|
Against the backdrop of the on-going SME Fair 2005 in the city and the government's renewed interest to help bolster the growth and expansion of the small and medium enterprises (SMEs) sector, country's industrial progress should get a shot in the arm.
Reports published in FE this week suggested that the Fair, organised by the country's apex trade promotion body, was showcasing Bangladesh's potentials in SMEs. Seven best such industries will be rewarded for their contribution to the development of SMEs.
What appears from recent deliberations of the Prime Minister and the
Industries Minister is that the government is really on the move to do
something for the promotion of the SMEs. It is worthwhile to examine how the government is trying to help the sector.
The government is focusing its attention to reorganising the Bangladesh Small and Cottage Industries Corporation (BSCIC), which is now not an active organisation. The SME entrepreneurs will be trained in the BSCIC.
The new Industrial Policy has identified SMEs as a thrust sector. The ministry has set up a SME cell to take up a policy and strategy for the expansion of the SME sector.
The ministry has formed a SME panel with representatives from the private sector to help the government implement the recommendations of the SME Taskforce. It has also a plan to set up a SME foundation.
Meanwhile, the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) has taken steps to collect district-wise data to open a SME website. It has also a plan to turn its SME cell into an institute for the development of the SMEs. Special tax incentives for SMEs were also demanded by the Dhaka Chamber of Commerce and Industry (DCCI). The government said such incentive is under active consideration.
However, it cannot be ascertained at this stage how many plans and programmes of both public and private sectors will be materialised in future. Everybody knows high-ups in the administration talk tall and there is no guarantee that all such schemes will be implemented. Yet the honest will of both the government and the private sector should go a long way to turn the SME sector into a more active and vibrant one.
However, a level playing field for small businesses is important for generating employment and increasing opportunities for women and the poor. The small business community is often stymied by structural impediments, including over-regulation, corruption, and other aspects of poor governance, as well as by high prices caused by providers of inputs and services, often the state-owned enterprises.
Country's strategy should be to identify impediments to business growth, followed by supports to enhance the private sector's ability to engage in policy dialogues to move forward reform agenda and technical assistance to government to the improve its provision of basic but important services such as power, water, communications, and waste removal.
A baseline survey undertaken by the Asia Foundation in 2003 of more than 400 enterprises in a city demonstrates that the regional economy is dominated by very small businesses, with an average of three employees, which are constrained by the poor quality of basic public services and infrastructure, weak access to credit and, especially in the case of women entrepreneurs, corruption and poor law and order.
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.
A recent survey on the SMEs depicted a grim picture on the state of affairs about such industries. It said the SMEs particularly in areas like food processing, leather products, electronics and garments have been performing the 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.
The SME sector accounts for 40 per cent of gross manufacturing output, 80 per cent of industrial employment and 25 per cent of total labour force. 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.
A survey conducted jointly by the Small Enterprises Development Fund (SEDF) and the 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 a 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 sees growth 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 were eating into the vitals of the national exchequer. Nothing had worked really to revive those ailing enterprises from the clutches of the vested quarters that were nullifying each and every attempt of the subsequent governments to turn those loss-making concerns into profitable ones.
The private sector, termed as the engine of growth, came to the rescue. Hundreds of thousands of SMEs were set up throughout the country by the enthusiastic entrepreneurs. But the fact remains that most such industries were set up without conducting feasibility studies and, as such, many of them could not last long.
There is a need to create institutional mechanism that can effectively coordinate and implement the SME-related policies. The SMEs have problems of their own like financial constraints during start-ups and operations.
Commercial banks view them as being of relatively high credit risks and smaller returns. Such factors do hardly justify their high administrative and servicing costs of small loans. These are genuine concerns and need specific policy decisions to effectively sort them out.
Development partners and specially both the World Bank and the Asian Development Bank have identified this problem and offered funds to finance the needs of the SMEs specifically.
Indeed, the SMEs need a complex network support. From encouraging policy reforms to building up financial intermediaries, from facilitating access to the best-in-class global industry knowledge to help develop industrial basic skill, the country needs to structure its efforts to help SMEs' businesses reach their full potentials.
|