The Review of

Industrial Policies in
Bangladesh from
1971 - 2014

SubmittedtotoSubmitted

Dr.Abul
AbulKashem
KashemMohammad
MohammadJamal
Jamal
Dr.
Uddin
Uddin
Professor
Professor

DepartmentofofSociology,
Sociology,
Department

Universityof
ofDhaka.
Dhaka.
University

Date of Submission: July 15, 2014.

Submitted By
Name

s Roll

Md. Hasanul Banna

Roll No.303

3rd Semester,7th Batch.

Dept. of Sociology

University of Dhaka.

Industrialization is an essential pre -requisite for rapid and sustained

economic development and social progress.
Modernization and structural transformation of the economy and
diversification of the economic base and standard of living of the people
are the universally recognized dynamic benefits arising from industrial
development.
Industrialization is thus pursued as an overriding development objective in its
own right.
In the past, efforts towards industrialization in Bangladesh were made under
changing economic paradigm and political economy regimes. Since independence
in 1971, a total of ten industrial policies have been formulated and adopted
for industrial development of Bangladesh.

Concept of Industrial
Policy.

The term "industrialpolicy" is very comprehensive and often misleading it covers a wide range
of options and instruments falling under the domain of trade, fiscal, monetary and exchange
rate policies.
It may include direct regulatory policies like investment sanctioning, import licensing and
exchange controls, and allocation of areas of activities for private and public investment.
It may also include indirect economic policies and instruments such as tariffs and quantitative
restrictions, several activities like construction, hospital and clinics, hotels and tourism,
technology-base.
The term 'industry' in the phrase industrial policy was generally understood to mean
manufacturing it did not include agriculture construction, services, or transportation.

The policy contents of industrial policy are now getting wider and wider. While the
traditional role of industrial policy.

to influence the allocation of resources to industry, i.e., policies that affect the
infrastructure of industry in general, such as the provision of industrial sites, roads,
ports, and electric power,

to regulate the internal organization of particular industries, such as industrial

restructuring, consolidation of firms, and output restrictions, and

To influence the growth of small and medium scale enterprises (SMEs), etc.
remains as before, industrial policies are now directed at achieving on-economic
goals.

Main Theme of Industrial Policy In

Bangladesh
It has been 43 years since Bangladeshs independent. Since then the
country has formulated ten industrial policies.

The country till now has gone through 10

policies:

Sl
No.

Name of the
Policy

Timeline

The Key Focus of the Policy

Industrial
Investment
Policy

January,
1973

Nationalization of all medium and large scale industrial policies

New Industrial
Investment
Policy

July, 1974

Encouraging private sector activity in manufacturing, and

reducing, through disinvestment, the dominant role of the public
sector

Revised
Investment
Policy

December,
1975

Focus on a private sector-led growth. The period witnessed large

scale denationalization of industrial enterprises, and private
sectorinvestment began to pick up with liberal credit policies
and generous lending by commercial hanks and DFIs. Boosting up
export sector

New Industrial
Policy (NIP)

June, 1982 Stimulate industrial development through the private sector and
to that end it made fundamental changes in the industrial policy
environment and promotional instruments. Large scale
denationalization

Sl
No.

Name of
Timeli
the Policy ne

The Key Focus of the Policy

Industrial
Policy

July,
1991

The whole industrial policy was premised on the philosophy of

market-based competitive economy.

Industrial
Policy

1999

the first ever policy that had a true vision of industrial

development, and the objectives outlined in the policy
statement had a clear sense of direction. Its major objective
was to have, within a decade, sizable industrial sector where
manufacturing would account for at least 25% of GDP and 20% of
the employed workforce.

Industrial
Policy (IP
2005)

March, The policy envisages that in the next one decade the
2005
manufacturing sector will account for about 30 to 35 percent of
GDP and about 30percent of employed workforce. More focus
on the SMEs

Sl
No.

Name
of the
Policy

Timeline

Industri 2009
al
Policy

the prime objectives of this Policy will be to give clear

signal to the private sector highlighting governments
commitment to private sector led industrialization
strategy.

10

Industri
al
Policy

and hunger to less than a half by 2017 through the adoption

of short-, medium-and long-term programmes that help
build a modern and vibrant industrial sector.

