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INDUSTRIAL POLICY 2016: A CRITICAL REVIEW

Technical Report · September 2016

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INDUSTRIAL POLICY 2016: A CRITICAL

REVIEW

DR. MUHAMMAD ISMAIL HOSSAIN

SHAH & ASSOCIATES

1
Industrial Policy 2016 and the Background Statements

Perhaps all the least developed economies and some of the emerging economies have their
own industrial policies. An industrial policy which normally outlines the targets, growth
incentives and the strategies relating to industrialization is needed to provide an overall idea
of how the economy as a whole will move forward by with the help of a targeted industrial
progress. The main economic goals like achieving a high GDP growth rate, low inflation,
high saving & investment, desired level of job creation, boosting export and integrating the
economy with the global market are related to how much an economy can progress in its
industrial expansion. In fact, in a growing economy where the pace of industrialization is
surpassing that of agriculture, the growth in the GDP is closely connected with the pace of
industrialization & industrial expansion. The volume of greenfield investment in an economy
also depends on how the growing sector of the economy can absorb those investments.
Industrialization is found to be the key to create new jobs. If the economy is divided into
sectoral areas like agriculture, industry & the services, the more dynamic sector in terms of
new investment absorption as well as new job creation has been singled out as to be the
industry. Industry means manufacturing activities but in some cases or after a certain level,
the difference between manufacturing activities & services activities gets blurred.

The industrial policies in Bangladesh are in place since independence. The policies adopted
immediately after independence were biased towards management & creation of industries by
the public sector. But Bangladesh gradually liberalized its economy providing means for
private investment and management in the economy. The subsequent industrial policies
especially since the beginning of 1980’s were tailored towards accommodating the needs of
the private sector. Private sector interest issues such as the need for private capital, the
incentives the private investors would have, & the areas where they could invest thus were
primarily echoed numerous times in all the subsequent industrial policies.

Apart from the private sector issues the common phenomenon in the subsequent industrial
policies were like the definition of the types and kinds of industries that Bangladesh will
have, the source of financing, special incentives issue for disadvantaged entrepreneurs like
women, benefits to offer to foreign investors & NRBs etc.

2
A question may haunt many minds as to whether an economy can prosper or go ahead at a
desired pace or a pace directed by the market system without a stated industrial policy. Yes, it
can, but then the policy relating to investments, incentives, implementation strategies etc.
shall have to be written in other policy papers of the government. However to have a clear
focus and proper direction it is advised to have an industrial policy in place, at least the
examples of the developed countries speak in favor of this. What is needed is a clearly stated
policy of investment & income, especially when the task of industrialization is to be carried
out by the private sector.

In Bangladesh, although MOI is the primarily entity to frame industrial policy related
documents, there are other organs of the GOB like BOI that is also doing similar type of work
Therefore when it comes to the issue of implementation very little the MOI can do due to the
involvement of such diverse GOB organs. A good industrial policy may remain in paper only
if other executing organs do not cooperate in implementing of what have been stated in the
so-called good IP.

Industrial policy, no matter how good it is, or what good it wishes for, cannot alone bring
more investment or more industrialization in the economy unless the other policies & factors
move in tandem towards the same goals in other sectors of the economy. No one will say
Bangladesh had bad industrial policies or even a bad policy in investment in the past, but did
Bangladesh achieve the desired or targeted results in investment & industrialization? So,
policy matters but not in every context. Though industrial policy is one of the economic
policies of the government but it is deemed to be a more important one.

Industrial policy also consists of some goals like the amount of the investment to be received
in a period & the numbers of employment to be created. The goals & targets stated in an IP
are closely tied up for achieving the important macroeconomic goals like GDP growth rate in
the economy.

