Rahim Mia, who was once a labourer in Star Jute Mills in Khulna, must be wondering why he has been relegated to making ends meet in the jungle of rickshaws despite not having to worry about the Agreement on Textiles and Clothing, or tariff and non-tariff barriers. The point here is not to highlight the strengths or weaknesses of the garment sector. I am in no position to do so. Experts busy levelling the playing field have the answer to those questions. However, what I would like to illustrate is that the garment sector, often held as a saving grace in Bangladesh's economy is based very much on similar economic support mechanisms and principles as what has often been cast as the economy's worst haemorrhage -- the Jute Sector.

Experts busy "levelling the playing field" would argue that the Jute Sector was artificially propped up and thereby diverting resources away from productive use. Experts busy "cultivating the field" will put forward the logic that dependence on primary commodities such as Jute is harmful to Bangladesh in the long run.

The anti-subsidy attitude of industrialised countries is paradoxical when you have situations such as Brazil accusing the USA of subsidising cotton, which in turn harms competitive Brazilian cotton producers (news published in The Daily Star). The rich seem to have many parents where the poor are often left orphaned.

I argue that the lack of a strong industrial policy has taken the Public Sector Jute Mills on their way to virtual collapse. The story of Private Sector jute producers is more or less the same. Few Private Sector Jute Mills are partially operating in the local market and the rest have been shut down. There are two key reasons for this. Firstly, a lack of investment in the sector and an inappropriate privatisation policy led to accelerated decline of public sector jute production. Secondly the burden of the World Bank Jute Sector Adjustment Credit (JSAC) coupled with the poor state of the commercial banking sector has crowded out the private sector producers.

The world import demand of traditional jute goods remains around five hundred thousand tonnes (FAO). The total production in Bangladesh today is around 200 thousand tons and exports of traditional jute goods over the past five years have been nearly 206 thousand tons. This compares to average exports of 308 thousand tonnes in the ten years preceding this period. It is difficult to understand why industrial policy has not been adopted to develop trade capacity, which I argue should have included restoration of the jute sector -- both public and private.

With appropriate industrial policy, the closure of Adamjee could have been avoided. Adamjee now is a dead issue but one that will haunt Jute pundits and the Jute family for a long time to come.

Declining production and exports of jute in Bangladesh has been offset by increased production in and exports from India. Export of traditional jute goods from India has increased to around 210 thousand tonnes (FAO) compared to nearly 100 thousand tonnes (FAO) in the previous recent years. India has made up its loss of market in the Soviet Union by increasing exports to markets that traditionally were dominated by Bangladesh exports. India will no doubt be able to gradually capture all our export markets.

The irony of the situation is that India has become the largest importer of our raw jute. This takes us back to 1949, when East Bengal was regarded as the hinterland that supplied raw materials to fuel the jute industry on the banks of Hoogly river.

This needs to be rectified. The failure to address this dilemma provides the source of the inherent contradiction in Bangladesh's privatisation policy. Both public and private sector jute producers will face doomsday.

I will not be able to describe a full recipe for Bangladesh's jute industry in one article. I would, however, like to try and sum up in this article some of the key ingredients at least. The present situation of the Public Sector jute industry is not due to loss only. Firstly, there is a lack of funds which could help to open up the inoperative jute mills and enable them to purchase raw materials. Secondly, there is a contradiction in the privatisation policy as Bangladesh Jute Mills Corporation and Bangladesh Export Processing Zones Authority are already at loggerheads on the issue of machinery of Adamjee (news published in the Bangladesh Today).

With regards to private sector jute mills, the World Bank JSAC and huge outstanding loan with financial banks/institutions need to be looked into constructively in order to define a clear solution. I am suggesting few policy decisions for future analysis.

With regard to Public Sector Jute Industry:
a. Make immediate availability of fund allowing them to start buying raw materials;
b. Transfer available fund of golden handshake towards possible BMR;
c. Link subsidy to performance;
d. Ensure proper management and manning;
e. Introduce policy of prize and punishment;
f. Restore the machinery of Adamjee proportionately to other jute mills.

With regard to private sector jute mills initial prescriptions could include:
a. Freeze JSAC loan, which is supposed to be soft or link deduction of a certain amount from successful individual mills against their export earnings;
b. Bank loan need to be analysed thoroughly in the same light as that of other private sector industry.

Only a strong industrial policy may be able to overcome the avalanche. Bangladesh still produces 45-50 lac bales involving around 20-25 million farmers. Only yarn sector cannot consume the total quantity and therefore the balance would find its route to destination, which would benefit the country. It would be wise to mention here that a Jute Manufacturing Study (JUMS) funded by donor agencies concluded that the jute industry is viable in Bangladesh.

I asked one of my economist friends what the difference was between nationalisation freak and privatisation mania. He replied "Private Public Partnership!" I thought he was my last hope. Alas!

Khaled Rab is a jute expert of long standing.