Cluster Development · Economy of Bangladesh · Employment creation · Industrial Development · Industrialization · Investment · Policy · Small and Medium Enterprise (SME) · SME Clusters in Bangladesh · SME Development · Trade Negotiation

Transformation of the economy: Problems and prospects

Transformation of the economy: Problems and prospects

Md Joynal Abdin
The Financial Express on November 22, 2014

Bangladesh is one of the most emerging countries of the world. The current size of its GDP is about US$ 140 billion with annual 6 per cent plus growth rate during the last decade.  Economic growth of the country is mainly dependent on a very few sectors like readymade garments, manpower, leather goods, plastic goods, pharmaceuticals, ceramics and a very few agro-processed items.

Contribution of industries to the GDP was 29 per cent in 2012-13 FY and it is rising day by day. On the other hand, contribution of agriculture to GDP was 13.09 per cent in the same period and it is decreasing gradually. Till now, agriculture is the single largest sector for employment generation; agriculture employs 47.5 per cent of total manpower. This means productivity of agriculture sector is still lower in terms of employed population.

As per the Labour Force Survey 2010, conducted by the Bangladesh Bureau of Statistics, there are 2.6 million unemployed people in Bangladesh; at the same time, another 2 million workable labour force is coming forward per year into the job market. Employment generation for this large number of unemployed population is a very hard task for any government. Therefore, the government has emphasised private sector development and industrialisation as an effective tool for employment generation. Development and promotion of labour-intensive small and medium enterprise (SME)-led industrialisation could offer a better solution to this unemployment problem. If adequate policy, institutional and monetary supports are made available, a large number of this unemployed population could emerge as entrepreneurs and employ others in their own firms.

From the last ten years’ statistics, it is quite clear that the Bangladesh economy is going through a transformation. Industry is fast replacing agriculture as the base of the economy. The government has already initiated a few industry-friendly policies and support through SME Foundation, Bangladesh Bank, EPB, BSCIC, BITAC, BCSIR, BEPZA, SEZ authority. We are getting dividend of their activities by this time. As a result, the Bangladesh economy grew steadily even during the global financial crisis of the recent past.

But we have the capacity to grow further if a few more policies and institutional support could be given to the micro, small and medium enterprises (MSMEs). These may include the following:

ESTABLISHMENT OF AN ‘ENTREPRENEURSHIP DEVELOPMENT INSTITUTE (EDI): Establishing a new institute for entrepreneurship development while we already have about 111 universities in Bangladesh could sound as a wrong proposition. We have about 34 public universities and 77 private universities in Bangladesh. All of these are creating skilled and knowledgeable professionals including business graduates, engineers, doctors etc. We are enlarging the list of jobseekers every year but not producing job-providers academically. That entrepreneurs are just born is an old concept. It has been proved that entrepreneurs can be created through systematic training, guidance, support and mentoring. The Indian government (Gujarat, for instance) has established a completely separate type of institute in 1983 to produce only entrepreneurs.

The Entrepreneurship Development Institute of India has achieved enormous success in its mission. Its model is being replicated by many countries including Vietnam, Cambodia, Myanmar and a few African countries. Bangladesh can easily replicate this model to establish an engine of entrepreneur creation. These types of specialised institutions for entrepreneur-creation is also available in many other countries like the Entrepreneurship Institute of Malaysia, the Entrepreneurship Institute of Australia (EIA), the Institute for Entrepreneurship & Enterprise Development (IEED) of the UK, the Entrepreneurship Institute of Canada, Global Entrepreneurship Institute (GEI) of the USA etc. So, it is quite clear that a separate institution is required to create job providers i.e., entrepreneurs. Bangladesh government could establish or inspire relevant organisation like the SME Foundation to take the lead to establish ‘Entrepreneurship Development Institute of Bangladesh’. Development partners could come forward to establish such an institute here to produce entrepreneurs, the most essential component of private sector development or industrialisation or economic growth.