The IP of 2016 was framed keeping in mind the government’s statement of vision 2021 which
aspired to transform Bangladesh into a middle-income country during this time. Meanwhile to
achieve this or to get closer to this target the mere 6.5% growth rate that Bangladesh has been
achieving for the last 4-5 years will not be enough. The UN Commission, headed by Noble
Laureate Michael Space concluded that high growth that is transformative in impact for
economies would have to be 7% or higher annually for consecutive 20 years or more (7th
FYP. P-35). Meanwhile, although IP of a country laid down the fundamental policy issue

3
relating to industrialization, which has a direct impact on achieving higher growth rate,
however can an IP put together all the economic ingredients needed for high growth? No, it
cannot, no matter how effectively and efficiently it spells out its policies & implementation
strategies. Had the IP been the lone driving force of industrialization, then Bangladesh
should, by this time, have been on a higher growth path we had reasonably good IP in place
since our independence.

Fixing up the growth target for the economy and recognizing the role of Industrial Policy to
achieve the target, should be the two primary policy decisions that the government of
Bangladesh needs to take. Bangladesh already fixed up the growth target, which is higher
than the desired 7% p.a. through the 7th FY, documents and also recognized the need for an
accelerated industrial expansion. The Industrial Policy 2016 was framed as a supplementary
policy paper but important one, towards achieving the growth rate & other macro economic
targets. Meanwhile Industrial Policy 2016 made some changes when compared to Industrial
Policy 2010 toward achieving the mentioned targets. While making some incremental
changes IP 2016 have some completely new inclusions. To get a snapshot of these
incremental and proposed new changes a table contrasting the IP 2016 and IP 2010 is
presented in the following along with comments relating to these proposed changes:

Ref. 2016 Ref. 2010 Contrasts & Comments

No. No.
Intro. Small & Medium Scale 1.2 The current government Specific sectors were
Para Industries emphaszed is considering emphasized in IP 2016
3 for Industrial industrialization a very whereas IP 2010 had a
Development important sector. more general focus
regarding
industrialization/industr
ial development.
Therefore, IP 2016
seems to offer better
strategic direction in
this aspect.
2.5 Implementing the time N/A Not required.
bound action plan of
industrial policy 2016
to establish agile and
expert industrial and
service sector
(Annexture 9)
2.2 Percentage of GDP 2.1 Percentage of GDP Not a significant

