In 1972, the year after its establishment, Bangladesh nationalized most of its industries and set up nine corporate conglomerates to oversee the state-owned enterprises (SOEs). The lack of commercial orientation inhibited investment and growth, including in the traditional jute industry, and the emerging leader, the garment industry. From the mid-1980s, the government shifted to encouraging private investment, but the industrial sector remained closely regulated. In 1991, in the post-Cold War international environment, and with the end of military rule, the government inaugurated a new Industrial Policy planning investment liberalization, the interim restructuring of several large parastatals, as well as the gradual privatization of public enterprises in all but the airways, railways, and mining sectors. Political resistance to privatization was very strong, and in the early 1990s restructuring resulted in some output decline. With a new government, in the period 1996–2001, 33 SOEs were sold by the state, but the Economist Intelligence Unit reported that these were smaller operations, and that the divestments did not significantly lessen the government's dominance of the industrial sector. The flood of 1998, which covered about two-thirds of the country, accelerated confrontational politics over the SOEs. 1999 industrial growth only reached 2.5% due to flood disruption. The public sector employs about one-third of the formal labor force and accounts for over 40% of the country's manufacturing and utility assets. 1999 industrial growth only reached 2.5% due to flood disruption. The World Bank reports that for the two fiscal years to mid-2001, losses by SOEs rose seven fold, from $80 million to $591 million. According to the Asian Development Bank (ADB), the garment industry, which employs 1.5 million workers, about 80% of whom are women, has been adversely affected since 2000 by US grants of quotas and duty-free access to Sub-Saharan African countries. By ADB figures, Bangladesh garment exports declined 4% to 6% June to August 2001.
In fiscal 2000/01 the leading industrial goods produced and their increases or decreases by volume included jute products, 380,00 tons, up 11%; textile yarn (produced by SOEs), 58.5 million kg, up 2%; textile fiber products (produced by SOEs),11.7 million kg, down 0.8%; paper, 55,000 tons, up 0.7%; petroleum products, 1.5 million tons, up 15%; fertilizers, 1.8 million tons, down 5%; cement, 157 million tons, up 13%; sugar, 177,000 tons, up 43%; ready-made garments, 68.2 million, up 2.3%; mild steel rod, 142,000 tons, up 7.6%; tea, 52,725 tons, down 2.7%; leather and leather products, 22.5 million sq m, up7.8%; and soaps and detergents, 48.3 million tons, up 1.3%. By value of export receipts, the leading manufactured exports in 2000/01 were ready-made garments ($3.3 billion), knitwear ($1.4 billion), frozen food ($370 million), leather products ($234 million) and jute products ($222 million). Raw jute exports brought in $66 million and tea exports earned $24 million in 2000/01.
Recent discoveries of large natural gas reserves and plans for new power plants throughout the country were slated to boost industrial growth in 2000 and beyond. However, as of late 2002, plans for the development of natural gas resources continue to be delayed by political rows over the participation of foreign companies.