69366 Operationalizing Political Economy South Asia Political Economy and Governance Issues Note No. 2 Brick Industry in Bangladesh There is a large demand for bricks in Bangladesh because the country doesn’t have stone aggregate. However, most brick-kilns use traditional, coal-burning technology that is a major contributor of hazardous air pollution in urban centers, and the largest stationary source of CO2 emissions nationwide. Various reforms and alternative practices have been introduced or proposed to reduce this pollution, including environmental regulation, relocation, shifting to more environmentally friendly technologies and processes, and importing stone aggregates from India; yet these haven’t made much headway due to regulatory and behavioral issues. Addressing the issues hindering reform will take actions on many fronts, including coalition building and a good communications strategy. This note summarizes the results of political million or about 1% of GDP. The industry is economy analysis [1] to understand the brick expected to grow at nearly 6 % per year over the industry, and addresses three sets of issues: next decade. 1) What are the systemic problems that There is a large demand for bricks in thwart efforts to improve producer Bangladesh because the country doesn’t have practices? stone aggregate. Most of the brick kilns around Dhaka belong to small owners on leased low 2) Why have these ailments persisted? lands with a minimum 2.5-3.5 million taka 3) How can coalition building and a good (US$36-50,000) initial investment. communications strategy help to address Most kilns operate only during the dry season these issues? (November-March) on land leased for ten years. The analysis is based mainly on in-depth Fixed-chimney kilns (FCKs) employ between 200-350 laborers. About five percent of the kilns interviews of key informants, including directors of the regulatory bodies, owners of brick-kilns, (e.g. Gas fired Tunnel/Hoffman kilns, Chinese leaders of the brick producers’ association, Hoffman kilns) can operate year round. Total individuals involved with raw materials supply employment in all stages of the production and and staff/managers and workers of the brick- distribution chain is close to one million. kilns. A number of focus group discussions were About 50% of brick kiln owners are represented also conducted with owners, managers and by the Bangladesh Brick Manufacturers & workers of the brick-kilns. Owners Association (BBMOA). Its achievements include reaching consensus with Context Government on policy issues, solving local Over 5000 brick kilns in Bangladesh produce 15 problems with Upazila administrations, and billion bricks annually, valued at US$640 promoting the changeover to more advanced 1 technologies. In addition, there are in some are less polluting than the FCK. In addition. districts local-level, informal brick owners there are around 30 kilns (mostly Tunnel kilns) committees that work with local administrations using natural gas, which can be the cheapest on taxes or license-related issues. They also try energy source, and also environmentally to address labor supply problems, and mitigate friendly. disputes between owners, and between labor and owners. Brick kilns consume about 2.2 million tons of coal each year, most of which is imported by What are the systemic problems? land from the Indian states of Meghalaya and Assam. In addition, an estimated 1.9 million Local and global pollution tons of firewood are consumed. While wood is used to start fires, a ban on using wood is Nearly 1600 kilns are in Dhaka Division, increasingly shifting users to other polluting contributing about 10% of the airborne fuels, including automobile tires, used tukris particulate matter (PM) pollution to Dhaka’s (basket made of bamboo to carry sand and clay) airshed. Average seasonal particulate and fuel oil. concentration varies from 25 to 100 µg/m3 due to brick kiln emissions; but existence of clusters Migratory labor causes pollution “hotspots� levels as high as 200 µg/m3. Dhaka’s overall PM10 pollution is about Owners do not directly recruit labor, but rely on 200µg/m3, and PM2.5 about 100 µg/m3 (2007), Sardars (labor leader/supervisor) for supplying much higher than the WHO standards of labor. Most laborers come from the poverty 20µg/m3 and 10µg/m3 respectively [2]. The stricken areas of greater Pabna, Mymenshing density of PM10 worsens during the dry season and Rangpur districts. Labor availability is a (December-March) to over 450 µg/m3, one of great concern to owners, since laborers go back the highest levels in the world. This contributes to their villages at the end of the production to pulmonary, respiratory and neurological season, usually far from the clusters. Since the illness, and an estimated 5,000 premature deaths return of laborers the next season is uncertain, [3]. owners have little incentive to arrange formal training for them. Brick kilns account for 8.75 million tons of CO2 emissions each year, the largest stationary Governance and Institutional Issues source (about 16% of the total from all sources). Before the enactment of the Brick Burn Control These CO2 emissions absorb infrared radiation, Law in 1989, the only legal requirement for and contribute to global warming. establishing a brick-kiln was to obtain a no- Mostly outdated technology objection certificates from one of 4,498 Union Parishads (UP: lowest level of local About three-quarters of the kilns are fixed government), which was routinely granted upon chimney kilns (FCK), using basic technology. payment