4
 with industrial ancestry
will grow
from the present 29% to
35%and where the
proportion of the labor
force employed will
rise from the present
18% to 25%.
3.3.1 For manufacturing large 3.3.1
industry the value
(replacement cost) of
fixed assets excluding
land and building in
excess of Tk. 500
million.1000 workers
for garments industry &
300 workers other than
garments industry.
3.3.2 For services, ‘large 3.3.2
industry’ will
correspond to
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building in excess of
Tk. 300 million or with
more than 120 workers.
3.3.3 For manufacturing, 3.4.1
medium industry will
be deemed to comprise
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk.
150 million and Tk. 500
million, or with
between 121 and
300workers.Incase of
garments industry
workers no. highest
1000.
3.3.4 For services, ‘medium 3.4.2
industry’ will
correspond to
with industrial ancestrydifference observed
will grow from the between IP 2010 and IP
present 28% to 40% 2016 in this respect.
and where the Meanwhile, the
proportion of the labor reasoning behind the
force employed will revision in percentage
rise from the present is not provided
16% to 25%. therefore it is difficult
to justify the suggested
changes.
For manufacturing large By assessing the IP
industry the value Policy of different
(replacement cost) of neighboring countries
fixed assets excluding the proposed changes of
land and building in IP 2016 seems logical.
excess of Tk. 300
million or with more
than 250 workers.
For services, ‘large Seems ok however the
industry’ will reasoning behind the
correspond to shuffle is not clear.
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building in excess of
Tk. 150 million or with
more than 100 workers.
For manufacturing, Same comments as
medium industry will 3.3.2.
be deemed to comprise
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk.
100 million and Tk. 300
million, or with
between 100 and 250
workers.
For services, ‘medium Same comments as
industry’ will 3.3.2.
correspond to
5
 enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk.
20 million and Tk. 300
million, or with
between 51 and 120
workers.
3.3.6 For manufacturing, 3.5.1
small industry will be
deemed to comprise
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk.
7.5 million and Tk. 150
million, or with
between 31 and 120
workers.
3.3.7 For services, ‘small 3.5.2
industry’ will
correspond to
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk. 1
million and Tk. 20
million, or with
between 16 and 50
workers.
3.3.9 For manufacturing, 3.6.1
micro industry will be
deemed to comprise
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk. 1
million and Tk. 7.5
million, or with
between 16 and 30, or
smaller number of,
workers.
3.3.10 For services, ‘micro
industry’ will
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk.
10 million and Tk. 150
million, or with
between 50 and 100
workers.
For manufacturing, Same comments as
small industry will be 3.3.2.
deemed to comprise
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk. 5
million and Tk. 100
million, or with
between 25 and 99
workers.
For services, ‘small Same comments as
industry’ will 3.3.2.
correspond to
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk.
half a million and Tk.
10 million, or with
between 10 and 25
workers.
For manufacturing, Same comments as
micro industry will be 3.3.2.
deemed to comprise
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building between Tk.
half a million and Tk. 5
million, or with
between 10 and 24, or
smaller number of,
workers.
N/A This is an addition in IP
2016, which is very
6
 correspond to
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building below Tk. 1
million or with 15
workers.
3.3.12 For manufacturing, 3.7.1
cottage industry will be
deemed to comprise
enterprises with either
the value (replacement
cost) of fixed assets
excluding land and
building of less than
Tk.1 million, or with up
to 15 workers,
including household
members.
3.3.14 ‘Hosto o karushilo’
means the use of artistic
mind and labor of
Karushilpi or ancestor
endowed intelligence,
expertise and tactics or
when creative
individual through
training, use of modern
technology if needed
and accommodating the
change produces
aesthetic and utility
based product.
3.3.15 ‘High-tech industry’ 3.8
means knowledge and
capital based high-tech,
environment friendly
and IT/ITS/Animal
timely considering the
number of startup
companies especially in
ICT companies that is
coming up for building
a better and stronger
Bangladesh.
For manufacturing, The cottage industry as
micro industry will be labeled in IP 2016 was
deemed to comprise labeled as micro
enterprises with either industry in IP 2010. It is
the value (replacement not clear why we are
cost) of fixed assets changing such label. It
excluding land and is a bit more confusing
building of less than when 3.3.13 of IP 2016
Tk. Half a million, or states that an industry
with up to 9 workers, classified as cottage
including household industry in one standard
members. can be classified as
micro industry in
another standard. In that
case the industry would
be classified as micro
industry. Such
confusion is not
desirable. There should
be clear specification of
specific industry not
overlapping ones.
N/A This is a good addition
as Bangladesh is
endowed with a good
number of people with
such profession. As
there is high demand of
such products in
overseas market
especially the
developed countries so
their inclusion would
certainly give this
sector a boost and
policy support.
‘High-tech industry’ The inclusion of animal
means knowledge and technology is a good
capital based high-tech, one. This sector is
environment friendly contributing to our
GDP and GNP and the
and IT/ITS or research contribution is
7
 technology or research
and development based
industry.
3.3.16 Introduce creative
industry-
Example: Advertising,
Interactive leger
software, Music,
publishing, software
and computer and
media program
3.3.18 High Priority Industry
(Annexure-1)
These industry with get
high priority for proper
development.
3.3.19 Commitment withdraw 3.10.1-
4 extra Facilities for
3.3.21 Without NOC from
respective
ministry/approval of
commission controlled
sponsoring authority
does not give
permission any industry
project of enlisted.
3.3.22 Sponsoring Authority
means any special
class/sector industry
controlling
administration
authority. As per
allocation of business
respective sector under
which ministry/division
that ministry /division
will work as a
and development based increasing due to the
industry. increase of local and
foreign. Their inclusion
would certainly help
them to grow bigger
and better as an
industry.
N/A
N/A Explicit declaration
regarding giving higher
importance for adequate
development of high
priority industry is a
good addition in IP
2016. This will give a
clear signal to all
concerned organs of
government to prioritize
anything relating to
high priority industry.
Commitment given for The inclusion of 3.3.18
in IP 2016 mandates
priority sector industry such withdraw as stated
in this subsection.
N/A This was a demand for
good governance from
regulating authorities to
ensure environmental
and other well-being.
Therefor, such
inclusion in IP, 2016 is
timely and plausible.
N/A Specific definition of
sponsoring authority as
included in IP 2016 will
reduce confusion
among the direct
stakeholders about
whom to approach for
their work.
8
 sponsoring authority.
Withdrawn 5.11
4.15 To encourage NRB
investors Bangladesh
Ministry of Industry
will promote a mutual
fund with the help of
ICB
Withdrawn 5.15
4.23 It will be encouraged to
invest venture capital
and offer specialized
services to risky but
promising projects.
NRB can save foreign
currency
N/A This is to encourage and
facilitate the
participation of NRBs
in the economic
development of
Bangladesh. A timely
inclusion in IP 2016 as
NRBs in general are
very willing to
contribute something
to the country.
The private commercial Bangladesh had acute
electricity generation crisis of electricity
companies those will therefore to fasten the
commence their generation of electricity
production up to June, government had to
2012 will receive tax include such provision
exemption up to 15 in IP 2010. The
years from the data of situation has improved
production; In addition a lot and now we have
the private more capacity than the
entrepreneurs in power demand that we have.
generation sector will Therefore, it is quite
receive other incentive reasonable to withdraw
as per Private Sector such incentive as given
Power Generation in IP 2010.
Policy of Bangladesh.
However, if there is any
change in Energy
policy, relevant
adjustment would be
made if deemed
necessary.
N/A This is certainly a very
good inclusion in IP
2010. The
entrepreneurs
especially the star up
ones is struggling a lot
due to lack of fund and
other specialized
support. Now, they will
9
 be motivated to
innovate new products,
services as the
incentives are there.
4.24 Steps will be taken to 5.16 Special tax exemption
strengthen capital facility from capital
market to arrange profit earned through
alternative financing for the transfer of public
industrial sector limited company shares
listed in Stock
exchange.