2010

The Key Focus of the Policy

Importance of Industrial
Policies in Bangladesh

1. It is ninth most populous country of the world but, in terms of income and
standard of living, it is among the poorest in the world.
2. Based on the United Nations criteria of per capita income, contribution of
manufacturing activity to GDP, and the rate of literacy, Bangladesh is
categorized as a "least developed country". Per capita income in the country
is about $445, and nearly a half of the population is below the poverty line.
3. The economy is dependent mainly on agriculture, which accounts for 22
percent of GDP but provides employment to as much as 52 percent of the
country's labor force.
4. The country's population and labor force are growing rapidly every year, and it
is impossible that the growing labor force can ever be absorbed in the
agriculture sector.
5. Industrial policy can be of great significance to these countries as means of
achieving faster economic growth, creation of productive employment and
alleviation of poverty.
6. Industrial growth and Improve the long-term performance of the economy in
terms of productivity, employment, and international competitiveness.

7.

The key to poverty alleviation lies in the generation of productive employment through
rapid economic growth and structural transformation of the economy away from
agriculture and toward industry.

8.

While the slow growth of the manufacturing sector may be attributed to factors like
energy shortage, reduced availability of bank credit, poor inflow of foreign direct
investment (FDI) labor unrest, and poor law and order conditions no less responsible
are the inconsistent policies.

9.

The market failure approach makes public policy to focus basically on supplying lacking
inputs: physical capital, skills, technology, etc. While this is an important policy area,
developing countries also tend to suffer from a lack of demand for such inputs.

10.

Market failures are not always easy to locate except in the most obvious situations
(namely, education, infrastructure, etc.) and, when they can be located, their
seriousness may not be apparent.

11.

There is what amounts to a private sector failure, when a firms goal of making
profits (or raising share value) conflicts with national development. It may make good
commercial sense for a private firm to pull out of one country and move to another
that offers.

Different size categories of

industries are defined in the
following manner:

Diagram of Categories of Industries

Large Industry

In the case of manufacturing activity, large industry will include enterprises

with either the value (replacement cost) of fixed assets excluding land and
building in excess of Tk. 200 million or enterprises having more than 150
workers.

In the case of non-manufacturing industrial activities, large industry will

include enterprises with either the value (replacement cost) of fixed
assets excluding land and building in excess of Tk. 100 million or enterprises
having more than 50 workers.

Medium Industry

In the case of manufacturing activity, medium industry will include

enterprises with either the value (replacement cost) of fixed assets
excluding land and building in the range of Tk 15 million to Tk. 200 million or
enterprises having between 50 and150 workers.

In the case of non-manufacturing industrial activity, medium industry

will include enterprises with either the value (replacement cost) of
fixed assets excluding land and building in the range of Tk 5 million to Tk.
100 million or enterprises having between 25 and 50 workers.

Small Industry

In the case of manufacturing activity, small industry will include enterprises

with either the value (replacement cost) of fixed assets excluding land and
building in the range of Tk 0.5 million to Tk. 15 million or enterprises having
between 10 and 50 workers.

In the case of non-manufacturing industrial activity, small industry will

include enterprises with either the value (replacement cost) of fixed assets
excluding land and building in the range of Tk 0.5 million to Tk. 5 million or
enterprises having between 10 and 25 workers.

Reserved Industry

Industries that are kept reserved for public investment due to national
security or other reasons have been termed as reserved industries.

Micro Industry

Micro industry will include industrial enterprises with either the value
(replacement cost) of fixed assets excluding land and building of up to Tk 0.5
million or enterprises having 10 or fewer workers.

Cottage Industry

Micro industries with predominance of family labor will be defined

as cottage industries

Urban and Rural Industrialization

in Bangladesh
Major Problems Faced by Industries in Rural and Urban Bangladesh

Trend of Urban Sectors Contribution to GDP in Bangladesh during 197273 to 2000-01.

Source: Bangladesh Bureau of Statistics (1993), UN World Urbanization

Prospects (2000) and Bangladesh PopulationCensus,2001

Evolution of Industrial Policy in

Bangladesh

Evolution of Industrial Policies in Bangladesh from 1971 2014.

Industrial Investment Policy, 1973

The rationale behind such strategy can be adduced to the following
three principal factors.
1.

It was embraced by a host of other countries of the world during the

time Bangladesh emerged as an independent state,

2.

There was pervasive presence of IS industries in the economy that

needed to be highly protected-a legacy of the pre-independence era
and

3.

The spectra of "export-pessimism" shook many of the then LDCs,

including, Bangladesh.

New Industrial Investment Policy, 1974

Identifying the problems in the previous policy a number of steps were
taken up by the then government mostly, to lure private investors:

Enhancement of the investment ceiling from Tk. 2.5 million to Tk. 30 million
(and later to Tk. 100 million).

Provisions for monetary incentives to allow more corridors to the enhancement

of a moratorium for nationalization for up to 15 years.

