SMEs Bangladesh

Constraints to SME Development in Bangladesh

2011-06-07T15:29:00.000-07:00

I. Introduction

The development of small and medium enterprises (SMEs) in developing

countries is generally believed to be a desirable end in view of their perceived

contribution to decentralized job creation and generation of output. SMEs constitute the

dominant source of industrial employment in Bangladesh (80%), and about 90% of the

industrial units fall into this category. The actual performance of SMEs, however, varies

depending on the relative economic efficiency, the macro-economic policy environment

and the specific promotion policies pursued for their benefit.

For the JOBS Program, Zaid Bakht (1998) and Salahuddin Ahmad, et al. (1998)

developed research papers that describe the policy environment within which SMEs in

Bangladesh operate. The reports also discuss the accompanying legal, regulatory and

administrative constraints to employment creation by SMEs. This paper attempts to

highlight the findings of those two studies. To complement the issues discussed in those

two papers, a summary of industrial problems, as perceived by entrepreneurs during the

past one decade (HIID, 1988; MCCI 1992; World Bank 1994; JOBS 1998), is also

presented in this report.

II. SME Development in Bangladesh

Historically, Bangladesh followed a development strategy in which private

investment was controlled through a host of regulations involving investment

sanctioning, credit disbursement, import licensing, foreign exchange allocation, etc.

While these regulatory barriers thwarted private investment in general, the impact fell

unevenly on SMEs. This was because of the relative inability of the SMEs to cope with

the regulations compared to their large-scale counterparts. Thus, the policy regime was

largely biased against the SMEs although, paradoxically, promoting SME development

was a stated objective of successive governments.

In a bid to render its industrial sector internationally competitive and to move

towards greater efficiency in its production structure, Bangladesh implemented a number of

economic reforms during the 1980's, underwritten by the familiar structural adjustment

policy. These included deregulation of sanctioning procedure and relaxation of other

regulatory barriers, easing of import procedure, reducing trade barriers, following a market

oriented exchange rate policy, and implementation of fiscal, monetary and public enterprise

reforms.

These reforms helped remove a large part of the policy bias against SMEs that

prevailed earlier. Recent studies confirm that these reforms had positive impacts reflected in

a fairly rapid growth of the sector during the past decade. However, because of their

structural weaknesses, the SMEs may need more pro-active policies for their development

in addition to the further removal of the policy biases.

III. Policy Issues

Public Development Outlay

Although successive five-year plan documents have mentioned development of

small, medium and cottage enterprises as priority area, public development expenditure

in this sector has not been commensurate with this declared policy. Thus, in the Fourth

Five Year Plan, the revised public allocation to this sector was Taka 2,016 million which

was a meager 0.58 per cent of the total public development outlay in the plan. What is

even worse, only about 69 per cent of this small allocation were actually invested during

the plan period. In the current Fifth Five-Year Plan, the share of the sector in total public

development expenditure has gone down even further. If the sector has to make much

headway, there is need for substantial increase in public investment in the sector

particularly in the area of training, extension, research, market promotion, etc. A

collaborative effort of the government with business associations, non-governmental

organizations NGOs and other development partners is recommended in such public

outlays.

Trade Policy

During the past decade, substantial reforms have been carried out in the external

trade regime of Bangladesh. The import procedure has been greatly eased and

deregulated. Import tariffs have been lowered and quantitative restrictions virtually

eliminated. All these have facilitated greater access of domestic producers to imported

raw materials. This has particularly benefited SMEs as they were affected more adversely

by the regulated trade regime.

However, import liberalization has also exposed domestic producers to

competition from foreign goods. To ensure a level playing field and to enable domestic

SMEs to compete effectively with imports, the following policy concerns need to be

addressed.

Prior Announcement of Policy Changes: To enable domestic producers, particularly the

SMEs, to prepare themselves to face external competition there is need for adequate

forewarning about impending policy direction. This is particularly true of trade policy

measures. If the government makes prior announcements of its impending trade policy

changes, particularly with respect to tariff schedules, investors will be aware of the

degree of competition they will be facing with the changes and will make adjustments in

their investment and production plans accordingly.

Tariff Rationalization: To encourage domestic production, there should be adequate gap

between duty on raw materials and duty on finished products. In fixing duty on finished

products, possible under-invoicing and dumping should be taken into account, as

otherwise, effective duty rates on finished goods will turn out to be lower than that on

raw materials in spite of the higher statutory rate on the finished item.

Appropriate Tariff Valuation: To avert the problem of under-invoicing, a system of

tariff value has been put in place for certain categories of imports. There are complaints

that these tariff values are often not in line with the going world price of these items

which sometimes puts domestic producers at a relatively disadvantaged position.

Fiscal Policy

Value Added Tax: The main components of indirect tax in Bangladesh are Value

Added Tax (VAT), Supplementary Duty and Excise Duty. VAT is imposed on producer,

manufacturer, importer, exporter or service renderer under the Value Added Tax Act,

1991, on goods or specified services, at the rate of 15% at every stage of transfer. VAT

paid against the input is adjustable against the VAT on output to be collected from the

buyers and the net sum stands payable on delivery of goods or specified services to the

VAT authority. Exemption is allowed to certain goods or service or certain taxpayers.

All cottage industries, except those producing particular products, are exempted

from VAT. But, manufacturer, producer or service renderer (other than cottage

entrepreneurs), whose annual turnover does not exceed Taka 1.5 million are required to

pay Turnover Tax at the rate of 2.5 per cent in lieu of 15 per cent VAT. This limit is too

low for small industries. As a result, small industries are subjected to the same 15 per

cent VAT as their large-scale counterparts. In addition, supplementary duty is imposed at

variable rates on certain categories of consumption goods across all size categories.

Finally, excise duty applies to a limited number of items irrespective of size

classification.

Thus, in terms of indirect taxes, there is virtually no differentiation between SMEs

and their large-scale counterparts, which is considered inequitable by most SMEs.

Tax Holiday: Similarly, there are no differentiated treatments of SMEs either with

respect to duty on capital machinery or direct taxes. There are provisions of tax holidays

for enterprises of all size categories subject to rules and procedures set by the National

Board of Revenue. To avail themselves of tax holiday, enterprises recommended by the

relevant sponsoring agencies have to get the approval of the National Board of Revenue

which is a cumbersome and lengthy process. The tax holiday, however, is not available to

sole proprietorship enterprises which are the usual form of small and cottage industries in

Bangladesh.

Wealth Tax: Wealth tax is payable by an individual if his net wealth exceeds Taka 2.5

million. As per existing law, no wealth tax is payable by a company, the usual legal form

of a large industry. On the other hand, the legal form of small industries is usually sole

proprietorship, and hence these enterprises have to pay wealth tax on their business

capital.

Thus, fiscal policy in Bangladesh is not particularly tailored to provide support to

SMEs, which is pointed out by most SME entrepreneurs as a critical policy constraint

hindering SME growth.

SMEs and NGOs

SMEs appear to be facing discriminatory competition from the commercial

activities of NGOs. On the other hand, smaller units may be receiving valuable assistance

in the form of training or market information from the NGOs. NGOs should be

promoting small businesses and not themselves become competitors – crowding out

private enterprises. Further research and debate on the role of NGOs in promoting SMEs

is propounded.

IV. Legal, Regulatory, and Administrative Constraints

As mentioned earlier, policy reforms of the past decade have brought about

substantial relaxation in the investment sanctioning procedure. No prior approval is now

required for investments involving own finance. However, there is scope for further

improvement in the following procedural aspects relating to investment regulations:

Trade License: Investors are required to procure trade license from local government

bodies by paying statutory fees. The process involves unnecessary delays, harassment

and side payments. The procedure needs to be simplified and the issuance of the license

made automatic subject to payment of requisite fees and declaration by the investor that

the proposed investment is in conformity with the rules and regulations and zoning

restrictions of the local government authority.

Registration under Factories Act: According to the Factories Act 1965, all

manufacturing units employing 10 or more workers are required to be registered with the

office of the Chief Inspector of Factories and Establishments. The job of the Factory

Inspector is to oversee the working condition and safety measures in the factory. In

practice, the regulation has proved to be a major source of delay, harassment and

unofficial payments for the investors particularly for those in the SME sub-sector as the

existing regulations do not differentiate between different size categories with respect to

safety and working conditions requirements. To relieve the investors of these problems

the requirements relating to safety and working conditions should be defined separately

and realistically for the SMEs and the discretionary powers of the Inspector should be

minimized. Registration should be automatic once the investor has declared that the

requirements have been complied with.

Clearance from the Department of Environment: All industries are also required to

obtain a certificate from the Department of Environment in respect of proper arrangement

for anti-pollution and safety measures. Here again, the requirements should be clearly

stated for the type and size categories of industry and the investor should be allowed to

go ahead with investment on the basis of the undertaking that the requirements will be

complied with.

Registration with Sponsoring Agency: Registration with sponsoring agencies such as the

Bangladesh Small and Cottage Industries Corporation (BSCIC), Board of Investment

(BOI) or Bangladesh Export Processing Zone Authority (BEPZA) is voluntary unless an

enterprise wants to avail itself of government incentives. To keep track of private

investment in various sub-sectors, it would be useful to make registration with the

sponsoring agency mandatory. However, to relieve the investors of possible hassles,

registration procedure should be simplified requiring minimum information to be

provided by the investor, and registration should not be held up until the proof of

investment has been produced as the current practice appears to be.

Contract Enforcement and Resolution: This is a constraint, which is faced by both large

and small firms. Inadequacy in the system for contract enforcement and resolution arises

from archaic legal system where procedure of adjudication is long drawn out and

cumbersome and the system is corrupt. As a result it is not difficult to delay a scheduled

date for hearing. SMEs with low sustaining power often lose out in the long drawn out

court battle.

V. Financial Constraints

Access to Finance: SMEs encounter great difficulties while raising fixed and working

capital because of the reluctance of banks to provide loans to SMEs. Banks are shy to

lend to SMEs because of high processing and monitoring costs of loans to SMEs. The

loan application forms for investment financing from banks are long, tedious, and

redundant. Since the removal of the interest rate subsidy without the removal of interest

band, financial institutions find little incentive to lend to SMEs. SMEs find it difficult to

use non real estate assets as collateral to obtain loans from the banks.

In the past, the government has attempted to provide SMEs with access to finance

through targeted lending. There was a government directive that 5 per cent of a bank's

loan portfolio be set aside for small and cottage industry financing. A new bank, namely,

the Bank of Small and Cottage Industries (BASIC) was set up in 1988 with the objective

of financing the small and cottage industries. There were also attempts to channelize fund

received from international agencies such as the Asian Development Bank (ADB) to the

sector through private banks. There were provisions of favorable debt equity ratio, special

interest rates and credit guarantee scheme. The central bank also issued directives to both

public and private commercial banks regarding working capital loans, use of standardized

documentation procedure and time limits for credit sanctioning and loan disbursement.

Notwithstanding all these arrangements for financing of SMEs, the actual delivery

of institutional credit to this sector has been grossly inadequate. The following seem to be

the key factors inhibiting flow of institutional finance to the sector.

