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Closure of Adamjee Jute Mills: Ominous SignAuthor(s): Anu MuhammadReviewed work(s):Source: Economic and Political Weekly, Vol. 37, No. 38 (Sep. 21-27, 2002), pp. 3895-3897Published by: Economic and Political WeeklyStable URL: http://www.jstor.org/stable/4412631 .

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BANGLADESHClosure o f AdamjeeJ u t e M i l l sOminousSignThedecline of theAdamjeeJuteMills goes backto as early as1995, soon aftera WorldBank-Bangladeshgovernmentagreementenvisagedwide-ranging changes in thejute sectorinvolvingclosure,downsizingandprivatisation of several millsand retrenchment f their workers.Adamjee'sexperiencehasfound replication n numerouscases in the manufacturing ector,promptingrenewedquestionsonce again aboutadjustmentprogrammesand who actually constitute its truebeneficiaries.ANU MUHAMMAD

he closureof AdamjeeJuteMills,established in Dhaka in 1951 byAdanjee, a leading business houseof then Pakistan, has been considered bythe local-global policy-makers as a greatrelief. The 51-year old mill with about30,000 workers,thebiggest in thecountry,has gone away without any review orrescue measures from the government andfinally without any resistance from thetrade unions. Three hundredacres of landlies there for something else, which hasnot been disclosed yet. 50,40, 30-year oldmachinery s therewaitingto be taken overby somebody. Thousands of skill workersare now unemployed, the lucky ones arewaiting to be transformed nto shopkeep-ers. Several thousand petty traders andprofessionals linked, with Adamjee arealso now in harduncertainty. The effectsof it on millions of jute growers do notneed elaboration.Adamjee Jute Mills have been throwninto the past. But is it only the Adamjeethat has gone into history or is it a trendof this economy to become a land ofsupermarketsdestroying potential manu-facturing enterprises? There are severalinstances of factories (public andprivate)closing down on the one hand and ofhigh rise constructions growing in everycomer, on the other. It is not surprisingthat about 80 per cent of the new invest-ments are taking place in construction,which has captured highest growth rate tofurther nflate of GDPgrowth[Muhammad2000]. It is also not surprising, therefore,

to see a mad competition to grab all openspaces including wetlands and ex-factorylands.The causes, shown in the media behindthe closure of Adamjee have been itslosses, nearly 1,200crore taka in 30 years.The mills authorityor even the ministriesconcerned did not issue any detail orsummary report explaining or reportingto the people details of such losses, rev-enue earned from the mills, foreignexchange earned from the mill goodsduring the same period and other relatedfacts. Only things we have from thegovernment have been some comments,and as usual promise, from the jute min-ister and the chairman of privatisationcommission. The government and itsrelevant authority did not bother to ex-plain such an 'epochal' decision to thepeople, which is going to affect not onlypeople who were living for generations inthe area and the future ones but also thewhole economy.Although losses in state-owned enter-prises(SOEs) havealways beena favouritetopic of local-global policy-makers whohave also been united in their proposedsolutions: dismantlepublic sector by clos-ing or privatise, none of them have madeanyattemptoinvestigatehehemorrhageof publicresources. tseems thatnone ofthem areunhappyo see losses in publicsector,rather osses are desirable o setwholething nto thechosen 'model'.Itiseasytomake osses an ssue,afterkeepingconditionsof leakage,takingpolicies toblock normalfunctioningof the enter-prises, patronising and encouraging

lumpen trade union leaders to keep thingsunder control.GS Sahota of Harvard University hadbeen in Bangladesh in late 1980s to con-duct an intensive study on the manufac-turingsector. So far, this has been the mostcovered and analytically sophisticatedstudy on the sector. Sahota could not hidehis surpriseafter finding the conditions ofAdamjee and other jute mills. His studynoted in 1991, "Bangladesh installedbetter-practicetechnology of jute mills inthe 1950s than India's. Today, 40 yearsafter that, many of Bangladesh jute millsarestill using the same machines, scarcelyrenovated"[Sahota 1991]. As a result, thejute mills in India flourished while 50 percent of jute mills in Bangladesh have beenclosed down including the world's largestone. In 1991, a task force of the firstcaretaker government revealed that theassets of 29 jute mills, worth more than245 croretakawerebythendenationalisedat the face value of only 5.5 crore [TF1991]! Could those, even after this dis-tress sale, survive in private sector? Weknow the answer at least most of those:No.Does thecryof losses of the local-globalpolicy-makers mean that the profit-mak-ing enterprises would be spared to sur-vive? No. Thechairmanof theprivatisationcommission, ministers and above all thecountry director of the World Bank haveinformed us in many occasions thatpolicywould not be different for profit-makingenterprises. So, if Adamjee could havebeen a different story, even then it wouldface the same fate. If that is the case thenthe issue of losses in Adamjee or in anyother SOEs becomes irrelevant so longdecision of closure or giveaway is con-cerned. When the policy-makers are de-termined to dismantle the publicsector byclosure orprivatisationof SOEs, irrespec-tive of its performance and the accountsof profit or losses or its linkage effects onthe economy then the policy is not basedon economics it is highly ideological/political. But the emphasis on losses ofSOEs in public discourses is quite under-standable: it is easily saleable andeasy tohide the real agenda.Adamjee, in fact, was established andlater expanded not by private initiativealone. It is importantto note that the mainresource-supportto establish jute mills atthat time including Adamjee came fromthe public resources. State policy regard-ing state-sponsored manufacturing hadbeen vital behind establishment of jute

