinheiro, A.E., 1993, Efficiency Analysis of Developing Country

Agriculture: A Review of the Frontier Function Literature, Agricultural and Resource

Economics Review, 22, 88-101.

BSCIC, Bangladesh Small and Cottage Industries Corporation (various publications),

Bangladesh

Coelli, T., 1995, Recent Developments in Frontier Modelling and Efficiency Measurement,

Australian Journal of Agricultural Economics, 39, 219-245.

Coelli, T., Battese, G., 1996, Identification of Factors which Influence the Technical

Inefficiency of Indian Farmers, Australian Journal of Agricultural Economics, 40, 103-128.

De Blij, Hj (19678) Geography: Regions and concepts: Wiley.

Dohrs, FE & LM Sommers, (1976) World Regional Geography: West Publishing co. St Paul.

Field, Brian. G and MacGeorge. Bryan. D., 1992, Forecasting Technique for Urban and

Regional Planning, UCL Press Limited, London, UK.

Førsund, F.R., Lovell, C.A.K., Schmidt, P., 1980, A Survey of Frontier Production Functions

and of their Relationship to Efficiency Measurement, Journal of Econometrics, 13, 5-25.

Friedmann, J & W: Regional Development & Planning a Reader; MIT Press, Cambridge,

Mass.

107

Glasson, J., 1974, An introduction to regional planning, Hutchinson Publication, London,

UK.

Goletti, F., 1994, The Changing Public Role in a Rice Economy Approaching Self-

Sufficiency: The Case of Bangladesh, Research Report no. 98, International Food Policy

Research Institute, Washington, D. C.

Greene, W.H., 1980, On the Estimation of a Flexible Frontier Production Model, Journal of

Econometrics, 13, 101-115.

Greene, W.H., 1993, The Econometric Approach to Efficiency Analysis, in Fried, H.O.,

Lovell, C.A.K. and Schmidt, S.S. (Eds), The Measurement of Productive Efficiency, Oxford

University Press, New York, 68-119.

Hallam, D. and Machado, F., 1996, Efficiency Analysis with Panel Data: A Study of

Portuguese Dairy Farms, European Review Of Agricultural Economics, .23, 79-93.

Haque, M.S. and Z. Hussain, 1984, Cottage Industries of Bangladesh – Potential for

Development, Institute of Business Administration, University of Dhaka, Bangladesh.

Hjalmarsson, L., Kumbhakar, S.C., and Heshmati, A., 1996, DEA, DFA and SFA: A

Comparison, Journal of Productivity Analysis, 7, 303-327.

Huang, C. J. and Liu, J.T. 1994, Estimation of a Non-Neutral Stochastic Frontier Production

Function, Journal of Productivity Analysis, 4, 171-180.

Jondrow, J., Lovell, C.A.K., Materov, I.S., Schmidt, P., 1982, On the Estimation of

Technical Inefficiency in the Stochastic Frontier Production Function Model, Journal of

Econometrics, 19, 233-238.

Kalirajan, K. and Flinn, J.C. 1983, The Measurement of Farm-specific Technical Efficiency,

Pakistan Journal of Applied Economics, 2, 167-180.

Kalirajan, K., 1981, An Econometric Analysis of Yield Variability in Paddy Production,

Canadian Journal of Agricultural Economics, 29, 283-294..

Kumbhakar, S.C. 1994, Efficiency Estimation in a Profit Maximising Model using Flexible

Production Function, Agricultural Economics, 10, 143 - 152.

108

Kumbhakar, S.C., Ghosh, S. and Mcguckin, J.T. 1991, A Generalised Production Frontier

Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms, Journal of

Business and Economic Statistics, 9, 279 - 286.

Kumbhakar. S.C., 1989, Modelling Technical and Allocative Inefficiency in a Translog

Production Function, Economics Letters, 31, 119-123.

Lingard, J., Castillo, L. and Jayasuriay, S. 1983, Comparative Efficiency of Rice Farms in

Central Luzon in the Philippines, Journal of Agricultural Economics, 34, 163-173.

Meeusen, W., van den Broeck, J., 1977, Efficiency Estimation from Cobb-Douglas

Production with Composed Error, International Economic Review, 18, 435-444.

MoI, 2007, Ministry of Industries, Industrial Policies (various), Government of the People

Republic of Bangladesh.

Muller, J., 1974, On Sources of Measured Technical Efficiency: The Impact of Information,

American Journal of Agricultural Economics, 56, 730-738.

Parikh, A., Ali, F., Shah, M.K., 1995, Measurement of Economic Efficiency in Pakistan

Agriculture, American Journal of Agricultural Economics, 77, 675-685.

Rahman, A, 1997, Mineral Resources of Bangladesh and their history: Huq Printers,

Arambagh, Dhaka.

