Reopening State-Run Jute Mills: Industrialists not interested

Reopening of the country's 25 state-run jute mills still remains uncertain as the government proposals for reopening the mills are given a cold shoulder by most of the jute industrialists.

The government is more interested in leasing out the mills to the private sector for the short term, said officials at the Bangladesh Jute Mills Corporation (BJMC) and textile and jute ministry.

But the investors are interested in taking the lease for longer periods, like 99 years, and loans to launch the business.

Meanwhile, the promises, made by the government in July when the mills were closed, of modernising and reopening the mills remain far from being kept.

According to proposals presented in recent meetings of the technical committee formed to modernise and reopen the jute mills, only the mills and its machineries should be leased out to the investors who have the working capital to start the modernisation process without government funds and can start production at the soonest time possible.

The land and other infrastructure of the mills should remain under government control, officials said.

"Most of the machineries at these factories are very old. We assume that the investors will install newer ones. So, the duration of the lease may depend on the time needed to start production and make profit," said Abdur Rouf, chairman of the BJMC, which regulates the jute mills.

"However, we have not decided anything about it yet," he told The Daily Star.

Rouf, also a member of the technical committee, said, "We have bad experiences with leasing out the entire mills. Some industrialists tried to grab or misuse the land."

But the potential investors are not too eager to take the lease under such terms.

Md Zahid Miah, chairman of Bangladesh Jute Spinners Association (BJSA), said the government should lease out the mills for about 99 years.

"We need time and funds to replace the machineries. After restarting the mills with the new machineries, we will have to assess the market and diversify our products accordingly. It will take a long time to make profit. Without a considerably long-term contract, the investors will not be interested in taking the risk," he said.

The government closed all 25 jute mills of the BJMC on July 1 after years of losses. A 13-member technical committee was formed on July 16 to recommend ways for reopening the units in accordance with the national and global market demands.

Jute and Textiles Minister Golam Dastagir Gazi on June 28 announced that the mills would be shut down and 24,886 of its workers would be laid off in the process.

The rationale behind the decision was excessive production cost in these mills due to the workers' wages, which constituted 60-63 percent of the production costs.

Talking to The Daily Star recently, Mohammed Mahbubur Rahman Patwari, chairman of Bangladesh Jute Mills Association (BJMA), said the government should make provisions so that the investors can get bank loans on easy terms, like allowing interest-free loans for 10 years.

"Modernising these factories, most of which have been left unreformed for over 50 years, will require a lot of funds. It is not possible for us to invest such a large amount without bank loans," he said.

The industry leaders are also not very interested in public private partnership (PPP).

BJSA Chairman Zahid said, "Our past experience with PPP is not very comforting. PPP will come with its bureaucratic tangles that will slow down the progress of modernisation and could result in wastage of funds that the private sector cannot afford."

The government plans to go for government to government (G2G) agreement to modernise the factories is also uncertain.

In 2016, the BJMC and China Textile Industrial Corporation for Foreign, Economic and Technical Cooperation signed an agreement to modernise and diversify production systems in the state-run Karim Jute Mills in Dhaka, Amin Jute Mills in Chattogram and Platinum Jubilee Jute Mills in Khulna.

According to that agreement, with Chinese cooperation, these jute mills were to produce viscose fibre and various other non-traditional jute-based products like expensive car-dashboards, linen cloths, car seat covers and curtains.

The agreement could not materialise.

The BJMC chairman said when he assumed the office, the decision that BJMC would gradually stop production in these mills to minimise heavy financial losses was already made.

"So, we could not proceed with that project. Since we have not decided on the method of reopening yet, the options for government to government agreement are still open," BJMC Chairman Md Abdur Rouf said.

However, experts are emphasising on exploring alternative methods of breathing new life to the jute sector.

"These large jute mills should be replaced by smaller and medium privately run mills. The machineries of the closed jute mills can be sold out to the entrepreneurs so that they can start small jute mills in various parts of the country," said Khondaker Golam Moazzem, research director at Centre for Policy Dialogue.

"And, the existing infrastructure and lands can be handed over to BEPZA and BEZA who can establish economic zones to attract businesses to invest in different industries," he said.

For instance, jute mills in Chattogram can be lucrative locations for heavy industries due to its proximity to the port while Jute mills in Dhaka and Narayanganj can make way for consumer product-based industries, he said.

"Special allocations for jute and agro-based industries can also be made in these economic zones. This way, the government can initiate massive industrialisation while rehabilitating the jute industry as well," said the research director of CPD, who has been researching the jute sector for decades.

Prof Dr M M Akash of Dhaka University's economics department, said the government could lease the factories out to workers' and employees' unions on performance contracts. To do so, the government should ensure easy access to loans to.

The workers, who suffered under an inefficient BJMC administration, will automatically boost production for their own good, he said.

"For overhauling the mills, the government to government agreement is also a viable option because the process requires massive investments. However, it has to be ensured that the agreement is done on equitable terms."