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mills and their survival. Between 1950 and1961 many public institutions were estab-lished to build an industrial base in Paki-stan. Those include: Pakistan IndustrialDevelopment Corporation PIDC) in 1950and its division into two wings (EPIDCand WPIDC) in 1962, Pakistan IndustrialCreditand InvestmentCorporation PICIC)in 1957, the formation of East PakistanSmall Industries Corporation (EPSIC) in1957 and IndustrialDevelopment BankofPakistan (IDBP) in 1961.Between 1952and 1958, PIDCextendedsupportto the private sector by establish-ing 12jute mill companies. PIDC's part-ners in private sector were all West Paki-stanis although all of the jute mills werebuilt in East Pakistan. Share of East Pa-kistanisasentrepreneurs emainedinsipid.Only a handful of local investors' partici-patedbutthey were also dependenton statesupport,as an estimate said, "the share ofthe Bangalee entrepreneur n the financesneed to set up a jute mill was as low as10 per cent" [Ahmad 1978].

A Story of Rapid CollapseJute industry had been the mainstay ofthe manufacturingsector butits profitabil-ity and survival always rested on explicitand implicit subsidy from the state evenin the private sector. The export bonusscheme was a very importantpartof thatpackage. It was introduced in 1959 and

graduallyextended. This scheme had beenproviding significant support to the ex-porters of jute andjute products. Its rolein making jute industry more profitablewas such that,"without thebonusearningsnot only that there would not have beenany surplus of sales value over costs butin fact there would have been considerableloss"...and "the contention that the indus-try was runningefficiently in the 1960s tobe able to make good profits is in fact amyth" [Ahmad 1977].After Bangladesh came into being, thestate did not continue the incentives andsupport, given traditionally to the jutesector that constituted afterwards the

major part of the public sector. On thecontrary, direct incentives were furtherstrengthened for the privatesector export-oriented enterprises later. Import of rawmaterialsandcapital machineryhave beenduty free for 100 percent export-orientedindustries. Exporters also have cash com-pensation of 25 per cent, income tax re-bate, and tax holiday, increased ceiling forforeign currency retention. In differentforms, the garments sector alone is nowgetting nearly thousand crore takasupportfrom public resources. Although publicsector jute mills also had been export-oriented enterprises they did not get simi-lar supports [Sapri 2001]. One couldwonder what would be the profit-lossscenario of the foreign investors in EPZor local investors in garments if the statewithdrew all support, indirect and directsubsidies?The closure of Adamjee was announcedon June24, 2002 but its death warrantwasactually issued on February17, 1994, whengovernment of Bangladesh signed an

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agreement with the World Bank/IDA forUS $ 247 million jute sector adjustmentcredit. This jute sector reform project hasbeen considered by the policy-makers asone of majorprojects of the World Bankto 'help' industrialisation in this country.The programme, however, involved(i) closing 9 of the 29 public mills anddownsizing two large public mills;(ii) retrenchment of about 20,000 em-ployees in the public sector; and(iii) privatisation of at least 18 of theremaining20 public mills.March 1995 was the estimated date forrelease of the second tranche from theWorld Bankupon some conditions. Thoseconditions include: (i) wage policy injuteindustry satisfactory to IDA; (ii) disposeof equipment of four closed mills andequipment; (iii) close five identified pub-lic mills anddownsise one other to reducecapacity nthepublicsectorby 2,700 looms;(iv) reduce permanent employees in thepublic mills by an additional 8,000; (v)reduce government's share in the totalloom capacity to at the most 7,000 loomsby privatisationorother means of disposalof at least nine mills; and (vi) completeliquidation of the BJC.The second tranchewas delayed becausethe then government failed to privatise orclose 14 public jute mills in time as re-quired for that. The World Bank becamehappy to see that the next governmenttenderednine public jute mills and wouldtender five more. But what happened totheprivatesector in Jute?Did they prosperby themoney andpressurefrom the WorldBank and follow up steps by the govern-ment? World Bank documents give anegative answer.According to the World Bank InspectionPanel's report, a group of Bangladeshcitizens who were intended beneficiariesof the project filed a request in August1996 and it was resubmitted in November1996. The requestersclaimed thatthey andthe jute private sector had been harmedrather hanhelped through 'some flaws inthedesign of thereformprogramme'.Theycategorically stated that the private sectorwas worse off than before the 'reformcredit'. They also alleged, "the JSAC isresponsible for the reduction of privatesector capacity. Operating oomage fortheprivate sector has dropped from 5,955looms in FY 1992-93 to 3,969 looms inDecember 1996." They also hold JSACresponsible for temporary closure or re-duction incapacity of 11privatemills. Notonly that, herequestersapprehendedmajor

