Is there an industrial recovery round the corner? The symptoms, albeit very fickle, may be showing in the industrial production index.

As it shows from Bangladesh Bureau of Statistics (BBS) figures. industry' showed a 5.6 per cent growth on a point to point basis from June 1999 till January 2000. However, one must keep in mind that in the previous fiscal year, industry was badly hit by floods and last year's industrial production till January 1999 showed a 2 per cent slide.

The average point to point industrial index till January in fiscal 1996-97 was 181 from where it rose to 204.6 in 1997-98 at 12.73 per cent growth. It later slumped to 200.8 point till January of 1998-99 because of flood. This year, the Index rose by a modest 5.6 per cent to 212.1 point till January

This shows a recovery, if one looks at it that way. But this is till far behind the sort of upturn that the year before the flood saw

In January' 2000 alone, prodnetion increased In case of paper. fertiliser and petroleum products by 24 8 per cent. 21 5 per cent and 1.5 per cent rcsjx’c-tlvely over that of the previous month. On the other hand, production declined by 19.9 per cent, 17.7 per cent and 10.7 jxt cent In garments, jute-textile and MS products. Decline- In garments Is understandable because of the seasonality ol the item. But what about the rest?

"As such the average industrial growth Is not anything up to expectation and the growth is largely from the export-oriented industries which actually determine the performance of the total industry sector," says Dr Zaid Bakth of Bangladesh Institute of Development Studies (BIDS).

On the other hand. Import substitution Industries continued to show lacklustre performance, mainly because there had not been robust domestic demand. At the same time, the displacement effect was high on the domestic industries because of import liberalisation

As It now shows, exports were on a double-digit patii until it showed down to a single-digit low-level last year. Riding on such high export growths, industry also showed a good 8 per cent growth.

However, on the brighter side there has been a 15.48 per cent surge in disbursement of industrial term-loan during the first six months of this fiscal year compared to the same period last fiscal year. Again, the flood induced Ioan depression in the previous year may turn this figure looking dim

In quite a positive way. the government has been lowering duty rates on raw materials. However, economists feel that such reductions did little to help the Industry because of what they call 'water in the tariff effect.

Finished goods are being

imported through underinvoicing and smuggling in the absence of effective regulatory system This has eroded whatever benefits the industry was to get from reduced duty on raw and intermediary goods," said Dr Bakth

"I strongly feel that there are still many tariff anomalies between finished goods and raw materials, which should be removed. Duty on raw materials should be reduced further to give the local Industries some elbow room. I feel that duty gap between the two should be at least 20 per cent to make our industries become competitive."

On top of it. the overall Investment climate, law and order situation and Institutional credit problems have been stalking the Industry for long

But Bangladesh’s industry now needs export promotion in the South Asia on an urgent basis after having liberalised Its own market to a large extent. The potential markets are being denied because of non-tarif? barriers, which must be addressed properly.

At the same time, Bangladesh should be well-equipped to face the post-re-form world scenario when tariff barriers would be dismantled. When the quota will be gone, it will be logical to assume that buyers will prefer a regimented and well-placed China to source their products, not Bangladesh.

So, we need to take steps Ln the budget to cut the real rate of interest, keep utility rates low and improve the Infrastructure facilities." Says Dr Bakth. "At the same time, the Increasing consumer awareness, trade union demands and neo-pro-tectionism will pose new nontariff. non-price challenges for Bangladesh’s exports. The government has to take a pro-active role to solve these problems and improve the country’s image."