How small ventures make old town electrical goods hub a Tk30,000cr affair

Financial hardship forced Muminur Rahman Mithu of Kadamtali in Old Dhaka to quit study after higher secondary education and embark on vending electrical goods in 2005 with a tiny investment of Tk800. He had strong dedication and worked hard that brought him success in a short time.

But the enterprising youth dreamt something bigger. He set up a factory in 2017 to manufacture LED bulbs, and soon the venture turned successful.

Mithu's factory of 50 workers now manufactures about 15,000 bulbs a day and has an annual turnover of Tk9 crore. His working capital has grown to Tk6 crore.

Alamgir Kabir is another successful entrepreneur in the electric appliance-making cluster of Old Dhaka. He started cable manufacturing in 2017 in Jatrabari with an investment of Tk20 lakh. At present, his factory produces 700-1,000 coils of cable a day – each coil consisting of 100 metres of cable – and has an annual turnover of Tk4 crore.

Alamgir tells The Business Standard that his factory can grow further to fetch at least Tk15-20 crore in annual sales within the next 5-10 years if he gets some assistance from the government.

The stories of Mithu and Alamgir are two among many examples of successful entrepreneurship that have silently turned the Kadamtali, Kudrat Ali Bazar, Pater Bazar, South Dania, Kajla, Matuail, West Dholaipar, Mirhajirbagh, Jurain, and Shyampur areas in Old Dhaka into an electrical goods manufacturing hub.

The cluster of electric goods factories currently has an annual turnover of around Tk30,000 crore, employing around 5-6 lakh people.

According to the Bangladesh Electrical Merchandise Manufacturers Association, production of electrical equipment in the Old Dhaka cluster started in 1995 with five-six small factories.

The number of factories stood at around 100 by 2005 and the cluster expanded the most in the following 10 years with the establishment of some 600 new plants.

Currently, around 800 small and medium-scale factories manufacture a range of products including ceiling fans, switches, holders, plugs, fuse cut-outs, and regulators. Of them, 200 are registered.

Stakeholders say the industrial cluster will be able to generate around 15 lakh jobs in the next 10 years, if facilitated by the government.

The demand for electrical goods produced here has grown all over the country as they are cheaper but of good quality. The products are marketed through wholesale markets in Gulistan and Nawabpur.

Entrepreneurs say they use raw materials such as copper, aluminium, blades, coils, capacitors, urea resin, brass sheets, iron, and moulding powder from nearby areas of Old Dhaka like Nawabpur, Shanir Akhra, and Babubazar.

Most entrepreneurs in this Shyampur-Kadamtali cluster were once workers in different factories and now their own factories employ hundreds of people.

Shark Electric's proprietor Mithu told TBS, "At first I tried to learn about Chinese LED light manufacturing technology on my own. I then visited China and Vietnam. After that I decided to import raw materials from China to produce LED lights," he told The Business Standard.

"However, now with the help of Buet engineers, I manufacture lights using both local and Chinese raw materials," he added.

The Covid blow

Entrepreneurs say business in the cluster is facing challenges nowadays due to an increase in imported products in the market, and the rise of some big companies.

The Covid-19 pandemic also forced some entrepreneurs here to leave their businesses and around 30% of the workers lost their jobs during the pandemic, they said.

Yusuf Hossain has been working for five years in an LED light factory in the capital. He said, "I started working in this factory with a monthly salary of Tk8,000. Now I am a craftsman and my salary is Tk18,000 per month. However, I am afraid that if the factory closes again due to Covid-19 or any other reason, I would lose my job."

More challenges

Entrepreneurs, however, said a lack of government support and a modern production system, and unavailability of low-cost and easy-term bank loans are the main obstacles they face.

They also mentioned unsafe and unhealthy workplace conditions for workers, the high cost of raw materials, lack of laboratories and quality certification as other factors hindering the industry's growth.

The manufacture of counterfeit products in some factories and imports of substandard products from India and China are also harming the business here, they said.

Some 300 factories in the industrial cluster now remain shuttered because of various reasons. Many of them are trying to resume operation while a few others see little hope for a rebound unless the government comes up with some essential measures to address the problems the industry is facing.

Abul Kasem Chowdhury set up a ceiling fan factory in 2000 with a working capital of Tk50 lakh and 30 workers. At one point, the factory had a turnover of Tk30 crore, producing 800-1,000 fans daily. However, the business could not survive the competition from big companies and in 2020, he shut down the factory permanently. Currently, he has an outstanding bank loan of Tk7 crore.

"Whenever one of our products does well in the market, the big companies do everything to beat us. They hire our workers, offering them more money, and try to entice our wholesale customers with discounts," he said.

He added, "After 2000, 70 small and medium ceiling fan factories sprang up in Mirhajirbagh of ​​Jatrabari, but only 25-30 factories are left now. If the government does not pay more attention, such small and medium industries will not survive."

Nasir Uddin, a factory owner in Kudrat Ali Bazar of Dania, said, "The government fee for BSTI certification is Tk7,000, but I could not get that in a whole year, even after paying a bribe of Tk50,000."

"If we could get the necessary documents from Bangladesh Standards and Testing Institution (BSTI), the labour ministry, the environment ministry, and the fire service with ease and in a timely manner, most of our problems would be solved," he added.

Need for govt incentive

Abul Kalam Azad, senior vice-president of the Bangladesh Electrical Merchandise Manufacturers Association, told The Business Standard, "The entrepreneurs of this cluster did not get any government incentive during the Covid-19 period. Now they need long-term unsecured bank loans at low interest rates to expand their businesses."

He said that these entrepreneurs also need help with improved marketing practices, government cooperation in exports, attracting foreign buyers, and the use of technology and raw materials, to expand their production capacity.

It is possible to generate employment for 14-15 lakh people in the next 10 years, he added.

Md Mafizur Rahman, managing director of the SME Foundation said, "We will do our best to expand the cluster and create a stable market in a sustainable business environment.  In particular, we will help in various training including e-commerce, and e-marketing. The SME Foundation will immediately raise these issues with the government on the behalf of entrepreneurs to address their problems."