Project Preparation and Evaluation: The first problem entrepreneurs face in seeking

institutional finance is with regard to preparation of the project proposal. In spite of

directives from the central bank to follow standardized procedure, the loan application

process has still remained lengthy and cumbersome. The entrepreneur often lacks the

ability to formulate a proper project proposal. Even when he prepares the proposal

drawing on outside expert services, there is no guarantee that the proposal will be

evaluated properly as the financial institutions themselves lack adequate capability for

proper project evaluation.

Collateral Requirements: One of the main factors that have hampered flow of

institutional finance into SMEs is banks' pre-occupation with collateral based lending.

Traditionally banks have used fixed asset ownership, particularly land ownership as the

basis for judging credit-worthiness. This puts SMEs at a relative disadvantage, as large

entrepreneurs are often able to get around the problem because of their influence and

contacts by putting up collateral of dubious valuation. The solution to this problem lies in

banks seeking deposit relationship with owners of SMEs and using cash flow rather than

asset ownership as the criterion for credit-worthiness. An expanded credit guarantee

scheme will have to play a vital role in this regard.

Bureaucracy and Corruption: Because of lack of proper autonomy and accountability

the public sector financial institutions are beset with inflexibility, inefficiency, political

interventions and corruption. Since the performance of the bank officials is not properly

evaluated they lack the incentive to bring a large number of suitable borrowers,

particularly those in the SME sector, within the fold of institutional financing. They adopt

a passive and inflexible attitude towards the borrowers either to avoid the risk of making

an inappropriate lending or to force the borrower to make side payments for more

favorable handling of the loan application. Until necessary reforms in the public financial

institutions are carried out, the SMEs will continue to bear the brunt of this institutional

malice.

VI. Major Industrial Constraints – A Historical Perspective (1988-98)

There is a growing literature on various constraints that have impeded the growth

of SMEs in Bangladesh. Many of the constraints presently encountered have been

discussed in the preceding section. In this section, a summary of the findings from

selected studies, during the 1988-98 period, is being presented.

Major Findings: Over the years, various studies have been conducted to identify

constraints encountered by entrepreneurs in the industrial sector. A summary of the

ranking of the problems from selected studies over the 1988-98 period is presented in this

section. Table 1 provides the ranking of the top eight problems according to the recently

completed survey of eight SME subsectors under the JOBS program. The subsectors

include: Steel Furniture, Small Metal Works and Light Engineering, Electrical Small

Goods, Plastic Products, Specialized Handloom, Bakeries, Textile Dyeing and Printing,

and Footwear. According to Table 1, electricity, credit, and law and order are

respectively the three top ranked problems followed by legal barriers, excess competition,

and dearth of technical assistance.

Relative ranking under selected past studies of the top eight problems, identified

under JOBS, is presented in Table 2. As evidenced in Table 2, points are awarded only if

a problem was ranked as one of the top five under each of the respective studies (5 =

most serious). A summation of the scores from the various studies reveals that credit and

working capital have consistently remained as the major bottlenecks to industrial growth

in Bangladesh. Electricity problem is also ranked close to credit as a serious problem at

present and in the past. Unavailability and/or high price of raw material, poor law and

order conditions and legal barriers are cited as serious problems, but not as highly as

credit and power.

VII. Conclusions

The studies reviewed reveal that SMEs have received disproportionately smaller

support from the government in terms of policy or fiscal incentives. SMEs, as a group,

are weak in echoing their needs and demands.

There have been improvements in the sanctioning and other administrative

procedures affecting SMEs; further simplification, transparency, and accountability are

necessary to promote SME development.

A wide array of constraints faced by SMEs have been briefly discussed in this

report. It is apparent that problems related to power and credit are the two most

significant ones. Legal barriers, poor law and order conditions, are some of the other

problems that have adverse affect on SME development.

The JOBS program should identify and promote innovative means towards

addressing the credit problem phenomenon. In the area of legal reform also, JOBS may

pursue further work. Problems related to power and law and order conditions are well

known, and continued pressure from the business community, NGOs and others are

collectively needed to bring about improvements.

References

Gain Sahota, et al. "A Rendezvous with Industrial Leaders and Entrepreneurs."

Working Paper No. 13. Harvard Institute for International Development's (HIID) ESEPP

Project, Dhaka, Bangladesh, 1987-90.

Gain Sahota, et al. "An Assessment of the Impact of Industrial Policies in

Bangladesh." Working Paper No. 16. Harvard Institute for International Development's

(HIID) ESEPP Project, Dhaka, Bangladesh, 1987-90.

Metropolitan Chamber of Commerce and Industries, Report on Manufacturing

Survey, 1990, 1992.

Najmul Hossain, "Business Perceptions on Problems Encountered and Incentives

Availed by the Private Manufacturing Sector: Further Empirical Evidence," The World

Bank, Washington, D.C./Dhaka, 1993-94.

Najmul Hossain "Regulatory Reform and the Private Sector's Response to

Liberalization Policies," The World Bank, Dhaka, 1991.

Salahuddin Ahmad, Khan, F.K., and Akram, T. "Legal, Regulatory, and

Administrative Constraints to Employment Creation by Small & Medium Enterprises in

Bangladesh." Paper prepared for JOBS project. June 1998.

World Bank, "Industrial Strategy Study: A Nationwide Industrial Survey," 1993-

94.

Zaid Bakht, "Growth Potentials of Small and Medium Enterprises: A Review of

Eight Sub-sectors in Bangladesh." Paper prepared for JOBS project. August 1998.

SMEs Foundation of Bangladesh

2011-06-07T15:13:00.001-07:00

The SME foundation is very much keen to build capacity in the form of skill development for SME entrepreneurs and those who are interested or feel encourage to become SME entrepreneurs. Considering the dire needs of the SME entrepreneurs the Human Resource Development (HRD) wing has been organizing different kinds of training program through public private partnership system. In this connection, SME foundation has been organizing different nature of capacity building program like entrepreneurship development & management leadership program, cluster based skill development program, cluster based technology development program and productivity improvement program. The category wise program are as follows:

Entrepreneurship development & Management leadership:

(a) Entrepreneurship Development

(b) New Business Creation

(d) Market Promotion and Market Development

(e) Preparation of Project Profile and Project Appraisal

(f) Improvement of Productivity

(g) Cost of Doing Business

(h) Marketing Management

(i) Business Development and Financial Planning

(j) Product Marketing and Budgetery control,

Cluster based skill development program:

(a)Bakery and Confectionery Food Preparation and Marketing

(b)Leather Products Production & Marketing

(d)Fashion Design & Dress making

(e) Ikebana(flower decoration)

(f) Basic Beautification

(g) Jute Products Production & Marketing

(h) Artificial Jewellery & Pottery

(i) Pickle Production & Marketing

(j) Modern Hand Paint Techniques

(k)Coconut Coir Products Production & Marketing

(l)Food Preservation & Marketing

(m)Agricultural Seed Production & Marketing

(n)Fast Food & Sweetmeat Production & Marketing

(o)Screen Printing

(p) Handicrafts etc.

Technology Development Program:

(a) Hands on Training on Heat Treatment

(b) Hands on Training on Welding & Cutting

(d) ICT in business communication

(e) Hands on Training on Material selection.

Techniques of Productivity Improvement:

(a) Basic concept of productivity

(b) Productivity by objectives

(d) Productivity diagnosis

(e) 5s: Japanese tools of productivity improvement

(f) Green productivity

(g) value added productivity

(h) Gain-sharing of productivity

(i) Total Quality management

(j) Waste minimization

The HRD wing of SME foundation has a comprehensive Month-wise Annual Training Calender where different modules of training programs have been available. Very soon the Training Calender of SME Foundation may be uploaded to the web-portal of SME foundation for ready reference of SME entrepreneurs/stakeholders.

EXISTING INTELLECTUAL PROPERTY LAWS IN BANGLADESH AND PROPOSAL FOR REFORMATIONS

Posted: Sep 26, 2009 | Comments: 0 | Views: 120 |

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The expression, ‘intellectual property’ has come to be internationally recognized as covering mainly two branches, namely; ‘industrial property’ and ‘copyright’. Patents, industrial designs and trade marks used to be considered as different kinds of industrial property. In Bangladesh (during the time of the then British regime), the first legislation of its kind, on copyright was introduced in 1914, which was mainly based on the British Copyright law of 1911. After the independence from Britain new law on copyright was promulgated in 1962. The Copyright Ordinance 1962 has been replaced by the new copyright act of 2000. Now in our country, Copyright law is regulated by the Copyright Act 2000. This is done because of the prevailing situation in Bangladesh and around the world.

In case of patent and designs we have law which we inherited from our Colonial ruler. Patent rights are created by statute and governed by the Patent and Designs Act 1911. We have also law related to trademarks and it is regulated by the Trademarks Act 1940.

Intellectual property has acquired an internationally recognized character. Now it is regarded as “one of the most important sectors” of international law, having its source in various international conventions. At present, each and every country is trying to shape or reshape their legislature, relating to intellectual property; in the light of those international conventions.

The convention establishing the World Intellectual Property Organization (WIPO), concluded in Stockholm on July 14th, 1967, provides that, ‘intellectual property’ shall include rights relating to:

1. literary, artistic and scientific works,

2. performances of performing artists, phonograms and broadcasts,

3. inventions in all fields of human endeavor,

4. scientific discoveries,

5. industrial designs,

6. trade marks, service marks and commercial names and designations,

7. protection against unfair competition,

And all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields. (Article 2/VIII) 1

Intellectual property protects application of ideas and information that are of commercial value.2

By virtue of a number of international conventions such as the, Berne Convention and the Universal Copyright Convention, copyright acquired in one country extends to other countries which are member of these conventions. Other intellectual properties are beginning to acquire the same nature as well.

The principles of intellectual property law are substantially the same in all countries with little variation to meet the national requirements of each of the countries.

Bangladesh, as a least developed country, has also enacted intellectual property law in its national legislature.

The Trade Related aspects of Intellectual Property rights (TRIPs) were included as integral part of World Trade Organization (WTO) due to pressure and interest of basically transnational companies and developed countries to ensure maximum profit or interest out of intellectual property in international trade.3 The TRIPs Agreement has been called the most ambitious international intellectual property convention ever attempted. TRIPs agreement has established the protection of intellectual property as a major part of the multinational trading system embodied in the WTO. As one commentator observer, intellectual property is now a key component of this trading system, “the protection of intellectual property is one of the three pillars of the WTO”.4

Bangladesh is now enjoying the transitional period that has been fixed by WTO under the light of TRIPs. So, we do not have a clear idea about the relation between intellectual property rights and economical development. But, it is certain that after the expiration of transitional period, Bangladesh will have to face a serious and severe situation because of the weak legal framework relating to intellectual property.

Now, in brief, the main features of intellectual property laws are given below:

1. The Patents and Designs Acts, 1911:-

(Act no. 11 of 1911)

The salient features of our existing Act are as follows;

Part-1; of the Patents and Designs Act, 1911; is about of patent. This part starts from section-1 and extends to section-42.

Section 2(8) contains the definition of invention; it proceeds as – invention means any manner of new manufacture and includes an improvement and all alleged invention. In sub-section (10) of the same section, provides the explanation of manufacture, “manufacture includes any art, process or manner or producing, preparing or making any article and also any article prepared or produced by manufacturer.”

