A Presentation On

“Sick Industry”

Course No.: Econ 5205

Course Title: Economics of Industry

Presented To: Presented By:

Mohammed Ziaul Haider, Ph.D Pinkey Sikdar
Professor Student ID: MSS 211527
Economics Discipline 1st Year 2nd Term
Khulna University Economics Discipline
Khulna University

Date: August, 2022 Page no. 1

 Outline

 Sick Industries

 Causes of Sickness

 Symptoms of Becoming Sick

 Growth and Magnitude of Sickness

 Example of Sick Industries

 Remedial measures to prevent Sickness

 Conclusion

Page no. 2
 Sick Industries

Industrial Sickness as when: An industrial unit which could not reach
 The company has negative working the stage of normal production with
capital and the unit continue to make loss; normal profit or has incurred loss or
remained at the unprofitable level for
 Cash inflow during the last 3 years has consecutive three to six years from the
been progressively going down in relation first year of commercial production or
to revenue commitment; could not produce above the break-even
 Cumulative loss exceeds capital and point for reasons beyond the control of
reserve. the entrepreneurs.

The term Industrial Sickness goes beyond bankruptcy. It

is described as the extreme state where accumulated losses
exceed the net worth.

Page no. 3
 Internal Causes of Industrial Sickness
1. Management
 Lack of proper education,
training, experience and
business outlook of the
Sponsors/Entrepreneurs;
 Poor Entrepreneurial skills;
 Poor Management;
 Lack of Integrity/Division of
Funds;
 Faulty Project Planning and
Appraisal;
4. Personnel
 Lack of Competence;
 Lack of Loyalty;
 Lack of Professionalism;
2. Production/ Technical 3. Marketing
 Wrong choice of technology;  Lack of Market
 Improper utilization of Planning;
production capacity;  Inadequate Market
 Imbalanced and Defective Survey;
Machinery;  Poor Collections;
 Poor Raw-material Planning;  Defective Pricing;
 Inadequate Quality Control
 Poor labor relations;
 Location problem;
5. Finance
 Poor Management of Financial Resources;
 Delay in Mobilization of Equity Funds;
 Faulty Costing;
 Adverse debt-equity combination;
 Lack of Proper Accounting system; Page no. 4
 External Causes of Industrial Sickness

1. Govt. Policy & Implementation 2. Bank & Financial Institutions

 Frequent Policy changes;  Non-availability/Inadequacy of
 Lack of Proper Implementation of Working Capital;
Industrial Policies;  Lack of required financial assistance
 Liberal Import Policies; for BMRE;
 Poor Infrastructure / Frequent  High rate of Interest on bank loan;
Power Disruption;  Lack of timely decision & support by
 Smuggling; the banks and financial institutions.
 Fiscal Anomalies;
 Exchange Rate Fluctuation; 3. Environment
 Over-Saturation of particular  Political Unrest;
industry type / Sector due to wrong  Labor Unrest;
policy;  Market Recession;
 Delay in Project
Implementation.
Page no. 5
 Symptoms of Becoming Sick

 Reduced working capital, fall in sales  Unfavorable market development;

& profit;
 Rapid increase of debtors, frequent  Rise in finished product inventory;
liquidity problems, wiping out of
capital reserve;  Decline in productivity;
 High managerial and labor turnover,
labor unrest;  Difficulty in paying salaries, bills,
 Rise in complaints from staffs and loans, taxes, bank interests, etc.
customers;

