Market Failure of the Brick Making Industry in Bangladesh

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Brick-Making Industry
An Analysis on Market Failure

Table of Contents
Brick Making Industry in Bangladesh2
Undesired Current Status3
Impacts of Brick Making Industry4
Environmental Impacts4
Social Impacts5
Reforms and Developments7
Implemented/In-process7
Proposed Reforms7
Aftermaths of Proposed Reforms9
References10

Brick Making Industry in Bangladesh
Present-day Status
Brick making is indispensable for the economy of Bangladesh. Though not formally recognized as an industry, brick-making is a significant economic activity in Bangladesh. The country’s overwhelming dependence on bricks is due to its lack of stones in any sizable quantity or other alternative building materials at comparable cost. Snapshot of Bangladesh’s brick sector (2011):

Parameter| Value |
Estimated total number of coal-fired kilns | 5,000 |
Number of natural gas fired kilns | 20 |
Annual brick production | 17.2 billion |
Value of output | TK83 billion (∼US$1.2 billion)* |
Contribution to GDP | ~1% |
Coal consumption | 3.5 million tons |
Value of imported coal | TK22.6 billion (∼US$322 million) | Firewood consumption | 1.9 million tons |
Emissions CO2 | 9.8 million tons |
Clay consumption | 45 million tons |
Total employment (incl. supply of clay and coal, transport of bricks) | ∼1 million people | Growth rate of the construction industry (1995-2005) | 5.6% | Estimated future growth rate of the brick sector over the next ten years | 2-3% | Sources: BUET (2007), Gomes and Hossain (2003) and World Bank (2011b) *Estimated at a per-brick price of TK5.5.

Undesired Current Status
Brick kilns in Bangladesh are mostly informal and small-scale operations. More than 90 percent of brick kiln owners are small-scale operators. Most FCKs are individually owned, with each owner possessing one kiln only. Multiple ownership of one kiln and multiple kilns under the same ownership are rare. In a few cases, established business houses own brick kilns that are part of a portfolio of industrial establishments. The kiln owners are organized as the Bangladesh Brick Manufacturers Owners Association (BBMOA). This association is expected to support actions perceived as beneficial to the interest of its members; thus, it must be involved in any reform concerning the brick sector. Outdated brick-production technology and seasonality of kiln operations hinder brick-sector productivity. FCK technology is more than a century old. The brick sector has largely grown by replication of existing kilns, with little variation in kiln design or operation. Brick-making is a seasonal operation. Because kilns are often located in low-lying areas that are flooded during the monsoon, the operational period averages about 5 months out of the year. Employment in brick kilns is therefore also seasonal, involving migrant workers who receive low wages and perform hard physical labor under hazardous conditions. As a result, annual production averages about 3–4 million bricks per enterprise (BUET 2007), compared to 12 million standard Chinese bricks (equivalent to 9.2 million Bangladesh bricks) per enterprise in China. Most brick kilns have low energy efficiency. Most brick kilns in Bangladesh burn low-quality coal imported from India with a high content of sulfur (about 5 percent) and clinker content. Dependence on this type of coal is likely to continue in the foreseeable future. Owing to Bangladesh’s current energy shortage, the GOB decided not to provide natural gas for new brick kilns. Moreover, the 20 existing gas-fired kilns are facing closure. Most operating kilns consume about 18–22 tons of coal to produce 100,000 bricks (BUET 2007). Brick kilns have a negative effect on agricultural productivity. Almost invariably, good-quality topsoil from agricultural fields with high clay content is used in Bangladesh’s brick kilns. Depletion of topsoil with high organic content for brick-making is a major...
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