Section-3 of the Act provides about the manner and mode of an application for patent. According to section-3(1); a patent application can be made by any person, whether he is a citizen of Bangladesh or not. An application can be made, alone or jointly with any other person.

According to section-4 of the Act; there are some provisions about specification. Wection-4(2) states that, a complete specification must particularly describe and ascertain the nature of the invention and the manner in which the invention is to be performed.

Section-10 of the Act, discusses about the topic, “grant and sealing of patent”. According to section-10(1); if there is no opposition of the patent application or, in case of opposition, if the determination is in favor of the grant of a patent, a patent shall, on payment of the prescribed fee, be granted, subject to such conditions if any as the Government thinks expedient, to the applicant, or in the case of a joint application to the applicants jointly, and the Controller shall cause the patent to be sealed with the seal of the Patent Office.

Term of patent, is laid down in section-14(1) of the Act. The duration of patent is sixteen years from its date. Section 15 of the Act; also provides rules regarding extension of the term of patent.

If any patent has been ceased, owing to the failure of patentee to pay any prescribed fee within the prescribed time, the patentee may apply to the controller in the prescribed manner for an order for the restoration of the patent. Section-16 of the Act deals with the matter, restoration of lapsed patent.

Section-22 of the Act contains provisions of “Compulsory Licenses and Revocation”. Both the Govt. and High Court Division are empowered to grant compulsory license or revocation of patent. Any person interested may present a petition to the Govt., alleging that the demand for a patented article in Bangladesh is not being met to an adequate extent and on reasonable terms and praying for the grant of a compulsory license, or in the alternative, for the revocation of the patent.

According to section-25 of the Act, if any patented invention or the mode which it is exercised; is mischievous to the state or prejudicial to the public; Govt. can declare the patent, revoked, by notification in the official Gazette.

Section-26 of the Act; provides the grounds, on which; a patent can be revoked by the High Court Division. Section-26(2) also provides, who can present a petition for revocation of a patent.

Section-30 of the Act; declares that; an innocent infringer of a patent; is exempted from liability or damages for infringement.

Part-II of the Act; describes all about ‘Designs’ or industrial designs. According to section-43(1); any person claiming to be the proprietor of any new or original design not previously published in Bangladesh, can apply to the Controller for the registration of that particular design.

According to section-47(1); the proprietor of a registered design, shall subject to the provisions of this Act, have copyright in the design during five years from the date of registration.

Section-51(A) of the Act; narrates that, any person interested may present a petition for the cancellation of the registration of a design. Such petition should be presented to the High Court Division.

Part-III of the Act; is about, Patent Office and proceedings there at.

According to section-59 of the Act; every register kept under this Act shall at any convenient times be open to the inspection of the public, subject to provisions of this Act.

Section-65 of the Act; states that, in any proceeding under this Act, the Controller shall have the powers of a Civil Court for the purpose of receiving evidence, administrating oaths, enforcing the attendance of witness compelling the discovery and production of documents, issuing commissions, for the examining of witnesses and awarding costs and such award shall be executable in any Court having jurisdiction as if it were a decree of that Court.5

2. The Trade Marks Act; 1940:

(Act No. V of 1940)

The basic principles of the Trade marks Act are described below:

Section-2 of the Trade marks Act contains definitions that are related to this Act. As to, section-2(k); trade mark means a mark used or proposed to be used in relation to goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some person having the right, either as proprietor or as registered user, to use the mark whether with or without any indication of that identity of that person.

The establishment of Trade marks Registry at Dhaka, appointment of the Registrar and Deputy Registrar are laid down in section-4 of the Act.

According to section-5 of the Act; the registration of a trade mark, requires distinctiveness. Purpose of such distinctiveness is to distinguish those particular goods from the others, which have similarity in nature.

Any mark, containing scandalous design; or be likely to hurt the religious susceptibilities of any class of the citizens, or to be contrary to any law for the time being in force or morality is prohibited for registration of that mark. Section-8 of the Act, say so.

Section-16 of the Act; provides that; when an application for registration of a trade mark has been accepted and either has not been opposed or having been opposed, has been decided in favor of the applicant, the Registrar shall, registers the said trade mark.

Section-18 of the Act, says that; the registration of a trade mark shall be a period of seven years, and may be renewed from time to time in accordance with the provisions of this section.

According to section-20 of the Act; no person shall be entitled to institute any proceedings to prevent, or recover damages for the infringement of an unregistered trade mark.

According to section-46 of the Act; any person aggrieved can apply to the High Court Division or the Registrar, for the cancellation or verification of the registration of a trade mark on the ground of any contravention of, or failure to observe a condition entered on the register in relation there to.

Chapter-IX of the Act; is specially written down for textile goods.

Chapter-X of the Act, states the provisions regarding offences and restriction of use of Royal Arms and state emblems.

According to section-73 of the Act, any suit for the infringement of a trade mark or otherwise relating to any right in the trade mark; shall be instituted to a District Court having jurisdiction to try the suit.6

3. THE COPYRIGHT ACT; 2000:

(Act No. 28 of 2000)

A short overview:-

Section-2 of the Copyright Act; provides all the definitions related to copyright and so on.

According to Chapter II; section -9, 10 and 11; Copyright Board will consist and the post of Register has made. The board is a quasi-judicial body; while working, it would be deemed as a Civil Court.

Definition of copyright is laid down in Chapter III; section 14 of the Act. Section 14(2) includes, ‘computer programs’ as a subject to this Act.

Chapter IV; deals with the ownership of copyright and the rights of the copyright owner. This Chapter starts from section-17; ends to section-23.

Chapter V of the Act; describes all about the term of different types of copyright. Generally the term extends from the lifetime of the author until sixty years from the beginning of the calendar year next following the year in which the author dies; is at section-22. The section also provides that, copyright shall subsist in any literary, dramatic, musical or artistic work (other than a photograph). Section-25 to section-32 of the Act narrates the duration of copyright for different types. For instance, posthumous work, cinematograph films, sound recordings, photograph, anonymous and pseudonymous works, Govt. works, work of any local body, work of international organizations.

Section-50 of the Act; deals with compulsory licenses in works withheld from public.

Chapter X of the Act is about, registration of copyright.

Chapter XII; section-71, describes about infringement of copyright and section-72 of the Act; provides acts not to be infringement of copyright.

Chapter XIV; is about Civil remedies, that are available against infringement of copyright. Exclusively, section-76 of the Act; provides, remedies against such infringement. According to section-81 if the Act; the Court of District Judge, is the Court of first instance of such proceedings.

Chapter XV of this Act; describes offences and punishment. According to section-82 of the Act; any person who knowingly infringes or abets the infringement of copyright; shall be punishable with imprisonment for a term which shall not be less than six months. But, which may extend to four years and fine which shall not be less than fifty thousand taka but which may extend to Taka two lacks. But; where the infringement has not been made for gain in the course of trade or business; the Court may, adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than six months or a fine of less than fifty thousand taka.

According to section-95 of the Act; an order made by the Registrar is a subject to appeal to Copyright Board. According to section-96; against any order; made by the Board; any aggrieved person, within thirty days of such order can file a petition of appeal to the High Court Division.7

PROBLEMES AND INSUFFICIENCY OF THE EXISTING INTELLECTUAL PROPERTY LAWS:

PATENTS AND DESIGNS ACT:-

The defects are;-

Like any other national patent system, novelty is an essential requirement of an invention to be patentable under the existing law of our country. But it is clear from the definition of ‘invention’ in section-2(8) of the 1911 Act; the invention to be patentable need not have a commercial pecuniary success. In other words, utility of an invention is not required by this definition. Although lack of utility is a ground for revocation of a patent under section-26(f) of the Act, till now this has not been included in the definition of invention.

The 1911 Act makes no difference between patentable and non patentable inventions. Considering the public interest certain items should be kept outside the domain of patent protection. Since under the existing law no item has been excluded from the domain of patent protection, any type of new invention may obtain patent protection although it should not be patentable for the greater interest of the public at large.

Under the existing law, the application for a patent must contain a declaration that the applicant is the true and first inventor or the assignor or legal representative of such inventor. But the term, “true and first inventor” is left undefined. Thus any person importing an invention for the first time into Bangladesh or any person to whom an invention is first communicated from outside Bangladesh can claim to be the “true and first inventor” of that invention and thus, can take the advantage of the vagueness of the term. Here; a fact should be added that, such practice already has begun. Some pharmaceutical companies don’t having any research and develop cell, importing some drugs, and by claiming patent, under the ambiguity of the Act, getting patent. A statistic says that, at the 1st and 2nd week of March, 2006; on an average, 40 patents were granted by the patent office, in each week. Thus, the local producers are forced to remain non productive on that particular patented items.

The standard of examination varies from country to country. In some countries like Netherlands, Germany, U.S.A. and Japan it is rigorously involving an extensive search for both novelty and obviousness among documents published in many countries, over a period of many years. But according to our existing patent law; examination is less rigorous involving for novelty only, and the extent of search is restricted.

Term of patent protection shall, as laid down in section-14, be sixteen years from its date. But the term is not sufficient enough for the exploitation of the patent right.

What constitutes infringement of patent isn’t defined in the Patents and Designs Act, 1911. Section-29(1) of the Act only says that, the patentee has a right to sue against the infringer during the continuance of the patent acquired by him.

Section-30 of the Act says that, a patentee shall not be entitled to damages against an innocent infringer. But, ignorance of law is no defense. The infringer should pay for the project as compensation of damages.

Under the existing law any process or manner of producing, preparing or making an article in patentable as appears from section-2 (8) read with section-2(16). But, the 1911 Act does not confer upon the patentee the exclusive right to exercise the process.

The 1911 Act contains provisions regarding compulsory licenses of patent rights but the terms and conditions of conditions of compulsory licenses are not detailed in the Act.

TRADE MARKS ACT:-

1. Section-22(3) of Trade Marks Act defined infringement in a very narrow sense though the act has provisions against infringement.

2. Although Chapter X of the Act, describes about offences and restrictions of use of Royal Arms and state emblems but this chapter does not extends to the infringement of any registered trademark. Any deceptive use of any registered trademark; is not also included in this chapter.

3. There is no provision for protection of internationally recognized trademark in our existing Trademark Act 1940.

Our existing copyright law has been enacted in line with the copyright law of India. It has been enacted to cope with the prevailing international set up of copyright system. So, preventive measures have been adopted to tackle the future complications in copyright sector.

NECESSARY PROPOSAL FOR REFORMATIONS: The term ‘intellectual property’ is still at its nascent stage in our country and people are not aware of the concept and importance of intellectual property. But, in international arena, the concept and coverage of intellectual property is growing so fast than any other brunches of law. We have intellectual property laws but these laws are not sufficient to tackle the challenges that are imminent and threatening us. Keeping in mind the Trade Related Aspects of Intellectual Property Rights (TRIPs) agreement and other relevant conventions the following reformation proposals can be made:

Reformations of the Patents and Designs act:

ü The Patent and Designs Act, 1911 should be revised thoroughly.

ü Essential requirements of patentable invention should be described clearly and there must be a clear distinction between patentable and non patentable inventions.

ü The standard of examining a patent application should be made more effective.

