Many people in Bangladesh believe that the country’s jute industry has been steadily declining.
Some, nostalgic about the golden days of the golden fiber, are concerned about this and would like to see a revival of the industry.
Others, enthused by the growth of newer industries, such as the garment industry which has emerged as a major player in the global market, are more inclined to look past jute and think instead of more complex products such as electronics and higher value-adding garments as a future driver of Bangladesh’s exports.
But is the jute industry really declining? There seems to be some misperception about this. Let us look at the data.
The first chart shows the long run trend in the volume of jute good exports from Bangladesh for the 35-year period from 1983/84 to 2018/19 (the figures do not include raw jute exports).
It breaks down total jute good export volume into three categories, each representing different groups of jute mills of the country.
This categorization has a special significance.
The first group consists of the jute mills under the Bangladesh Jute Mills Corporation (BJMC) and represents the state-owned part of the industry.
These mills mostly manufacture the traditional jute products, i.e., hessian, sacking and carpet-backing cloth.
Hessian and sacking are fabrics used to make jute bags for packing and storing commodities such as pulses, grain, potato, onion, sugar, tobacco, and cement.
Of these, hessian is of finer material while sacking is a coarser quality jute fabric.
Carpet-backing cloth (CBC), as the name suggests, is used in carpets, mainly to provide stability to the latter.
The jute mills belonging to the Bangladesh Jute Mills Association (BJMA) also largely make the traditional jute products, i.e., hessian, sacking and carpet-backing cloth, although in recent years many have also gone into jute yarn, also known as jute twine.
However, these mills are all in the private sector, unlike the BJMC mills which are all government owned.
Finally, the mills belonging to the Bangladesh Jute Spinners Association (BJSA) are also all privately owned but their product is jute yarn, and not the traditional hessian, sacking or CBC.
Export volume trends
Let us first look at the trend in export volume for the state-owned jute mills.
The trend is steadily downward sloping and provides a strong clue as to why there is a widespread perception in Bangladesh about a decline in the jute industry.
In 1983/84, the state-owned jute mills exported 2.9 lakh tons of jute products. It then rose a bit to reach a peak of 3.26 lakh tons in 1989/90.
Since then, notwithstanding some ups and downs, the long run trend is that of a sharp decline. By 2008/09, these mills were exporting less than 1 lakh tons of jute goods.
A revival in the early part of the last decade turned out to be short-lived.
Exports declined sharply in recent years and a nadir was reached in 2018/19 when the BJMC mills managed to export only 0.29 lakh tons of jute goods, i.e., exactly one-tenth of the volume in 1983/84.
So clearly there has been a serious decline in jute exports from the state-owned jute mills, which is attributable to a number of factors such as decrease in capacity due to closure and transfer of some mills to the private sector, and reduced utilization of existing capacity due to performance deficiencies.
But what about the private sector?
The other two lines in the chart show the trends for privately owned jute mills.
For the BJMA mills, the product line was long dominated by the same traditional jute products that the BJMC mills make, although in recent years some of these mills have diversified into jute yarn as well.
Here too we see a decline, but only for the first twenty years covered by the chart.
Jute export volume for this group of mills was 1.85 lakh tons in 1983/84, i.e., about two-third the level of the BJMC mills.
By 2004/05, it had fallen to 0.33 lakh tons.
But then the trajectory changed, and the export volume started to rise for these mills, while that of the public sector mills continued its secular decline.
In 2017/18, the BJMA mills exported 1.7 lakh tons of jute products compared to just 0.86 lakh tons by the BJMC mills.
One reason for the changing fortunes of the BJMA mills is the diversification into jute yarn.
For example, in 2018/19, of the total volume exported by these mills, i.e., 1.77 lakh tons, 0.4 lakh tons came from jute yarn.
This brings us to a very important development in the jute industry of Bangladesh, i.e., the rise in the manufacturing and export of jute yarn, or jute twine.
This is most clearly shown in the third line in the chart which refers to the jute mills covered by the Bangladesh Jute Spinners Association (BJSA).
The BJSA mills are all in the private sector, specializing in the manufacturing of jute yarn.
The long run trend of the export volume of these mills is a sharp contrast to that of the BJMC mills, and also different from that of the BJMA mills.
Starting from a low base of just 0.28 lakh tons in 1983/84, exports from these mills show a trend of continuous increase, with the growth rate accelerating between 2008/09 and 2013/14.
Since then, export volume growth has slowed down a bit but even in 2018/19, export was 4.88 lakh tons, i.e., 17 times that in 1983/84.
What about export value?
The above story is told in terms of the volume of jute good exports.
Readers may also want to know about export value.
The following chart shows the value of total jute goods exports from Bangladesh since 1996/97.
The export earnings from jute good fluctuated between $200 million and $400 million during the period 1996/97-2008/09.
This was not very different from previous years.
For example, jute goods fetched export earnings of about $250 million on average per year during 1975-80; the corresponding figure for 1980-85 was $350 million.
In other words, jute good export earnings were more or less on the same trajectory from the mid 1970s to about 2008/09.
But then, the trajectory changed. Export earnings started to increase significantly, and a new trajectory has been maintained for the past one decade, with export earnings hovering around $700 - $800 million per year.
This trajectory shift involves a more than doubling of export earnings.
Thus, while average annual export earnings from jute goods during 2004/05-2008/09 was $315 million, the corresponding figure for 2010/11-2014/15 is $750 million, an increase of roughly 2.4 times.
A large part of this increase is attributable to jute yarn exports from BJSA mills.
The export earnings from these mills went up by 2.7 times over the same period.
Thus, in 2018/19, these mills accounted for 71% of all jute good export earnings, up from 42% in 2001/02.
So, in a nutshell the story is the following.
The notion that there has been a secular decline in the jute industry of Bangladesh is misplaced.
The story is more nuanced.
Yes, there has been a decline in the export of traditional products such as hessian and sacking.
But this has been more than compensated by the sharp increase in the export of jute yarn. Moreover, much of the decline has been in the state-owned jute mills.
It is a different story for the private sector jute mills. The private sector jute mills which used to specialize in the traditional jute products, i.e., the BJMA mills, have been able to compensate for the decline in demand for traditional jute products by increasingly shifting to jute yarn production.
This is something that the public sector jute mills have not done for some reason.
But the most interesting story is that of the private sector jute mills specializing in jute yarn making, i.e., the BJSA mills.
Their story is that of a steady increase in both the volume and value of export earnings for the past 35 years.
This increase has been so substantial that it has not only compensated for the decline in the state-owned sector but put jute exports on a completely new trajectory.
So, the story line is clear.
The popular narrative about the secular decline of the jute industry is not correct. In fact, there has been a revival.
And this is attributable to two things: increased role of the private sector and the ability to move into new products whose demand is strong.
These facts are interrelated.
Private sector enterprises are typically more nimble than state-owned firms and faster in responding to emerging market demand.
Text-book economics has always told us this. The jute industry of Bangladesh has shown this in practice.
The author is an economist, previously with an international development agency.