of a small fee. With the 1989 law, the About 1/5 are Bull’s Trench Kilns (BTK) which UP Chairperson was given inspection authority, have been banned by the government for and his permission was required for a five-year environmental reasons. Some mainly large license. The law also banned burning wood, brick-kiln owners have introduced Zigzag, including date trees. In 1992, the law was Hoffman, and Vertical Shaft Brick Kilns, which amended giving licensing and inspection power 2 to the Deputy Commissioner (DC) in the most brick kilns in the country don’t conform to relevant one of 64 districts. The punishment for the strict criteria. On top of this, each district burning wood was specified as six month’s committee of the BBMOA makes an annual imprisonment, a ten thousand taka (US$143) contribution of one hundred thousand Taka fine, or both. In 2001, the law was again (US$1430) to the respective DC’s Local amended to make the license valid for three Resource (LR) Fund. To set up a new brick kiln, years. In addition, brick kilns were prohibited one must make a further deposit of one hundred within 3 kilometers of any residential area thousand taka to the DC’s LR fund through the (minimum 50 families), government structure, Nezarat Deputy Collector, and for which no municipality, city corporation, Upazila sadar, receipt is given. Bribes also need to be paid to forest areas (minimum 50 trees) and lands the Surveyor and Assistant Commissioner acquired by the government. (Land) offices, since relevant reports will be sent to the DC from these offices. With over 5000 brick-kilns in the country, 58% operate without environmental clearance, There are many other ways in which the industry including 800 traditional BTKs which have is caught in the maws of the regulatory been operating illegally since they were banned framework and political environment. Bribes of in the Environmental Conservation Act, 1995 up to one hundred thousand taka are required by and subsequent revised acts. Department of Environment (DOE) officials for clearance of an environmental management Why have these ailments persisted? plan. Since many owners don’t know how to prepare one, some DOE officials prepare it for Rent seeking and corruption them in exchange for an illicit fee. In addition, owners pay on average up to four hundred The brick industry has been slow to adopt thousand taka to the members of the ruling party environment-friendly practices in part because at the district level. Mafia groups demand of the manner in which the above institutional “tribute� of one hundred thousand taka annually and governance arrangements are enforced. For from owners operating in their area. In remote example, the adoption of the 1989 Brick Burn areas, thugs extort money by beating up Control Law gave discretionary power to the UP laborers and threatening to kill owners. In areas Chairperson, and led to the need to pay up to dominated by outlawed political parties such as five thousand taka (US$71) along with the legal Chuadanga, Jhenaida and Kushtia, owners have fees; however, this fee was negotiable since the to pay an additional toll to them on a regular chairperson was a politician who needed basis. electoral support from local businesses. With the 1992 amendment, shifting responsibility to a Owners and the BBMOA severely criticize this non-elected DC, and specifying strict penalties, regulatory framework. They claim that laws and the normal bribe payment for license renewal amendments are framed without any increased to five to ten thousand taka for a consultation with the industry, and enforced by license renewal. In addition, the stricter officials that lack specialized knowledge to do enforcement against wood burning led to their jobs. They feel that laws and procedures payments to police/inspectors to overlook such are deliberately made complicated to maximize practices. The 2001 amendment to the Law rent seeking opportunities. Policy uncertainty is increased the need for bribes even more, since also an issue. For example, a 2001 act made the 3 use of 120 foot chimneys mandatory. After brick The use of stone aggregate / chips as an input to owners complied at great expense, the cement blocks which can replace clay would be government ordered owners to replace the environmentally friendly, both by eliminating air chimneys with a filtration system, disrupting pollution and preserving top soil. It would also business activities and increasing costs. help comply with the government’s decision that clay cannot be used for producing bricks after Barriers to adopting new technology 2010 (which well-placed stakeholders believe is impractical, and possibly resulted from undue Adopting new technology can lead to other influence from stone block producers). forms of official harassment. Some owners have However, there are problems in this as seen by switched from fixed chimney to Zig-zag the brick industry, and/or by their real estate technology, which is relatively cleaner as well as developer clients: affordable. Zig-zag kilns look larger than fixed chimney ones, so tax officials may impose  Cement blocks currently don’t come in higher taxes, assuming that production has standard sizes like bricks, don’t allow increased, although it may not have. In addition, for nails and hooks to be inserted into DOE officials may harass such owners for not walls made of them, and require more complying with the 120 foot requirement on complex construction methods (e.g. chimneys, even though the limit doesn’t apply to electricity and sanitary connections