Nazmul Ahsan, Assistant Manager, Credit Risk Management Division, IDLC Finance Limited

Jute was popularly termed as the golden fiber as it was one of the prominent cash crops of Bangladesh. Jute has been produced in Bengal since ancient times. But, prior to 1855, the fiber was locally used by the handloom weavers to make twines, ropes and coarse fabrics for the poor. Crimean War (1854-56) made the cotton and flax supply erratic and impulse the Scottish millers to examine the possibility of jute as a commercially viable substitute. Due to comparative cheapness and availability of such commercially viable fiber from a British colony, the first jute mill named Acland Mill was established in Kolkata in 1855. Jute industry made rapid progress once it started its journey. The number of mills increased to 18 in 1882 and 35 in 1901 with 315 thousand spindles, 15 thousand looms, 110 thousand workers and a paid-up capital of 41 million rupees (Source: Banglapedia). Bangladesh alone met the 70-80% of world jute demand till 1948 which fell down to 25% in 1975. In the financial year of 1972-73, jute and jute goods contributed around 92% in our total export earnings.
However, it is still second export earning sector next to RMG. The sector has an average contribution of 3% in our export earnings and 1% in GDP. Moreover, though RMG sector is the highest contributor in our economy in terms of export earnings and employment, it is to be remembered that 1 Dollar of export earnings from Jute sector is tantamount to that of 4 Dollar from RMG sector since each 100 Dollar export of RMG item requires 55-60 Dollar import of raw materials. Bangladesh is the largest exporter of raw jute and second largest jute producer in the world. In value terms, India (USD 1.2 bln), Bangladesh (USD 899 mln) and Pakistan (USD 70 mln) were the countries with the highest levels of market value in 2018, with a combined 79% of global jute market share (Source: IndexBox).

Important Highlights on Global Jute Market

Market Size and Growth of Jute based products:
According to the imarcgroup, the global jute bag market size reached USD 2.3 Billion in 2021 and it expects the market to reach USD 3.8 Billion by 2027 and expected CAGR is 8.94% during 2022-27. However, according to a report of Globe Newswire (Published: May 04, 2021), global jute bag market value was USD 2.7 Billion in 2020. The major key factors driving the global jute bag market are growing adoption of jute bags based on their biodegradability, durability, low cost, high strength etc.

Consumption: The countries with the highest volumes of jute consumption were India (2.1 Million MT), Bangladesh (1.4 Million MT) and Pakistan (0.091 Million MT) with a combined 90% share of global consumption (Source: IndexBox).

Production: Approximately 3.9 Million MT of jute and jute fibers were produced worldwide and total output volume increased by at an average annual rate of 1.8% over the period of 2007-18. The countries with the highest volumes of jute production were India (2.1 Million MT) and Bangladesh (1.6 Million MT) with a combined 93% share of global production (Source: IndexBox).

Exports: Global jute export stood at USD 210 Million in 2018. From 2012 to 2018, exports remained at a lower figure. Bangladesh and India dominates the jute export structure reaching 0.243 Million MT which is near 84% of total exports. Tanzania, Belgium, Kenya and Malaysia together made up 13% of total global export. Exports from Bangladesh decreased at an annual average rate of -8.0% from 2007 to 2018. India and Kenya illustrated downward growth (-6.6% and -1.9% respectively) over the same period of time. However, at the same time Malaysia, Belgium and Tanzania attained positive growth rate of 33.3%, 6% and 1.5% respectively. [Source: Global Trade Mag]

Imports: Pakistan (0.091 Million MT) and India (0.064 Million MT) are the largest importers of jute and jute fibers. The countries share combined 53% of total imports. Nepal ((41 MT)) took the next position in the ranking, followed by China (31 MT). All these countries together took approx. 25% share of total imports. Jute imports amounted to USD 197 Million in 2018. In general, jute imports, however, continue to indicate a relatively flat trend pattern.

Bangladesh Jute Industry at a Glance

*Any jute product (except hessian, sacking, CBC, jute yarn and twine) where jute has been used at least 50% as raw materials, will be categorized as diversified items (Jute Act, 2017). Diversified Jute Goods include Bags (school bag, travel bag etc.), cover, curtains, suitcases, mats, vases, carpets, shoes etc.

Major Events and Policy Implementation (1972-2021)

Overall Industry Performance

The data indicates that the sector lost its remarkable growth over the last few decades in terms of its contribution in country’s aggregated export earnings. The export oriented jute sector secured around 90% contribution in export earnings in FY 1972-73 whilst the contribution came down to only 4.60% in FY 2000- 01 and later sustained the sharp downward movement which resulted in 3.60% contribution in total export earnings in FY 2020-21. Total export volume did not increase significantly. It rose from USD 313.1 mln (FY 1972-73) to USD 736.4 mln and USD 1,161 mln in FY of 2009-10 and 2020-21 respectively whilst our total export volume increased from USD 16.2 bln (FY 2009- 10) to USD 41.2 bln in FY 2020-21. Export volume decreased by 20% (from USD 1,026 mln to USD 816 mln) in FY 2018-19 as compared to FY 2017-18 due to production shortage, anti-dumping policy imposed by India and economic recession in Turkey and some other Middle Eastern countries. However, in 2020-21, export earnings from this sector secured highest ever export earnings and broke all the previous records.

