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Opinion

WB loan and poor management of sOEs

HAFEEJuL ALAM
THE government is about to go ahead with 40,000 job cuts this year from the different state owned enterprises (SOE) and manufacturing units, with the support of the World Bank loan of $ 300 million. The
privatisation commission has targeted 32 industrial units for privatisation this year and 96 more by the year 2006. More than 100,000 are going to be axed in the process. The chairman of the commission assured that "those
who will lose jobs will be adequately compensated for." He also mentioned that the job-cuts are meant for improving the over-all efficiency of the state sector. On the other hand, our Finance Minister reportedly wrote to the World Bank that about 100 state owned enterprises would be privatised and that "SOEs identified for privatisation, if no buyers are found, would be closed down."
Now, quite reasonably, the question arises as to whether the government wants to enhance the competence of the SOEs or just
want to shut them down to get some loan facilities from the World Bank. Every one knows that closing an industrial unit is very easy but setting up a new one and running it effectively is not. As a matter of fact, our industrial sector is decaying day by day. Foreign direct investment has declined considerably over the last few years and the internal investment scenario is not encouraging either. The unemployment problem in the country is awful to say the least and we are witnessing its direct impact in the deteriorating law and order and in many other unhealthy symptoms
that are too vivid in the society these days. In a recent seminar in Dhaka, it was revealed that about 30,000 women and children are trafficked across the border every month to get them engaged in immoral activities in India, Pakistan and the Middle East. Under such situation, if the establishment continues to close the industries without establishing new ones and cut the jobs without creating new job opportunities, the sociopolitico-economic conditions will dip to such a point that we would find no way out.
May we not forget that in a poor developing country like Bangladesh, where private investment is rather timid, the state has a great role to play in the industrial sector and to achieve a sustainable economic development, there is no alternative to rapid industrialisation. In this respect, the experiences of our neighbouring South Asian countries like India and Pakistan are worth emulating. If the state-sector fails to run their units well, the fault lies with the top management and there is no point in disposing those units off. In developing countries like India,
Pakistan, and even in the west, there are many highly successful state-run entities. If they can run their state enterprises, why can't we?
The snag lies in the bad management, corrupt practices, and poor governance. Every one knows that the closing down of Adamjee Jute Mills, the biggest of it's kind in the world, only paved the way for setting up of many more new jute mills in West Bengal and smuggling out our valuable raw jute, causing thereby an economic blow to the country. It appears that our
policy makers are not at all wasteful to cut an aching head, instead of treating or curing the same.
From my own experience as a former manager of an unit of BFIDC, I can confidently say that an enterprise in the state-sector can always be run profitably by controlling the costs, modernising the machinery, developing the human resources and shedding unnecessary staff and developing an honest and dedicated management system. The chairman of Privatisation Commission and the Finance Minister could do a great
service to the nation had they requested the World Bank for extending necessary loans and grants to restore these industries instead of closing them off. While the concept of privatisation may hold good for better management of certain types of small industries, the idea of closing down the industrial units for the lame excuse of "if no buyers are found" point to nothing but a poor management of the state economic system as whole.
Hafeejul Alam is a management specialist.