ü Term of patent protection shall, as laid down in section 14, be 16 years from its date. But the term should be extended to 20 years for patent and the term of a design, according to sec – 47(1) is 5 years from the date of registration, should be extended to 10 years.

ü Existing Act does not have any definition of infringement, it should be included.

ü The part of “designs;” have some confusing words, as in that part the term, “copyright” has frequently used. But it may create confusion. Such confusion should be effaced.

ü The Act does not have anything to do about the protection “Geographical indication” which could result a huge loss of losing our culture & heritage. So, it should be included.

ü Provisions relevant to PARIS convention should be incorporated.

ü The administrative provisions and complications should be avoided. The complications should be made more subject to judicial decision.

ü The provisions of offences and penalties should be revised and reformed with the need of the time.

Proposal for reformations of The Trademarks Act:

After studying present Trademark Act and different conventions, it is clear that our existing Trademarks Act 1940 should be amended as well. The following suggestions can be made:

ü The reformed trademark law should have a wide view about the marks which can be registerable and which marks cannot be.

ü Infringement of trademark should be defined more accurately. Besides, punishment for infringement should be made stricter.

ü How will we protect our renowned trademarks in international market and reciprocally how other countries trade marks can enjoy protection in our local market, should be defined in our trademarks act, with an assertive view.

ü Offences and penalties, in respect of violation of any provisions of this act, should be made more effective and harder.

ü If any complication or confusion arises in practicing of the act, the judicial body should be involved with more vigilance.

Proposed reformations to the copyright law:

The Copyright Act 2000 has been enacted to cover the rules and to cope with the international copyright system. Our existing copyright law has been enacted in line with the copyright law of India. It has been enacted to cope with the prevailing international set up of copyright system. So, preventive measures have been adopted to tackle the future complications in copyright sector. From the face of the Copyright Act 2000, it seems that our copyright law has fulfilled the need of the time.

Though computer programs, tables complications including data base are recognized to have the copyright protection, there is no legal recognition for transaction carried out by means of electronic data or other means ‘e-commerce’ which involves the use of alternativeness to paper based method of communication and storage of information to facilitate filing of documents with government agencies .

The growing global importance of the cyber law is posing new challenges and in view of the peculiarity involved in the fields, the understanding between the nations of the world by treaties or covenants, may be of considerable importance in the absence of which the implementation of the legislation would be near to impossibility. Our present act should be amended to fulfill the shortage.

Finally we can hope that a stronger protection system of the intellectual property rights, a qualified commission to observe the protection and thus policy making options to bring civil remedies for the violation of the rights and finally a complete law regulation in all sectors of intellectual property rights will surely lead us to a better future.

Enterprise dynamics and employment elasticities, 1986-2006

2011-06-07T15:11:00.000-07:00

Enterprises and Employment Growth in Bangladesh

Propoor growth, and the role of spurring the growth of SMEs in it, are the defining characteristics of a paradigm that has already emerged in the practice of international development. Bangladesh is no exception to this general rule. Employment elasticity of output is among the focal metrics in evaluating the pattern of growth, and this short note makes a modest contribution of that genre. A number of major efforts in Bangladesh contributing in this context range from technical assistance for fostering demand-driven enablers affecting the diffusion of better business practices, to understanding the manner how investment-climate impediments drag firm performance in SMEs sector (IFC/SEDF, 2006), tackling the policy issues surrounding SMEs’ access to finance (Chowdhury and Miah, 2006), launching new nation-wide supply- and demand-side surveys tasked to distill from primary data guidelines for implementing Bangladesh government’s SME Policy Strategies-2005 within the framework of the PRSP (SMESDP, RFP, 2006). Bangladesh has also been liberalising its economy since 1993, and has also gone along some distance towards substantial privatisation. How manufacturing and services subsectors have fared in the period 1986 – 2006 in terms of the growth especially of the employment generated by enterprises would perhaps be useful.

Before proceeding any further, we must quickly define “small”, “medium” and “large” enterprises used in this paper. BBS informally defines “small” firms as those with between 10 and 49 employees; and medium firms, with between 50 and 99 workers. Anything larger in employment is deemed large. Units with between 1 and 9 employees are considered “micro”.

The objective of this short paper is to process data from three economic censuses carried out over the last twenty years by Bangladesh Bureau of Statistics (BBS), and throw some new light, especially relating to SMEs. These censuses were carried out in 1986, 2001/2003, and 2005/2006.[1] The first two were full-blown enterprise censuses, and have been reported on by the BBS (BBS, 1992; BBS, 2004). The scope of the last was limited to that of a Business Registry (BR) of all enterprises in Bangladesh with an employment of at least 10 workers. The latest updating as of 2005/2006 did not cover establishments with between 1 and 9 workers, which, it must be said, account for an overwhelming proportion of all establishments in the country. While decomposing changing employment among its various contributory components is our main concern, we offer derivative observations about the employment elasticity of growth in Bangladesh.

The following scheme is used for classifying 2-digit entities under Bangladesh Standard Industrial Classification (BSIC): (a) manufacturing---10 through 45; (b) trade and eateries---50, 51, 52, 55; (c) finance and business services---60 through 74; and (d) other services---75 through 93.

Decomposition of jobs growth in economic development

The economy of Bangladesh grew at 5% or so between 1986 and 2006. Per-capita income growth during that same period of some 3.4% or so was certainly not tepid. It is certainly worth testing whether any resulting demand stimulus did perceptibly alter the industrial composition of either SMEs or large enterprises. Organic growth by secularly increasing average enterprises size. It would be nice to know if a strong size effect is discernible in the data, as a source of employment growth. The more is the increase in average size of enterprise from one period to the next, relative to the change in the number of enterprises alive, the greater would be the percentage contribution of the pure enterprise-size effect as a growth source. The “dynamic” is the “industrial-composition” setting, the larger is likely to be the pure “composition” effect in percentage terms.

Decomposition methodology, and the data

Tables-1 and 2 present the underlying data required to implement the MV decomposition.

Table-1

The underlying data relating to SMEs

Industry class	1986			2006			% change between 1986 and 2006
	No. of SMEs	‘Industry’ mix	Size Per unit	No. of SMEs	‘Industry’ mix	Size Per unit	% change between 1986 and 2006
	No. of SMEs	‘Industry’ mix	Size Per unit	No. of SMEs	‘Industry’ mix	Size Per unit	SME Number	% share	Size Per Unit
Manufac- ing	17033	41.3	22.9	29273	37.8	23.7	71.86	-3.5	3.49
Trade	7765	12.97	15.7	7509	7.05	17.2	-3.3	-5.92	9.55
Financial Business srvcs	6494	12.4	18.0	9557	11.35	21.8	47.1	-.95	21.1
Other srvcs	18045	33.2	17.4	38281	43.7	20.96	112.1	10.5	20.46
Total	49337	100.0	19.1	84620	100.0	21.7	71.5	-	13.6

Source: BBS, 1992; BBS, 2006

Table-2

The underlying data relating to large enterprises

Industry class	1986			2006			% change between 1986 and 2006
	No. of large units	‘Industry’ mix	Size Per unit	No. of large units	‘Industry’ mix	Size Per unit	% change between 1986 and 2006
	No. of large units	‘Industry’ mix	Size Per unit	No. of large units	‘Industry’ mix	Size Per unit	Large unit Number	% share	Size Per unit
Manufac- ing	1854	80.6	449.6	4579	71.4	429.1	147	-9.2	-4.59
Trade	63	2.7	244.0	128	2.0	207.1	103	-.7	-15.17
Financial Business srvcs	150	6.5	277.3	413	6.4	319.1	175	-.1	15.16
Other srvcs	232	10.1	252.8	1291	20.1	298.5	456	10.1	18.07
Total	2299	100	412.8	6411	100	385.9	179	-	-6.5

Source: BBS, 1992; BBS, 2006

The decomposition methodology

In obtaining the sources of growth in terms of total employment outside agriculture we customise the Minhas-Vaidyanathan (MV) decomposition scheme. The MV scheme decomposes the employment growth into (i) an enterprise-change effect; (ii) an industrial-composition effect; (iii) an enterprise-size effect; and (iv) a couple of interaction effects.

E_t – E₀ = ( N_t - N₀) åⁿ_i=1 S_i0C_i0 + N₀ åⁿ_i=1 (S_it - S_i0) C_i0 + N₀ åⁿ_i=1 S_i0(C_it - C_i0) + N₀ åⁿ_i=1 (S_it - S_i0)(C_it-C_i0) +( N_t - N₀) åⁿ_i=1 S_i0(C_it-C_i0) + ( N_t - N₀) åⁿ_i=1(S_it - S_i0)(C_it-C_i0) (1)

where

E= Total employment by enterprises;

N = Number of enterprises;

S = Average size per establishment (or enterprise);

C = percentage share of an industry-group in total employment;

i = 1, 2, 3, 4 (and relate to manufacturing, trade, finance and business services and other services);

t, o = time subscripts

Before going into the specifics of the results relating to the decomposition itself, we should perhaps take note of the principal findings from Tables 1 and 2. Between 1986 and 2006, annual growth in number of enterprises and the employment by them grew at 1.24% and 1.8%, respectively. In contrast, real output outside agriculture has grown at about 6% per year. What do this pair of estimates tell about the employment elasticity of non-agricultural output in Bangladesh during these two decades? They say that employment elasticity of output in non-agriculture is less than a third, or so.

Table-3

Growth rates of the number of enterprises and employment in manufacturing and services, Bangladesh, 1986-2006

(Percentages)

Type of output	Compound annual growth rates, 1986-2006, in
Type of output	No. of enterprises	Employment	Output
Manufacturing	1.27	1.7	6.0
Services	1.22	1.98
Both	1.24	1.8

Note: Between 1986 and 2006, the number of SMEs in manufacturing registers an annual compound growth rate of 1.18%. For large enterprises in manufacturing, the compound annual growth rate over the same period is 1.98%. The corresponding SMEs growth rate for all the other three kinds of services taken together is 1.176. For large-enterprise services of all kinds, the corresponding growth rate is 3.12%.

Explaining the decomposition of enterprise employment generation

It is the net enterprise creation that predominates any other source of growth in employment in Bangladesh’s enterprise: net job creation is driven by net growth in the number of enterprises in the economy. This effect is quite pronounced when we treat SMEs and large enterprises separately from each other. That said, there is a twist in the data. When we lump the data together, the dominance, just witnessed, of net enterprise creation is seen to wilt somewhat. Thus, whereas the contribution of net enterprise creation contributed 85% of the growth in the total SME employment between 1986 and 2006, and whereas large enterprises contributed 108% of the growth in the total large-enterprise employment, when we treat the enterprise sector as one lump, that percentage falls to 71% alone.

Secondly, changes in average size of enterprise is also found to be a much more substantial contributor to the employment creation by the enterprise sector than when SMEs are separated from large enterprises. Roughly, a quarter of employment change is due to changing average size of the typical enterprise.

