Dhaka, Bangladesh (BBN) – Import orders for capital machinery plummeted by nearly 30 per cent in the fiscal year ended on June 30 following the ongoing global meltdown, officials said on Saturday.
Letter of credits worth US$1.234 billion were opened to import machinery for factories in the 2008-09 financial year (FY09) against $1.753 billion in the previous fiscal, according the central bank statistics.
Actual import of capital machinery — equipment needed for industrial production — dropped by a meagre 0.78 per cent to $1.403 billion in FY09, boosted by the previous orders executed last year, they added.
Bangladesh Bank (BB), the country’s central bank, officials have expressed concern over the declining trend of capital machinery import, saying it indicates sluggishness in investment in manufacturing sectors.
“The central bank has taken the issue seriously and is now working out a strategy to boost machinery import in the current fiscal,” a BB senior official said.
Former BB chief economist and currently director general of the Bangladesh Institute of Development Studies (BIDS) Mustafa K Mujeri said the slump in machinery import is due to the global economic crisis.
“Global meltdown has created an atmosphere of uncertainty in the country’s industrial production. Private entrepreneurs have adopted a go-slow policy due to sluggish demand at home and abroad,” Mr. Mujeri added.
“The data clearly shows that our entrepreneurs are placing fewer orders to import new capital machinery,” he said, adding the same thing happened in most of the developing countries in Asia following the global meltdown.
Manufacturers and exporters said they don’t see any sizable increase in machinery import until the economic health of the rich nations improves and the Bangladesh government removes some key infrastructural bottlenecks.
“The import of capital machinery will shoot up as soon as the government ensures adequate gas and power supply to factories,” President of Bangladesh Knitwear Manufacturers and Exporters Association Fazlul Hoque said.
He also said a fall in demand in the recession-hit West and higher lending rates at home are also deterring the investors from setting up new factories or expanding their existing plants.
Mr. Mujeri forecasts an increase in import of capital machinery from the second quarter of this fiscal, as he sees silver lining in the global economy from October. “Things should start improving in the October-December quarter.”
“A turnaround in global economy would create huge demand for items such as apparel in the western countries, prompting manufacturers in the developing countries to place new orders for machinery,” he said.
BBN/SS/SI/AD-92August09-3:24 am (BST)