Tuesday, February 19, 2019 | ePaper

Role of Public Sector

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Non discretionary measures include the control without any administrative discretion of an authority. These measures are exercised at the macro level through fiscal and monetary policies. For examples imposing different taxes on different products at different places, amending customs tariffs, regulating the bank interest, regulating money supply and credit creation and granting subsidies to different industries like sponsoring and providing subsidies for solar and power projects for sustainable development. Hence, non discretionary measures are achieved by passing different laws. In Bangladesh, the regulatory role is exercised in following manner:-
I. The Companies Act, 1994:   
II. The Banking Laws (Amendments) Act, 2018:
III. The Securities and Exchange Ordinance, 1969:
IV. The Bangladesh Safe food Act, 2013:
V. Consumer Right Protection Act, 2009: This is an act to protect the interest of consumers in Bangladesh by making provision for the establishment of consumer councils and other such authorities for the settlement of consumers' disputes and for matters connected therewith.
VI. Industrial Policy: In Bangladesh, Industrial Policies have been announced after every three years. These the policies aimed at development of Industrial   Structure by Liberalization, Privation and Globalization and encouraging the private sector to start their venture in Bangladesh economy.
VII. The Monopolies and restrictive trade practices (Control and Prevention) Ordinance, 1970. The Monopolistic and Restrictive Trade Practices Act, 1970, were enacted to make sure that the operation of the economic system does not result in the concentration of economic power in hands of few, to restrict the monopolies, and to forbid monopolistic and restrictive trade practices.
VIII. Foreign Exchange Regulation Act, 1947: Foreign Exchange Management Act, 1947, is an Act to consolidate and amend laws related to certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency, for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interests of the economic development of the country.
IX. Commercial Law: This act has been made with a view to order operational aspects of trade and business. It includes acts like Bangladesh Contract Act, 1872, Sales of Goods Act, 1930, Negotiable Instruments Act, 1881, Arbitration Act, 2001, etc.
The regulation and control discussed above are aimed to encourage the trade and industrial growth by monitoring the actions of private, public, joint and cooperative sector and limiting them if required. It helps the economy with increased competitiveness at both the levels nationally and internationally.
b. Entrepreneurial role: In the entrepreneurial role, the government acts as an entrepreneur and participates in economic activities through its own ownership the form of public sector ventures.
Sometimes, the private sector is unable to establish its venture in some area due to constraints like lack of capital, lack of knowing how or restrictions by government. For this, the government has to perform the entrepreneurial role by entering the market with its ownership through public sector. For example in the steel sector, minerals, chemical industry, engineering, irrigation, power and heavy industry government of Bangladesh established its business. Entrepreneurial role of government is encouraged owing to the following reasons:
For social welfare
For balanced regional growth
For capital intensive growth
For providing consultancy to the private sector
However, Central Public Sector Enterprises (CPSEs) are making losses due to no profit motives, lack to proper operational function, inadequate research, deficient technology enhancement and slow process of bureaucracy. Hence, Government of Bangladesh has favored disinvestment of public sectors. In 1982, the function of disinvestment started. This action aimed for finance generation, encouraging participation of private sector and to ensure greater market accountability. Moreover to increase the competitiveness and resource generation, disinvestment assumed to be significant. In practice, this did not ensure the development of the private sector. At present, the disinvestment process or privatization of the public enterprises is seriously discourses by amalgamating the Privatization Commission and Board of Investment through the establishment of Bangladesh Investment Development Authority.
Although after the New Industrial Policy, 1991, the role of entrepreneurship is declining as the government introduced the concept of Liberalization, Privatization and Globalization. This reorientation of Government of Bangladesh encouraged the private sector to be more participative in economic activities. However, still, the government of Bangladesh is performing the role as an entrepreneur in required areas.
c. Promotional role: In promotion role, government does not regulate or control the activities of business, however, supports the business activities by promoting better environment, advanced infrastructure, offering various incentives to endorse economic activities in the business. This role includes arrangement of proper roads, transportation, communication, power supply, financial institute, banking, capital markets for coordination among various sectors. The Government should have direct participation in the business activities to understand, regulate, take the proper policy to promote the business.
Experience of privatization in Bangladesh
The most significant move in the privatization process occurred in 1982 with the announcement of the New Industrial Policy (NIP). The Government introduced fundamental changes in the industrial policy environment and the adoption of various promotional measures, designed to accelerate the pace of private sector-led industrial growth. A number of large industries in the jute and cotton textiles sectors (33 jute mills and 27 textile mills) were returned to their owners under the auspices of the NIP2. In order to encourage foreign private investment, the Foreign Private Investment (Promotion and Protection) Act of 1980 was promulgated and a "One-Stop" service agency, i.e. Board of Investment (BOI), was set up, commencing its operations in January 1989. From the 1st September, 2016, amalgamating the Privatization Commission and Board of Investment, a new organization, Bangladesh Investment Development Authority is established.
