The importance of steel in a modern economy cannot be overemphasised. It is a strategic material necessary for infrastructure, housing, industry, energy, power, transportation, mechanised agriculture, etc. Recognising this, a separate steel and engineering corporation was created after the independence of Bangladesh and the only steel making plant of the country Chittagong Steel Mills Ltd. was put under the state owned corporation. But for various reasons this state owned sector did not function properly and Chittagong Steel Mills Ltd. had to be closed down in 1999. Increased steel demand in the country and the demise of Chittagong Steel Mills Ltd. created opportunities for private entrepreneurs to gradually take over the steel sector.

A sizable investment has been made already. Reports suggest that at present there are about 60-70 steel making plants in the country producing about 500,000 tpy of liquid steel, which is consumed almost entirely in the production of long products such as reinforcing bars, angles, etc. A few backward linkage industries e.g., a ferroalloy plant and a sponge iron plant have also been set up; and some are in the process of being set up. Forward linkage facilities are even more developed: about 800,000 tpy cold rolling (CR) facilities for CR coils, about 1.5 million tpy re-rolling facilities for rods, more than 700,000 tpy galvanised iron/corrugated iron sheets making facilities are already existing in the country. One hot rolled (HR) plate making facility is already installed and a few cold rolled (CR) coil manufacturers appear to be interested to set up more HR coil/plate production units. The country's steel sector is showing signs of healthy growth. The annual national demand for finished steel has been predicted at about 3.1 million tons in 2007-08. Thus the proposed capacity of Tata constitutes about 77 per cent of local steel demand in 2007-08.

The steel sector of Bangladesh is an infant sector that has been growing over the last couple of decades. In spite of the lack of experience, technology, human resources, etc. and despite the failure of state-owned steel making enterprise, a few brave and adventurous entrepreneurs ventured into this technology intensive sector. Some of them have started exporting steel products also. The Steel Mills Owners' Association of Bangladesh has raised its concern over the Tata's investment proposal.

Some quarters would like to brush aside their concerns and would point out their deficiencies e.g. monopolistic attitude, lack of concern for quality, lack of corporate culture, etc. While some of these complaints are by and large valid, one has to recognise that these private entrepreneurs have gone a long way in taking over the steel sector in spite of numerous difficulties in terms of lack of infrastructure, policy support, trained human resources, etc. It would be too trivial and cruel to sweep away their efforts and concerns. After all, it is quite natural for an infant steel sector like ours to fear the might of none other than Tata, which has about hundred years of enviable experience in the steel sector.

Newspaper reports say that Tata has been quick to respond to the concerns of the local producers by saying that it would produce HR coils. Tata is also known to have a declared strategy to get into the market of long products (in the Singapore and South East Asia region). Indeed the product mix of Tata's proposed steel mill will be crucial to the local producers and will be something for them to be concerned with. It has been learned that a couple of local entrepreneurs have recently submitted proposals to the government to set up steel mills for the production of HR coil. If local companies seriously implement their proposals, then there could be a marketing conflict with Tata. On the other hand, one may argue that if a group like Tata were allowed to produce and market steel in the country, it would be beneficial to the local consumers. Because Tata with its vast experience and large production capacity and with the advantage gained through the use of gas will be able to produce quality products at a low cost. Tata will also bring in corporate culture in the steel sector.

In this scenario, the issue should be considered objectively and professionally in the light of a national strategy for the steel sector. This country, however, does not appear to have any such strategy. In such a case the government should formulate one before considering any FDI or local proposal in this sector. Steel is much too important to be considered with an adhoc approach. Even in a market economy, the government cannot point out to the market forces for everything. In a globalised economy, a government has even a greater role to play in creating opportunities, facilitating and supporting local industries. Let us just look at a few examples of the proactive role the Indian government, having a regularly updated iron and steel policy, is playing in developing its steel sector: A government ministry go out to financial banks/institutions to highlight and convince them of the need to develop steel industry; the ministry regularly interacts with entrepreneurs interested in setting up iron and steel plants to assess implementation problems; it identifies and removes infrastructure bottlenecks for the growth of iron and steel sector; it also meets with Steel Consumer Council to address their grievances etc. And many of these activities are directly coordinated by a minister. Our government has to consider what role it should play in securing the future of this vital sector in our country.

Having said all the above about the interest of local producers, we must not send a wrong signal to Tata. However, we must consider Tata's proposal in the light of our own national steel sector policy. We have to negotiate from a position of strength and confidence. After all our main strength i.e. gas has the potential to offer cost advantage of several thousand taka per ton of steel produced. While negotiating a deal, we should look into maximising our national interest in areas including the following:

i) Tata's proposed steel making facilities must not hamper in any way the natural growth of our infant steel sector in the future; ii) Tata's product mix and marketing plan should be complementary to those of local producers; iii) Participation of local investors, general public, consortium, etc. in the investment of the project to as large an extent as possible; iv) Ensure that this project brings about local human resource (HR) development, both technical and management, and generate local employment to the maximum extent; v) Future R&D related to the project should be carried out locally; and R&D and HR development linkages should be made with appropriate local academic/research organisations so that technology transfer takes in the real sense; vi) The investment proposal should be de-packaged in order to find areas where local engineering firms can participate in fabrication/erection/construction of the plants as far as possible.

We should also give a fresh look at our national economic planning and do some stocktaking. Successive governments have been trying to boost private sector investment in the country. Sectors like IT, agro-based, food processing industry, etc. are being considered as thrust sectors, and special packages are on offer for these sectors. But we somehow failed to realise that a great opportunity was in the making in the steel sector. Tata is obviously smart enough to seize the opportunity and make the loudest investment proposal. But perhaps the opportunity has not totally unnoticed by a few local entrepreneurs; their voice does not appear to be loud enough for us though. It has been learned that International Finance Corporation (IFC) of the World Bank Group is one of the backers of the Tata proposal and is ready to invest in it. It may be mentioned that IFC has the experience of having a catalytic role in a similar project in Egypt. IFC financed a $625 million integrated steel making facility for HR coil production at the Alexandria National Iron and Steel Company in 1998. In that project, 78 per cent of the shares are owned by Egyptian companies and individuals, 10 per cent by a Japanese consortium, and the rest by IFC. The policy makers should keep this in mind while considering our case.

Finally, with or without Tata in town, it is time that we devise a comprehensive iron and steel policy for the nation. Let us not consider it as our dream just to bring in Tata. It might be our economic strategy. But let us make it our dream to create a Bangladeshi Tata in a few decades. Whether we will be able to fulfill this dream depends on how we plan and act today.

Dr. Haseeb is a Professor in the Department of Materials and Metallurgical Engineering, BUET.