4.25 In order to fasten the N/A Acknowledgement is

industrialization in the
country every year
‘Presidents prize for
industrial development’
will be awarded to
outstanding contributor
industrial development.
Withdrawn 5.21
5.2.2 Women Entrepreneurs 6.2 (c)
will be given priority in
the SME sector. At
least 15% of total
sanction will be held in
reserve in favor of the
women entrepreneurs.
Without mortgage loan
amount and scope will
increase for women
entrepreneurs.
always encouraging so
this would be a very
good boost for those
entrepreneurs working
relentlessly towards the
industrialization of
Bangladesh.
After assessing the
feasibility of the
proposal of the women
entrepreneur a special
quota system would be
implemented depending
on the assessment of the
demand of EPZ.
Women Entrepreneurs The incentives for
will be given priority in women entrepreneurs
the SME sector. At are increased further. In
least 15% of total addition, the various
sanction will be held in loan arrangements are
reserve in favor of the also made easier for
women entrepreneurs them. So, from these
and the interest rate will perspectives IP 2016 is
be 10% only. more women
entrepreneur friendly
than IP 2010.

6 Establish cluster N/A A good inclusion taking

industry. into account the
examples set by the
developed nations in
their effort toward
industrialization.

6.1 To develop cluster N/A This inclusion in IP

10
 industry & industry
park government will
establish land bank by
govt. land & Sand land.
For establish new
industry govt. will give
land from land bank &
industry ministry help
for this purpose.
7.1- Government owned
7.77 industry management &
reformation (Newly
adopt this section)
2016 is a good
initiative, no doubt
about it, however, its
implementation would
be a big challenge
especially considering
the fierce scarcity that
we have regarding land.
N/A This is a good inclusion
in IP, 2016.