ESTABLISHMENT OF ‘CLUSTER DEVELOPMENT AUTHORITY’: Cluster-based SME development could be another vital weapon for boosting industrialisation of Bangladesh. There are 177 SME clusters identified by the SME Foundation throughout the country, of which 129 fall under SME booster sector and 48 under non-booster SME sector. There are 69,902 enterprises operating in these 177 clusters employing a workforce of 1,937,809, of which 74 per cent is male and the rest 26 per cent female. Total approximate annual turnover in these clusters has been estimated at Tk 295,150.66 million. Clusters are found in 51 districts of Bangladesh. So development of SME clusters could give us another platform for balanced economic development considering their geographical locations. Undertaking massive development interventions in these clusters is required to develop and promote the SMEs located there. The government could establish a separate body, namely, ‘Cluster Development Authority of Bangladesh’ or establish specialised wings in the SME Foundation with adequate budgetary and manpower support for rapid development of SME clusters. It will increase GDP growth, make Bangladesh self-dependent, increase export earnings, generate more employment and finally alleviate poverty.

ESTABLISHMENT OF ‘SECTOR SPECIFIC ENGINEERING AND TECHNOLOGY INSTITUTE: Like the first proposal, this one too could sound wrong to establish sector-specific Engineering & Technology Institute as we are having a number of engineering universities and polytechnics in Bangladesh. But the ground reality is that there is a long gap between the graduates of these engineering universities, polytechnics and our industry’s demand. Industry needs operators and technicians of modern machinery currently being used in the sectors. Engineering universities and colleges are producing high-profile graduates to deserve 5 digit salaries from their first day at job. Therefore, it’s time to establish sector-specific engineering and technology institutes as per sectoral needs.   The government allocated Tk 100 million in the last budget to establish the Bangladesh Institute of Plastic Engineering and Technology (BIPET). Similarly, we are in need of institutes of Agro-machinery, shipbuilding technology and a host of other sector-specific institutes.

ESTABLISHMENT OF ‘COMMON FACILITY CENTRES’ (CFC) IN EVERY CLUSTER: There are 177 SME clusters in Bangladesh. Entrepreneurs in a cluster produce similar products throughout the year. In some cases, there is one or more common process to manufacture several products. Currently, these tasks are being done manually. As a result, product quality can not improve beyond a certain level. On the other hand, individual entrepreneurs cannot afford modern machinery to complete the common process due to high prices of the machines. A single testing is applicable for almost all products of a cluster to ensure product quality. But due to the same reason, none can afford it. If the government and development partners establish a common facility centre in the SME Clusters with machinery to complete the common process or test the product quality, then all entrepreneurs will be benefited. As a result, a common facility centre in each of the clusters could play a vital role to increase product quality or productivity of that cluster. It will increase overall productivity of Bangladesh as well. Quality of the products will go up and it will be acceptable to potential local and foreign buyers too.

   ESTABLISHMENT OF ‘TRADE NEGOTIATION COMMISSION’: Till date, there is no organisation for trade negotiation with a foreign country bilaterally or regionally or in the WTO (multilateral level). A group of professionals in the WTO Cell of the Ministry of Commerce, the Bangladesh Tariff Commission,  EPB, NBR etc., represent Bangladesh in different trade negotiations. Most of them are civil servants performing transferable jobs. A person, being specialised in any particular area, is  transferred to a completely different post after three or four years. We can remember many officials of the WTO Cell previously involved in the process, but currently they serving in totally different positions. Therefore, we need a constitutional body for handling our trade negotiation issues only where professionals will get chance to be specialised on a single issue and handle it efficiently with any counterpart. In this age of multilateral trade regime, Bangladesh could find itself completely isolated if proper initiatives are not taken to negotiate effectively in bilateral free trade agreements with our existing or potential partner countries.

ESTABLISHING ‘PRODUCT RESEARCH & NEW PRODUCT DEVELOPMENT CENTRE’: Product basket is extremely small in terms of local production or export items. To enlarge the product basket and diversify export items we are in need of a product research and new product development centre. It should be a separate body to conduct research in existing and potential products or items that could be produced in our industries.

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