It is also a story of RFL-Walton!


Those who grew up watching Bangladeshi Television (BTV) in the 1980s and 1990s well remember the commercials BTV would do, in part because there were only a handful of them. Toiletries, batteries, jewelry, shoes and clothing would dominate the intervals of the television programs.

Now compare them to the TV commercials of 2021. The range of products displayed is simply astounding. All types of durable household goods – electronic and non-electronic – take up the airtime of channels, from plastic pails to high-definition smart TVs. This layman’s observation about the changes in the makeup of types of television commercials, I think, aptly sums up the transformation that the manufacturing sector, serving the domestic market, has gone through over the past three decades.

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Bangladesh’s growth story since the 1990s has been characterized by two main protagonists – clothing and remittances. As they are labor intensive in nature, they promote pro-poor growth, ushering in a more inclusive growth paradigm. While this simple story has been around for a long time, there are a few characters asking to be added to the story lately.

The increase in domestic demand, thanks in large part to clothing and remittances, has led to the growth of a wide range of manufacturing industries in Bangladesh, specially designed to cater for the domestic market. While these characters are not yet influential enough to be called protagonists, they can still claim the role of “ confidant ” in Bangladesh’s current growth story – like Horatio in Hamlet.

Over the past decade, the country has seen astonishing growth in durable consumer goods, at the expense of the burgeoning middle class, even in rural areas.

Household income and expenditure surveys conducted by the Bangladesh Bureau of Statistics show that around 29% of rural households had television in 2016, a substantial increase from just 7% in 2000. About 1% of households owned a refrigerator in 2000, and this figure rose to 10% in 2016.

If today one visits a household of a middle class or even upper middle class family, one will hardly come across durable household goods that are not produced in the country. A large number of import substitution manufacturers sprang up, led largely by RFL, Walton and a few others, producing a wide range of consumer goods. Here, RFL and Walton are used as examples to represent the electronics and light engineering industries.

The emergence and growth of this sustainable consumer sector has unique characteristics, unlike clothing. First, this industry originated during a time when China remains ubiquitous in the global manufacturing market. India, as a primary neighbor, has always been a threat to the growth of local industries. Local industries emerged and flourished in competition with cheap Chinese and Indian imports under a very liberal tariff regime.

Second, this sector had to challenge the country’s natural comparative advantage, which is cheap unskilled labor, and invested in uncovering “latent” comparative advantages.

It is important to note that these seemingly comparative-advantageous activities were not the result of the government’s direct aspiration to create “ national champions ” – the hyper-nationalist impulses that resulted in many failures in the past across the world failed experiments with automobiles from 1950 to 1970). The electronics industry’s “self-discovery” process, for example, has been entirely a private sector initiative.

Third, unlike ready-made garments, which are “born for export”, a large number of companies have gone through the following complete transformation sequence or part of it to become manufacturers and exporters.

Retailer è Importer / Wholesaler è Assembler è Manufacturer è Exporter

This path is extremely long and risky; only a few win the race and reach the final stage of becoming exporters. The transformation from assembler to manufacturer is the most difficult obstacle as it involves the creation of new value through technology and upgrading of skills.

Walton began his journey as a retailer under the name “Rezvi and Brothers” in 1977 and went through all stages of the complete transformation sequence to become a manufacturer in 1999 and an exporter in 2010.

RFL started its adventure in 1980, producing cast iron products and then branched out into plastics, electronics and a wide range of other durable consumer goods. In this case, the transformation from one step to another varies according to the product lines. This type of large-scale product and process upgrade is something the country’s manufacturing sector has never seen before.

Fourth, as we know, the success of ready-to-wear is due to a combination of luck, dynamic entrepreneurship and government support. Imitative entries have been possible due to the low tech nature of the industry. But this kind of imitation and replication is highly unlikely to happen in more sophisticated industries such as light engineering and electronics. Therefore, strategic partnership with government is more important to get this industry to grow both horizontally and vertically.

In addition, participation in regional and global value chains will only take place when the country has a large number of industries reaching a certain level of efficiency in the production of these high value added goods, even if not. is that for the local market.

The history of industrialization has never been a purely market-driven process. The government has supported industrialization in many forms depending on the stage of development and structure of the economy. These include protection (England protected its manufacturing for over 350 years, the United States for about 100 years, and South Korea for 30 years), mass government purchases (e.g. , Indian IT) and allowing a few industries to become big (eg Chaebols from South Korea).

The industrial policies within the neoclassical framework pioneered by Dani Rodrik, Justin Yifu Lin and Joseph E Stiglitz suggest that the government should leave rooms for the first to fail so that they can take the risks of new ventures and undertake a ‘ self-discovery ”. Win or lose, such initiatives create externalities – other companies can also learn from failures, and society as a whole ultimately benefits. This justifies supporting the first players through the government and helping to orient the pathways of upgrading and industrial diversification.

The durable consumer goods industry in our country is now populated for the first few moments, and their growth potential depends mainly on what the government wants to see in the next 10 years.

The trying period of the pandemic also reminds us of the importance of expanding the country’s technological base. The light engineering and electronics industries are definitely newbies.

I hope that the ensuing budget will support the aspiration to become an industrialized country by 2041. More than 20 years!

The author is a senior researcher at the Bangladesh Institute of Development Studies. He can be contacted at [email protected]


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