Special Report

A special report on the immense potential of the Light Engineering Industry in Bogra

By Asaduzzaman

Having become a major player in the global apparels industry, Bangladesh is now seeing the emergence of a new promising sector which can further enhance the country’s export diversity – the Light Engineering Sector (LES). This newly emerging sector has witnessed exponential growth and contributed about 1.5% to our export earnings during the financial year end June 2016. Statistics of the Export Promotion Bureau (EPB), Bangladesh show more reasons to boast. The export figure from engineering products stood at $510.08 million in FY 2015-16, making it a booster sector in our industrial policy. Additionally, time series data of the last five year shows that cumulative figures for engineering products in FY 2011-12 stood at $375.49 million. The export map had earlier shown bicycles as the leading item, whereas, now we have engineering equipment from the likes of Globatt and Duranto achieving global recognitions.

Engineering Englightment
The import substitution sector provides critical support to industrial, agricultural and construction sectors by manufacturing a variety of spare parts. Players from this sector now claim that electrical goods like switches, sockets, light sheds, channels, cables and electrical fans and generators, which are manufactured by the LES are now meeting 48% to 52% of the country’s demand, which previously was met through imports. The LES is also called the “mother of all sectors”, because it provides back up support to cement, paper, jute, textile, sugar, food processing, railway, shipping, garments capital machineries by repairing and maintaining those.
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Out of the major LES hubs in Bangladesh, the one in Rangpur–Dinajpur concentrates on producing spare parts for automobiles, railways, mills, factories and maintenance work. On the other hand, Bogra and Natore’s hub focuses more on foundry, agro-machinery, factory spares, LPC, cylinders and maintenance work. Sylhet’s hubs are focus on spare parts for mills and factories. The Dhaka-Gazipur-Narayangonj hubs rely on producing capital machinery, bicycles, construction equipment and spare parts. Khulna-Barisal hubs are concentrating on spare parts of mills, factories and industries; and the Chittagong hubs focus on ship breaking activities, spare parts for automobiles and maintenance work.
A study by Japan International Cooperation Agencies (JICA) has shown that there are a total of 40,000 small-scale light engineering enterprises in Bangladesh producing around 10,000 different types of items for construction, agriculture and other industries. Another study, conducted by the International Finance Corporation (IFC) in partnership with the UK’s Department for International Development (DFID) and the Norwegian government, shows that this sector employs around 600,000 people who are involved in 50,000 micro enterprises, and 10,000 small and medium enterprises. The study conducted by the Bangladesh University of Engineering and Technology (BUET), however, estimates that the sector comprises of around 40,000 enterprises, employing some 800,000 people. These figures are different because of the methodological variations in the studies. However, given this information, it is quite ironic how the LES draws such little attention from policy makers. This is especially alarming as it has emerged as a potential cost cutting sector by producing at least 50% the items which can be applied as import substitutes.

LES Contribution to Various Sectors

CONSTRUCTION SECTOR
mixture machine, piling machine, construction crane, soil moulding, machine, auto bricks manufacturing machine, brick crasher, stone crasher, concrete mixer machine, vibrator machine.

AUTOMOBILE SECTOR
spring, break dram, bush, pulley, piston ring, gijon pin, gijon bush, slip, head sheet valve, auto crankshaft, hanger pin, head seat, gear shaft, nut & bolt, auto valve, auto gas cylinder, connecting bush, shaft, cabling, sit socket, block liner, booster connecting, booster body, booster pin, automobile filter, radiator engine fan, CNG engine fan, motor cycle bearing, chain cover, motor cycle pinion, motor cycle sit cover, motor cycle carrier, motor cycle cylinder and motor cycle paddle.

PAPER & PULP SECTOR
manual knife, gate valve, agitator, pneumatic valve, compressor pump, gear coupling, felt roll, helical gear, spur gear, herringbone gear, compressor, roller, pump and cutter.

PHARMACEUTICAL SECTOR
pharmaceutical blister, packing machine, tablet packing machine, tablet steep machine, tray dryer, tablet machine 16 punch, fluid bed dryer machine SS, film cutting machine tablet, liquid filling, sealing and labelling machine, pharmaceutical powder mixer machine, tablet steep machine, malit mill machine, wrapping machine.

MOULD & DIE SECTOR
industrial parts, egg tray, garment hanger, water filter, cookeries, plastic bottle, cosmetic, toy, sanitary and shoe.

