Abstract
Assessing productive efficiency is vital for enhancing the manufacturing sector’s contribution to economic and environmental sustainability. This study examines Bangladesh’s manufacturing sector, concentrating on technical and environmental performance. Through analysing measurement, dependence, and responses of performance scores to policy shifts, it uncovers reasons for the sector's limited contribution to the nation's industrial foundation. Nonparametric frontier models were employed to estimate economic and environmental efficiency, revealing compelling insights via diverse econometric techniques.
This research has generated five types of analytical results utilising three distinct datasets – two are quantitative, and one is qualitative. The quantitative datasets comprise subsector and individual firm-level data for 2012 and 2019. The qualitative data encompasses viewpoints from 32 stakeholders.
Results show that subsector-level average economic and environmental efficiency notably fell in recent years, with a higher disparity. Organisational practices minimally affected performance, except labour intensity. Export-oriented sectors like apparel performed poorly, while jute industries remained consistently successful.
Individual firms also witnessed a remarkable fall in overall efficiency, reflecting dispersed performance. Larger enterprises showed dominance, while smaller ones faced marginalisation. Export processing zones excelled as prime sites, while government-private partnerships demonstrated enhanced performance. Unlike tax payments and labour intensity, incentives and social security impacted firm-level outcomes nominally. Furthermore, firms’ average environmental efficiency decreased from 0.25 in 2012 to 0.12 in 2019.
Examining the prioritised industries classified as ‘thrust’ sectors showcased that fiscal support benefitted micro and small firms but harmed medium and large ones. Another case study found that brick manufacturing performance rose despite strict environmental regulations. Stakeholder interviews also generated background information and suggestions for future progress.
The recommendations emphasise improving managerial skills, restoring trust in authorities, exploring diversification through jute, cocoa, and polyethene, giving special attention to micro and small firms, implementing a decentralised enforcement system, and introducing market-based tools. Additionally, industry-specific regulations should be considered.