Table-4

Relative contributions of net enterprise growth, average enterprise size, and others

(All numbers are percentages)

Particulars	Employment change in SMEs alone (%)	Employment change in large enterprises alone (%)	Employment change in all types of enterprises(%)
Pure growth in the number of enterprises	85.4	108.2	71.0
Size-of-enterprise effect	13.4	-1.5	24.8
‘Industrial-composition’ effect	-0.6	-2.7	1.0
Interaction between size and composition	1.3	1.0	1.4
Interaction between number and composition	-0.4	-4.7	.8
Interaction between number, size and composition	1.0	-0.3	1.1
Total effects	100.0	100.0	100.0

Source: BBS data and author’s calculations

Factors determining subsector employment growth

Data from 49 BSIC 2-digit categories were further consolidated into 22 “super-categories”. They exhausted the entire range of industries and services. The following equation was fitted to the data:

∆lnN = lnα+ %_share + ∆lnS + Y_ +  (2)

where N = Employment in a sub-sector;

%_share = subsector relative share in employment;

S = Average size of enterprise in a sub-sector;

Y_{ =}Income elasticity of demand in a sub-sector;

 = An error term;

lnα = A constant term;

∆ = Proportionate change between 2001/2003 and 2006.

Data relating to N and S are obtained from BBS (2004) and (2006). The first source covers data from 2001/2003 Economic Census. The second source covers the data from the updating of the Business Registry of SMEs and large enterprises as of 2005/2006. The estimates relating to income elasticity of demand for the 22 sub-categories are obtained from Dorosh (1994), Ahmed and Shams (1993), Goletti (1993), Bakht et al., (1992), and other assorted sources.

The estimated coefficients are as follows:

∆lnN=-0.3629^*+0.5838 (%_share)+0.9194(∆ln S)^*+0.1991(Y_)^* adj. r-squared = 0.62

( - 4.7 ) (1.0) (2.52) (4.2)

The symbol ^* denotes that the coefficient in question is significant at 5% error probability level.

The results suggest that subsector income elasticity of demand and proportionate change in the average size of enterprise are statistically significant determinants of proportionate changes in subsector employment. A ten-percent increase in the typical size of enterprise leads to a nine-percent percentage increase in the subsector employment level. Each doubling of the income elasticity of demand contributes almost a twenty basis point of growth in the subsector employment level. Results suggest that growth in goods and services demand that is driven by the growth of incomes is crucially important driver of employment generation, as is the achievement of organic growth by enterprises already in existence, causing mean enterprise size to grow.

The responsiveness of employment generation to demand growth is nothing new. It is however a long-run source. In Bangladesh case, moreover, income inequality is growing secularly (Sen et al. 2004). Increasing incomes inequalities are likely to pare back income elasticities across the board. The imperative is therefore for creating room for equalising, pro-poor growth. We shall return momentarily to what kinds of public investment and “sectoral policies” are likely to spur such beneficial patterns of growth in Bangladesh.

The second important result points at “organic enterprise growth” as a driver of labour-intensive economic growth. Achieving such growth typically stems from a subsector achieving higher total factor productivity (TFP) levels compared with its competitors.[2] To quote from David Dollar, of the World Bank, and his colleagues: “We expect that part of inter-firm differences in total factor productivity reflect plant-level heterogeneity in technology and firm capability, but that part of it may reflect regional differences in investment climate as well” (Dollar, 2002). Following this characterisation, we shall argue that enterprise strengths in terms of product positioning, technology platform choice, firm branding and design capability, firm commitment to product and process innovation are critically-important determinants of TFP growth within enterprises. The most important supra-firm variables that may likely influence TFP growth include location within agile and learning eco-systems which might be in the form of creative clusters, and a small number of conducive investment-climate variables. These eight target strengths highlight the centrality of creating, managing and adapting knowledge, skills, organisation and infrastructural delivery as a well-orchestrated package. A basis of high-quality information and insights illuminating the characteristics and the laws-of-motion of enterprises in general and SMEs in particular, cross-fertilised with intimate knowledge of where government and market failures create strong head-winds for TFP growth, is a pre-condition. There is an undeniable need for professionally competent policy-oriented applied enterprise research, generating primary data diligently, ferreting out market failures rigorously, embedding pro-poor institutional interventions in the bedrock of solid empirical knowledge, and fostering inclusive forms of public-private partnership. There is a great need for technical assistance aimed at each of these eight areas of policy change and well-aimed capacity building. There is a great need to harness information and communications technologies in building virtual clusters of entrepreneurs and other enablers steeped in widening virtuous cycles of creating, managing and adapting business-friendly knowledge and practice, in pursuit of efficiency and inclusiveness in production and distribution.

What public investment and “sectoral policies” are likely to spur pro-poor patterns of growth? Research by International Food Policy Research Institute (IFPRI) has shown that the highest payoff in terms of poverty reduction belong to rural roads, followed by agricultural research. Empowerment of women and augmenting their production and marketing skills is also a powerful avenue for pro-poor growth. Expanding the outreach of primary and secondary education, especially in rural areas also has high returns in terms of poverty reduction.

[1] Small & Medium Enterprise Sector Development Programme (SMESDP) being implemented by the Ministry of Industries, Government of Bangladesh has partially funded an updating of a list-frame covering SMEs and large enterprises in Bangladesh as of 2005/2006.

[2] TFP is a residual, and calculated as the excess in production over and above what can be attributed to factor accumulation. It is typically ascribed to the existence of technical progress.

Small & Medium Enterprises (SME) Development in Bangladesh

2011-06-07T15:05:00.001-07:00

A Reasoned Approach to Letting SMEs Count

Executive Summary

Small and medium enterprises (SMEs) have historically been one staple of the enterprise landscape within economies globally. Especially growth with clear benefits for poverty reduction puts a premium on integrating, productively and profitably, small and medium enterprises in the very process of economic growth. The over-riding vision must be for setting up a market-based economic order with a level playing field for all enterprises, in which SMEs can aspire to opportunities of growth and wealth-creation commensurate with their own endowments and diligence, innovation and management commitment. In addition, the vision must lead to a priority in the delivery of government services so as to neutralize, on a continuing basis, the handicaps and irritants which, almost reflexively, tend to spring themselves upon SMEs in a selective manner. A historically accelerated pace of trade liberalization in Bangladesh since the early 1990s by spurring a veritable deluge of imports has quite significantly increased competitive pressures on SMEs in Bangladesh. Rapidly falling cost of communications have by unifying global markets heightened the intensity of competition. Trading is widely seen as a safer, richer, smarter and bulkier career to have than manufacturing---bad news indeed for industrialization. It is against this background that the Government of Bangladesh constituted the Taskforce on Small & Medium Scale Industries late in 2003. This report is the harvest of the effort of that Taskforce.

2.0 In essence, the Taskforce’s cardinal goals are the following:

To formulate a framework of policy formation to achieve development of SMEs with an accent on poverty reduction, as also a relatively broad plan of actions, just shy of a more detailed suite of specific action programmes with corresponding actors and time-lines to match;

To recommend a set of SME-development Policy for Bangladesh;

To redefine the small and medium enterprises---both of manufacturing and non-manufacturing types---for the purposes of the practice of SME development policies. At the same time, to formulate criteria of enterprise eligibility to the assistance package.

To prescribe, on some well-agreed rational bases, a number of booster industries with a sizeable proportion of SMEs which then to create a package, comprising at once of major financial-assistance, fiscal rationalization and some capacity-building programmes for. Wherever appropriate, priority will be accorded for entrepreneurs from social categories that have been crowded out during liberalization (such as jolha, telli, sonar, etc), small enterprises and entrepreneurial activities by women;

To produce a self-contained set of implementation guidelines for the Taskforce’s prescriptions to have lasting value, recognizing that guidelines are not the same thing as specific implementation execution;

In view of the rapid structural change in the world economy, especially in favor of increasingly weightless, paperless, knowledge-rich industries and services, to see structural change as among major imperatives for intervention by government and the civil society that are supposed to have an advantage on informed strategic planning that private investors probably lack.

Proven or demonstrable market failures or policy failures, the playing field being uneven, or increasing returns to scale or imperatives for structural transformation were accepted as important rationale for public intervention (through implementation of the Taskforce’s recommendations). The Taskforce adopted an SME-only approach towards the capture of priority actions to impact selectively upon the competitive handicaps of the SMEs.

3.0 Taskforce’s major findings

3.1 Development of SMEs is increasingly being held at the highest echelons of policy-making globally as a permanent and integral part of poverty-reduction strategy of developing country governments. Success here will require acting decisively in terms of making SMEs’ scarce financial resources go further, and harnessing, up to the hilt, human resource and institutional capacities of the stakeholders in SME development.

3.2 The archetypal small-ticket manufacturers, often closely associated with occupational categories with a social accent, such as jolhas, tellis, sonars, kamars, have been crowded by middle-class elites, and this denial and the associated divide calls for a correction through proactive interventions.

3.3 With liberalization apace, withering competition from more entrenched countries and globally-branded companies operating on a global scale, and with deviations from the rule of cascading in the setting of border tariffs, trading has become a career of choice in Bangladesh at the expense of manufacturing for many who would have otherwise worn happily the mantle of a manufacturer.

3.4 There are systematic handicaps which choke the SMEs’ entrepreneurial drive or put a crimp on their choices, and thus drag their net performance, versus their competitors’---thus justifying prescriptions which selectively impact SMEs in an effort to alleviate, if not remove altogether, such handicaps.

3.5 In an age of sweeping globalization, and growing penetration of information and knowledge technologies into the emerging international division of labor, appropriately positioning Bangladesh’s SMEs in the resulting structural transformation of the global economy is seen as an important basis for both selecting the booster industries as well as the enterprises deserving injection of public assistance that benefit them.

3.6While governments often perform poorly in production, they have (or at any rate can potentially acquire at low cost) an innate advantage in terms of acquisition, dissemination and maintenance of a base of information and knowledge of a kind that enhances productivity of private investors’ business decisions in an inclusive manner. In addition, governments by virtue of its vastly superior catalytic or mobilizational potential have ameliorative role(s) to play when either markets fail, or externalities skew private investors response in sub-optimal ways or when venture-capital is in too short a supply for the nation’s good in high-risk-high-gain investment opportunities. In such cases, there is a well-grounded rationale for public intervention, including a provider of equity capital, a practice in which a modest beginning has already been made in Bangladesh.

4.0 Lessons from international experience versus SME development

4.1 The Taskforce has been benefited from the assimilation of several major lessons from recently-concluded Istanbul meeting on SME development, held under the aegis of the Organization of Economic Cooperation and Development (OECD).

4.2 Several of the most important lessons are as follows:

Because a considerable extent of strategic stewardship and gap-filling---with the gaps in question not being visible to the private decision-makers--- is typically required in this kind of structural transformation, a three-way set-up, involving the government, civil society and the private sector, is typically required. Only the government can be entrusted the central role of the architect of the change management, with the provision that it will formulate a broad plan of actions and then a much more detailed action programmes in the interest of execution. Government and civil society institutions in question typically also needs technical assistance and capacity building so as to attain maximum cost-effectiveness. That is why such improvement in the competitiveness of SMEs versus large enterprises typically requires a modification of the structure of public investment in desired directions. The policy and institutional-delivery set created for the development and empowering of the SMEs should be promotional, catalytic, incubatory and selective, and should not involve indiscriminate subsidies. To the extent that removal of specific market failure or previous government failure or negative pecuniary externality puts a premium on the creation of a package of financial incentives, then perhaps a small quantity of subsidies may also be justified. There is precedent in Asia of well-directed government intervention in a coherent package of ameliorative and stimulative action, including of channelizing strategically-focussed and small dose of financial subsidies, in the interest of fostering the growth of SMEs. Perhaps, a similar case can be made for SME development in Bangladesh, too.