need Zig-zag technology. to be made simultaneously); These and other perverse aspects of the  Hollow cement blocks absorb moisture; regulatory framework hold back adoption of to prevent this, walls have to be painted environmentally friendly technology, despite the with emulsion paints at least every five awareness among stakeholders that existing years, adding to costs. technologies cause serious air pollution leading to health hazards. Another factor adding to the  Checking the quality of cement blocks risk aversion of brick kiln owners is a low is more difficult; while any lay person awareness of more efficient technologies that are can check clay bricks by looking at the currently available in Bangladesh and other color and sound of hitting one brick with countries. Even if they are aware of alternative another, in the case of cement blocks technology, most operate on a small scale, and one needs to know the exact ratio of prefer low-tech solutions that they already cement and sand, which requires understand, backed by readily available, low- expensive assistance from experts and cost human labor. One reason for this is that use of laboratories. more advanced technology needs to be operated year-round to be cost effective; yet the basic raw  Inputs like stone chips and clinkers materials of coal and clay are imported on a have to be imported, and electricity is seasonal basis, and are only available at other needed for the production process. times of the year at a higher cost. The labor cost Despite these challenges, cement blocks can be structure would also go up in shifting from manufactured for the same or less cost than clay seasonal to permanent staff. The non-availability bricks, and are more durable. of high land above flood level is also a major barrier for move to year-round operations. 4 Resistance from Sardars and workers low-lying areas where brick kilns are located; customers have to pay for the Sardars and workers also resist technological installation costs of their supply line; change. For example, porai mistri, or firemen, oppose technology upgrading due to a fear of  Brick producers are charged commercial losing their job. They also worry about losing rates (like restaurants), which are much the flexibility they currently have of working higher than industrial rates; simultaneously in different kilns; new technologies require more concentration in  Gas pressure isn’t uniform, and may not work, restricting firemen’s mobility. To resist meet the minimum required for brick change, firemen reportedly spread rumors that kilns, especially those with advanced new firing technology is inefficient and technology; produces low quality bricks. Owners of  Owners want credible assurance from upgraded brick-kilns can suffer reputational loss the government on how long gas from such rumors, and consequently become supplies would be assured; there are reluctant to further adopt new technologies. rumors that gas supply will be reduced Lack of financing and collateral nationally starting in 2011 if new gas fields are not found; Lack of available financing is an additional challenge. Bank financing is hard to obtain  The Titas Gas Company requires large because of the seasonal nature of the business, security deposits (as much as the cost of the lack of collateral, and generally weak a small kiln), of which only 40% can management and financial skills of brick come from a Bank guarantee; the rest owners. Brick kilns aren’t a government must be paid in cash, and does not recognized industry qualifying for financing generate interest among owners. benefits such as tax holiday, reduced interest rates, or extended loan repayment schedule. How can these issues be addressed? Addressing the issues hindering reform will be Challenges in switching to natural gas challenging, and take actions on many fronts. Although use of natural gas would be For example, relocation of brick kilns from environmentally friendly, there are many factors Dhaka City and its adjacent areas would help hindering its adoption: reduce pollution in the city, but will be difficult to pull off because:  Government policy does not encourage the use of gas for brick kilns; because of  Brick kilns tend to locate in clusters to their informal and seasonal nature, lack provide access to raw materials and of classification as industry and due to markets, and to provide security from current gas scarcity; extortion and related risks;  Gas connections are not available  Suitable sites well linked to road throughout the country, and when infrastructure and availability of clay available, gas supply lines are located may not be available; next to highways, and don’t reach the 5  Owners may not be capable of of investing in new technologies. These large abandoning their existing FCKs and owners tend to provide leadership in the building new ones, without technical BBMOA. Others that might come together in a and financial support; pro reform coalition include owners of environmental friendly technologies (Hoffman,  Forced relocation in the Savar zone and Zig-zag, Gas Burner), large developers using other areas may create political high grade/fancy bricks and cement blocks, repercussions, where a few powerful environmental groups such as Bangladesh transport owners linked to the major Poribesh Andolon (BAPA), and like-minded political parties are also involved in policy makers of DOE. Skilled laborers should brick production. also be pro-reform, as new technologies would require relatively more of their time, and less Market forces can help