Industrial Development · Industrialization · Small and Medium Enterprise (SME) · SME Development

On SME development in Bangladesh

On SME development in Bangladesh

Md. Joynal Abdin

The Daily Sun on October 31, 2012

The “D-8 Taskforce Meeting on SME” was held at Palash Hall of Hotel Ruposhi Bangla in Dhaka on October 9. Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria and Turkey presented papers on SME development. Here are some notable features of the presentations which Bangladesh can follow to accelerate SME growth and ensure sustainable industrial development.

The Bangladeshi presenter mentioned:

1. Present status of SMEs — 84% SMEs took loans from commercial banks.

2. Constraints on SME development are — lack of running capital, high production costs/low profits, inadequate loan size, repayment before generating cash flows, low production due to shortage of fuel/electricity, and lack of information on technical/marketing aspects;

3. Recommendations for SME development are — SMEF/SME Cell should be strengthened; SMEF personnel need to have practical experience; increase workforce in SMEF; create infrastructural facilities (roads, electricity, gas, water etc); establish industrial parks at various locations; and create subcontracting facilities so that specialisation takes place;

To make a brief comment on the Bangladesh paper, I would like to say that it was a nice presentation but had partial information on overall SME development in Bangladesh. This paper laid emphasis only on the bank loan part of SME support. I would like to cover other areas like technological upgradation in SME sector during the last decade, government initiatives for SME development, increasing role of SMEs in GDP, greater role of SMEs in employment generation, exportable products of our SMEs, technical collaboration that our SMEs are searching for, potential fields for joint venture investment from D-8 member states, regulatory barriers of SMEs hindering growth etc. It is mentionable that none from Bangladesh side attended previous meetings of this working group held in different countries earlier. As a result, the Bangladesh side does not know much about the previous meetings. So I request our policymakers to attend all meetings of the working group.

The Egyptian presenter mentioned:

1. Egypt’s vision to become the leading industrial country in the Middle East and North Africa by 2025.

2. Major SME industries of Egypt are — textile products, food industries (sugar refining, tobacco, juices, medical herbs preparation, grinds and rice millers), Chemical industries (plastic and rubber, fertilisers, cement), leather industries (tannery, shoes, leather products, leather wares);

3. SME related public organisations in Egypt are — Social Fund for Development (SFD), Industrial Development Authority (IDA), SMEs Exports Development Sector (SEDS), Productivity and Vocational Training Department (PVTD), General Authority for Investment (GAFI), Industrial Modernization Programme (IMP);

The Egyptian paper laid emphasis on Egypt’s vision-2025 like the present government’s Vision-2021. The discussion mainly revolved around the SME sectors and different initiatives taken by the Egyptian government to promote SMEs.

The presenter from Indonesia mentioned:

1. Main areas of the Indonesian SMEs are — R&D, design, engineering, financial support, production, distribution and marketing;

2. Indonesian SMEs are passing through a creative economic age. Indonesia was in economic agriculture age up to 1945, economic industrial age during late 70s, and economic information age in early 90s and now they are passing through the creative economic industrial age.

4. Indonesia is working on four pillars for SME development — pillar-1: Cluster Development (creative industry, networking, common service facilities), pillar-2: Entrepreneurship, Fast Track (franchising), pillar-3: One Village One Product, and pillar-4: Initiative (international cooperation and promotion, machinery)

Cluster scheme — identify, collaboration, forum group discussion, action plan, implementation

Indonesia is a D-8 member working intensively on SME development and it has made remarkable progress. They came to this position by working upon four pillars namely cluster development, entrepreneurship development, one village one product and finally international cooperation and promotion.

Bangladesh may replicate two things from Indonesia: 1) Setting up SME vision of different stages with deadline; and 2) Working upon the four pillars model for sustainable development of SME.

The Iranian presenter mentioned that:  

1. About 92% of Iran industries are SMEs;

2. Iran Small Industries & Industrial Parks Organisation (ISIPO) is working for establishment and development of infrastructure, support services to SMEs;

3. Facilities in Iranian Industrial Parks are — single contract, single commission, providing infrastructure (water, gas, communication facilities, waste water treatment), installed payments (30% cash, 70% in three years), facilitating and speeding up the implementation by decreasing bureaucracy, gaining ISIPO supports;

4. ISOPO’s entrepreneurship supports are — supporting training courses for improving the scientific and professional skills of SMEs workforce; developing engineering and consultancy services to entrepreneurs and SMEs, and improving business environment;

5. ISOPO support in technology enhancement of SMEs are — IT development in SMEs, establishing IT and Software services centres, setting up technology parks adjacent to the industrial parks, and establishing business and technology service centres;

6. Consultancy support are — creating a network of more than 140 highly experienced and professional consultants in different fields such as: Management, Market Development, Innovation, R&D technology development, Productivity and Quality Improvement, Human Resource, Subsidising some part of SMEs consultancy expenses

It can be said that Iran is a role model for SME development and has achieved self-sufficiency despite trade embargos. Today Iran is offering training, technology, and joint venture investment in many fields mainly in cluster development and refinery industries. Bangladesh can follow the Iranian model of cluster development to ensure cluster development in Bangladesh. Last year SME Foundation has identified 177 MSME clusters throughout Bangladesh. Now the government may assist them in undertaking and implementing cluster development project.

The Nigerian presenter mentioned:

1. There are about 17,284,671 Micro, Small and Medium Enterprises (MSMEs) in Nigeria, employing about 32,414,884 workforces.

2. Constraints on SME development in Nigeria are — poor access to affordable finance leading to inadequate working capital, poor access to both local, regional and international markets leading to poor business turnover, obsolete technology leading to inability to compete globally, inadequate government support and encouragement, weak infrastructure leading to high cost of doing business, inconsistency in government policies/programmes etc.

3. Major SME development agencies in Nigeria are the Industrial Development Centres (IDCs) 1960s, the National Directorate of Employment (NDE) in 1989, the Bank of Industry (BOI) in 2001 from the defunct Nigerian Industrial Development Bank (NIDB) and the Nigeria Bank for Commerce and Industry (NBCI), the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) via SMEDAN ACT 2003, the Microfinance Banks 2005.

Nigerian government is distributing SME loan and supporting industrial expansions through different government schemes. Development partners are supporting Nigeria with various schemes, including credit guarantee schemes and reconstruction funds etc. Bangladesh government may assist SMEs with such credit guarantee scheme.

The Turkish presenter informed us that Turkish SME development agencies are working on a few innovative issues like regional and local development, SME market research and export promotion, project coordination etc. Bangladeshi SME development agencies like SME Foundation, BSCIC, and BITAC etc can undertake similar programmes for better output.

So in the light of above-mentioned initiatives, Bangladesh can take some steps to ensure development of SMEs:

1. Establishing SMEs Exports Development Authority (SEDA) like SMEs Exports Development Sector (SEDS) of Egypt.

2. Setting up SME vision by determining different stages of development with timeframe like Indonesia.

3. Working on four pillars for SME development like Indonesia.

4. Placing emphasis on cluster development like Iran.

5. Supporting SMEs with different guarantee schemes and loan products like Nigeria.

6. Balancing central and regional SME development, placing emphasis on market development and export promotion like Turkey.

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