Schmidt, P. 1986, Frontier Production Function, Econometric Review, 4, 289 - 328.

Seyoum, E.T., Battese, G.E., Fleming, E.M., 1998, Technical Efficiency and Productivity of

Maize Producers in Eastern Ethiopia: A Study of Farmers Within and Outside the Sasakawa-

Glabal 2000 Project, Agricultural Economics, 19, 341-348.

Shapiro, K.H. and Muller, J. 1977, Sources of Technical Efficiency: The Role of

Modernisation and Information, Economic Development and Cultural Change, 25, 293-310.

Sharma, K.R., Leung, P., Zaleski, H.M., 1997, Productive Efficiency of the Swine Industry

in Hawaii: Stochastic Frontier vs. Data Envelopment Analysis, Journal of Productivity, 8,

447-459.

109

Shrivastava, O. S. 1998, Economic of Growth, Development and Planning, Vikas

Publication, New Delhi, India.

Son, T.Vo. H., Coelli, T. and Fleming, E., 1993, Analysis of the Technical Efficiency of

State Rubber Farms in Vietnam, Agricultural Economics, 9, 183-201.

Tadesse, B. and Krishnamoorthy, S., 1997, Technical Efficiency in Paddy Farms of Tamil

Nadu: An Analysis based on Farm Size and Ecological Zone, Agricultural Economics, 16,

185-192.

Wadud, M.A and White, B., 2000, Farm Household Efficiency in Bangladesh: A Comparison

of Stochastic Frontier and DEA Methods, Applied Economics, 32, pp. 1665-73.

Wilson, P., Hadley, D. Ramsden, S. and Kaltsas, 1998, Measuring and Explaining Technical

Efficiency in UK Potato Production, Journal of Agricultural Economics, 49, 294-305.

Financed by RDRS Bangladesh

Questionnaire: Problem Identification of Industrialisation in this Region

Researcher

Md Abdul Wadud M.S.S. (Rajshahi)

Ph..D. (Newcastle, United Kingdom)

Professor Department of Economics Rajshahi University Rajshahi 6205, Bangladesh Email: [email protected]

This research is solely for academic reasons and all your responses will remain confidential. We will try our best to share the results of our research with you once completed. We will be extremely grateful if you agree to collaborate with us and give some of your time to

110

1. Name of the respondent

2. Profession of the respondent

3. Would you think that the followings are problems in industrialisation in this region?

3.1 Concentration mentality of Entrepreneurs in Dhaka

3.2 Dependence on imported raw materials

3.3 Inadequate demand of Products

3.4 Inadequate infrastructure and supported services

3.5 Inadequate Supply of Raw Materials

3.6 Insufficient Loan Facilities

3.7 Irregular Supply of Raw Materials

3.8 Lack of Backward Linkage Industries

Profession Code

01= Former Member of Parliament 02= Unversity teacher 03=D.C. 04=Pourashava Chairman 05=TNO 05=Entrepreneur 06=NGO official 07=Civil society member 08= Members of Chembers of Commerce 09= Banker (Govt & Private) 10= Others (specify)

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

111

3.9 Lack of capacity building

3.10 Lack of Commitment of the Government

3.11 Lack of Entrepreneurships

3.12 Lack of Implementation of Commitment

3.13 Lack of Skilled Labour

3.14 Long away from Dhaka that raises transport cost

3.15 Problems in Marketing Products

3.16 Scarcity of Raw Materials

3.17 Scarcity of Technical Service and Training

4. The Jamuna Bridge How do you evaluate the role of this bridge in industrialisation in the Northwest Bangladesh?

4.1. The price of inputs and raw materials has increased because of easy mobility of them

4.2. The price of output has not increased remarkable because of low quality

Your opinion

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

112

5. Land Ports How do you think that land ports can contribute to the industrialisation in this region?

5.1. Land ports can easy access of inputs and raw materials to Bangladesh from India and other

countries

5.2. These can help export commodities to India and other countries

5.3. Do you think that quality of commodity will be a barrier to export

Your opinion

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

113

6. Uttora EPZ

Do you think that the followings are problems to develop the EPZ

6.1. Long away from Dhaka that does not attract investors and increases cost:

6.2. Lack of an integrated effort from the government:

6.3. Lack of improved infrastructure from here to Sea Port:

Your opinion

7. Which types of industries do you think more suitable in this region in terms of generating

employment and thus reducing poverty and why?

Food and Allied Products

Textile, Wearing Apparel and Leather Industries

Wood and wood products including furniture

Chemicals, Petroleum, Coal, rubber and Plastic Products

Basic metal Industries

Fabricated metal products

Other manufacturing industries

Name and signature of the Interviewer

01=yes, 02=no

01=yes, 02=no

01=yes, 02=no

industrialization in northwest bangladesh - rdrs · industrialization in northwest bangladesh ......

Documents