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Bad or good, how SMEs are performing?
Shahiduzzaman Khan

          A recent survey on the small and medium enterprises (SMEs) depicted a grim picture on the state of affairs about these industries. It said the SMEs under food, leather, electronics and garments sectors have been performing worst in the country.
In spite of being termed as bad performers, these SMEs have been contributing enormously to the economy of Bangladesh. Thousands of small and cottage industries, set up throughout the country over the years, are ensuring bread and butter to its dependants without adequate government support.
Access to market is the main problem of the SMEs. The entrepreneurs do not have fair knowledge where to market their products and how to gain maximum profit. They lack clear vision about marketing strategies. The industrial policy, now at the final stage, should address this problem.
The SMEs do a substantial amount of subcontracting jobs for large-scale enterprises, especially in the garments sector. If this particular aspect is taken into account, the SMEs in this sector are not bad performers.
The small industries under leather sector, in spite of various odds and difficulties, account for 70 per cent of the export earnings of the sector.
Can they be called 'bad performers' in their specific sector? Experts say they are also 'good performers' as well.
While evaluating the SMEs' performances, the survey has apparently failed to take all these aspects into account. But it rightfully said that these SMEs could not avail various incentive packages due to complicated administrative and bureaucratic processes. It is thus necessary to streamline the management of these incentive schemes for their easy access to the SMEs.
Interest rates charged on loans are also unaffordable for many SMEs.
Commercial banks should be encouraged to lend to the small industries.
Sincere efforts are needed to raise SMEs access to formal finance. The collateral requirements should be made easy and affordable in order to encourage the small entrepreneurs.
The survey conducted jointly by the Small Enterprises Development Fund (SEDF) and Bangladesh Enterprise Institute (BEI) said free flow of information on regulatory issues at the firm level can help the SMEs follow necessary procedures to avoid the use of facilitators. In the long run, however, strengthening governance will be key to reducing regulatory burdens.
It said introducing e-governance could help improve administrative procedures, making government-firm interaction more efficient and transparent.
Indeed, the history of growth of small and medium industries dated back to the days after liberation when hundreds of large industrial enterprises were nationalised. After their nationalisation, small industries had thrived across the country to cater to the growing consumer demands.
The nationalised industries were incurring heavy losses due to mismanagement and corruption, which was eating into the vitals of the national exchequer. Nothing had worked really to revive those ailing enterprises from the clutches of vested quarters that were nullifying each and every attempt of the subsequent governments to turn those losing concerns into profitable ones.
The private sector, termed as the engine of growth, came to the rescue.
Hundreds of thousands medium and small enterprises were set up throughout the country by the enthusiastic entrepreneurs. But the fact was that most of these industries were set up without conducting feasibility studies and as such, many of them could not last long.
With the introduction of free market economy, focus is now on the quality products and their bulk production in order to survive in the global markets. Foreign-made goods are making easy duty-free entry into the country and quality of most of these goods are better compared to those of Bangladesh. Thus the consumers are sure to prefer those goods imported from abroad. In this way, machinery, electronics, IT products etc. are making slow but steady inroads into Bangladesh markets.
Worldwide market surveys say that the small and medium enterprises (SMEs) struggle to compete in difficult and complex environment. These are more obvious in the developing countries like Bangladesh. Indeed, the SMEs need a complex network support. From encouraging policy reform to building up financial intermediary, from facilitating access to best-in-class global industry knowledge to develop industrial basic skill, the country needs to structure its efforts to help SMEs' businesses reach their full potentials.
The country is having some problems in delivering cheaper goods as the cost of production in the SMEs has moved up due to a number of increases in the administered prices of fuel oil, power and gas. This is also putting stresses in many cases on industries and services to remain competitive. As stated earlier, globalisation has resulted in the country's doors to remain wide open to foreign goods at a cheaper price due to their tariff-free entry and as such, the government should take up appropriate policies to reinvigorate the small and medium industries by injecting fresh funds and pave the way for their faster growth.
Lending policies of the banks and financial institutions should also be updated in the context of emerging situation. Autonomous bodies like Bangladesh Small and Cottage Industries Corporation (BSCIC), BASIC Bank etc. should be given greater freedom in sanctioning loans to the small entrepreneurs. Proactive policies should be followed by both the NCBs and private banks in giving credit to the small and medium enterprises so that they can withstand any challenge arising out of the process of globalisation.
There is no denying that the investment activities are the main stepping-stones to generating higher income growth. But such investment climate is yet to be developed to attract the foreign investors. The government has, indeed, formulated liberal investment policies for the foreign entrepreneurs, but these are obviously not in the implementation phase. Otherwise, such a tragic scenario in the field of industrial investment could not be witnessed. At least medium-scale enterprises could thrive rapidly side by side the large ones.
An agrarian country vying for becoming an industrialised nation is undoubtedly a challenging task. Nevertheless, the country has, on its way, the models of Malaysia, Singapore and Sri Lanka-the nations that rose to the height of industrially developed nations from purely agrarian status. By development and promotion of SMEs, Bangladesh could immensely benefit in its way to economic development and its further integration.


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