Page no. 6
 Growth and Magnitude of Sickness
There were only few industries in
Bangladesh, before 1947.
Industrialization took place during the period
of (1947 to 1970).
Some industries in private sector was cotton,
jute, consumer goods (SMS) industries were
also established during the period (1950 –
1970).
After the birth of Bangladesh some heavy
industries on manures, steel, energy, etc. were
established.
Availability of cheap labor, establishment of
export processing zones and BSCIC industrial
areas many garment, ceramic, pharmaceutical,
and other small scale industries (SSI) have
been established then.
Statistics shows, in 1991 government first declared
1581 industries as sick.
Experience of closing down of some of her heavy
industries like Machine Tools Factory at Joydevpur,
Chittagong Steel Mills, Urea Fertilizer Factory
Limited, Gazi Wires Limited, Chatak Cement
Company Ltd, Natural Gas Fertilizer Factory Ltd. etc.
Before the closure of these industries obviously they
became sick, tried to overcome the causes of
sickness and being failed have been closed down.
Many industries, both in government and private
sectors, have been closed down one after another due
to many uncontrollable factors.
Page no. 7
 Table 1: The Scenario in Sector Corporations of Bangladesh

Name of the corporation Total number of Established Presently owned By the

industries in ‘70s Corporation

Bangladesh Jute Mills 77 23

Corp.(BJMC)
Bangladesh Textile Mills 72 21
Corp.(BTMC)
Bangladesh Sugar and Food 54 14
Industries Corp.(BSFIC)
Bangladesh Steel and 54 12
Engineering Corp.(BSEC)

Page no. 8
 Examples of different types of Sick Industries
Chittagong Steel Mills Limited (CSM)
mills became a losing concern before
closer. It was having continuous loss since
1989 because its average revenue had
been decreasing continuously. Causes
might be over employment, cost of
product was too high, over estimation of Figure 1: Chittagong Steel Mills Limited
market demand, political and labor
unrest. Bangladesh Machine Tools Factory at Gazipur,
is a commercial automobile assembly plant of
BD army. It mainly engaged to build and modify
automobiles specially for defence industry became
a losing industry since 1990. Its revenue earning
had been decreasing because of Improper
marketing policy (Lack of publicity campaign
through TV, Radio, Press etc. for popularizing
Figure 2: Bangladesh Machine Tools Factory
the products). Page no. 9
 Examples of different types of Sick Industries
Gazi Wires Limited (GWL) is Govt. owned
company that manufactures wiring, for
example copper wires. Authorities of the
Corporation do not consider that Gazi wires
limited, in Chittagong, is not a losing
industry but data show the overall condition
of production, sales and profits are not
good. The amount of profit is poor in every Figure 3: Gazi Wires Limited
year.
Pragati Industries Limited, is a car
assembly company in Bangladesh. It
assembles cars based on components
manufactured by various foreign
companies, which are marketed locally.
The performance of Pragoti Industries
at Sitakunda, Chittagong, was not
Figure 4: Pragati Industries Limited Page no. 10
good enough in last years.
 Remedial measures to prevent Sickness
 Inventory and supply chain management;
 Technology management;
 Total quality control and quality assurance;
 Scheduling and production planning;
 Optimization principles;
 Productivity analysis and planning;
 Training & safety measures;
 Appropriate government policy to save the industries
of the country, etc;
 Proper application of scientific methods of Production
Planning & Control;
 Favorable government policy with respect to import,
export, project appraisal, tariff, etc.

Page no. 11
 Conclusion
Sickness among companies in private and public sector has become wide
spread, regretfully it is stated that enough research has not been done in
developing schemes of financial reconstruction in the Bangladesh
environment. It is Needless to add that the academic and professional institutes
could play useful role in this regard. A great deal more is required to be done to
revive sick undertaking than is being done today; Besides, we think, political
stability is also needed and BMRE (Balancing, Modernization,
Rehabilitation & Expansion) steps might also be practiced in old
industries/machines.

Page no. 12
 References

Hoque, A.S., & Biswas, S.K. (2013). Problems of Sick Industries Bangladesh
Perspective. Journal of Mechanical Engineering, 43(2), pp.82-91.

Quader, M.A., Wazed, M.A., Aziz, A. & Mojumder, J.C. (2013). Industrial
Sickness in Bangladesh: An Empirical Analysis.

Page no. 13
Thank You