unskilled, migrant labor. BBMOA leaders argue that in the next few Tackling resistance to reform years, clusters in and adjacent to Dhaka city will move away due to market driven processes; The major resistance to technological change indeed there are clear indications that brick kilns will come from middle- and small-sized owners, in areas such as Demra-Shyampur and Rayer who are less educated, less financially capable, Bazar have started relocating as the price of land and more risk averse. The pro-reform group has gone up, making it economically attractive needs to convince these skeptics by for owners to transfer land to real estate demonstrating the new technologies functioning developers. Thus, while Government may in Bangladesh in an economically viable incentivize the process, it should not force manner. They could initiate piloting of new relocation, which might risk introducing technologies, and organize training for owners pathologies seen in other regulatory efforts in and workers (with new technologies and around- the sector. However, market forces alone will the-year production, training of workers would not bring about many other needed reforms. become economically viable). They could lobby the government to formulate policies to make Politicians unlikely to block changes investment less risky for the medium- and small- Powerful politicians are less interested in the sized owners, and to support research and brick sector (than other sectors, such as development on new technologies, and on transport) because potential rents are smaller and alternative products such as cement blocks , political actors are largely small time local level hollow blocks, perforated bricks, light weight leaders. Associations are largely apolitical; party bricks and fly ash bricks, drawing on knowledge politics is a factor in getting contracts for public in other countries. They could work with works, but these contractors have little stake in government on designing an effective process technological reforms of the brick sector. for finding alternatives to clay brick production, and on disseminating information on the Pro reform groups advantages of these alternatives. They could also lobby government to provide incentives to The driving force to promote reform could come encourage clusters to develop far away from the from the small group of large FCK owners that city and/or with a set standard of emission; tend to be more open to and financially capable owners could be selected through a screening 6 process to ensure, inter alia, valid documents to DOE, with the support of the Bank and other operate a business. international partners, could help to develop the collective action capacity of pro-reform groups, The BBMOA could take the lead in these areas. and communication strategies to improve It would be more credible in doing so if it could networking among the groups. be made more representative, and its technical/logistical capacity increased so it could Although not facing the extent of high level provide more credible and efficient leadership. political resistance to reform as in other sectors, brick industry reform will be constrained by DOE support for reforms will be mixed. Senior resistance from perceived losers, and a complex policy officials will support reforms that will operating environment requiring coordinated enhance the Department’s reputation, gain actions by multiple players unaccustomed to appreciation from city dwellers, and help pacify working together. Yet with determined organized environmental groups. Middle- and leadership from BBMOA and other pro-reform low-ranking DOE officials will oppose the loss stakeholders, progress is possible. of rent seeking opportunities, and may collude with officials of local government and References administration (e.g. DCs, UNOs) to invest time and effort in blocking changes. DOE’s technical 1. “Political Economy Analyses of Two Key capacity could be improved by using specialized Industry Sectors in Dhaka, Part B: Brick cadres for higher level positions, rather than Sector�, report for the South Asia Social, using staff from the generalist civil service who Environment, and Water Resources Department, lack technical knowledge, and are subject to The World Bank, 2008. regular transfers. 2. “Bangladesh Clean Air and Sustainable A present constraint is that pro-reform groups Environment Project�. Project Appraisal are little known, hardly know each other, have Document. Washington, D.C.: World Bank, no capacity for collective action nor collective 2009. platforms to facilitate their networking. To address this, the media could facilitate 3. “Bangladesh: Country Environmental roundtable discussions among stakeholders. Analysis� Bangladesh Development Series Paper No. 12, The World Bank, 2006. This Issues Note is based on a study conducted for the World Bank by Mirza Hassan and Abul Hossain (Consultants, SASGP) in 2007-2008 under the guidance of Jose Edgardo Campos (Lead Governance Advisor, SASGP) and Sameer Akbar (Task Team Leader & Sr. Environmental Specialist, SASDI) from the World Bank. It was prepared by Clay Wescott (Consultant, SASGP) in July 2009 as part of the South Asia Governance and Public Sector (SASGP) series on Political Economy and Governance. Comments on earlier versions of this Note were received from Dr. M. Khaliquzzaman (Consultant, SASDI), and Arun Banerjee (Consultant, SASDI). The study was financed using DFID Trust Fund resources. Any comments and questions about the study should be directed to Sameer Akbar at sakbar@worldbank.org 7