additional damages in the future, such as:"(i) permanent closure of private sectormills, with related loss of security, incomeand dislocation of careers; (ii) job loss forthousands of employees and (iii) lossto Bangladesh's economy and socialwelfare" [World Bank 1997].So, in essence people of Bangladeshwere burdened with more debt for notestablishing new factories or promotingolder ones either in public orprivatesectorbut to 'downsize' or 'close' them. Ironi-cally, the amount taken as credit from theWorld Bank to close down or downsizejute manufacturing units was more thanthe amount losses in 30 years fromAdamjee.The Larger Picture

The experiences regarding jute mills isconsistent with the overall experiences inthe manufacturing sector. Many of oldenterprises, publicandprivate,havecloseddown or downsized during last two de-cades. A portion of the sector has beengradually replaced by the export-orientedones. Due to closure of many large-scalefactories and sickness of medium and smallenterprises, the number of industrialworkforce has shrunk despite new entryin export-oriented garments and EPZs.Since 1989, absolute level of employmenthas fallen from 7.8 million to nearly fivemillion; this fall has been steeper inmanufacturingsector, from seven millionto nearly four million since 1989 [BBS1996]. The recent closure will add to thatsharp fall.In fact, during the last three decadesproportionate share of manufacturing inGDP marked a little change, rather itshowed a clear sign of decline in someperiods. According to the old estimates ofGDP, manufacturingwas 7.90 percent in1972-73, it increased to 8.47 per cent in2000, less than 1 per cent increase in 30years. It is importantto note that share ofmanufacturing reached 11.14 per cent in1982 and then it began decreasing. Thisis the same period when StructuralAdjust-ment Programme(SAP) sponsored by theWorld Bank/IMF started unctioning.Withthe new estimates, the methodologyadopted recently, figures go upward buttrends remains the same. According to thenew estimates, the shareof manufacturingin GDP was 15.43 per cent in 1995-96;it decreased to 14.68 per cent in 2000. Ifwe compare the shareof manufacturing nearly 1980s with the figure in 2000 then

it would show a clear de-industrialisation(GOB, different years). This outcomeexposes the real agenda of different 're-form' programmes.Effectively, different governments havebeen happily participating in projects tomake productive sectors more costly andnon-competitive, to make sick industriessicker, and transform potential fields forproductive expansion into liabilities andfinally set the direction of the economy inaway thatgives enough scope fortofrauds,lumpens and grabbers while creating hellfor skill, creative, innovative workers andentrepreneurs.While more than one hundredthousandpeople were thrown directly under the'income poverty line' by closing downAdamjee, the interestgroups who usurpedbillions of taka by looting and mis-man-aging, haveprobably urned oanotherope-ration. With the new addition of poverty,child labour, women trafficking, prostitu-tion and uprooted people, new 'povertyalleviation' projects will now find a start.The ministries were prompt and secre-tive to close down Adamjee accusingworkers for making losses of 1,200 croretaka in 30 years. Within a week of that'epochal' decision, TransparencyInterna-tional informed us that the ministry - highofficials have been contributing to thecountry by draining off 11 thousand croretaka per year! What will happen to them?They will flourish and fatten. The AIDprojects are there to support them. MReferencesAnu,Muhammad2000):EconomyofBangladesh(in Bangla), Dhaka.BBS (1996): Reporton Labour Force SurveyinBangladesh, 1995-96.Gian, S Sahota (1991): 'An Assessment of theImpactof IndustrialPolicies in Bangladesh'in Bangladesh DevelopmentStudies, specialissue.Ministry of Finance, GOB (1995, 1996, 2000,2001): Bangladesh Economic Review.Qazi, KholiquzzamanAhmad (1977): 'Was theJuteManufacturing ndustryProfitable n Pre-LiberationDays?' BDS Journal, July issue.- (1978): 'The Manufacturing Sector ofBangladesh- An Overview', BDS Journal,Autumn issue.Debapriya,BhattacharyandRasheedA M Titumir(2001):BangladeshExperiencewithStructuralAdjustment: Learning from a ParticipatoryExercise, StructuralAdjustmentPartcipatoryReview Initiative, SAPRI Dhaka, March.TaskForces TF)( 1991):Reportof theTask Forceson BangladeshDevelopmentStrategies orthe1990s, Vol 2.World Bank(1997): The FirstFourYears(1994-1998), Bangladesh: Jute Sector AdjustmentCredit,ReportandRecommendation,May 14.

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