Industrial Land
Tribunal – will form to
settle land related
disputes in govt. owned
and private organization
9 Creation of intellectual N/A A good inclusion.
property, conservation
& Management
(Newly adopt this
section)

Automation of
Department of patent,
design and Trademark

10.3 Govt. will consider N/A Another incentive

mortgage free loan &
group loan for High
quality project proposal
submitted by women
entrepreneurs.
11.4 To encourage 10.3
investment in industry
minimum 3 years the
entrepreneurs will
receive various
motivation & advantage
from the year of
commercial production.
11.13 The export oriented
industry under the
priority sector will
receive special privilege
and support from risk
provided to encourage
women entrepreneurs
and certainly a good
inclusion in IP, 2016.
Incentives and various Couldn’t figure out this.
concessions announced
by the Government are
subject to changes over
time.
N/A A well thought out
forward linkage support
offered in IP, 2016.

11
 fund/venture capital
12.7 Prospective foreign 11.4
investor will be given
minimum 5 years
multiple visa.
12.7 Prospective foreign 11.5
investors may be
considered for
citizenship with a
minimum threshold of
US$ 1,000,000 or by
transferring US$
2,000,000 to any
recognized financial
institution (non-
repatriable). Minimum
investment ceiling for
the consideration of
permanent resident-ship
for foreign investor will
be increased from a
minimum of US$
75,000 to a minimum of
US$ 200,000.
12.13 Foreign investor will 11.9
enjoy `No Visa
Required (NVR)
facility
issued by the
Immigration and
Passport Department
provided Board of
Investment/BEPZA
certifies him as an
investor in any heavy
industry or long-term
industry/business with
an
amount of not less than
Prospective foreign Relaxation of such
investor will be given 6 entry requirements
months multiple visa. made the life of
prospective
entrepreneurs a bit easy
considering the longer
time commitment
required to establish
and operationalize an
industry.
Prospective foreign Timely
investors may be modification/adjustmen
considered for t done/made in IP, 2016
citizenship with a
minimum threshold of
US$ 500,000 or by
transferring US$
1,000,000 to any
recognized financial
institution (non-
repatriable). Minimum
investment ceiling for
the consideration of
permanent resident-ship
for foreign investor will
be increased from a
minimum of US$
75,000 (non-
repatriable) to a
minimum of US$
100,000.
Foreign investor will Timely adjustment
enjoy `No Visa made in IP, 2016
Required (NVR) regarding this.
facility
issued by the
Immigration and
Passport Department
provided Board of
Investment/BEPZA
certifies him as an
investor in any heavy
industry or long-term
industry/business with
an amount of not less
than US$ 5 million.
12
 US$ 10 million.
Anne Two segment Annexu Thrust Sector Splitting the thrust
xure-l 1. Highly thrust re-ll sector makes good
sector sense as we cannot
2. Thrust Sector pursue the entire thrust
sector simultaneously
with equal importance.
Anne Newly adopt to industry N/A These industries need a
xure- 1. Film Industry bit backup to revive
lll 2. News paper their original status
industry therefore inclusion of
these industries in IP,
2016 makes good sense.

The Positives of IP, 2016

However, the IP of 2016 contains many positive aspects. It is more exhaustive and detailed
than the previous ones. It dealt with issues relating to changing global situation and the
pattern of productivity. The policy also sheds light on issues like green productivity and green
technology in the context of preserving the environment. Moreover, by including several new
types of industries like creative, high-tech, arts and crafts etc. the industrial categorization is
expanded in industrial policy 2016.

Land scarcity and land management related issues in the context of making that available for
industrial use is addressed for the first time in IP, 2016. Taking the issue of severe land
scarcity into consideration the present Industrial Policy also focused on setting up special
Economic Zones by both public and private sectors, which was not there in the previous IP
reports.

Like the previous IPs, IP 2016 also defined the size of the industries in terms of fixed capital
used & number of labour employed. In addition, the present IP also categorized the industries
according to national priority and that of the technology to be used.

The present IP detailed the incentives to be provided by the govt. depending on the types of
industries to be set up and where they are to be set up. It also detailed the special incentives to
be given to NRBs if they come forward to set up industries or invest in the activities relating
to industries.

