Yet another arbitrary decision on state-run jute mills

Editorial, NewAge, October 1, 2007

The military-driven interim government has now decided to outsource the management of eight state-owned jute mills, four of which has already been shut down for later divestment. According to a report published in New Age on Sunday, the government believes that it cannot run the mills profitably and, therefore, in order to avoid losses, will outsource their management. It is believed that the industrial units will then remain in operation and at the same time the government will not have to incur losses, the report says. The report also suggests that the government considers losses of the state-owned mills as the main reason to either shut them down for privatisation or outsource their management. While it is true that the jute mills incur serious losses to the exchequer, it has never been seriously investigated as to the reasons behind the losses. There are allegations that the losses have largely been due to flawed policies of successive regimes, corruption and irregularity of jute mill management and the Bangladesh Jute Mills Corporation in collusion with a section of the labour leaders, and overstaffing which in turn bred inefficiency. Even the current regime, proclaiming its dedication to elimination of corruption, is apparently reluctant to conduct such investigations and bring those guilty of ruining the entire sector to justice. The report mentions that the government has also revoked its earlier decision to constitute a commission that would map out a survival strategy for the jute sector and presumably look into the reasons behind its current state of affairs.

As pointed out by experts and insiders, the government has never invested enough to modernise the equipment and thereby increase the efficiency of the factory units. Nor has there been infusion of skilled human resources. Currently, there is not even a single jute institute of the country that might promote skill development of the personnel although about a fifth of the population of the entire country are directly or indirectly affected by the jute economy. Establishment of public sector industries or services is not only a result of market failure but almost always a matter of political decision since it is an effective and sustainable avenue for the state to generate employment, thereby increasing public welfare, encourage further industrialisation and contribute to economic activity in general. Furthermore, a government, especially one in the third world, cannot afford to merely consider its activities from a purely commercial point of view but from the perspective of furthering human development and improving the living standard of the citizens.

As for management outsourcing, similar to the previously touted panacea-like formula of privatisation, the incumbents have to posit the scale and extent of probable benefits to the exchequer as well as to the labourers. The incumbents have yet to cite successful instances of such measures that have paid off in other sectors or other countries in a similar level of development. As we have pointed out before, the current government, being an unelected interim one, cannot and must not decide on the fate of these institutions that are owned by the entire nation.

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