01 April 2018
Boost capacity of contractors to speed up projects
Bangladesh must increase the capacity of local contractors to ensure timely implementation of projects and sustain the economic growth momentum, said a top entrepreneur. “How long will we have to rely on foreign contractors? Bangladesh's economy will not be able to grow at the current pace if local capacity doesn't improve,” said Ghulam M Alomgir, founder and Chairman of Max Group. He said India gave protection to its own contractors, but it has not happened in Bangladesh. Local contractors may delay a project but they have never failed in executing projects. He gave the example of the Dhaka-Chittagong Highway, which was delayed by several years by a foreign company. Project cost was also increased significantly, he noted. Max Group, founded in 1989, transformed into a group of companies since inception and diversified its business. It is involved in the manufacturing of track fittings, infrastructure development, power generation, and trading of consumer products. It has own locomotive, engine, and walking train. The company also completed engineering, procurement, and construction of combined cycle power plants, the first time in Bangladesh. “This will encourage more companies to enter the market. We are capable. The government should encourage local entrepreneurs,” said Alomgir in an interview with The Daily Star recently. A trained engineer at the Bangladesh University of Engineering and Technology, Alomgir dreamt of becoming an entrepreneur from his student life. He didn't find facilities needed to become an entrepreneur. So, after finishing education, he went to the Middle East and stayed there for five years. He worked for a French company where he learned firsthand what quality meant and how to finish a project on time. “That helped me kept my dream alive.” He came back to Dhaka in 1983. Alomgir and two of his engineer friends, who had still been working in the Middle East, set up AFA spring factory in Bangladesh. The factory name used the acronym of their names: Alomgir, Faruk, and Anis. Before setting up the project, Alomgir went to then Sonali Bank Managing Director LR Sarker and met him. He was able to convince Sarker about the prospect of the new business they were planning to set up. The bank's board approved Tk 68.75 lakh in loans in 1985. AFA Spring has been a huge success and buyers used to queue up to buy leaf spring used in motor vehicles that used to be imported from Japan. After the imports of just three consignments of raw materials, Alomgir made a profit of Tk 1 crore. His confidence level went up and seeing the business success two of his friends returned from abroad. Established in 1985, AFA Steel Industries Ltd manufactures leaf spring for automobile and railways. It is the leading manufacturer of leaf springs, dedicated to supplying top quality springs at competitive prices. Although AFA leaf spring has been a joint effort, the trio decided to expand their business on their own. This led Alomgir to set up Max Automobile in 1989, now known as Max Infrastructure. After some struggle, he started producing railway products and got a contract of Tk 2 lakh in 1990. He added new machines to produce rail products that gave him a huge boost. The major breakthrough for the company came when the government decided to put up a rail bridge along with the Bangabandhu Bridge. The rail bridge was not included in the original plan. A French company got the work, contacted Max Group, and offered to buy products. It supplied products worth Tk 150 crore. “I earned more than what the French company did. That was really a boost-up for my business.” The French firm also transferred technology to Max Group, jointly worked on two to three projects. Later, it offered to sell machines to the Bangladeshi company. Alomgir got an adequate supply of equipment and started getting contracts after contracts. Some people criticise that that only two companies work as contractors for the state-run Bangladesh Railway. The contractors are Max Group and Toma Construction. “I bought Tk 100 crore railway equipment. Who else has done it? Now, Mir Akhter has entered the market. We get works through international bidding.” “It's a pride for Bangladesh,” he said. He praised the prime minister as she knows how to develop a country. “We can easily reach 10 percent growth rate if the government and bureaucrats become aware of it.” He also touched upon Bangladesh growth journey, applauded the country's vibrant private sector, the dynamism of entrepreneurs. He plans to export railway products to the EU, the US, the Middle East and Africa. As part of the move he has started modernizing the AFA Spring. He said there are some policy-related problems. Alomgir said the engineering sector lies at the heart of the industrial sector, but no engineering products are being exported because of lack of incentive. If the incentive is awarded, more jobs will be created and the country will earn more foreign currency. Max Group employs 7,000 people. Of them, more than 400 are graduate engineers. Some 40 to 50 foreigners work for the company on monthly basis, mainly in the power and bridge sectors. Alomgir said profit-loss is a byproduct of any project, but a contractor should deliver a project on time. Max Group is building Akhtaruzzaman Flyover in Chittagong and this will be the best one in Bangladesh although he claimed he has to spend more to do the work. He also touched upon the issue of cost escalation in different projects in Bangladesh. He said labour cost grows 20 percent annually and the price of raw materials also goes up every year. For example, stone price trebled in just five years. He said while approving development project proposal, the cost is cut by government officials, but it should not be. This happens because of the inefficiency of the administration. He said the government is implementing a lot of mega projects. The biggest obstacle is involved in foreign-aided projects. These projects need foreign consultants and they are too expensive. But these foreign consultants don't think about the country and implement the project on time, Alomgir said. “Moreover, if they fail no penalty is imposed on them. A penalty should be there for failure.” Alomgir said if a businessman is politically aligned and gets works for a project for political support, a project will never go well. “Political influence ruins a project and implementation will be delayed and costs will go high.” He said his company pays Tk 200 crore in tax which benefits the country. The 62-year-old said he wants to continue working in the same spirit for another decade. “I have an only vision: to make Max Group a brand company.” He is very optimistic about the country's future. “Many of our problems will go when we have solvency. We have a huge population and we will have to transform them into productive workforce.” About the scam in the banking sector, he said many borrowers are not involved in real business, still, they get loans. “Bankers are involved in the scam. Intellectually corrupt people are looting banks.”