Technology and employment in the cotton industry of Bangladesh December 1992 Technology and employment in the cotton industry of Bangladesh Mohammed Reazul Islam INTERNATIONAL DEVELOPMENT RESEARCH CENTRE Ottawa • Cairo • Dakar • Johannesburg • Montevideo • Nairobi • New Delhi • Singapore Material contained. in this report is produced as submitted and has not been subjected to peer revtewor editing.,by IDRC Public Information Program staff. Unless otherwise stated, copyright for materiàl in this report is held by the authors. Mention of a proprietary name does not constitute endorsement of the product and is given only for information. ISBN 0-88936-663-2 l\•tl'. Printed on recycled paper TABLE OF CONTENTS Acknowledgements List of Abbreviations and Acronyms used Chapter one Introduction . 1 Chapter two Bangladesh: its economy and textile industry . 6 Chapter three Evaluating technology . 21 Chapter four Options, sources and parameters for the . 26 evaluation of alternative technologies Chapter five Selection of machinery . 41 Chapter six Costing of alternative technologies . 47 Chapter seven Evaluation and analysis . 57 Chapter eight Policy implications of the findings . 67 Glossary of textile terms . 69 Tables .......................................................... 72 Figures .......................................................... 107 Bibliography .......................................................... 109 ACKNOWLEDGEMENTS This publication is made possible through the encouragement of Dr. Amitav Rath and Mr. Brent Herbert-Copley, International Development Research Centre (IDRC), Canada. 1 am very much indebted to IDRC for providing me a research fellowship at the David Livingstone Institute (DLI) of Overseas Development Studies, University of Strathclyde, Glasgow, Scotland, UK and also for financial support to prepare this manuscript. 1 am also grateful to the World Bank for their support. ln carrying out the research, 1 am very much indebted to my supervisor, Professor James Pickett, for his continuous guidance and detailed comments as the study unfolded. 1 am grateful to Dr. R. Robson and Dr. G. Zawdie of DLI and also to Mr. A.D.P. Boyle, Scotish Business School, Glasgow for their help in the course of this research work. 1 also express thanks to Mr. A.S.M. Shahid, Mr. A. Hossain and Mr. M. Ahmed of the Bangladesh Textile Mills Corporation and also to many others from Bangladesh and India for helping me with this research. ln the course of preparing this manuscript, 1 have benefited enormously from editorial changes made by Mr. J. Garner for which 1amgrateful.1 would also like to thank Mr. F. Choudhury for his advice on the presentation and Mr. M. B. Miah and Ms. N. Raider for their research assistance. Thanks are also due to Messrs. SA. Habib, D. K. Barua, P. Sarker and T. C. Sarker for their support. Finally, 1 would like to thank my wife, Sylvia, for ber help and continuous inspiration throughout this study and in the completion of this publication. LIST OF ABBREVIATIONS AND ACRONYMS USED AIFCOSPIN All India Federation of Cooperative Spinning Mills Ltd. ATDA Appropriate Technology Development Association ATIRA Ahmedabad Textile Industries Research Association BDT Bangladesh Taka BHB Bangladesh Handloom Board BIDS Bangladesh Institute of Development Studies BJSS Bangladesh J atiya Samabay Samity Ltd. BMR Balancing, Modernization and Replacement BMTF Bangladesh Machine Tools Factory BSCIC Bangladesh Small and Cottage Industries Corporation BTMC Bangladesh Textile Mills Corporation DCF Discounted Cash Flow DLI David Livingstone Institute of Overseas Development Studies EPSIC East Pakistan Small and Cottage Industries Corporation IBRD International Bank of Reconstruction and Development IRR Internai Rate of Return ITIS Intermediate Technology Industrial Service KVIC Khadi and Village Industries Commission NIP New Industrial Policy NPS National Pay Scale NPV Net Present Value PVC Present Value Cost RFC Rural Fabric Centre SC Service Centre UNECLA United Nations Secretariat of the Economie Commission for Latin America. Chanter One Introduction This study examines the characteristics of cotton textile production in Bangladesh in some detail, identifies a range of alternatives from modern, intermediate and traditional technologies that are feasible under the operating conditions in Bangladesh and, at least implicitly, evaluates the present government policy of freezing the expansion of mechanized looms in the cotton sector. An overview of the textile industry of Bangladesh is presented in chapter two. It is seen that the cotton textile industry is highly significant in its basic needs, employment and contribution to manufacturing value added. Textile policy during 1973-88 aimed at protecting employment in