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Is Pakistan Better Off Industrially (and More Diverse in Industrial Production) Compared to Bangladesh?

Bilal9

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How come Vietnam is lower than Bangladesh?

They're considerably higher up the manufacturing value chain than us. Their exports of Samsung smartphones alone are much higher than our total exports as a country.
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I don't believe Samsung produces or sells cellphones in China, which explains that. I believe the cellphone manufacturing investment in Vietnam was made by Samsung itself, not Vietnamese partner. Their cost of labor is low enough - but of course not lower than Bangladesh.

Like someone mentioned - Covid shock is number one reason for this phenomenon. Bangladesh manufacturers could not stop manufacturing and kept going with Health precautions. People have to eat.

Vietnam was more careful and had shutdowns.
 
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Bilal9

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There are plenty of examples in Pakistan of products manufactured there which uses newer improved cottage industry techniques for improving economies of scale suitable for profitable export activity compared to global competitors. Sialkot has been known as hub of sports good and stainless steel implements (including medical items) export since British times. I will highlight (in video) some of these processes and export sectors in Pakistan, which do not exist (or are scarcely present) in Bangladesh, this could be a source for either import trade or at some point - a JV. Pakistani brothers are also welcome to post videos here.

For example Ali Trading in Sialkot (Alitra for short) uses Kaizen Continuous Improvement principles in collaboration with Juki, which is a Japanese Sewing machine manufacturer (among other things).

Alitra has been manufacturing sports goods (e.g. Football/Soccer Ball, leather gloves and tennis rackets etc.) and exporting to EU and US for over a hundred years, since 1919.



This is one other football manufacturer in Sialkot


Here are Stainless steel surgical items manufacturing processes in Sialkot (some manual cottage industry type situation). This industry is largely absent in Bangladesh (even at cottage industry level). However there is plenty of scope and also raw material found from ship-breaking (hundreds of tons monthly). I have seen this myself. Watch the process, how value is wonderfully added.


 
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Bilal9

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Some idea of Stainless steel Sialkot-made medical products, for which there is immense demand in Bangladesh...





Compared to third world, here are stainless steel surgical instruments being manufactured in Germany,


And in Sweden,


but also costs ten times as much. Unsustainable IMHO.
 

Bilal9

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Specialisation is better than being jack of all trade.
Bangladesh has one item for export in large quantity, apparel (70% or more of all exports). Specializing in this is good (having a supportive ecosystem that developed is good), but this is not a sustainable scenario. Other competing countries will keep coming up (in Africa, especially) with lower cost of labor, as we emerge economically and our rate of labor goes up. This has happened to Japan, then Taiwan/HK/Korea, then China, and now also Malaysia, Thailand and Indonesia. It will happen to us, to Vietnam and already Laos/Cambodia (population is relatively low). So putting all our export eggs in the apparel basket will be economic suicide.

We have to diversify our export basket and improve,

1. Type
2. Quality, and
3. Quantity

of value addition, to serve markets of all types and buying powers (just like China has). China sells and exports plastic items for Poundland and also items like DJI Mavic drones, Precision Cameras/Lenses. massive construction equipment and CNC/Waterjet manufacturing items. That is why they are one of the world's largest economies. We can never become China, but we can certainly do better for ourselves than we are doing right now.

The dangers of just staying at apparel production will become apparent after we graduate to middle income country and lose GSP status in EU, when our exports to that area become much more expensive due to tariff.
These steps are a must.

Pharma, ceramics/porcelain, leather goods, IT and shipbuilding exports will help somewhat, but we cannot stop there.

Here are the academic reasons, follow the link for a more comprehensive discussion.
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"Export diversification may be an important issue for developing countries for several reasons. First, a diversified bundle of export products provides a hedge towards price variations and shocks in specific product markets (Bertinelli et al., 2006; Levchenko and di Giovanni, 2006). Second, the type of products exported might affect economic growth and the potential for structural change (Hausmann et al., 2007; Hausmann and Klinger, 2006; Whang, 2006). Third, export diversification in the direction of more sophisticated products may be beneficial for economic development. Given these potential benefits of export diversification, an important policy question is what a country can do to diversify its exports.

For poor countries to grow rich, it is important for them to modify the composition of their exports which will enable them to look more like that of rich countries. For over 50 years, economic and export diversification has been given high importance on the list of priorities for development policy.

The argument was based on the observation that dependence on primary commodity production and exportation by developing countries expose them to commodity shocks, price fluctuations and declining terms of trade. As a result, a country’s foreign exchange reserves and the ability to have funds for imported inputs become subject to instability and uncertainty.

The debates about the Prebisch-Singer hypothesis (1959) and the need for industrialization gave priority to diversify economies away from primary commodities because of unfavorable and declining terms of trade, slow productivity growth, and relatively low value added.