Provisions for tax holidays for less-developed areas.

Devaluation of currency by a substantial margin (perhaps largest in the history of

Bangladesh).

The number of industries reserved for the public sector was reduced to18.

Fiscal and monetary incentives were expanded to stimulate private investment.

Revised Investment Policy, December 1975

Few of the changes of that time were as follows:

Elimination of ceiling on private investment on oil.

Relaxation of investment sanctioning procedures.

Amendment of the constitution to allow denationalization.

Reviving the stock market.

Shifting from tile fixed rate system of the 1970s to a 'managed'

system of floating exchange rate.

New Industrial Policy (NIP), June 1982

The principal objective of the NIP, as documented were to:

Emphasizes export oriented growth with necessitated substantial

changes in the regime of trade and industrial incentive structure with
prominence placed on export diversification and import liberalization

Assign the private sector be pivotal role to play in rapid industrialization

of the country.

Down-size the role of tile public sector to a substantial extent by

specifying its areas of existence to a limited number of restricted areas.

Rationalize the tariff structure and pursue appropriate fiscal measures

(Ministry ofIndustry 1986).

Revised industrial policy (RIP), July 1986

In keeping with the government's policy of balanced regional

development the country's geographical area was divided into three
categories:

Developed Areas, where adequate infrastructure exists and sufficient

industrialization has taken place,

Less Developed Areas, where infrastructure has been partially developed and
some industrialization has taken place, and

Least Developed Areas, where neither infrastructure has been developed nor
any industrialization has taken place.

Industrial policy, July 1991

The whole industrial policy was premised on the philosophy of a market-based
competitive economy. A number of relatively more positive and biting policy
initiatives were undertaken to lure foreign and domestic investors:

elimination of concessionary interest rated and special credit facilities,

deletion of any requirement of permission to set up industries,

removal of restrictive provisions for equity participation by foreigners.

The number of industries reserved for only public sector investment was reduced to 5 from 7
of the previous policy.

Industrial policy, 1999

The Industrial Policy, 1999 was perhaps the most comprehensive
policy, which sought to give the private sector a dominant role :

Focus the role of the government as a facilitator in creating an enabling

environment for expanding private investment.

Attract FDI in both export- and domestic market-oriented industries give the
industrial sector a dominant export Orientation.

Encourage the competitive strength of import substituting industries for

catering to a growing domestic market.

Encourage a balanced industrial development and regional dispersal of

industries throughout the country by introducing suitable measures and
Incentives.

Develop indigenous technology and to expand production based on domestic

raw materials.

Industrial policy 2005 (IP 2005)

The latest industrial policy was announced in March 2005.
The major objectives and strategies of IP 2005 are more or less similar to
those of the 1999 policy,
The policy envisages that in the next one decade themanufacturing
sector will account for about 30 to 35 percent of GDP and about 30
percent of employed workforce.

Industrial policy 2009

The overall objective of the Industrial Policy 2009 will be to provide a

policy and institutional framework that will create and sustain a
momentum of accelerated economic growth through industrialization in line
with the vision laid out earlier.

The Policy will aim at creating a highly positive proactive and enabling
environment in which private investors can operate without unnecessary
bottlenecks, delays and interference.

The Industrial Policy 2009 will attempt to rationalize the existing incentives
structure for attracting higher levels of private investment in areas of
dynamic comparative advantage in the economy.

National Industrial Policy 2010

industrial Policy-2010 aims at achieving the Millennial Development Goals

(MDGs) and, above all, reducing unemployment and the proportion of the
population afflicted by poverty and hunger to less than a half by 2017
through the adoption of short-, medium-and long-term programmes that help
build a modern and vibrant industrial sector.

Achieving the recently-announced Digital Bangladesh goal by 2021, and

creating employment opportunity for at least one person from each
household in order to reduce poverty and unemployment loom large
among the central policy objectives of the government.

Major Structural Constraints that Hinder

Industrial Growth

Limited access to credit, its high cost, legal or illegal, and procedural difficulties in
obtaining credit from banks.
Poor- physical infrastructure
Acute energy shortage and Unreliable supply of power and other utilities such as gas and
water.

Lack or skilled labor and the tendency for labor to be militant.

Competition from dumped and smuggled imports.

Lack of' g good marketing facilities.

Pervasive corruption in bureaucracy, particularly in the administration responsible for

delivery of public services.

A fragile political situation.

Poor law and order conditions.

Insecurity of life and property.

Growing incidences of crime and extortion at every stage starting from production to
distribution and marketing, of the products.

Thanks All Of
You.