4.3 It is important to foster the evolution of a congenial, transparent and simplified regulatory framework that keeps low the compliance costs of an enabling environment for SMEs, and especially small enterprises. By avoiding invasive procedures (such as rent-seeking behavior, etc) and keeping cost of compliance low, many countries have integrated informal-sector enterprises in mainstream SME development.

4.4 It is very important to know what the elements of SME policy are. The main ones require that: (i) the government accords to SME development an integral and vigorous role in the overall management of growth and poverty-reduction; (ii) identify and establish the network of infrastructure and institutional delivery mechanisms that facilitate the promotion of SMEs; (iii) especially existing regulatory framework and government support institutions be re-oriented towards bolstering the goals of SME policy; (iv) nurture and partner civil-society institution(s) having credible management teams in terms of the delivery of needed services, leadership, initiation, counseling, mentoring and tutoring; etc

4.5 Create innovative but meritocratic arrangements so that deserving and especially small enterprises with desired entrepreneurial antecedents and promise can be offered financial incentives within industries prescribed on some well-agreed bases.

4.6 Dispute settlement procedures should proactively shield small enterprises especially from high legal costs and insidious harassment.

4.7 In order to assist small enterprises in dealing with their pervasive lack of access to finance, avenues of mobilizing debt without collaterals to match (either using debt-guarantee schemes or mapping intellectual-property capital into pseudo-venture capital) must be urgently created.

4.8 There is a need to systematically accord precedence to small enterprises versus medium enterprises, within the limitations of government’s resources.

4.9 Governments are increasingly harnessing information & communications technologies, IP-based infrastructure, and electronic-governance in an effort to parlay regulatory services, all kinds of useful information and mentoring inputs, with an accent on increasing the viability of SMEs in all sectors of the economy.

Taskforce’s Recommendations by way of Policies & Institutions, Implementation Guidelines

5. Identification of booster Sectors

The following industries, including one based exclusively on the imperative to foster women entrepreneurship, are prescibed by the Taskforce for preference in terms of prospective public assistance and capacity-building programmes, within the limitation of a review every three years:

Electronics and electricals;

Software-development;

Light engineering and metal-working;

Agro-processing/agri-business/plantation agriculture/ specialist farming/tissue-culture;

Leather-making and leather goods ;

Knitwear and ready-made garments;

Plastics and other synthetics;

Healthcare & diagnostics;

Educational services;

Pharmaceuticals/cosmetics/toiletries;

Designer, aesthetically-challenging, personal wear and effects;

Notwithstanding the prescriptive nature of the foregoing recommendation, non-classification as such should not disqualify an SME from financial assistance from any scheduled banks.

The Taskforce has organized its additional recommendations in three groups in order of their underlying time-horizons: short-, medium- and long-term. By short term, we mean actions whose impact may be felt between now and 18 months away. By medium term, we mean actions whose initiation could itself take up to 18 months, whose fruition could well take take between 18 month and 4 years. Long-term is defined as something that takes more than 4 years to fructify.

Short-term Policies

6.1 Framing and carrying out policies for SME development

6.1.1 An unambiguous policy statement declaring that the Government consider SMEs, especially small enterprises, as an integral and important element in the cause of economic growth and poverty alleviation in Bangladesh.

6.1.2 An SME Advisory Panel be constituted to perform the services of a specialist brain-trust for the Ministry of Industries (MOI). Likewise, an SME Cell is set up in MOI to help implement the SME policies.

6.1.3 A roadmap and a tactical plan of action, to be conceived and then detailed by SME Advisory Panel and the SME Cell.

The Panel may comprise a few of the members of this Taskforce, other subject-matter specialists representative of the booster industries themselves, one or two certifiable role models of mass awareness-raising to generate mass interest in technepreneurial careers. In the medium term, the Advisory Panel and the SME Cell will eventually morph into what we call a SME Foundation (this is further detailed under the rubric of medium-term recommendations of the Taskforce).

The Panel will report to the Minister of Industries. The tactical plan of action is about what it will take to move SMEs forward the way they should.

6.2 Identification of SMEs

6.2.1 Defining enterprises for targeting purposes in terms of either fixed investment or head-count is an well-established policy practice, for instance in India. A one-attribute definition typically reduces the proportion of indeterminate cases compared with a two-attribute one. Any definition, no matter how well-thought-through is bound to involve some degree of arbitrariness.

6.2.2 For manufacturing industries, the Taskforce recommends that: an enterprise should be treated as small if, in today’s market prices, the replacement cost of plant, machinery and other parts/components, fixtures, support utility, and associated technical services by way of capitalized costs (of turn-key consultancy services, for example), etc, were to up to Tk. 15 million;

an enterprise would be treated as medium if, in today’s market prices, the replacement cost of plant, machinery, and other parts/components, fixtures, support utility, and associated technical services (such as turn-key consultancy), etc, were to up to Tk. 100 million;

from both definitions above, land is excluded.

6.2.3 For non-manufacturing activities (such as trading or other services), the Taskforce

defines:

an enterprise should be treated as small if it has less than 25 workers, in full-time equivalents;

an enterprise would be treated as medium if it has between 25 and 100 employees;

From both definitions above, land and structures, once again, are excluded.

6.2.4 By making the definition especially of small enterprises more inclusive with a lower threshold for assistance eligibility, the outreach of SME policy for poverty alleviation and employment generation has been augmented versus all past statements of industrial policies.

6.2.5 Our proposed definition sets the threshold smallness at a much lower level compared with the treatment in the existing Industrial Policy of Bangladesh. The Taskforce recognizes that there will remain a need for National Board of Revenue (NBR) and other implementation arms of the government to incorporate the definitions in the declared SME policy within their own operating environment.

6.3 Setting criteria for deserving enterprises

6.3.1 Enterprises which, as well as meeting the size requirement proposed by the Taskforce, must have (i) proven credentials as an entrepreneur (for example, membership in well-recognized social occupational groupings) with requisite presence and facilities on the ground; (ii) an above-average insiders’ equity participation; (iii) certifiable professional specialization of top-management in relevant production skills; (iv) the stamp of approval from globally-recognized quality-assurance bodies (ISO 9001:2000, for example); (v) high management commitment to innovation. Women entrepreneurs will be accorded preference, wherever appropriate.

6.4 Rationalization of VAT and other budgetary measures

6.4.1 We recommend that very small manufacturing enterprises with fixed investment of up to Tk. 3 million (three million), should be completely exempt from any obligation to pay VAT. For manufacturing enterprises with fixed investment greater than Tk. 3 million and less than Tk. 15 million, the corresponding turnover tax will be 2.5% (two and a half percent).

6.4.2 We recommend that such very small enterprises (with up to Tk. 3 million in fixed assets not counting land and building) should be given a tax holiday for 7 (seven) and 10 (ten) years from their initiation, for enterprises in the cities of Dhaka/Chittagong and all other areas/locations respectively. Both recommendations will, we propose, be applied in all industries, not just the boosters.

6.4.3 Small industries in technologically-nuanced industries take substantial degrees of risk in new products through R&D. They crucially assist in developing technology base of Bangladesh. Arguably, these grounds warrant that Government help by granting resources to alleviate the pain, at least in part, from such R&D. This is why we have recommended that public sector should make available equity resources to SMEs.

Exceptions:

6.4.4 The above two facilities will not be given to : i) Joint Venture industries with foreign partners, ii) Sectors that should be discouraged based on health, environment, or other grounds such as Tobacco, liquor and narcotics related industries.

6.5 Two blanket clauses to protect local industries from irrational tax policies

6.4.5 The total incidence of all taxes at import (Import duty, Supplementary Duty, Regulatory Duty, Development surcharge, VAT, etc.) on the raw materials and spares of locally produced commodities cannot exceed that on corresponding finished imported commodities. If such taxes for a finished commodity are reduced at any time, then the taxes on the raw materials and spares of that product will automatically stand adjusted following the above principle.

6.4.6 VAT on imported products shall not be less than that on like domestic products. Any reduction in existing VAT on imported products shall be automatically matched by an equal reduction on VAT on like domestic products.

7.0 Levelling the playing-field in credit and venture-capital markets

7.1.1 A credit-distribution package will need to be worked out by the Ministry of Industries. An innovative scheme---rather like a two-stage screening mechanism---that can really probe for the bone fide of the applicants as entrepreneur materiale will be deployed. Donor financial resources made available specifically to help with implementation of SME policy being enunciated here would only be allocated to competitively-selected enterprises within the booster industries here being prescribed. Of the total resources available, no more than 20% may be earmarked for medium enterprises, while the remainder, 80%, will be earmarked for small enterprises. Within each division, the resources will be divided up into a public-sector venture-capital fund (10%), approximately on the lines of the currently-implemented EEF at the Bangladesh Bank. The remainder will be allocated to a credit fund. (This does not have anything to do with debt-equity ratio relevant in discussions of enterprise financing.) In the short run, the distribution of the credit fund and venture-capital fund will be the task of the BASIC Bank, which is here being recommended as the lead bank, it being borne in mind that BASIC Bank will closely work with the Advisory Panel. (Over the medium term, this responsibility will devolve to the SME Foundation.) The Ministry of Industry and the SME panel/Foundation, as the case may be, will determine modalities of how to implement both the credit-fund and the venture-capital fund. Projects to be funded from the venture-capital fund will be evaluated by a team of experts---a handful of subject-matter specialists---which will be constituted as a part of the implementation of SME Policy.

7.1.2 A publicly-mandated venture-capital scheme be created in deference to the rationale cited in the main text. It will also give a stimulus to the morale of entrepreneurs who commit in-house capital to projects with novel and potentially innovative processes and technologies with demonstrable potential for commercial success. Such projects have a-typically high risk and high returns. This recommendation is rationalized in terms of the private under-investment based on extensive, even potentially crippling, negative pecuniary externalities in certain among the booster industries prescribed here, with regard to the leaching of shareholder’s value outward from the enterprise.

7.1.3 The Advisory Panel working together with the Lead Bank in the short-term, and the SME Foundation in the medium- and long-term, would implement a transparent and meritocratic arrangement for steering public equity and debt resources into a genuinely deserving selection of enterprises. The development of human resources in both the BASIC Bank and the SME Foundation with regard to effective targeting of resources made available under public equity funding would remain imperative.

8.0 SMEs need for quality-assurance (QA) stamp-of-approval

8.1.1 Bangladesh Starndards and Trademark Institute (BSTI) with its accountability to SMEs fundamentally enhanced through appropriate SME representation in its governance might become the focal point for offering assistance with regards to securing quality-assurance (QA) certification from registrars of QA. Such association(s) would be eligible to grants from Government towards the cost of setting up testing laboratories.

8.1.2 Small, out-right co-financing grants may be available for registration with globally branded QA registrars (say with ISO 9001:2001 or equivalent).

9.0 The urgent need for a major overhaul of the availability of reliable and current data about the characteristics of SMEs

9.1.1 The Taskforce recommends that the Ministry of Industries immediately take up the conception and implementation of a multi-stage sample survey of SMEs in the metros and the district headquarters. Ideally, there should be a complete enumeration of all SMEs, the data from which should be of use in drawing up a survey methodology for a systematic stratified random sampling.

