DHAKA: Bangladesh Thursday shut its loss-making jute mills and laid off 25,000 employees, saying the state-owned plants could not compete with the private sector.

Jute, a vegetable fibre spun into coarse threads, grew in popularity over the past decade after a long decline, as it became an environmentally friendly alternative to plastic bags.

But the state-run factories struggled to generate profits and compete with some 250 smaller, private mills that employ 300,000 workers.

"Since 1972 to 2019, these (state-run) mills made some profits for only four years," the head of the state-owned corporation that runs the mills, Abdur Rouf, told AFP.

"They incurred huge losses in rest of the years."

The decision came as the impoverished nation struggled with the coronavirus, which badly hit export-oriented apparel factories when global brands cancelled or withheld orders.

Officials told AFP the shutdowns were not caused by the virus.

The 24,866 workers were given "golden handshake" payouts totalling $590 million, the Bangladesh prime minister's principal secretary, Ahmad Kaikaus, said.

But union leaders, who led thousands of workers in protests earlier in the week over the expected announcement, said the closures would be devastating for workers.

They said 20,000 of the workers were part-time and would not receive any compensation.

"It is not a question of ourselves but our families' survival too," union leader Murad Hossain told AFP.

"I once again request our Prime Minister, don't kill us this way," another union leader, Zahid Hossain, added.

On Tuesday, some 4,000 workers staged protests in the southern city of Khulna, which has grown from a small jute mill town into a city of three million people.

Dozens of big jute factories were set up in the 1960s, when the country was still part of Pakistan, as part of a major push to industrialise the agrarian economy.

The state-run factories were heavily subsidised.

In 2002, the then-government shut the country's largest state-run jute mill, which was loss-making.

Bangladesh's jute industry currently generates just under $1 billion in annual revenue.

Exports -- mostly from private factories -- include raw jute fibres and jute products such as bags, carpets and sacks.

Before the pandemic, the government estimated the economy would expand by a record 8.2 percent in the financial year ending June.

But the World Bank said in early June growth would slow to 1.6 percent "due to pandemic-related disruptions... and sharp falls in exports and remittance inflows".—AFP