Industrial output set to rise again

Industrial output set to rise again
Sajjadur Rahman

After three years of slowdown, industrial output is set to rise this year driven by value rather than volume.

According to a recent projection by the Asian Development Bank (ADB), industrial production is expected to grow by 7.5 percent this fiscal year ending on June 30 compared to 6 percent in the previous year.

The sector’s growth was dipping down from robust 8.4 percent in 2006-07 to 6.8 percent in 2007-08 and 6.5 percent in 2008-09, mainly due to the global recession and internal political instability.

Mustafizur Rahman, executive director of Centre for Policy Dialogue, said a rapid rise in imports of raw materials and capital machinery and growing industrial term loan — all show the manufacturing sector is set to go back to the historical growth trend.

According to Rahman, the growth is mostly for cost escalation rather than the volume factors, which can generate employment.

He said growth of the industrial sector is important in terms of absorbing additional labour force as the opportunities in farm and overseas employment sectors are getting squeezed recently.

“There may not be a growth in actual production. It will be in value terms,” said the CPD executive director on this year’s industrial growth projection.

Industrial growth went down during the past few years because of internal and external factors. Bangladesh faced a political turmoil since the last quarter of 2006 till the elected government took the power in early 2009. In the meantime, the global situation also got volatile for economic meltdown originating from the US, which later spread to other parts of the world.

When the global economic condition started to recover in 2010, prices of commodities — from food items to fuel oil, steel and cotton — soared rapidly. The price of cotton, which is a must ingredient for garments, has trebled during the time.

Bangladesh Bank data shows import of industrial raw materials and capital machinery has increased significantly in the first eight months of the current fiscal year.

During the July-February period of the current fiscal year LCs (letters of credit) opened and settled for industrial raw materials were worth of over $10.5 billion and $8.2 billion respectively. The growth rate was 69 percent and 55 percent respectively compared to that of the same period a year ago.

Disbursement of industrial term loan also rose considerably — by over 34 percent to Tk 16,924 crore during the July-December period of 2010-2011 against the same period of the previous year.

“Improvement in power supply and a rise in business confidence are likely to boost activity,” said the ADB in its outlook report for 2011. But there are risks too.

“The inability to bring the planned short-term addition to power supply and slippages in addressing gas shortages would also slow growth, mainly through their effects on industry,” said the Manila-based lender.


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