The jute industry grew rapidly and jute mills were established in many countries, including USA, Germany, France, Belgium, Austria, Italy, Holland, Spain, Russia, Brazil and Bengal. This led to a rapid increase in the demand for jute. The Bengali peasants responded quickly to meet the world demand by increasing the area under jute cultivation.
The jute industry in the public sector, by virtue of its location in East Pakistan, became the property of Bangladesh after independence in 1971. Pakistani mill owners (about 68% of the total loom strength) left the country, leaving the industry in disarray. Abandoned jute mills were subject to heavy looting. The new government of Bangladesh had to take up the responsibility of rebuilding the industry. By a Presidential order, about 85% of industries, including all jute mills, were nationalized.
Bangladesh Jute Mills Corporation (BJMC) was formed to manage and look after all the 73 jute mills having 23,836 looms at that time. At one stage the number of jute mills under the jurisdiction of BJMC went up to 78. BJMC had to revive the industry from a ruined position. Immediately after liberation, it became very difficult to solve problem of financial hardship of the jute industry because financial institutions were not working well. The short supply of spares, labor unrest, wastage in production etc. shook the industry severely.
For jute industry of Bangladesh, the first two years after liberation was the period of reorganization. The government offered cash subsidy to the industry, which amounted to Tk 200 million annually. The annual cash subsidy was reduced to 100 million since 1976-77. Thanks to this policy and periodic devaluation of currency, Bangladesh could retain its position of a prime exporter of jute goods in the dollar areas of export. The industry earned profit in 1979-80, when the subsidy was withdrawn.
By December 1979, BJMC had 77 jute mills, two carpet backing mills, and two spare parts producing units. In 1980, six twine mills were disinvested to the private sector. In June 1981, BJMC had 74 mills under its administration. These mills had about 165,000 workers and 27,000 managerial and office staff.
Denationalization of jute mills started in July 1982. The government ordered BJMC to complete the process by 16 December 1982, but only 10 mills could be handed over to Bangladeshi owners by that time. The valuation process and settlement of other organizational matters relating to handing over of the mills took a long time. Among the jute mills owned by BJMC, 46 had satisfactory financial performance in 1982-83, when their profit before contribution to national exchequer was about Tk 240 million.
The same mills incurred total losses of about Tk 430 million in the previous year. Jute mills incurred losses regularly over years and external donor agencies pressed hard for denationalization. More and more mills were put into the denationalization list. In 1999, BJMC had 33 mills. The World Bank continued to work closely with the government to restructure the jute sector, especially through denationalization, merger, dissolution, closure and setting up of new units.
The importance of the jute sector to the Bangladesh economy, in particular, cannot be over-stated, it is a major cash crop for over three million small farm households, the largest industry, producing about one-third of manufacturing output, and the largest agricultural export commodity in Bangladesh. The livelihood of about 25 million people (almost one – fifth of the total population) is dependent on jute – related activities in agriculture, domestic marketing, manufacturing and trade.
Lest we forget, the jute industry was the life blood of our economy for several decades and continues to be one of the mainstays of our rural economy even today. About 15 million farmers are involved in growing this cash crop and several million more of our population, perhaps an equal number, are involved with its processing, transportation, conversion, etc. In order to understand the current state of affairs in the industry, one must look into the background of the jute industry and the events that took place over the last several decades.