Agri. Machinery Manufacturing Industry: Significant Opportunities

Bangladeshi investors, businessmen and engineers have proven their capability to establish the new industries, create the global market for it and sustain in the market with leading role. Readymade garments, pharmaceutical industries, small ship building industries, and leather industries are successful examples.

There are significant developments in agricultural/crop production technology to produce sufficient food to support 160 million people. In the past four decades, Bangladesh has changed from a fully agricultural based country to an agricultural-industrial country.

Improved technology has expanded from lab to agricultural field, in farmers’ hand. It changes the crop production pattern. Introducing new, small and farmer friendly technology and machinery has significantly increased the production of rice, wheat, maize, fish, chicken and cattle. This revolution in agriculture creates a big market for agricultural machinery, a vast opportunity for investors and businessmen in this field.    

For an open market economy, it is important to allow imports, but at the same time it needs to adhere to certain quality standards. Bangladesh does not have any strong and active organization that controls quality for imported machineries. There was a standard committee, which stopped its work in 1988.

In 1988 floods devastated rural life, killed a mass number of animal in Bangladesh. After the severe flood damage, the government allowed Chinese machinery into the country. Nowadays, Bangladesh needs badly a strong agency to control the quality of the imported machineries. This agency can ensure the agricultural machinery and accessories’ quality which directly impact on farmer and on production cost. It also can help local small industries to create a standard quality check for their product.

We criticize our local machinery products for being ‘Made in Zinzira’. Honestly, yes it is made in Zinzira and it could be proud brand for us, if we are able to maintain the quality of the parts and safe work place. In recent years, there are good numbers of local workshops around Dhaka, Comilla and Bogra fabricates different agricultural machineries. All are small scale production line, but the local demand is very high.

There are some challenges reported being extending local agricultural machinery and accessories industries. Most local workshop is facing storage issue due to seasonal demand. Another problem is skilled labor. There are insufficient institutes or schools who trains hands on skills.

Investor and commercial prospect, local Manufacturer is under double taxation system.  For example, excise duty on raw materials and value added tax on local manufactured items increase the piece price of machinery which negatively impacts on both manufacturer and farmers. Lack of proper marketing and distribution is another problem. All those manufacturers are small scale businesses. Without infrastructure and inconsistent electricity and gas supply makes it very harder to do a competitive market with China. Availability of raw material supply and price control for material is another major issue. Credit problem is also barring real manufacturers to get proper support from respective sector.

Bangladesh Bureau of Statistics shows the metal and machinery equipment’s growth is slow though we have a lot of opportunities. Because nowadays, manufacturers are looking for new places for mass production in order to decentralize from China. The neighboring countries’ such as Indonesia, Hong Kong, Republic of Korea, Taiwan (China), Thailand, Malaysia, Japan and Singapore with their rapid economic growth has been recognized by the world power as the ‘East-Asian Miracle’. What policies and factors contributed to their growth?  Can Bangladesh replicate those policies to stimulate similar rapid growth?

Now the question is; what policies should be established for Bangladesh to create new agricultural machinery industries? Industrial policies are directed at developing and encouraging certain sectors. What are these industrial policies? Why were other East Asian countries adopted? And did they work, either by directing resources to desired areas or, more broadly, in promoting economic growth?

Most countries shared three objectives: developing technological capabilities; promoting exports; and building the domestic capacity to manufacture a range of intermediate goods. Supporting particular industries and imports of the necessary foreign technology took several forms.

First, the emphasis on education-particularly engineering and science education-provided an intellectual infrastructure that facilitated technological transfer and created facilities for engineering graduates, job facilities and standard wage rates. Second, the decision to discourage through financial market regulations the allocation of capital to areas such as real estate meant that more capital was available for areas with higher technological benefits, such as plants and equipment. Third, the government encouraged exports, discourage imports and quality policies. Fourth, in some industries with many firms, government promoted technology programs. And finally, the government provided explicit and implicit subsidies to industries it wanted to support. An important element in the expansion of certain industries was receptivity to direct foreign investment.

According to the by Chairman of President Clinton’s Council of Economic Advisers and professor of economics, Stanford University Joseph E. Stiglitz, It also induced capital inflows by providing sound macro-economic management, a stable political environment, and well-managed labor markets with educated workers.

In many cases governments took explicit steps to ensure that a transfer of technological and human capital would accompany these inflows. Foreign investment increased the pace of expansion, reducing the constraints imposed by limitations on the availability of capital, domestic entrepreneurship, and technological know-how.
Some recommendations made for rapid growth of manufacturing industries by Professor Joseph:

• Policies that actively require ensuring macroeconomic stability.
• Making markets work more effectively by regulating financial markets.
• Creating markets where they did not exist.
• Helping to direct investments to ensure that resources were deployed in ways that would enhance economic growth and stability.
• Creating an atmosphere conducive to private investment and ensured political stability.

No single policy ensures success, nor do the absences of any single ingredient ensure failure. There was a connection of policies, varying from country to country, sharing the common themes that have emphasized: governments intervened actively in the market, but used, complemented, regulated, and indeed created markets, rather than supplanted them. Governments created an environment in which markets could thrive. Governments promoted exports, education, and technology; encouraged cooperation between government and industry and between firms and their workers; and at the same time encouraged competition.

If Bangladesh sufficient in local demand and stop imports agricultural machinery, production cost for food will be cheaper. Agricultural manufacturing industries could be the field where a big number of young workers, business grad and engineers get their expected job.

There are several African countries likes Bangladeshi small size agricultural machineries. Bangladeshi rice thrasher, seeder, maize and wheat harvester, potato planter and other small machineries are already very popular there. Mass production will minimize the food cost, quality product gives the confidence. This is the right time to show the world our technical and innovative capability.

Writer: Advance Automotive Engineer (Specialization in New Product Development) from Michigan, USA.