This latest move, sudden and widely debated, has once again brought to the fore discussions about the future of jute, globally and in Bangladesh. And at the centre of the debate lies a number of critical issues -- slow productivity in the jute industry complicated by even slower to come technological improvement, lack of domestic support for jute and rather incentive for discarding jute farming, the immediate global jute trade pattern that shows an uncertain situation but somewhat rosier picture in the long term, the diversification of products and so on.

ENDS IN BANGLADESH, BEGINS IN INDIA
Another point much pertinent today is what impact did the World Bank's Jute Sector Adjustment Credit (JSAC) had on Bangladesh. The project was supposed to revitalise the sector through privatisation, debt restructuring and technical upgradation. But as industry insiders say it proved to be another project that did not yield any positive result. Rather they say the Bank's policy had moulded the present day mindset that jute had lost its golden glory and so downsizing production capacity is the best option.

But as an oxymoron to Bangladesh jute situation, India is now witnessing a strong jute sector with new mills being set up -- some counts say at least 56 new mills were set up in the West Bengal, since Bangladesh started closing down its jute industries.

For now, India is mainly focused on internal demand. But it has adopted a strategy to reduce internal dependency by 20 percent a year and thereby increase exports. In five years, its export would increase by 100 percent and with all likelihood at Bangladesh 's expense.

Indian jute production has not kept pace with its increasing demand and so it is now importing raw jute from Bangladesh. Today, the situation is such that although Bangladesh accounts for 90 percent of global raw jute, global production and consumption of jute has become increasingly concentrated in India. Bangladesh however meets 75 percent of the global jute yarn demand with the rest supplied by India.

The demand for jute for traditional products on the export markets declined in the face of competition from synthetic with carpet backing the first to suffer in the US. And then the dismantling of the Soviet Union saw a huge rapid loss of demand for sacking from a peak of 250,000 tons in 1981 to below 25,000 tons in 2003. And in recent years, the western European market also declined. However, recent developments are heartening with some revival in exports to the former Soviet Union. And the overall export market for jute yarns combining both Europe and the Middle East and elsewhere of about 120,000 tons in 1080 had grown to over 300,000 tons a year by 2004. However, Bangladesh could not scale back its export market for jute and jute goods, which has been on a steady and substantial erosion.

REVIVAL OF JUTE INDUSTRY?
However, there have been positive developments in the form of a growing market for yarn used in woven carpets and sacking. With the rising oil prices -- and the trend is projected to continue in the future -- manufacturing of synthetic alternative to jute has become costlier and therefore beaconing a new life for jute industry. And environment concerns are back on the consumers' mind in favour of natural fibres.

Bangladesh was all through the major provider of raw jute to the mills set up by the British in Calcutta. But then the scenario changed and India has been the leading jute producers since the 1970s. Today it produces 1.977 million metric tons of jute while Bangladesh produces only 963,000 metric tons in 2003-04. The more recent growers like China and Thailand decreased output in the 1980s and 1990s. Myanmar, Nepal and Brazil are just some small producers on the edge.

The Centre for Policy Dialogue (CPD), which has begun a study on the jute sector, in a preliminary analysis has shown that the jute growing area in Bangladesh reduced by 8.3 percent over the last six years although jute production increased 3.2 percent mainly because of a yield growth of 12.5 percent. And in 23 years since 1981, Bangladesh's total production of jute goods decreased by 53.94 percent while India's increased by 42.5 percent.

In Bangladesh, although the internal market for jute goods is much less prominent than in India, there is a good case to be made for the introduction of packaging regulations to encourage the use of jute sacks as has existed for many years in India. This policy successfully generated a huge internal market for India. Today, internal per capita jute goods consumption in Bangladesh is about half the amount of India. Bangladesh also does not have a Minimum Support Price (MSP) for jute like its neighbour, rather there has been price support for rice farmers, resulting in farming migration from jute to rice. As a consequence, there has been a long-term reduction in jute growing area.

Pakistan, on the other hand, imports jute from Bangladesh and maintained a stable production at 75,000-85,000 tons a year mainly for internal use and a little bit of export. But Chinese jute industry collapsed for competition from synthetic products in the late 1980s

The industry is also in crying need for new technology with some mills running on equipment dating as back as 1930s. Although there are a few examples of improvisation through using textile mill machinery in jute industries, most of the mills have equipment made in the 1960s and more recent versions are available. As such, it now needs 40 man-days to produce a ton of yarn or fabric. Bangladeshi entrepreneurs had imported second hand machinery from Europe, Thailand, Pakistan, Indonesia and African countries, but fund crisis often stymied the modernisation process. There is also a bleak future for further modernisation as equipment manufacturers do not find much incentive to invest heavily in research and development.