The jute was not able to show promising improvement in export performance due to phenomenal growth in RMG and shrimp sector, popularity of plastic items in domestic and international market, poor innovation and diversity over time.

Product-wise Export Performance of Jute Goods

According to the Fig-3, jute goods export is remarkably dominated by yarn and twine as compared to sack and other jute goods including Jute Diversified Products. In the last five years, total earnings from jute goods were accounted to USD 4,146 mln where jute yarn and twine solely contributed 76% and rest 24% came from sack and other jute goods combined.
Yarn, twine and sack export secured positive momentum whilst export performance of other jute goods represented negative movement (-21%) from FY 2018-19 to FY 2020-21.

Export of Jute Goods (Lac Metric Tons)

From the figure-4, it is clear that there is a downward movement from FY 2013-14 to 2018-19 from the state owned jute mills due to closure and transfer of various mills to private sector and reduced utilization. On the contrary, privately owned jute mills under BJMA and BJMC maintained upward movement from 2010-11 to 2018-19. Both BJMA and BJSA continued to grow and remained rising as opposed to BJMC amid industry unrest, reduced price of jute goods etc. However, export volume of BJSA represents abnormal rise as our jute goods export is dominated by twine and yarn (as observed in Fig-3).
Figure-4 also suggests that jute mills under private sector are relatively better off than state owned mills.

Raw Jute vs Jute Goods: At a Glance
Although Bangladesh is the largest raw jute exporter in the world, jute industry is being ruled by jute goods in terms of value. It is notable that export volume of jute goods was significantly higher than raw jute throughout any time period. Raw jute export is disadvantageous for our domestic millers and raw jute export has lower value proposition. Export value of raw jute is USD 900/MT whereas jute goods are being exported at the rate of USD1500/MT. Around 4 to 5 people are employed in the export of one MT of raw jute whereas 30-40 people work to produce yarns from one MT of jute (Source: TBS, 27 August, 2020). In 2018, the government imposed a ban on export of raw jute, though the very next year the ban was lifted. Moreover, raw jute exporters are not entitled to enjoy any export or cash incentives.

Export Destinations
Drawbacks and Challenges: How Past Glory Becomes Present Obscurity
1. Inadequate domestic demand: Despite being second largest jute producer, Bangladesh has relatively very small domestic market for jute and jute goods. From the advent of the industry, the sector remains mostly export dependent. Though Bangladesh government made the use of jute bags mandatory since 2008 instead of plastic bags for some listed items, the law is hardly enforceable given popularity and cheap rate of plastic bags.
2. Lack of product diversification and innovation: Our jute export mainly dependent on yarn and twine whereas global market size of twine is relatively smaller compared to jute sack and bag. Whilst export basket of China and India are dominated by jute sack and bags, ours are still being dominated by twine from the beginning.
3. Age Old Technology and lower productivity: The industry is losing competitiveness and productivity due to year old machineries. According to a report of Dhaka Tribune (published on December 2018), currently mills are operating with the old machines which have a 66% of productivity rate. Reportedly, mills under BJMC have productivity below 50%. In a government jute mills, 90 workers are required to produce one MT of sacks whereas mills under private sector require 25-30 workers to do the same job. Upgradation of decade old machineries is a must to ensure productivity and cost effectiveness.
4. Mismanagement and Corruption in state owned Jute Mills: Mismanagement and corruption engulfed the publicly owned jute mills and thus jute mills which were once making profit started to incur substantial losses. BJMC was not able to lead the management properly due to inefficient management personnel and nepotism. Unnecessary appointment of large number of workers, labor strike, procurement of low quality jute etc made the mills unprofitable and ended up with closure. Moreover, as farmers are deprived of right price of jute, quality of raw goods fell and buyers started to lose confidence.
5. Widespread use of Plastic Items: Jute mills started to lose orders due to the popularity and cheap rate of plastic products (bag, sack, etc.) from 1980s. Growing use and random production of plastic items apparently hamper the existing and potential jute market. Though the government has implemented the Mandatory Jute Packaging Act 2010, which was enforced in January 2014, to promote the country’s jute sector, the law is hardly enforced. Bangladesh has never set a target or comprehensive plan to minimize use of plastic.
6. Supply Shortage of raw jute: Very often millers face order cancellation from foreign buyers as millers cannot supply goods within stipulated time and price due to scarcity or price hike of raw jute. Earlier on January 25, the top leaders of jute mills said they were going through an exceptional situation as they had already lost around 40% of their market share in Turkey due to the scarcity of raw jute (Source: Daily Star, Jan 31, 2022).

