State-Owned Enterprises and Cluster-Based Industrialization: Evidence from Bangladesh

Like other developing countries, despite various problems, state-owned enterprises (SOEs) play an important role in the economic development of Bangladesh through creating employment and providing value added services to the economy. A total of 146 SOEs, of which 49 are non-financial, are now operational in Bangladesh, with an overwhelmed burden of debt that has ben posing potential risks for country's fiscal management. The government has to provide a large amount of subsidies to these SoEs every year and often convert their debt into equity. Even the revenue earnings (mainly non-tax revenue) from these SoEs are not consistent over time. Inefficient management and corruption are largely responsible for the poor performance of SoEs in Bangladesh. This poor financial performances of SoEs are attributed to the fact that some SoEs have been incurring losses over a long period of time, and some SOEs are not profit making but providing social services. Given the fact, this chapter takes one SOE into consideration, namely Bangladesh Small and Cottage Industries Corporation (BSCIC), to assess its performances, and within that context, provides some insights into the reforms that are necessary to improve the performance of SOEs in Bangladesh.