RAILWAY SECTOR
center p-boat, brake bim, brake shaft, 2 inc, CI coupling, brake hamper, rail channel pin and cable, bearing, elbow, mini-puli, bolt, cylinder liner, piston, compressor, S.P. cylinder, hanger and horn.

MARINE SECTOR
marine popular shaft, sugan bush, sugan, head, head valve, ring, fiver bush, machine tools, lathe machine, power press, shaper, hydraulic press, cooling tower, etc.

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The Bogra Scenario
Bogra is a major economic hub in the northern region of Bangladesh with traditional agricultural activities and recently developed agro-based industries. A number of SME clusters have developed in the region through successful horizontal and vertical integration with local and international markets for raw materials and finished products. At least 7 clusters were identified where about 4,000 industrial units of SMEs operate in different groups along with other traditional SMEs. These clusters have maintained both local and national marketing networks for selling their products and a small portion of these products are exported to the neighboring countries according to the study by Centre for Policy Dialogue (CPD).
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The iconic Vandari Group, hailing from Chittagong started their business in this region in 1964. The IBT team accompanied by Golam Azam Tiklu (President of the Forum for Agro Machineries Manufacturing and Processing Zone) and Badol Sarkar (President of the Bangladesh Agricultural Machineries Manufacturing Association) visited an agro parts manufacturing factory called Al Madina in BSCIC. They were lead into a special room for design where their manager, Rias Uddin Mondol, explained how their factory was making many types of dices in several designs. This factory’s line of production starts from separating raw materials to making the final product. The lengthy but smooth process starts with scraps being boiled and melted in the furnaces then shaped into dices, with workers from both genders provided with equal employment opportunities. The team then visited Reaz Metal, which produces foundry and industrial parts. Many brands of tube wells produced by Reaz Metal are marketed under different brand names around the country. The manufacturing procedure was mostly locally innovated and done manually, a striking feature of the Light Engineering Sector in Bogra worth mentioning. At the end of the extensive tour, the team visited the Mohoni Jute Mills where export quality jute products are being produced. The machineries used in the process were collected as scrap from Adamjee Jute Mills. As impressive as they already may be, there is no denying the fact that with proper the knowledge and technological supports, these factories would be able produce much more to add further value to this sector in this region.

DIFFERENT ENGINEERING PRODUCTS IN EXPORT BASKET (VALUE MLI US$)

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The LES Value Chain
The value chain in this import substitution industry is home grown. On the buyers side one arm comprises of domestic wholesale, domestic retail and domestic consumers and on another arm we see international wholesale, international retail and international buyers. The bottom of the supply chain starts with reverse engineering: Design and sample collection followed by and then raw material collection, processing, conditioning and warehousing of parts. The next step requires production and processing (casting, marching, welding, heat treatment, fitting). Then assembly installation of BOF items e.g. electrical items. Afterwards there is a quality assurance test which is followed by packaging and transportation.

Insights from the Stakeholders
Masudur Rahman Milon

Masudur Rahman Milon, the President of Bogra Chamber of Commerce and Industry is a second-generation businessman. According to him, LES has immense potential in the region, not only through local sales but through exports as well. “The Special Economic Zone (SEZ) is going to be inaugurated in January 2017 comprising an area of 350 acres of land accommodating many joint venture companies. Some of these are Chinese companies, with whom the MOU is already signed. The SEZ will hold a central water treatment plant and will help the business greatly in this area.”
However, Milon identified that the problems regarding the lack of gas and industry-friendly tax system needed to be fixed. Of the latter, they have already had discussions with the NBR Chairman. He states, “Our cost of tiles production is more than 30% than that of the area where gas is available.” He added that right now they were getting industry loans at 10%, which was previously 18%. He also lamented that since many of these companies were home grown proprietorships, they were not aware about compliance issues. He urged that the respective associations look into this matter.

