INDUSTRIAL SECTOR: SLUGGISHNESS AND CATCHING UP

NGO News Report :: The Unnayan Onneshan, an independent multidisciplinary think-tank, in its latest issue of Bangladesh Economic Update states that the industrial sector is witnessing decelerating rate of growth, indicating its contracted share in gross domestic product (GDP) and reduction in expansion of GDP in the current year.

The growth in manufacturing was 9.34 percent in FY 2012-13 which was lower than those of 9.37 and 9.45 percent of FY 2011-12 and FY 2010-11 respectively.

The Unnayan Onneshan predicts that if the business as usual situation lingers the growth of manufacturing might further decelerate to 9.22 and 9.11 percent in FY 2013-14.  “If the current trend continues, share of industry in GDP in 2013-14 might decline to 32.28 from 31.33 of 2012-13,” it adds.

The research organisation reasons that indicators of industrial performance such as industrial index, disbursement of term loan, opening and settlements of letter of credits (LCs), investment demand suggest sliding down.

The research organisation points out that decline in export receipts compared to import has led to a decrease in manufacturing trade surplus by 26.27 percent. Between FY 2011-12 and FY 2012-13, manufactured export earnings declined by 63 percent, while the import payment decreased by 46 percent. As a consequence, international trade surplus reduced to USD 10147 million in FY 2012-13 from USD 13758 million in FY 2011-12.

The growth rate of industrial term loan in the last quarter of FY 2012-13 was 4.49 percent which was the least positive growth since the second quarter of FY 2011-12, while third quarter of FY 2011-12, and first and third quarter of FY 2012-13 witnessed negative growth.

Import payment shows a downward trail in FY 2012-13 compared to FY 2011-12 in terms of opening and settlement of LCs. Import payment declined from USD 35516.30 million in FY2011-12 to USD 34083.60 million in FY 2012-13. Import of capital machineries reduced from USD 2005 million in FY 2011-12 to USD 915 million in FY 2012-13, equaling a reduction of 54.36 percent.

The Unnayan Onneshan notes that less diversified market and product act as stumbling block for the progress of economy as 66 percent of total export earning in FY 2012-13 was from only nine countries. Only nine products contributed 93 percent of total export earnings, adds the research organisation.

Showing comparative analysis of different countries, the Unnayan Onneshan observes that Bangladesh is far behind in terms of technological catching up and innovation. Moreover, total allocation (development and non-development) for ministry of science and technology is Tk. 3.67 billion in FY 2013-14 that is 0.16 percent of total budget expenditure which is 0.81 percent lower than that of the previous fiscal year.

Bangladesh economy is private sector oriented and the performance of all major indicators reflects that the private sector has been depressed with lower investment demand. Private investment reduced by 1.05 percentage point of GDP from 20.04 percent in FY 2011-12 to 18.99 percent in FY 2012-13.

Although private sector credit is increasing in volume, the rate of growth is following a declining trend. The rate of growth in private sector credit stood at 11.33 percent in August of FY 2013-14 that was 19.92 percent during the same month in the previous fiscal year.

Harmonisation between fiscal and monetary policy, reduction in the savings-investment gap, diversification of market and products, increased investment in infrastructure and technological catching up can boost the industrial sector of the country, adds the report.

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