The Government announced the Revised Industrial Policy (RIP) in 1986 with a view to further expanding, relaxing and strengthening the measures required to provide further impetus to the privatization process through a deliberate denationalization program. The RIP provisions also encouraged foreign private investment, allowed liberalization of imports, export incentives, and liberalization of fiscal and monetary measures. The Government's strong commitment towards rapid expansion of the private sector through progressive deregulation, liberalization, trade policy reforms and encouraging foreign private investment was reiterated through the declaration of yet another industrial policy in 1991. Indeed, privatization of the loss-making SOEs was one of the major objectives of the 1991 policy in order to increase the efficiency and productivity of the industrial sector.
For example, a study conducted by C.A.F. Dowlah (1997) for World Bank (referred to as World Bank Study, 1997, henceforth) points out that a total of 1089 enterprises consisting of industrial units, commercial businesses and banks etc. were privatized in Bangladesh between 1972 and 1996. The latest study conducted by ILO (1999) estimates a total 1083 SOEs being privatized during the same period of which 610 were industrial enterprises accounting for 56 per cent of the total denationalized units. The distribution of the 610 industrial enterprises by sectors of industry and over different periods of time between 1972 and 1996 are shown in Appendix B: Table II:.
Most frequent criticisms leveled at privatization in the recent periods are: (a) instead of augmenting new investments, higher industrial growth and generating additional employment opportunities, the privatized units are running at losses and/or are diverting resources into other use; (b) changing business or altogether closing down the operations; (c) the new owners are engaging in the speculative businesses and making commercial use of lands in the projects like housing and shopping complexes and (d) privatization is resulting retrenchment of surplus labor, causing unemployment and thereby contributing to the process of growing social unrest.
A World Bank (1993) Study of the performance of the privatized units divested during 1980s reports that nearly 50 per cent of the enterprises (e.g. 245 out of 497 small industrial Enterprises excluding large jute and cotton textile mills) have been closed down. A depleted asset base, high debt liabilities and inefficient management are noted as important factors explaining poor performance of the divested units.
The research findings on these issues of economic performance of the privatized enterprises are at best mixed and hence inconclusive (Ahmed, 2000). This is primarily because of two reasons: one, privatization in Bangladesh has not proceeded under a coherent and consistent strategy and has not therefore been accompanied by desired improvements in the macro policy framework, institutional, legal and financial infrastructure and an overall conducive environment required for smooth functioning. Two, the process of privatization is not without some cost; on the contrary, it is fraught with political, social and economic problems which must be reckoned and the expectations must be kept within reasonable limits.
Table 3: Change in employment status of the operating enterprises after privatization during 1991-96
Name of the Enterprise    Employment
    Employmentat the Time of privatization    After  Change    Percentage
1. Dhaka Vegetable Oil Industries Ltd.    525    295    -43.8
2. Chittagong Cement Clinker and Grinding Co. Ltd.    318    252    -20.8
3. Kohinoor Chemicals Co.    889    798    -10.2
4. Kohinoor Spinning Mills Ltd.    1030    530    -48.5
5. Bangladesh Cycle Industries Ltd.    119    800    672.2
6. Barisal Textile Mills (New: Name 5R Ltd.)    1172    832    -29
7. Stile Fabrics & Embroidery Ltd.(Old Name: Zotime Fabrics)    61    50    -18
8. Kishoreganj Textile    1275    758    -40.5
9. Madaripur Textile Ltd.    1056    742    -29.7
10. Eagle Box & Carton Mfg. Ltd.    268    172    -35.8
11. Quontum Pharmaceutical Ltd.    283    na    na
12. Hamida Metal Industries  Ltd.        Closed    
13. Sharmin Textile Mills    6996    5229    -25.3
Source: World Bank (WB): Privatization  Experience  in  Bangladesh,  1991-96:  A  Study  undertaken  for  the  World Bank (Vol. 1); Sept. 1997.
However, the impact of closure of the privatized enterprises was found to have serious consequences as the aggregate loss of jobs due to closure alone was estimated to be 39007 by Ahmed (2000).  ILO (1999) study in this respect estimates a 25 percent decrease in employment (Table 3) after divestiture in 11 of the currently operating SOEs out of a total of 13 privatized during 1991-1996.
Bangladesh is now at the very early stage of developing countries. Most of the basic infrastructure Road, Transport, Electricity, Gas, especially the human capital did not develope to run private sector independently and efficiently to produce public goods and services and also private goods and services. On the other hand, to produce the public goods, individuals have not enough capital. In the case of the private goods, the market system does not quite perfect for ensuring competition. In such a situation, government should not withdraw its interference to producing goods and services. To efficiently run the private sector, public sector should take place on the driving chair and should have sufficient skilled employee/strength to control/regulate over the private enterprises. At present, public service employment is the significantly lower (12%) in Bangladesh and the size of the government, that is, public expenditure is only 9.2% which is also around the lowest in the world. As, per the many studies in the world to operate the economy, optimum government size is around 25% though it differs from country to country. So, the government size of Bangladesh is certainly very low to control and monitor and to promote the private sector. From 1972 to 1996, around 610 industries were privatized. The studies regarding the experience of the privatization or disinvestment of industries are very unpleasant. In such a situation, government should be more careful to privatize or hand over the control of the public enterprises to the  private entity. However, to efficiently run these organizations, appropriate policy measures are urgently essential.
(The writer is a distinguished researcher and columnist) 

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