Md. Imtiaz Hossain ChowdhuryMd. Imtiaz Hossain Chowdhury, Chairman, Bangladesh Steel & Engineering Corporation (BSEC) discussed how the region could do much better had there been enough policy implementation to ensure the growth and sustenance of the Light Engineering Sector. “Since the area produces mostly agro-based machineries, I thought of making tractors locally. In pursuit of that we held an open discussion forum with representatives from Rajshahi Agricultural University and Mymensingh Agricultural University. The experts however opined that the project would not be financially viable as the market is not big enough.” However, he is hopeful about the possibilities of setting up a dynamic industry of producing power tillers and hand tillers, products which are also being imported from India and China. “As of my best knowledge, only one company named Alim Industries in Sylhet is making power tillers. In Bogra, we would like to build the industry to manufacture the same instruments. The official process has already been initiated.”
Md. Sarkar BadoMd. Sarkar Badol, President of Bangladesh Agricultural Machineries Manufacturing Association(BAMMA) in Bogra said, “I was a witness to the initial LES development in Bogra. It all started with the arrival of shallow engine boats which required spare parts and other mechanical support. This necessity lead to the creation of the market in Bogra.” According to him, the growth of LES in Bogra owes to the Vandari and Jamil Group. Many of the technicians working in those factories later become entrepreneurs themselves.

Golam Azam TikluGolam Azam Tiklu
, President, Forum for Agro Machineries Manufacturing and Processing Zone (FAMMPZ) expressed his keen desire for the development of the heavy industry hub at Soy Pukuria. Tiklu said, “Our centrifugal system-pump has been exported to many countries but due to the lack energy e.g. gas and electricity, the production cost risen. The humid environment in Bogra makes it conducive for industries such as cast iron. However, we are still using ancient methods.” He continued that the auto power thresher made with homegrown technology which innovated in Bogra is now used in many rice-producing countries. “We do not have the distribution network across the country. Besides, our people are going across the line of specifications. Rangpur Foundry Limited (RFL), a sister concern of PRAN Group has made their 90% hand tube well with our parts and our products are exported to Myanmar and other countries.” As an expert of this LES industry, he said that raw materials used are basically scraps collected from here and there. He also added that to attain global standards, they need factories, which are business and environment friendly.

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Associations which can aid the Light Engineering Sector
There are numerous associations which cover this sector and its activities. This includes the Bangladesh Engineering Industry Owner’s Association (BEIOA), Bangladesh Electrical Merchandise Manufacturers Associations (BEMMA), National Association of Small and Cottage Industries of Bangladesh (NASCIB), Bangladesh Automobile Assemblers & Manufacturers Association (BAAMA), Bangladesh By-Cycle Parts Manufacturers and Exporters Association (BBPMEA). There are committees in the Ministry of Industries, special committee under the Business Promotion Council and training possibilities under the Bangladesh Industrial and Technical Assistance Centre (BITAC). BITAC has yet to start their operations in Bogra. With their training and input, this crucial sector could be given the much needed boost. Furthermore, the Export Promotion Bureau (EPB) needs to be more active regarding their efforts and execution of policies which can help these SME companies flourish.

What’s Next
A study report prepared by Dr. Khondaker Golam Mozzem, Additional Research Director, CPD titled, ‘Development of Small and Medium Enterprises of the Bogra Region: Challenges and Initiatives’, pointed that, traditional agricultural activities and recently developed agro-based industries have been boosting the LES in this region. A number of clusters have developed in Bogra region including agro products, fisheries, poultry and dairy farms. These SME clusters have naturally formed with successful horizontal and vertical integration with local and international markets for raw materials and finished products. The 7 clusters identified in the Bogra region have maintained both local and national marketing networks for selling their products. A small portion of these products are exported to the neighboring countries. The Soy Pukuria Area by the side of Bogra Nogayon highway could be the next big thing with its 15.42 acres of land. This proposed heavy industrial hub along with the SEZ is on the way; the sooner they arrive, the faster this sector will blossom.


Dr. Kamal Uddin Head Director, Institute of Appropriate Technology Bangladesh University of Engineering and Technology (BUET)

Dr. Kamal Uddin
Head Director, Institute of Appropriate Technology
Bangladesh University of Engineering
and Technology (BUET)


What is the status of appropriate technology and industrial development in Bangladesh?

Appropriate Technology and the industries have historically acted in a pivotal role in the industrial enterprise landscape both locally and within economies globally. Especially, growth with clear benefits for poverty reduction puts a premium on integrating, augmenting productivity and profitability. In the present era, all progressive countries have been intensifying their efforts to develop appropriate technology as part of their development strategy. Appropriate technologies in industries have potentials to make a significant contribution towards technological and economic development along with wide opportunities for employment generation. The analysis shows that the small and medium scale industries adorned with appropriate technologies have made a substantial contribution to Gross Domestic Product (GDP) during the last few decades and created appreciable employment opportunities. The small industrial sector has been playing a key role as support to all other industries by supplying various types of machinery and spare parts, and also industrial units and capital machinery. This comes to a vital support to other sectors of the economy. It is estimated that there are more than 50,000 light engineering industrial units in the country, which operate at a variety of scales and capacities.

