For more than four years, a Tk1bn project of TRZ Garments Industry is waiting for gas connection to take off. The project on 300,000 square feet space in Gazipur area has the capacity to employ over 6,000 people.
“When the waiting will end I don’t know,” said managing director Harun-ur-Rashid, who applied for gas connection in May, 2009.
To add to his woes, the application and related documents for gas connection was lost by the government officials. “They asked me to submit fresh application. But I did not finally it was found in the piles of files two months back.”
Presently, a part of the project is being run by diesel, inflating the production cost by 8-10 times. “I am counting losses of Tk180m every year,” said Rashid.
Like TRZ Garments Industry, many other manufacturing units of the country like Giant Textile and Milestone Garments failed to go for production years after years for gas crisis.
According to Petrobangla, the country produces around 2,300 million cubic feet of gas per day (mmcfd) against demand for around 3,000mmcfd.
The country’s manufacturing sector relies heavily on gas as a reliable, effective and affordable source of energy. “If governments do nothing to address it, the consequence will be dire. Many manufacturing companies will have no choice but to dramatically cut production. It would then affect the economic growth,” said Rashid.
His story has well reflected in the manufacturing sector growth. Contribution of the manufacturing industry to the Gross Domestic Product (GDP) contracted for the first time in three years in the last financial year, as output of mainly small scale industries witnessed a sharp decline.
Acute energy shortages, higher interest rate, increased cost of production, sluggish investment and drop in capital machinery import are taking their toll on the manufacturing sector, analysts say.
The country’s manufacturing growth, according to Bangladesh Bureau of Statistics (BBS), to GDP at constant price was provisionally estimated at 9.34% in fiscal year 2012-13, down from 9.37% a year ago. The manufacturing growth was 9.45% in 2010-11 and 6.5% in 2009-10.
The data underscored that the large, medium and small scale manufacturing had under-performed, dampening the annual target of economic growth of 7% in the last fiscal year.
The contribution of large and medium scale industries to GDP accounted for 10.32% in FY13, which was 10.52% in the previous fiscal year. The contribution of small scale industries to GDP remained almost static during the period.
It says performance of glass and glass product, carpet and rugs, petroleum refinery, industrial chemicals, leather products, transport equipments, tobacco, pharmaceuticals, wood products, ceramic, cement and electronic goods also showed slow growth.
Small scale manufacturing industries like rice milling, dairy products, knitwear, leather products, footwear, embroidery, wooden furniture and non-metallic mineral products show downward growth in the first six months of the last fiscal year.
“The slowdown in the industrial output was inevitable because of the cut in industrial productivity due to power and gas shortage,” said Jahangir Alamin, president of Bangladesh Textile Mills Association.
He said: “True, there’s a rise in textile exports. But look at the industry potential. Energy problems and spiking cost of doing business are not letting us take advantage of our potential.”
Over the last four years, many units remained inactive because of gas crisis and some units are running by using diesel-run generator, leading to make higher cost of doing business, he said.
Textile machinery import fell nearly 16% to $349.8m in FY13 compared to the previous fiscal year. During the period, import of capital machinery for leather industry dropped sharply over 58% to $4m, jute industry 31% to $23m, pharmaceuticals 21% to $362m, Bangladesh Bank data shows.
Energy shortages are affecting smaller manufacturer more than the large-scale ones having capacity to go for fuel oil based energy though expensive. “A number of small units have already closed down because they did not have and could not arrange alternative power supply due to financial shortcomings,” said a SME Foundation official.
Mizanur Rahman, managing director of Ratanpur Spinners Ltd, said there were no new investment and expansion of the existing plants over the last four years. According to his view the economic slowdown in Europe, appreciation of taka against the US dollar and Syria turmoil hurt their business.
Motiur Rahman, managing director of Uttara Motors, said looming political chaos and adverse policy on car business hit sales of automobiles. Capital machinery imports required for automobiles and other vehicles dropped by more than 60% in the last fiscal year.
Center for Policy Dialogue executive director Mustafizur Rahman said, in general, the manufacturing sector is facing energy crisis and under developed infrastructure for long, thwarting the opportunity of faster economic growth.
Higher cost of credit, though rate of interest started coming down in the recent days but still in higher level, has caused fresh investment in industrial manufacturing to dry up in the last financial year, deepening supply side constraints, he said.
“Political uncertainty is a new addition to slow down the manufacturing growth.”
Zaid Bakht, research director of Bangladesh Institute of Development Studies, said: “There has been no significant private investment in the industrial sector in the last year to increase productivity as it was evident in declining import of capital machinery.” Most medium to large scale manufacturers somehow managed to absorb hike in energy price, but small industry are finding it difficult to cope with the power cuts and gas shortage, he added.