There are several reasons for developing countries to have export diversification. Firstly, diversifying their bundle of exports will protect them from the risk of unpredictable declining trend in international prices of primary exportable commodities that, in turn, lead to unstable export earnings. Export diversification could therefore help out to stabilize export earnings in the longer run (Ostry, 1994; Greenaway, 2001). FAO (2004) maintains that due to the absence of export diversification in developing countries, decline and fluctuations in export earnings have negatively influenced income, investment and employment.

Diversification provides the opportunities to extend investment risks over a wider portfolio of economic sector which eventually increase income (Acemoglu and Zilibotti 1997). Romer (1990) believes that diversification can be seen as an input factor that has an effect of increasing the productivity of other factors of production. Through exports it is also possible to build an environment that creates competition and as a result acquire new skills. Overall economic growth and acquisition of human capital may be slow if there is the absence of pressure from outside competitive forces (Husted and Melvin, 2007).

Diversification helps countries to hedge against adverse terms of trade shocks by stabilizing export revenues. It enables them to direct positive terms of trade shocks into growth, knowledge spillovers and increasing returns to scale. Other industries in the country can also gain as export diversification can lead to knowledge spillovers from new techniques of production, management or marketing practices (Amin Gutierrez de Pineresand Ferrantino, 2000).

Furthermore economic growth and structural change depends upon the type of products that is being traded (Hausmann et al., 2007; Hausmann and Klinger, 2006; Whang, 2006). Thus through export diversification, an economy can progress towards the production and exportation of sophisticated products which may highly contributes towards economic development.

Export diversification allows the government of an economy to achieve some of its macroeconomic objectives namely sustainable economic growth, satisfactory balance of payment situation, employment and redistribution of income."

 
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American Pakistani

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Excellent thread and i hope people from other countries also contribute positively to this thread.

As @blueazure correctly pointed out that our small businesses are numerous but they lack the QA/QC hence cannot even compete outside Pakistan. Sialkot in Pakistan is known to have more per capita income than any other city in Pakistan but the fact remains that these industries employ unskilled or semi skilled people. The owners are resistant to innovation and do not want to upgrade their industries hence despite making a good fortune for them they add very little to Pakistan's exports.

Another chronic problem is that these businessmen do not have the understanding of project/product life cycle costs and end up destroying the quality of the product in their attempts for cost saving. It has been a consistent feedback from buyers that Pakistani companies do not maintain their quality over the years.

Leaving aside government inaction and virtually non existent assistance, it remains a fact that our businessmen lack the vision to expand their business and do not believe in healthy competition. In another thread i posted that there are 850 pharmaceutical companies in Pakistan but recently only 1 company got WHO certification while there are more than 10 companies in Bangladesh and 150 pharma companies in India which are WHO certified. Now there is only one pakistani pharma fulfills the requirement to export medicines to middle east, Europe and US. You can imagine how outdated our thinking has been.
Exactly, Pakistan is not only lacking in QA/QC but also timely modernization and automation is constantly ignored. The results are our companies not only lacking quality but also failing to deliver goods on time hence losing customers. Pharmaceutical manufacturing is such an easy industry but crucial, unfortunately Pakistan is way behind.
 

Bilal Khan (Quwa)

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Some SOEs (e.g., HIT) said they were committing to acquiring more inputs from the domestic SME base. This is key because in Pakistan, many of the biggest production sites and SOEs. However, we need them to stop vertical integration and, instead, offload more production work to private sector SMEs. Ideally, we would reach a point where PAC Kamra can source sub-assemblies for aircraft from privately owned SMEs.
 

bluesky

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It is widely maintained in Bangladesh business circles that the reason so many Indian products come into Bangladesh is because of Indian govt, pressure and strong arming Bangladesh govt. to not assign protective tariff to Indian imports, which has been continuing for fifty odd years. A compliant AL govt. does not hurt for Indians.
Bold Part: A country has to produce its own goods before imposing tariffs on imports and BD does not produce any good amount of these things except perhaps in Dholai Khal. BD's Bengali people generally tend to avoid working in small mechanical fields, but Biharis in BD are/ were. I have firsthand knowledge about the working methods of the Biharis.

They used to manufacture small things in Saidpur, Parbatipur, Shantahar, etc. where they used to live. I have seen even a soap factory. I think there still is a sizeable Bihari population there because all people there tend to speak in Urdu/ Hindi. I don't know about Mirpur/ Muhammedpur Biharis. They probably brought this work culture from India when they migrated to east Pakistan after 1947.

Bengalis, being unnecessarily snob, from the very beginning disliked working in mechanical workshops that dirty their hands. However, recently, I have seen a few workshops in my hometown in Faridpur. They produce small parts with electrical machines for what purpose I don't know.

Anyway, the time is over to build workshops anew to produce handmade mechanical goods. It is time for automation with automatic lathe machines. I believe it will happen when motorcycle/ cycle/ car/ bus manufacturers start assembling their goods. They will need millions of highly sophisticated mechanical/ electrical parts.