What are the main challenges and objectives to proliferate appropriate technology and industrial growth?
In the endeavor to proliferate the appropriate technology and industrial growth, there are many challenges of various natures. In order to promote this sector and enhance its competitiveness, a strong institutional network would be needed to provide support in a variety of ways. The key areas of institutional support needed for the development of this sector include information, training and counseling, technology, finance, market, industrial extension and management development. Trade bodies should be more responsive in the delivery of promotional and other supportive measures for rapid industrial development. The first step is awareness of competition, followed by understanding strength and weaknesses in order to upgrade. In order to proliferate appropriate technology and industrial growth, product items produced in the sector should be of required configuration and quality. Furthermore, the export items should conform to international standards.
One can disseminate the challenges into those that are internal and others that are external. Internal challenges include informational barriers, problems of raw material availability, technological upgrades, marketing, labor turnover, functional problems and marketing challenges. External problems are procedure barriers, government barriers, customer and competitor challenges, business environment challenges, and tariff and non-tariff barriers.
The Trade Promotion Organizations such as the different Chambers of Commerce & Industry and Trade & Industrial Associations will have to play a crucial role to meet the challenges of the sector. The industrial units will not be in a position to tackle many issues. They will have to obtain solutions through the trade bodies, government agencies, etc. It will be extremely useful to set up a central fund by the trade bodies to deal with various settlement cases with a substantial contribution from the government. In order to realize the full potential of the industry, all the stakeholders need to be committed to finding lasting solutions to the prevailing problems in the sector and to follow a number of objectives and implement the prioritized activities.

Could you elaborate upon the objectives that need to be carried out?
There are five major objectives include:
Objective 1- We must enacting appropriate policy measures in order to update and implement Bangladesh’s industrial policies based on a public-private dialogue in order to reduce import items, facilitate access to equipment and support export transactions.
Objective 2- Provide access to finance, which will allow industries to access finance for rehabilitation and adequate technology.
Objective 3- Upgrading Technology that will allow the nation to gradually advance from first to new generation machinery and improve quality monitoring and source of reference
Objective 4- We must give priority capacity building and skill development. This entails two aspects. The first is to upgrade agro machinery, automobile spares, and foundry technical workforce skills. The second will is to build marketing and management skills for factories and foundries entrepreneurs in order to respond to the markets demand.
Objective 5- Adopting advanced marketing technique that will strengthen the sector Trade Support Institutions with marketing tools and techniques in order to develop and make visible national products on the domestic and international markets

What would be the vital road map for the industrial sector in the next five years look like?
Establishment of following infrastructures and facilities can be a vital part of the roadmap for the next five years:
Industrial Park.
CNC System Training Center.
Cluster-based Common Facility Center.
Modern Induction Furnace Projects.
Develop and Implement Auto-Industry Road Map.
JVs in highly technological sub-sectors of light engineering sector including auto parts, foundry, mold, CNC Technology Training Center.
Setting-up of Common Facility Centers (functions: R&D, Special Jobbing, Training, testing, design, accreditation & certification,
Setting-up of Individual Specific Facility in Industry(such as heat treatment plant, surface coating plant, specialized testing lab)
Technology Incubation Centre
Technology Transfer Centre
Technology Innovation Centre

What can be the strategic approach for the faster development of appropriate technology and thereby the industrial sector?
There is a need for the faster technological development of appropriate technology and engineering industrial sector. Improving research organizations involved in the field of science and technology is necessary; there is a need to set up centers of excellence in selected fields. Special emphasis has to be given to automobiles, agro-machinery and spare parts of mills, factories, and industries. Time bound programs may be drawn up for development, improvement and expansion of products and processes in the sector development. Policies for the development of technology should be integrated with macroeconomic, industrial, agricultural, commercial and educational policies. Entrepreneurs should be linked with the supply of technology. Special attention should be given to bring the fruits of scientific and technological innovation to the doorsteps of the industries. The sector can take advantage of wider diffusion of modern technology and benefit from the globalization process. Development of technology is a long run process within which short-term strategies should be adopted for catering to the immediate needs of the economy. The sector should be able to take advantage of the benefits of progress in technology.


