Low-or semi-skilled human resources are stymieing the high potential of the light-engineering industry in Bangladesh to produce more import-substitute products and grab rebounding global trade.
Experts and industry leaders are of this view, and they say the economic impact of below-par productivity in the light-engineering sector (LES) is diverse: three cardinal ones are keeping the country import-dependent, failing to share its lucrative business cake on the world market, and missing out on huge jobs.
They say the low-productivity labour factor creates hurdles during scaling up small foundries and workshops, weaken negotiation capacity in bringing foreign investment, limits the development of high-value products, deprive workers of fair wages and, above all, affects the country's competitiveness on the global market.
It poses a two-pronged problem for the entire industrial sector. While big industries in the sector are facing an acute shortage of skilled labour, small-scale metal workshops and foundries get a competitive advantage on the local market by employing a cheap unskilled workforce.
At the same time, the Covid-19 pandemic has further weakened the capacity of institutions across the country and thus slowed down the efforts of upgrading the skills of the eligible labour force.
According to the Bangladesh Engineering Industry Owners Association (BEIOA) around Tk 300 billion (US$ 3.53 billion) worth of light-engineering products are sold annually in Bangladesh of which local manufacturers share Tk 90 billion or $1.05 billion while the rest are imported.
President of BEIOA Abdur Razzaque said local entrepreneurs meet about 30 per cent of the demand while the lion's share -- some 70 per cent -- is imported, mostly from China, India and South Korea.
"With effective government support in place, there are huge opportunities for import substitution and going for export after," he said.
Mr Razzaque singles out the scarcity of skilled workforce, especially in the area of operating modern machinery, a major barrier to the sector's development, though it is soluble with proper patronage.
"It's not that our workers are incapable of learning new skills. In fact, they are very quick learners, but the challenge is to arrange skill-development programmes for the workers," he said.
The industry leader mentions that majority of the industries are in SME category and they don't have the capacity to organise in-house formal training programmes while existing skill-development initiatives by different authorities are barely useful for rearing skilled labourers.
Dr Zahid Hussain, former Lead Economist of the World Bank (WB) Dhaka office, points out that productivity is a large component of the global competitiveness of a country in attracting foreign direct investment (FDI).
"Key competitors of Bangladesh on the international market, like Vietnam, Indonesia, Malaysia, India, Sri Lanka and Pakistan, have comparatively better labour productivity, though the gap with some of these countries is within catch-up range," he said.
According to the APO (Asian Productivity Organization) Productivity Databook 2020, the per-worker labour-productivity level in Bangladesh, measured as GDP per worker in US dollar as of 2018, was 10.4 per cent compared to the US level in 2018.
And, make no mistake about it, this productivity index represents overall productivity estimates and not just limited to LES.
While Bangladesh is only better than Myanmar (8.1 per cent), Nepal (8 per cent) and Cambodia (6.6 per cent), its other Asian competitors, like Vietnam, achieved per-worker productivity of 12.7 per cent while India 15.8 per cent, Pakistan 15.5 per cent, the Philippines 19.6 per cent, Sri Lanka 31.9 per cent, China 23.5 per cent, and Indonesia 23.9 per cent.
The labour-productivity growth in Bangladesh was 6.1 per cent during 2015-2018 which is lower than that of its key Asian competitors such as Vietnam (6.4 per cent) and India (6.9 per cent).
The labour-productivity growth in the country was 5.4 per cent during 2010-2015 and 3.6 per cent during 2005-2010, the APO Databook 2020 showed.
The former WB official said capital intensity in the country's firm-level is quite stagnant as less investment was done at industries to install state-of-the-art equipment and machinery which skilled labourers require to produce high-end products.
Secondly, terming human capital the biggest concern of the industrial sector, he said the low educational profile of the workforce limits their ability to learn advanced manufacturing techniques as well as getting benefited from skills programmes.
Lastly, he says in diagnosing the root causes, technological advancement of the industry through research and innovation is the area that contributes most to the improvement of both labour and firm productivity.
"It is not that there is no good example in the country; many companies in the sectors like RMG, leather, ceramic, pharmaceutical, and plastic have established state-of-the-art manufacturing plants. But such advancement is not uniform for all, especially for SMEs," he adds.
A report by the International Finance Corporation (IFC) showed that Bangladesh's LES has 50,000 micro-enterprises and 10,000 Small and Medium Enterprises (SMEs) that employed around 600,000 people.
Meanwhile, Export Promotion Bureau (EPB) data show that the LES fetched around $529 million exporting engineering goods in the FY 2020-2021, posting an impressive 80.60 per cent growth year on year.
However, the previous export records are a bit turbulent. The sector fetched $292.92 million in FY2020, $341.3 million in FY 2019, $355.97 million in FY 2018 while the LES registered the highest-ever export worth $688.85 million in FY2017.
Considering the LES's huge potential in local value addition and export, the government has announced a set of fiscal and regulatory supports for the investors in the sector, including incentives for export and tax holiday for investment in industrial zones.
However, market observers have raised questions about getting optimum outcomes from these policies because it mostly favoured the profit-making process while giving less importance to productivity upscaling.
Dr Sayema Haque Bidisha, a labour economics expert and professor at the Department of Economics at the University of Dhaka, termed the curriculum of technical and vocational education and training (TVET) in the country obsolete compared to competing countries.
"The government can incentivise the companies that arrange in-house training to train the labourers as per factory-specific needs," she said.
"But there should be a condition in the incentive support so that the trainees get a certificate which can be used outside that company."
She also said the authorities responsible for developing curricula for technical education should bring in experience of other countries that are pioneering in the global-market LES products to formulate modern training modules.