In the case of Pakistan, it is a little different. They already have mechanical workshops that may have started with gun manufacturing and with economic development, many of them would switch to automation.
 
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PoondolotoPandalum

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Bold Part: A country has to produce its own goods before imposing tariffs on imports and BD does not produce any good amount of these things except perhaps in Dholai Khal. BD's Bengali people generally tend to avoid working in small mechanical fields, but Biharis in BD are/ were. I have firsthand knowledge about the working methods of the Biharis.

They used to manufacture small things in Saidpur, Parbatipur, Shantahar, etc. where they used to live. I have seen even a soap factory. I think there still is a sizeable Bihari population there because all people there tend to speak in Urdu/ Hindi. I don't know about Mirpur/ Muhammedpur Biharis. They probably brought this work culture from India when they migrated to east Pakistan after 1947.

Bengalis, being unnecessarily snob, from the very beginning disliked working in mechanical workshops that dirty their hands. However, recently, I have seen a few workshops in my hometown in Faridpur. They produce small parts with electrical machines for what purpose I don't know.

Anyway, the time is over to build workshops anew to produce handmade mechanical goods. It is time for automation with automatic lathe machines. I believe it will happen when motorcycle/ cycle/ car/ bus manufacturers start assembling their goods. They will need millions of highly sophisticated mechanical/ electrical parts.

In the case of Pakistan, it is a little different. They already have mechanical workshops that may have started with gun manufacturing and with economic development, many of them would switch to automation.
Certain Bengalis envision Bangladesh to be perpetually stuck in Rabindranath Tagore's novel. Industrialization is too brutal, too unromantic for their queer minds.

I was following TBS's Linkedin posts to see the sort of comments people with fancy titles in Bangladesh end up writing. On one post about an op-ed, about the urgent need for industrialization and diversification, there were a worrying amount of PhDs (all in the humanities/liberal arts) commenting on how they know better. On how Bangladesh's development journey is unique. How she will re-write the books on economics and development by stitching underwear, at a lower cost than anyone else.

These kinda people worry me the most in BD if I'm honest (among others).


This fetish obsession with the "old Bengal" needs to be eliminated. Having fish and rice on a plate isn't enough for this century. Not good enough. Do more, achieve more
 

Destranator

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Certain Bengalis envision Bangladesh to be perpetually stuck in Rabindranath Tagore's novel. Industrialization is too brutal, too unromantic for their queer minds.

I was following TBS's Linkedin posts to see the sort of comments people with fancy titles in Bangladesh end up writing. On one post about an op-ed, about the urgent need for industrialization and diversification, there were a worrying amount of PhDs (all in the humanities/liberal arts) commenting on how they know better. On how Bangladesh's development journey is unique. How she will re-write the books on economics and development by stitching underwear, at a lower cost than anyone else.

These kinda people worry me the most in BD if I'm honest (among others).


This fetish obsession with the "old Bengal" needs to be eliminated. Having fish and rice on a plate isn't enough for this century. Not good enough. Do more, achieve more
The good thing is no one gives a crap about what liberal arts folks have to say about economics. They are almost as useless as BD extreme Mullahs and Hindutva temple monkeys.
 

Bilal9

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There is a channel called wow skills designated for this type of SME,s. The link is given below. BTW not a single business is registered with government.
I have a lot of respect for that guy Mohammad Ayyaz for putting up that channel on YT, and how much effort and time he spent, recording these detailed videos in the workshops.

I keep being amazed at how much productivity these talented guys put out with such old fashioned basic tools and the amazing amount of skills used.

If only our govts. in our countries helped these guys modernize some of the processes they could raise their quality a lot...

I'm sure with a little help and money injected in Chinese industrial automation tools for the processes used, these guys could easily double or even triple their productivity.
 

Bilal9

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Bold Part: A country has to produce its own goods before imposing tariffs on imports and BD does not produce any good amount of these things except perhaps in Dholai Khal.
To be honest @bluesky bhai, the majority of Indian goods dumped in Bangladesh are something we could easily produce (Fast Moving consumer goods, FMCG products like Britannia cookies, Cadbury candy-bars, Maltova drink, parachute coconut hair oil, hajmola, Paan Parag etc..

Any thing Bangladesh can make, Indians can make usually at a lower cost. It is a combination of using cheaper ingredients and older technology (which are older investments in machinery that have been paid off long ago. Indians also get rebates from govt. for exporting these products.

There is no special cutting edge technology needed to produce those items. It is only recently that Pran has taken on some of these Indian FMCG items (mostly food items) and has made a dent in local and Indian market price-wise, using newer more efficient production processes using higher technology than India uses.

India can easily dump these products in our market because their cost of production is still half that of ours because their economies of scale is much higher (because their market is eight times bigger). We need to place tariffs and NTB's on all Indian products, otherwise our economy and businesses cannot survive or compete with theirs.

Indians support and protect their industry - we should protect ours too. These organizations employ people with relatively well-paying jobs and puts food on their table.
 

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