Dr. K Siddique-e Rabbani Honorary Professor, Department of Biomedical Physics & Technology, University of Dhaka

Dr. K Siddique-e Rabbani
Honorary Professor,
Department of Biomedical
Physics & Technology,
University of Dhaka

What are your thoughts on Bangladesh as an industrial hub?
Bangladesh has an extremely intelligent, motivated and creative workforce that can transform any country into an industrial hub. During the 18th century, Bengal was one of the richest regions on the globe and industries developed by local artisans and craftsmen contributed to about 50% of the region’s economy. Unfortunately, the British colonial powers destroyed all this through their inverted tax policies in order to make the local production uncompetitive against tax free imports from Britain. Far more unfortunate is the fact we have not deviated prehistoric tax and regulatory policies. The attitudes they tried to inculcate among our educated class have not only lingered on, in certain cases, multiplied even though we won our freedom a long time ago. We were not able to realize our full industrial potential, primarily because of our failure to change these policies and regulations.
One has to understand the dynamics of industrialization that lead to an industrial revolution. This is only possible beginning with very small (or micro) industries grown on the technological talents of the local people, and products that help enhance the quality of life of the common people around. The latter creates a quick and easy market and since the technology is usually within the grasp of many others and the local market is familiar, its needs are well known to designers of products, who themselves usually become the manufacturers. The market is also large because of the large population and leads to establishment of more and more industries of a similar nature. This creates a network of backward linkage for supply of component parts and the network builds up quickly. When competition grows, the need comes to improve the technology, both of products and processes. This calls for research and development and often the industries come to the universities, which creates the university-industry interaction. With improvement in the quality of products, this naturally creates a favorable situation for export to countries with similar socio-economic backgrounds. Although the individual purchasing capability in these countries is low, but when one considers that proportion of the global population in this category, the combined market size and the economy involved are huge. Unfortunately, our leaders and policymakers never understood this phenomena, therefore, our concentration went in the wrong direction. Despite the fact that our immediate neighbor India has a similar historical, social and cultural background, they went up the industrial ladder faster, with a much better understanding of the scenario that encouraged and promoted an indigenous technology based industry early in its path to development.
One needs to be clear that such dynamism in the industrial sector is never possible with industries based on entirely imported technology and machinery. These are mostly built on turn-key projects and there is absolutely no need, in fact, no scope for integrating local technical and engineering talents in such industries. Local engineers may only be needed for installation and maintenance.

Can you give us a few examples of similar cases in other countries who were able to do better?
The above scenario is true in most of the Third World, as all of these countries came out of a colonial past that tried to ‘exploit’ local people. However, positive development that took place in a few of these counties can be related to individual or group leadership that had a science and technology backgrounds and a proper desire and vision for standing on their own feet in science, technology and industry. These three issues are intimately interconnected for a country’s development. Regarding the scientific leadership in some other countries mentioned, it was Jawharlal Nehru in India who had a science degree in his graduation, Mahathir Mahmud in Malaysia was a doctor, having a science background as well. South Korea’s military ruler gave a blank cheque to a scientist friend for the country’s development, and China in its formative stage had many engineers among its Politburo. Unfortunately, Bangladesh has always lacked this aspect.

There are compliance and export competitiveness issues when it comes to these technology based small and medium industries. How do we get past these problems?
The compliance and export competitiveness issues arise when we want to export to the rich countries of the North. We have made it difficult for ourselves by concentrating only on our labor oriented sectors and making the more developed countries as our export destinations. Obviously the entrepreneurs in these sectors received a great deal of support from the Government over the last few decades and are mature enough to work out necessary solutions at the right time.
On the other hand, if our indigenous technology based industry proliferate and if we can export to the Third World countries, the compliance and export competitiveness issues will not arise at all. We still have all the avenues open to us. This is the direction we should move in and it is never too late to tap this huge potential sector. Not only will this contribute to boosting our industry and economy, it will help enhance the quality of life of the people in our country, as well as in all Third World countries. Eventually this will lead to improvement of our capabilities, both technically and managerially, and a time will come when our products will be accepted by the rich countries as well.

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