Medium-term Policies

The OECD have recently opined that one of the major challenges of transitional and developing countries in this age of sweeping globalization is to ensure rapid development of the SME sector by harnessing scarce human and institutional capacities in availing of trading and investment opportunities. In consonance with this imperative, the Taskforce puts forward a package of medium-term recommendations.

10.0 The formation of a small and medium enterprises (SME) Foundation

10.1.1 Over the medium term and beyond, the Government must remove all remaining obstacles impeding the formation of an SME Foundation as a pivotal platform for the delivery of all planning, developmental, financing, awareness-raising, evaluation and advocacy services in the name of all SME development as a crucially-important element of poverty alleviation. This should be a PKSF-like foundation

10.1.2 The Foundation would, it is recommended, strive to ensure the provisioning of one-window delivery of all legal, administrative and regulatory facilities for SMEs in Bangladesh.

11.0 A tactical plan of action that leads to enabling environment

11.1.1 The tactical plan is needed to move from gap analyses to skills upgrading based on the product(s) in the booster-sectors identified in this report, paying careful attention to the requirements of the production clusters in the inner cities (such as Dholai Khal, Mirpur,and the like).

11.1.2 An enabling environment in which both extant and aspiring entrepreneurs find within an easy reach most of what they direly need---information, counseling, mentoring, access to finance, technology and the means to market.

11.1.3 A serious effort is recommended for fostering a supply chain for technepreneurship. Bangladesh needs role models who can get intelligent and diligent people excited about creating value through successful entrepreneurship. It is recommended that the SME Panel/Cell and the SME Foundation conceive programs in popular media, and anchor(s) for them to match, modeled after some widely-accepted success stories.

11.1.4 An online-community, availing of relevant information and communications technologies, of both extant and aspiring SME entrepreneurs, to be hosted on a SME Web portal in the SME Cell/SME Foundation, for the divining of technology, product and market trends, for career-counseling to benefit science/technology graduates, for technepreneurial problem-solving session(s), for mentoring using guru-disciple symbiosis. (The Taskforce is fully aware that pulling off such innovation would require careful planning and nearly flawless execution).

11.1.5 A Web-based virtual front-office providing all start-up assistance to SME entrepreneurs (application forms, FAQs, limited directory-assistance, success stories, horror stories, etc): an one-stop-service, with all interactions between the user and the system stored on databases in the interest of providing institutional memory.

11.1.6 Information regarding standards of labor and output pertaining to overseas markets to benefit export-oriented SMEs should be put on the Web portal.

11.1.7 Such structures of electronic-governance should be supplemented, at least for a time, by human touch, with adequate budget to match, to physically attend to the needs of small entrepreneurs who take recourse to them. This is based on the recognition that a totally hands-off delivery of all requisite services to SMEs is an ideal whose achievement was likely to only happen in stages.

11.1.8 A high-performance fiber-optics communications backbone be put in place in six of the country’s largest metro-markets (namely, Dhaka, Chittagong, Rajshahi, Khulna, Sylhet and Barisal) so that the launch of some serious ICT-centric applications to benefit e-governance to the profit of SME development is not unduly handicapped by woefully inadequate bandwidth.

11.1.9 Technology-exchange programmes between countries with similar stages of development, and with a similar maturity of the infrastructural development for SME development, in the interest of rapid technology transfer.

12.0 Formulation of a package of capacity-building and training

12.1.1 Specialized professional expertise in carefully-chosen niches that the Panel of Advisors recommends has potential for a broad-based replication. Such training can be so packaged to such high standards that the recipients feel motivated to pay up user charges, however minimal.

12.1.2 Re-skilling boot camps would need to be organized for each of the booster industries by rotation, with a view to provide periodic technology grounding in efficacious skills among workers in SMEs.

12.1.3 (a) BSCIC/SCITI, BIM, and BITAC---where a lot of equipment, infrastructure and other resources are in place---should undergo a significant strategic reorientation of their own core competencies under the watchful eye of the Advisory Panel/SME Cell. In particular, the skills and competencies needed to enable SME hold their own in the booster-industries in the changed global business environment should be re-emphasized in the ensuing revamping of these institutions.

(b) Towards this end, technical assistance and investment are both urgently needed to appropriately accent the training and motivational in these institutions so that they can become durable fixtures of technical and managerial skills can be nurtured, in a format of public-private partnership.

12.1.4 The selection of such training courses and then the delivery of such training is an important instance of public-private collaboration.

12.1.5 R & D that lead to prototypes with a scope for replication in potentially high-impact product niches (eg in the field of mobile games, 3-D animation, or bio-optics, or the manufacture of computer-controlled industrial and medical appliances, or spurring the use of resin in new production applications, etc);

12.1.6 Curriculum of vocational training institutes be revised and reviewed to make it SME

development friendly.

13.0 Evolving of an SME eco-system: Issues of Institutional Delivery Chains

Two kinds of institutions are recommended, preferably for adoption by civil society role models/ catalysts, bearing in mind that these institutions will not be in the employ of the government.

13.1.1 The mission of the first kind is in trying to render stakeholders out of indigenous

young science and technology graduates by bringing to their agenda for poverty alleviation the currently-missing fulcrum of technological innovations to improve the quality of life of the poor in Bangladesh.

13.1 .2 The mission of the second is to achieve mastery over a rapidly-changing slate of

IT skills, and to then quickly disseminate them among young self-starters, including in the university/polytechnic/colleges’ stream, through a regime of online and “brick-and-mortar” interactions.

13.1.3 Efforts to accelerate the retention and promotion of women entrepreneurs should be

strengthened.

13.1.4 Greater stakeholder involvement in the entire gamut of activities by way of SME

development while maximizing the extent of ownership to be promoted.

14.0 Mitigating Impediments in clusters

14.1.1 One should make an effort to identify three or four promising lines of production in a handful of clusters in the metros of Dhaka and Chittagong, where small enterprises abound. Gap analyses that lead to the diagnoses of weaknesses that stymie their productivity should then be launched. Several technical assistance studies should then be aimed at these problems.

Long-term policies

15.0 Education and Generational Ethos

15.1.1 Bangladesh should increase the number, and enhance the quality of technical education in, the country’s polytechnic institutes in the interest of increasing the number of entrepreneurs.

15.1.2 Content of a kind that seeds, early on in the global-view of the children, the

attractiveness of entrepreneurial careers should be pressed into service.

15.1.3 Similarly, the accent on mathematics, science and technology fare should be made

stronger in the educational curricula of schools and colleges in Bangladesh.

15.1.4 A census of all small and medium enterprises in Bangladesh should be conducted.

This is likely to require a very large investment.

15.1.5 The legal and contractual framework prevailing in Bangladesh often increases

especially small enterprises’ handicaps. A survey of SMEs should be launched in order to identify these insidious legal irritants. These should then be systematically weaned from the world of Bangladeshi SMEs.

15.1.6 A small-claims court needs to be instituted, with requisite resources and mandate to

match.

Section I

Introduction

What follows is the first draft of a report of the Small and Medium Enterprises Taskforce: it includes the outputs from various companion efforts in the appendices. While borrowing selectively from those companion output, the draft of this report has made an effort within merely a two-week time-period to round out a theoretically self-contained, sectorally well-targeted, and articulated prescriptions for the policy-maker.

The members of the drafting sub-committee are acutely aware that, while they have actively sought to give space to as many of the relevant threads of both analyses, discussions and recommendations from the companion output, they may have occasionally failed to capture each item that was important. The drafting sub-committee however feels that by including all of that valuable companion output in the body of the overall report of the taskforce, albeit in the appendices, the reader has not been denied of the fruits of that fertile labour.

The report is structured as follows: The main report is broken into three further subsections. Section II essentially makes the point that in the wake of fairly accelerated trade liberalization, and the growing ascendancy of both China and India as manufacturing powerhouses, the small and medium enterprises (SMEs) in Bangladesh are exposed to the chills of oversized foreign competition like never before. Furthermore, as a result of both shifting technological paradigm, and falling communications costs, the competitive situation become more and more heightened. Section III defines the SMEs for purposes of policy discussion, going forward, and then highlights the criteria for sectoral targeting. This section also finalizes a list of nine booster industries which must become the focal point of a strategy for SME Assistance in Bangladesh for the next three years. Section IV then presents the policy and institutional recommendations of the Taskforce. This section also then issues forth a number of markers as to how the eligible enterprises are to be drilled down for. Section V then presents the summary and conclusions of the report.

There are five appendices to the report. Appendix-1 presents a detailed presentation of the criteria for sectoral targeting. Appendix-2 presents the entire report produced by the Bangladesh Enterprise Institute, titled. Appendix-3 presents the entire body of the recommendations that arose from the Workshop held on January 23, 2004. Appendix-4 presents the body of the report produced by the Bureau of Economic Research, Dhaka University. Appendix-5 presents the basis for the formulation by the Taskforce of its recommendation regarding the VAT on the enterprises in the nine booster industries.

Section II

SMEs in manufacturing: Trade liberalization and competitive landscape

Bangladesh

has liberalized conspicuously throughout the 1990s. As a result of this broad liberalisation, the overall orientation of trade policy in Bangladesh has altered considerably, in the process becoming significantly less protective and less biased towards import substitution activities and therefore less discriminatory against domestic exporters (and potential exporters). During the 1990s, the coverage of quantitative restrictions fell from 253 four-digit Harmonised System (HS) codes to 28, while the average tariff actually applied (based on total revenue collections) fell from 62.3 per cent to 23.0 per cent. Maximum customs duty declined from 350 per cent to 25 per cent during this period. In other words, Bangladesh has been a poster child of good, even docile, management of its trade and industrial policies.

Has this great effort yielded commensurate gains in terms of growth rates? The growth rates---of the GNP, the manufacturing value added and trading sectors in the Bangladesh economy for four overlapping quinquennial periods beginning from 1976/77 up to 2003--- shows no evidence at all of a significant quickening of the rate of economic growth in any of the three growth indicators: Whereas, the differential between the rates of border taxation between the two period is highly significant. The clear implication is that trade liberalization is a necessary but no means sufficient condition of a significant acceleration of growth rate of any given developing country.

This is not the place for a fully-blown analysis of Bangladesh’s trade and industrial policy. What we want however to do at the present time is to emphasize that with the dismantling of the protective tariff structure, Bangladesh has become more outward-looking in how it sources its requirements for various products. An obvious by-product of that trend has been that domestic manufacturing for domestic absorption in which especially small and medium firms have a natural interest may well have declined. Business interest in making a quick profit from indenting and trading has been piqued, while successful domestic manufacturing has become very challenging indeed.[1]

It is in this context that the recent policy interest in the SMEs has to be seen. In country after country, leaders have come to the conclusion that while accelerated trade liberalization is a necessary condition for creating an enabling environment for the broad-based growth of the manufacturing industries, the small and medium enterprises will require well-targeted assistance package, especially in terms of credit availability, skilling-up and mentoring on how to make most of the opportunities that an outward-looking regime of trade and industrial policies can unleash. This recognition has been instrumental in spawning in the recent times an urgent and sustained interest in the SMEs as building blocks of adjusting to the radically different market and policy scenarios in the post-liberalization era in Bangladesh.