Opportunities and Prospects: Possibility of Reincarnation

Increased Demand of Natural and Green Products
According to a UN report, demand of natural products in consumer market is increasing by 2%-3% year on year. EU has already imposed a ban on usage of plastic bag. According to International Jute Study Group, global shopping bag market demand is 500 billion pieces currently. Bangladesh has the ample opportunities to rebrand its jute goods amid the popularity of eco-friendly products. Amid acceptance of green products and Go Green movement, demand of diversified jute goods is increasing dramatically in international market. Global jute bag market size reached USD 2.3 bln in 2021 and it expects the market to reach USD 3.8 bln by 2027.

Potential of New Products in Jute Exports

Interior Supplies for Automobile: Jute fiber is used to make car interior and jute fiber shows a huge potential in this realm. Bangladesh started supplying jute to high-end car makers like BMW, Mercedes-Benz, and VW in the early 2000s, according to Bangladeshi jute exporters. The global car industry needs approximately 80,000 to 100,000 tons of natural fibers a year, of which 10,000 to 12,000 tons of jute are supplied by Bangladesh (Source: Daily Star, 11 Apr-2019).

Furniture and Home Appliance: At present India, China and some other countries are currently producing furniture and home appliance items by blending poly propylene with jute fibers.

Jute Sticks for Charcoal and Carbon Powder: Jute sticks can be a game-changer in jute exports. There is a significant global demand for jute-stick ashes because these are used as a raw material in many industries. At the moment, the country produces around three million tons of jute-sticks annually. The prospects for exporting jute-stick ashes are impressive, with China being a large market. In fiscal year 2015-16, Bangladesh earned BDT 140 mln by exporting jute charcoal to China alone. Bangladesh also gets dutyfree market access to China in case of jute-stick carbon. Taking advantage of this access, the quantity of charcoal export to China can be doubled.

Jute Geotextile (JGT): JGTs are biodegradable, photodegradable, compatible with soil, harmless for fish/ plants/microbes/eggs, etc. JGTs meshes with the soil and act as a fertilizer after a certain period. Bangladesh is considered to have great potential to earn significantly higher amount of foreign currency by exporting JGTs produced with the existing supply of jute fiber.

Sonali Bag: The product is developed by a Bangladeshi scientist Mubarak Ahmed Khan (Scientist at Bangladesh Atomic Energy commission). In 2018, BJMC started commercial production. This bag is biodegradable and environment friendly. It is re-useable and recyclable. The world bioplastics market is estimated to grow to USD 66 bln in 2022, as Europe and North America are expected to make a transition and shift towards biodegradable packaging. The European Union explicitly aims to reduce overall consumption of single use plastics which means there is a great opportunity for promoting export of Sonali bags.

Jute Tin: An important addition in the family of diversified jute products has been environmentfriendly ‘Jute-Tin’, which should serve both domestic and international markets. Instead of using lead and zinc, core raw materials used in producing CI sheet (tin), the long-lasting jute-made tin is a recent invention of a Bangladeshi scientist Mubarak Ahmad Khan (the inventor of jute polybag). The newly invented tin is made of jute hessian, resin, coupling agent and some hardener. Jute-tin is sound- and heat-proof.

Jute Viscose: Regenerated cellulose fibre (viscose) is a popular man-made fibre, which is made from the chemical induced transformation of natural polymers and used as a basic input of fabrics. Bangladesh spent considerable amount of money to import viscose for textile industry. A MOU was signed by BJMC and China’s Textile Industrial Corporation for Foreign Economic and Technical Corporation to initiate the jute viscose project which will enable Bangladesh to produce 40,000 tons of viscose annually.

Policy Support
The government of Bangladesh implemented the Mandatory Jute Packaging Act 2010 which came into effect in 2014. According to the law, 17 commodities must be packaged in jute made bags.

The act increases the domestic demand of jute sacks. Government has already decided to buy 50% of jute bags and sacks from private manufacturers and the rest from traders. According to Jute Department, annual domestic demand for jute bags and sacks is 195.65 crore pieces.
The Ministry of Textiles and Jute recently published a list of 282 jute goods designated as “diversified jute products” taking into consideration their demand in local and international markets (Source: TBS).

Some Recommendations and Way-outs
1. Increasing new products in export basket
2. Reviving BJMC
3. Technology upgradation and subsidy for new machine
4. Innovations in product and process
5. Special fund for JDP manufacturer at lower interest rate
6. Implement quota on raw jute export
7. Establish research and training centers

Conclusion
Jute has ample prospect to become a vibrant industry of the country. Currently, Bangladesh is largely dependent on RMG sector for export earnings. Around 84% of total export income comes from RMG sector alone. A country certainly should not be such dependent on a single industry. Rather, diversification in export basket is expected. Usually, garments industry shifts to low cost countries and highly susceptible to economic recession. Moreover, Bangladesh is going to lose quota after 2025 as it is listed in LDC. Therefore, Bangladesh should seek alternative industry to keep sustainable export growth. As the global demand of jute based products is increasing rapidly, Bangladesh can secure a better position in the global market given the opportunities are properly and timely capitalized.
The writer is working as assistant manager in credit management division of IDLC Finance Limited and can be reached at NAhsan@IDLC.com