SAM

Published:
2019-12-28 17:41:51 BdST

Light engineering: Potential to bloom into $12b market


FT ONLINE

The lack of investment and infrastructure support disrupts the growth momentum of the light engineering sector, which has the potential to have a market size of US$ 12 billion by five years, industry insiders and experts said.

According to the latest statistics, the domestic market size of the sector is estimated at $3.12 billion with a 30 percent annual growth.

However, exports from the sector that comprises 50,000 macro and 10,000 medium enterprises almost halved-from fiscal year $688 million to $355.9 million in fiscal 2017-18.

"We are badly in need of investment and infrastructure support," Abdur Razzak, president of the Bangladesh Engineering Owners Association, or BEOA, said.

The light engineering entrepreneurs have been trying to have an exclusive park for the sector for a long, but the progress is far from satisfactory.

The Executive Committee of the National Economic Council, or Ecnec, approved a project for setting up an industrial zone for the light engineering industries in Munshiganj three years ago, but the implementation has been slow.

In the Munshiganj park, an area of 25 acres has been allocated for the light engineering sector, but it will take at least three years to hand over the plots to the entrepreneurs, officials said.

"Though we were not satisfied with the small portion the land, we accepted it because at least it was a beginning," the association chief said.

But the pace of work for the light engineering park is slow, he added.

Among the exportable items of this sector, bicycle has made a strong footprint in the EU market, becoming the third-largest -non-EU bicycle exporting country to the EU market after Taiwan and Cambodia.

The opportunity came after the imposition of the anti-dumping on China by the European Bicycle Manufacturing Association.

Currently the sector is meeting 30 percent of the local demand of the country. The sector comprises bicycle, agro-machinery, automotive spare parts, foundry, machine shops and repairing workshops.

According to a USAID research, domestic light engineering manufacturers can supply essential machines for the garment sector at 25 percent lower prices than imported machinery.

A locally-made machine-like DLPG film blowing machine costs around $50,00, but for an imported one the cost will be at least $70,000, the report said.

One of the main challenges of the sector is quality control of the raw materials.

"In Bangladesh the light engineering sector uses mostly ship scraps as input material, which is mainly low grade and frequently used without proper quality check standards," the USAID report said.

"BSTI and other certification bodies need to add new technologies for quality control of such materials to meet the international standards," the report added.

Commenting on the issue, Mr. Razzak said, "The lack of investment is a major problem in this regard. If big business groups and foreign investors come up, then many such problems will be solved."

He said that the foreign engineering enterprises, which are being set up in export zones, can help the sector through backward linkage and generate employment.

"But in that case the scope of technology transfer is slim. If the big business houses start investing in the sector in a big way, the real potential of this sector can be tapped" he added.

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