13
The issues of women entrepreneurship and their participation were addressed at length in the
present IP. The IP said, women entrepreneurs would receive special attention and privileges
in the receipt of credit from banks and their cases would be considered for concessionary
loans on priority basis.

The present IP laid special emphasis on export-oriented and export linkage industries. The
policy states that these industries would be offered cash incentives, tax holidays & bonded
warehouse facility. The present IP also emphasized on green productivity and the use of green
technology thereby to protect environment, setting up of ETP, CETP would be encouraged by
the government. To contain the green house effect, the IP advocates for setting up Clean
Development Mechanism or CDM in the industries. In this case, the use of 3Rs (Reduce,
Reuse, Recycle) strategy would be encouraged. For creating entrepreneurs & promoting
entrepreneurship the IP, 2016 suggests to set up Technology Incubator Centre or TIC at the
universities, technical institutes & research centers. To promote SME entrepreneurs the policy
emphasized on setting up of one village one product (OVOP) scheme throughout Bangladesh.

The Industrial Policy also talked about the harmonization of standards with those of
International or global ones. Setting up of the training centers for the RMG workers and
workers of high priority industries are also encouraged in IP, 2016. The IP, 2016 also
suggests for acknowledging successful entrepreneurs through conferring state awards and
giving them special respect and privilege by the state authority.

Building up database of skilled workers in order to ascertain their availability in future use is
encouraged in IP, 2016. The database is expected to help in synchronizing between demand
and supply of these workers.

Apart from the mentioned highlights of IP, 2016 the policy also suggests for setting up of
implementation, monitoring and evaluation cell in order to ensure the objective and timely
implementation of IP, 2016.

The Analytical Perspective of IP, 2016

At present an increasingly larger share of saving and investment is going towards speculative
activities such as in land holdings, real estate and stock with limited investment in power and
transport. Changing the composition of investment in favor of infrastructure and investment
(7th FYP P-38) can certainly increase the economic growth of the country. But in a market-

14
led economy, this change will not be that easy. Unless the potential entrepreneurs see the
prospects and clearly defined incentives for investment in this sector, they, especially the
small ones will be doing what they were doing with their investments in the past.

Talking about increasing labor productivity is easy, but increasing the same in reality is not
that easy. Improved technology, if adopted, will help increase the labour productivity, but the
rate of this increase will depend on basic education which many labors does not have or have
very little. In fact, improving the total factor productivity will remain a challenge for
Bangladesh up to a foreseeable future.

Bangladesh’s stride towards a high growth rate through connecting its economy to the global
market will face a harder challenge in the coming years, as most of the economies with the
equal levels of economic development or of similar types already inked or became members
in one or more global free trade agreements, but Bangladesh till now signed none.
Bangladesh’s export will face a critical challenge in the coming days in reaping
commensurating benefits from the $ 75 trillion global market unless new opportunities come
in Bangladesh’s way from the global trade negotiations under the WTO, or at least,
Bangladesh’s exports are treated equally by the major importing countries like the USA.

Hoping to put back the issue of energy constraint for the Bangladeshi industrial enterprises
will not be that easy. The completed industrial units are waiting since long to have them
connected with the source of gas supply. As the gas resources of Bangladesh is going to be
dwindled soon, Bangladesh’s efforts to connect its industries & manufacturing activities with
alternative sources of energy like the LNG will remain a challenging one in the coming years.
The days of cheap energy is over for Bangladesh. Importing energy from the international
market, then putting the same to the users’ use will be costly. Are Bangladeshi industries
manufacturing units ready to pay more?

Prior research shows that trade logistic costs are the key determinants of export
competitiveness. Bangladesh’s rank in this case is 79 out of 155 countries as per the report of
the World Bank’s Logistic Performance Index (LPI) of 2010 (The 7th FYP. P-40). This index
is a combination of performance in six areas: customs, transport, infrastructure, international
shipments, logistic competence, & tracing and timeliness. The IP 2016 said little on these
issues. Moreover, a combined & simultaneous initiative in these areas can only help improve
Bangladesh ranking in the LPI.

