Contrary to popular belief, Bangladesh has a large capital goods sector capable of manufacturing various items of machinery and equipment, even of sophisticated types. However, much of the capacity is lying idle with adverse consequences on the growth of the country. An important finding of the study is that there is an absence of a systematic government policy to exploit the potential of the machinery manufacturing sector in Bangladesh, and this is particularly damaging in the public sector engineering plants. In the process, Bangladesh has failed to absorb technology successfully, thus seriously constraining its economic development.