the handloom sector (Bangladesh, 1988a, pp. 5, 20). Moreover, the development plans advocated employment expansion in this sector through increases in productivity, setting up marketing channels and financial measures. The expansion of spinning capacity during 1973-81 was entirely organized within the public sector (Bangladesh Textile Mills Corporation [BTMC]), as this was the only sector producing yarn for the country. However, in policy changes since 1982, private-sector participation was encouraged, and ail Bangladeshi-owned textile mills, which had been nationalized following independence in 1972, were returned to their previous owners. This policy change, however, maintained the strategy of non-expansion of mechanized looms in the cotton sector. Development plans during 1973-90 emphasized expansion of spinning capacity to 1.83 million spindles. However, the actual growth in capacity fell far short of the plan target. It reached about 1.27 million in 1988. Per-capita 2 2 cloth consomption reached only about 7.9 m against the third five-year-plan target of 11 m • The textile industry suffers from three major problems. First, spinning and weaving machinery ranges in vintage from the early 1920s to the mid-1980s. Also, heterogeneity of machinery sources resulted in lack of availability of spares and maintenance, causing inefficiency in the industry (Ahmed and Rahman, 1979, p. 214). The industry needed an urgent modernization of a substantial capacity. Although some modernization took place, the pace and the extent of it did not meet the requirement. Second, the utilization of capacity by the mills both for spinning and weaving, is very low. During the postindependence period (1972-88), the utilization level of the years before independence was not achieved for spinning. Capacity utilization has been low due to age of the machinery, power failure and absenteeism. During 1980-88, between 4% and 14% of total production hours were lost because of power failure. In 1988, spindle and loom productivities achieved were about 21.4% and 20.9% lower than the pre-independence level (1970). Third, the enterprises suffer from inefficient management and an ill-motivated workforce, resulting in continuons lasses in the enterprises. The textile industry, however, has a great potential for expansion. Taking the third 5-year-plan target of per capita cloth consomption of about 11 m2 as a measure for the required expansion, it is estimated that there has to be something like a doubling in spinning and a four-fold increase in the present loom capacity (1 500 000 spindles and 28 000 looms) if the consomption target is to be met by expansion in the modern sector. Alternatively, if the target is to be met by modern spinning and handloom weaving then there is need for an expansion of about 60 modern spinning units, each with 25 000 spindles, and 200 000 additional handlooms. For a industry with such an expansion possibility, economic efficiency and provision of employment are of paramount importance. The choice of correct production techniques is the prerequisite for meeting the planning objectives. The policy on technology choice in different development plans (1973-90) has emphasized that, in view of the scarcity of capital and the comparative abondance of labour, the primary objective should be to adopt labour-intensive technology. The technology should also, however, be economically efficient. However, the policy - 2 - followed bas not differentiated between the efficiencies of capital- and labour-intensive technologies. It seemed to imply that although both sets of technologies generate surplus, labour-intensive technology should be adopted as long as it generates some surplus. Such policy clearly countenances losses in efficiency and therefore adversely affects economic development. However, the policy emphasized the improvement in efficiency of labour-intensive technology (Bangladesh, 1985, p. 107; 1988a, p. 30). An examination of techniques in large- and small-scale production shows that economically efficient alternatives are available, and technology choice in textile production does not suffer from any technological rigidity (UNECLA, 1966, pp. 4-5; Pack, 1976, pp. 155-156; Pickett and Robson, 1977a, pp.205-206, 1979, pp. 28-30, 1981, pp. 66-70; Boon, 1979, pp. 69- 73)). Such alternatives could be within modern technologies from diffêrent sources and subprocesses, inheriting various labour and capital complements, and from technologies suitable for small-scale and cottage production. The study requires a technique for identifying the alternative technologies that are technically feasible under Bangladesh conditions. One such methodology, developed by the David Livingstone Institute, bas been used here (DLI, 1975, pp. 27-50).