15
Managing land or making land available for industrialization is easy to say, but practically
making it available will be a daunting task. The price of land is soaring; moreover, there is no
organized land market in the economy. Transfer of lands from one hand to another require so
many papers & fulfill so many conditions. Again, land in a big size, which is needed for any
standard industrial unit, is practically non-available. Increasing population driving constantly
the demand for land up for homestead. Unless, land use is regulated by regulating or putting a
curb on the horizontal expansion of homestead, this problem of land scarcity will simply be
there in the coming days. Mere wish will not solve Bangladesh’s land problem. Government’s
effort to set up up to 100 Economic zones is a good step forward in this respect. But until
some of the Economic Zones become operationalized we do not know whether the problem of
land availability is put behind.

Massive industrialization and going green at the same time will not be that easy. It is agreed
internationally that growing first & dealing with the environment later is a bad strategy.
Bangladesh is a signatory to the Rio + 20 agreement moreover, the SDGs, to be built on the
MDGs, are to be achieved through upholding the causes of the green economy.

The pace of deforestation should be an eye-opener telling us how badly we are handling the
cause of green economy. Market mechanism can be used to slow down the causes affecting
the green economy. But Bangladesh is new in knowing how to use markets for stopping or at
least slowing down, environmental degradation. Many countries are addressing the issues
relating to green economy by levying extra tax, creating tradable property rights, and
reducing subsidies. Most green growth projects incur significant up-front costs. High risk and
not sufficiently compensating returns for green technologies are putting such projects on hold.
Special public sector allocation is also not seen to promote green growth. Also, the companies
and industrial units are not used to disclose financial information on environmental issues,
though the ICAB was talking of green accounting since past few years. Bangladesh’s shift
towards coal-based energy & electricity generation will pose a serious threat towards green
growth. Some other countries are coming away from the coal-based energy source and opting
for cleaner energy like that from renewable energy. The IP 2016 made very scant reference to
this very important aspect of industrialization. It should get more emphasis outlining how to
handle issues affecting the green growth. The old way of industrialization is over. The future
industries will be the green industries.

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In regards to women entrepreneurship, special emphasis was laid down on the role of women
entrepreneurs in the industrial ownership and management. The previously announced IPs
also emphasized the women entrepreneurship, but little progress has been made so far in this
case. Even the bank loans that were earmarked for women entrepreneurs remained
undistributed. Unless the society gets rid of the gender bias, no amount of expression of good
wish for involving women in the economic activities, specially those relating to industries,
will remain a far cry.

The IP 2016 expressed high hope to bring in reforms in the SOEs by bringing efficiency in
the management of the SOEs with the participation of private sector & foreign expert
knowledge. But our view is that the SOEs will remain beyond any kind of reform till they
remain under the govt. ownership. Many experiments were made to to make the operation &
management of the SOEs efficient, but the results are not encouraging. Better option is selling
these to private sector, and still a better option is to off-load the majority of the shares to the
investing public through stock exchange. The government’s decision and action relating to
the Privatization Commission also made us think that the process of privatizing the SOEs has
been also put on hold. The losses in the SOEs are acting as a cancer in the economic body of
Bangladesh. In the present situation, in most cases, if SOEs cease operation, govt. will be able
to save a huge amount of money.

The Industrial Policy also talked about founding a specially designed Mutual Fund for the
NRBs and the said Mutual Fund is to be managed by the ICB- the state owned investment
bank. But the present condition of the existing MFs in the capital market clearly points out
that such a mutual fund will not bring enough enthusiasm among the NRBs. NRBs have
special quotas both in the IPOs & in the MFs. But by investing in those instruments hardly
any NRB made any profit. Before such a MF is launched, the condition of capital market
shall have to be improved. Mutual Funds are at present lies at the bottom of choice when the
question of investment comes.

