Reasons Behind Closure of Government Jute Mills

In 2018, With the highest consumption (8,154 kgs per 1000 people) and 2nd highest production (1.6 tonnes) in the world Bangladesh is a big player in the global jute market. In 2018 worldwide total production of jute and jute fibre was 3.9M tonnes with revenue $2.7 billion and global market is increasing at a rate of +1.8% from 2007-2018.Though it is a growing sector and Bangladesh is a very big name, but Bangladesh government shut down all the operation of state owned 25 jute mills. Infect world biggest jute mill situated in Bangladesh ‘Adamjee jute mill’ stopped its operation in 2002. Now the million-dollar question what arethe reasons behind the closure of ‘largest state jute corporation in the world’ which is BJMC (Bangladesh Jute Mills Corporation).
Data on BJMC's loss journey
Fig: Data on BJMC's loss journey

Reasons behind closure of govt's jute mill:

1. Heavy financial losses:

One of the biggest reasons is over the years this sector is facing losses. Bangladesh govt. gave almost 7477.32 crore Taka in last 10 years to revive thosemills, but nothing happened. Those mills saw bigger losses every year.
Govt's financing to BJMC
Fig: Govt's financing to BJMC
2. Low productivity:

Bangladesh became independent in 1971 and most of the mills were bought before liberation. As a result, most of the machineries are almost 50-60 years old. With the help of modern machineries private mills are doing well at that time state owned mills are running on low productivity because of its age-old machineries. For that reason, efficiency of these mills is around 50%.
BJMC operated jute mill
Fig: BJMC operated jute mill
3. Lacking in using technology:
BJMC lacked in using modern technology. For example, BJMC website is almost a dead website as its ‘product’ page was updated in 1st September,2016. In business world a strong website is an important factor to show your product and to get order. how can the largest jute corporation in the world operate with a dead website?
BJMC website's page
Fig: BJMC website's page
4. Mismanagement:
World largest jute corporation can only run by a person who have great knowledge and experience in business. But the chairman and directors of BJMC always are bureaucrat. As a result, without proper business plan and experience BJMC faced heavy losses. 4 chairmen were changed in last 3 years.

5. High production cost:

In 2010-2011 production price of per tonnes jute goods were TK90,201 which increased up to 40% and in 2017-2018 it was TK1,26,286. But the production was almost same.
BJMC's prices TK per kg
Fig: BJMC's prices TK per kg
6. Losing global market:
In 2012-2013 top market for BJMC were India, Syria, Sudan, Iran, Thailand etc. But in 2017-2018 it exports decreased from 49,407 to 13,301 tonnes in India, Syria, Iran, Indonesia etc.

Only jute bag products market will reach at $3.1 billion by 2024.BJMC cumulative loss is around TK 10,674 crore. As a result, government shut down its mills. BJMC facedhuge amount of loss because of mismanagement, corruption, low productivity and high production price etc.

References:

  1. https://www.globaltrademag.com/global-jute-market-2019-bangladesh-continues-to-dominate-exports-despite-decline-in-the-past-few-years/
  2. https://www.thedailystar.net/frontpage/bangladesh-jute-mills-corporation-burdened-with-losses-1743721
  3. https://www.thedailystar.net/opinion/economics/news/slow-death-bangladeshs-state-run-jute-industry-1853179
  4. https://www.textiletoday.com.bd/global-jute-market-2019-bangladesh-continues-dominate-exports-despite-decline-past-years/
  5. https://tbsnews.net/economy/industry/demise-bjmc-natural-death-or-negligence-101515
  6. https://www.dhakatribune.com/business/2020/07/11/stopping-production-at-bjmc-jute-mills-ii-incurring-losses-since-inception
Author of this Article:
Md. Sadman Nafe
B.Sc. in Textile Engineering
Textile Engineering College, Noakhali.
Email: nafe2290@gmail.com
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Mazharul Islam Kiron is a textile consultant, entrepreneur, blogger and researcher on online business promotion. He is working as a consultant in several local and international companies. He is also a contributor of Wikipedia.


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