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Slow industrialization makes slow economic growth: UO

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Staff Reporter
Unnayan Onneshan (UO), an independent multidisciplinary think tank, said that the process of industrialization has been taking place in the country with a dawdling rate of transition to a sustainable and inclusive industrialization, thereby causing the economy not to grow at expected level as well as the growth potentials not to be translated into actual figures.
It revealed the matter in the September issue of Bangladesh Economic Update 2014.
Pointing to the recent decelerated rate of growth in manufacture, the UO shows that the contribution of manufacturing to GDP has been calculated at 17.75 percent, 18.28 percent, 19.0 percent and 19.45 percent in FY 2010-11, FY 2011-12, FY 2012-13 and FY 2013-14 respectively, whereas the rate of growth has been calculated at 8.68 percent, 10.31 percent, 9.96 percent and 10.01 percent in FY 2013-14, FY 2012-13, FY 2011-12 and FY 2010-11 respectively.
In addition to the country’s large dependence on agriculture for employment, low labor absorption in industry, lack of innovation and technological advancement, and short of capital deepening, lack of export diversification, myopic adoption of macroeconomic policies and poor infrastructure cause the sluggishness in industrial development, opines the UO.
Referring to the increased contribution of industry sector to country’ s gross domestic product (GDP), the think tank demonstrates that in FY 1980-81, the contribution of agriculture, industry and service sectors to GDP was 33.7 percent, 17.31 percent and 49.62 percent respectively, whereas the share stood at 16.33 percent, 29.61 percent and 54.05 percent respectively in FY 2013-14.
Observing the recent decline in the rate of growth in mining and quarrying, the think tank finds that the sector has grown by 5.22 percent in FY 2013-14, whereas the rate of growth in the sector was calculated at 9.35 percent, 6.93 percent and 3.62 percent in FY 2012-13, FY 2011-12 and FY 2010-11 respectively.
Noting the current bottlenecks in electricity, gas and water supply sector, which plays a crucial role in industrialization, the UO says that the sector has been growing at a declining rate of late and the rate of growth stood at 13.56 percent, 10.58 percent, 8.99 percent and 7.40 percent in FY 2010-11, FY 2011-12, FY 2012-13 and FY 2013-14 respectively.
Current uncertainties in country’s politics may depress the investment situation causing the rate of growth in the sector to decline further, cautions the think tank.
Following the highest increase of 2.5 percentage points between FY 1990-91 and FY 1997-98, the rate of growth in construction has been in some declining trend, finds the UO. The rate of growth in the sector stood at 7.21 percent, 6.95 percent, 8.42 percent, 8.04 percent and 8.56 percent in FY 2009-10, FY 2010-11, FY 2011-12, FY 1012-13 and FY 2013-14 respectively.
The Quantum Index of Production (QIP) which is used for measuring the production performance of the manufacturing industries shows that for medium to large scale industries, the QIP increased to 228.43 in 2000-01 from 141.80 in 1992-93, whereas the index stood at 157.89 in FY 2010-11 and then reached 205.45 FY 2013-14.
Pointing to increased number of informal labor in manufacturing sector, the think tank evinces that according to the labor force survey 2010, the number of formal labor in manufacture is 1975, whereas the number of informal labor is 4517 which is 2.29 times bigger than that of formal labor in the sector.
Referring to decreased disbursement of industrial term loan, the UO shows that the disbursement of industrial term loan stood at Tk. 9283.5 crore in the January-March quarter of the FY 2013-14, which is the lowest amount during the last five quarters, whereas it was Tk. 10513.27 crore and Tk. 12684.66 crore in July-September and October-December quarters of the FY 2013-14 respectively.
As a result, the rate of growth in the disbursement of the industrial term loan stood negative at 8.94 percent in the January-March quarter of the FY 2013-14 compared to the positive rate of growth of 6.88 percent in the October-December quarter of the same fiscal year, reckons the think tank. The research organization evinces that the total SME loan decreased by Tk. 1301.4 crore between the period of December 2013 and March 2014 and was calculated at Tk. 114583.5 crore in March 2014. Consequently, the rate of growth in SME loan has decreased from 6.71 percent in December 2013 to negative 1.12 percent in March 2014.
Indicating little addition of value by trade to the economy, the UO shows that the average import price index was 26.4 and 29.7 higher than the average export price index during 1980-85 and 2000-05 respectively. The gap between import and export price index further reached 69.9 in 2008 and then increases to 102.7 in 2013 resulting in a 46.92 increase in the gap implying trade’s little addition of value to the economy.
In order to get rid of the current bottlenecks in the industry sector, the Unnayan Onneshan calls for a strategy that generates increment in the productive capacity and provides avenues for industrial growth through the farsighted adoption and effective implementation of macroeconomic policies.