Trust in making PPP operational is important. In Bangladesh it seems both sides i.e. govt. &
private sector suffer from this element. The key issue in the PPP mode of investment is the
question of control of management. We do not believe that PPP will produce any result unless
the majority of ownership & that of management are left infavour of public sector. The IP
2016 also emphasized in no uncertain terms the need for PPP and rendering of the policy
support to make the same operational. Though we have been hearing about the PPP initiatives

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since last five years or more but little progress has been made to operationalise this mode of
industrialization. A few agreements were signed under the PPP mode of industrialization but
most of the projects are still in the drawing rooms.

The incentives, in cash or other forms, as proposed in IP 2016 are largely the functions of the
Ministry of Finance. The MOF through budget proposals or issuing SROs offer different
types of incentives for the industries or sectors it deem appropriate. Reduced tax rate is also a
kind of incentive that too can come only through yearly budget proposals. Little attention or
no attention is paid to IP while MOF decides on these issues.

The industrial policy 2016 outlined a time-bound framework for completing different
decisions. But the executing bodies are in no way under the control of one centralized body.
There is no binding on other organs of the govt. to cooperate with MOI. Most of the organs
and offices of the govt. have their own stands and opinions on the issues the IP 2016 brought
forward. As a result, the time-bound execution plan may remain a paper issue only.

Also, changes in the fiscal measures are largely an outcome of lobbying. The businessmen or
industrialists or on their behalf the chamber of businesses or industries can lobby strongly
with the govt. for tax concession or cash incentives normally receive those benefits. The
unorganized businessmen or persons performing other types of economic activities hardly
become beneficiaries of the cash or kind incentives govt. offers from time to time.

The issue of policy support to specific industry or service is an ongoing policy matter. Yearly
the policy support is reviewed during the budgetary preparatory time. In most cases, no
change is brought about, in some cases, the changes are brought about, that too keeping in
mind the issue of impact on revenue collection. While deciding on the fiscal measures, little
attention is paid to what has been said in the IP.

Also, in some cases, incentives are politically – directed. Businessmen & industrialists having
connection with the Govt. or whom the govt. think of their own people receive better terms &
conditions in business deals, especially where govt. becomes the other party. Rule based
business though seems to be there in paper, but in practice, that is a far cry. As a result, the
distribution of govt. sponsored benefits largely goes to benefit few selected people among the
business community.

There are a number of issues that are important for investment however those are beyond the
control of IP. These issues are, for example, the cost of doing business which is much higher

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 in Bangladesh than that in many other countries having similar level of economies.
Inadequate energy supply, dilapidated roads, bureaucrat red-tapism, high cost of loans, strikes
& stoppage, slow speed of the workers etc. contribute to the high cost of doing business.
What can an IP do about these? Apparently it seems very little.

Again, paying for corruption also adds to business cost. Bangladesh is one of the most corrupt
countries in the world. Here in every step businessmen or the other persons who want to do
something have to give bribe to get their job done. But many investors do not want to pay
extra money for corruption & they turn their back on Bangladesh. Corruption not only
negatively pushes the cost of doing business, this evil practice but also slows down the entire
economy. No one till today estimated the size of a corruption economy, but certainly it is a
huge economy, which forms a part of black economy. The Industrial Policy can do little to
bring down the level of corruption.

Another factor that is standing as an impediment in the way of investment is the terror &
violence. Extra judicial killing has become a normal phenomenon in Bangladesh. The rise of
terror attacks & that of violence are commonly regarded as the stumbling blocks in the way of
fresh investment both by local & foreign investors. Already many foreign investments were
kept on hold simply because of foreigners were hearing frequent terrors attacks in
Bangladesh. IP can do little in this case also. Some issues are to be dealt with politically, but
such initiatives are needed in Bangladesh. The policies of inclusiveness will go a long way to
reduce the up surge in terror attacks & violence.

Industrial Policy can only touch on the policies relating to investment & incentives & by
extension, to those relating to the economy, but it cannot handle or say something which will
reduce the bad effects of extra economic factors affecting investment and decision making in
the economy. The problem in Bangladesh is not of policies, good policies are there, but the
problems are more related to politics & other social policies which IP has noting do with.

References are provided upon request

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