It can’t of course be gainsaid that rapid trade liberalization has a knack for providing globally companies or globally-branded countries (such as China and India) a breakthrough for well-orchestrated penetration by their own products into debt-dependent countries in which SMEs are still in their infancy. Their capitulation is quick before the avalanche of imports of products from globally-branded competitors, at times from prices that suspiciously look like dumping, from countries that typically are capital-surplus. (A lot of the penetration by imports into Bangladesh by China and India in several lines of products is due to the formidable marketing clout of firms in the latter, not necessarily because the product was always of superior quality or most cost-effective.) Consequently, imports of the liberalizing countries can grow much faster than their exports ever can, given the non-price market barriers in the developed countries. In Bangladesh, imports payments have grown at a rate of 24% between 1988/89 and 2002/3, while exports have only grown at a rate of some 17% annually. The differences between those two growth rates are statistically highly significant.

While liberalization may well have created opportunities for gainful growth through trade on the demand side, such gains, going forward, must be seen as counterbalanced by formidable challenges on the supply side. First, competition has become increasingly fierce among the global and regional economies and enterprises, SMEs included. There are also many more producers competing for both existing and new markets and market segments for goods, services, finance and other wealth-creating technologies and knowledge. The competitive strength of China was notable in the above regard, even before the country became a member of World Trade Organization in December 2001. Indeed, market penetration and displacing pressures from China have been keenly felt by producers across Asia, particularly those suppliers (including SMEs) at lower stages of technology sophistication and relying on a high import content. At the same time, the fairly meteoric ascendancy of India since the turn of the century as a magnet for direct foreign investment (DFI), and the outsourcing of much design and development work from the OECD countries in industries as diverse from movie-editing to chip-design, is a sign, increasingly ominousness for competitiveness, of the present times.

Second, consumer preferences and market standards have become more sophisticated and exacting. Competitive advantage is now determined by several non-price parameters such as quality, health and safety, social equity in employment and production, and ecological compatibility of products and processes. Furthermore, market demand is constantly changing, a trend facilitated not least by the rapid advances in ICT, bio-engineering and new materials. In consequence, there are more frequent introductions of new products and processes, faster and more innovative design changes, shorter product cycles and smaller output batches, higher quality and greater mass customization, more just-in-time sourcing and greater punctuality in delivery. This is the context in which we are having to draw up a strategy for reviving the flagging SME sector in Bangladesh.

The goals before the SME Taskforce

In essence, the Taskforce’s cardinal goals are the following:

To recommend to the Government a body of what can be called SME Policy in Industrialization for Bangladesh;

To redefine the criteria of eligibility to the assistance package in terms of size of the enterprises;

To identify, on some well-agreed rational bases, a number of industries with a sizeable proportion of SMEs which then to create an assistance-package for;

To produce a fairly self-contained set of implementation guidelines for the Taskforce’s prescriptions to have lasting value;

In view of the rapid structural change in the world economy, especially in favor of increasingly weightless, paperless, knowledge-rich industries and services, to see structural change and remaining relevant as major imperatives for intervention by government and the civil society.

The Approach taken in this Report

A good deal of thinking and writing have taken place, especially since this Taskforce was formed in November 2003, on how to spur the growth of SMEs in Bangladesh. That scholarly activity produce several reports, including the report produced by the Bangladesh Enterprise Institute. The entire report of BEI can be seen in the Appendix-1 to this report. That report, as also some other work done by scholars on the subject of SMEs, produce many conclusions that are well-informed and valid. The Taskforce is much in the debt of the authors of those works.

Having said that, it is imperative that we make it frankly clear that we have taken the liberty, whenever appropriate, to employ a different methodology formulating the vital question(s) of real interest. More specifically, we have chosen to adopt a slightly more focused, perhaps more specific, approach to what is action-able within the admittedly limited financial and implementation resources of the government. The distinguishing feature of our methodology has been a constant concern with externally-induced constraints that affects, or are likely to affect, SMEs only but not others.

This “SMEs-only” global-view leads to side-tracking or totally omitting issues of a kind that affects alike both SMEs and large enterprises, for example. Given that the government is in any case likely to be starved of financial and managerial resources, the SMEs-only vantage-point appears to us to be more appropriate, both tactically and logistically.

We take pains in pointing out throughout where some of the other esteemed contributors, by using a more general approach, have been led to propound a significantly more expansive, more diffuse and less tractable package of assistance interventions for SMEs, compared with the one that we have put forward.

Let us give an example of what we have in mind here. The BEI writes: “Second, the government should be focused on creating an enabling environment comprised of sound macroeconomic and structural policies, good infrastructure, fair policy of competition, and efficiently functioning institutions (italics added). Economic policies should focus on creating a transparent and accountable legal and regulatory framework, a policy to improve quality and transportation system.” These policies will, if they are effectively implemented, increase the productivity, across-the-board, for all sizes of enterprises. How can they alleviate the competitive deficit of the SMEs versus large enterprises? An SME-only approach leads us to a more focused set of actions, with a more direct impact-route for SMEs’ constraints, is likely to address them in a clear and quantifiable manner.

The Role of SMEs in the National Economy of Bangladesh

According to UNESCAP, SMEs account for upwards of 90% of all firms in East and South-East Asia, as well as in Japan (Wattanapruttipaisha, 1999). It is also the biggest source of the region’s employment, including three-quarters of the region’s employment, in particular its women and young workers. The relative share of SMEs in total output and exports is typically much smaller, close to a third, or so.

In Bangladesh, large enterprises account only for a small percentage of all business enterprises. The percentage is much smaller in other than manufacturing than in manufacturing per se.

The manufacturing industry essentially comprises small and medium scale enterprises: by some accounts, 60% and 25%, respectively, of the workforce in manufacturing happen to be hired by small and medium enterprises. It is hardly an overstatement to say that small and medium enterprises are pretty much synonymous with manufacturing industry.

The scope of the work of this Task Force is about small and medium-sized enterprises in manufacturing industries or in trading or service-based ventures.

The SME Taskforce puts forward a well-structured approach to the problem of identifying booster sectors, and “eligible” enterprises within them. The essential elements in such a structure are

(a) a vision; (b) the objectives; and finally (c) the methods. With this, we now turn to the vision that has inspired the Taskforce.

Vision

The Taskforce believe that it was handed down a rare opportunity to make a difference, going forward, to the lot of SMEs in this country, draw up a tactical plan of action and finally a set of implementation details so as to spur small enterprises in a number of target industries. The period of the incumbency of this Taskforce has been one of thinking clearly about the vision and road-map for the development of SMEs. The vision guiding our work has included:

That legitimately promoting SMEs---or, at the very least, keeping SMEs, especially the small enterprises out-of-harm’s-way from the fierce competition powered by the large, formidably-branded, often multi-national, firms---would be widely accepted as an essential tenet of industrial policy of Bangladesh.

Only up to 20% of the budgetary allocation allocated to SMEs must be earmarked for the medium-sized enterprises.

Stake-holders of small and medium-scale enterprises shall run their business on a level playing field as regards the provisioning and pricing of each of the seven make-or-break inputs for any enterprise to compete, namely, equity capital; debt finance; technical skills; management skills; marketing know-how; gainful information, especially updates about market prices and about technical-substitution possibilities; and capacity for continuous innovation.

Such stakeholders on the other hand must also be ready for any change-management that survival may dictate or agility may require; have a high degree of management commitment to success; and finally must be willing to give to success what it takes by way of intelligent, prudent but diligent work whenever necessary.

There must be a minimum allocation certainly in the development budget for rendering legitimate public assistance to SMEs.

That there will be an Advisory Panel, equipped with professional expertise, with a lateral locus standi within the Ministry of Industry, mining its expert knowledge, scouring the profit horizon for the next big thing that especially small enterprises could have a natural ability to excel in. This Panel must be funded reasonably, with regard to what it takes to carry out rapid but knowledgeable appraisals. Such a brain-trust will work like a control-panel for screening-in on an early-on basis the products that small enterprises could own to succeed. This body will be tasked to identify thrust subsectors to steer the focus of small enterprises. The Panel will also supervise the professional work to be done within the SME Cell, which currently exists in the Ministry of Industry.

That inputs from service-organizations (technical, marketing and management know-how) will, whenever necessary, be accessibly priced and then be physically available when they are needed by SME businesses.

Objectives

The key objectives of the report of the SME Taskforce are to make a constructive and hopefully lasting contribution to identifying booster subsectors, and then to the leveling of the playing field for SMEs, and especially for small enterprises in these booster subsectors. SMEs, especially the small enterprises must be offered an enabling environment for routine operation and growth, unhindered by the predatoriness of stronger rivals, to name one of the most potent antithesis of their survival.

Methodology

The Taskforce has availed of a methodology that blends five best-practices, namely, (a) synopsis of first-principles that rationalize public intervention of any kind; (b) summary of deliberations from an intensive day-long workshop held in February, 2004; (c) the two reports produced by the BEI and BER; (d) lessons from case-studies of market and government failures; (e) stakeholder interviews (consultants, BSCIC, NASCIB, ATDP, some real-life entrepreneurs currently engaged in SMEs); and finally (f) distillation of international best-practice.

The drags the Taskforce faced

The Taskforce was handicapped by a paucity of statistical data evoking confidence in terms of the quantitative significance of SMEs in the national economy of Bangladesh. Comprehensive information as to the structure of industries where SMEs abound was also not available. Senior researchers from BIDS have pointed out that even data circulated by Bangladesh Small and Cottage Industries Corporation (BSCIC) regarding value added were deeply flawed. It is not just the case that necessary results were NOT to hand in terms of essentially descriptive characteristics of small enterprises (such as size, value-added per worker, capital per worker). The paucity of data and information was even more limiting as regards more substantive policy matters. The structure of costs, the relative importance of the sourcing of the inputs by small enterprises between domestic production versus imports, the ex-factory prices for small/medium firms of imported inputs (which can allow the calculation of the effective rate of border taxation of imports), etc, are some of the required data of substantial importance, which were virtually not at all available.

All too often, the members of the Taskforce were feeling as if we were on a mission to plan without facts or wage a war without maps. We had no evidence of certifiable authenticity as to which are the industries in which SMEs on our definition had prospered or withered. We had no firm evidence as to why they had prospered or withered. To the extent that casual empiricism led us to surmise that one or the other industry had seen their SMEs do well, there was no evidence at all to probe such episodes for their underlying drivers, for example, whether they had done well due to their ample wits, or they had done well due to public largesse (of cash subsidies, for instance). There was too little even of the data, not to speak of information or knowledge as to what are the quantitative laws of motions of SMEs in Bangladesh. Even NASCIB, the supposed association of small and cottage industries in Bangladesh, could not produce any real data purporting to show the business character of their avowedly 6,000 members. The situation regarding data was simply untenable, and cried for an early effort to alleviate its poverty.

Absent such any credible empirical basis for our work, we were reduced to depending on secondary research done by scholars, on abstract inferences we could reasonably make based on a priori theory, and on the accumulated practical work experience of a number of SME practitioners, both inside the Taskforce and outside. We freely admit that such an amalgam is scarcely an effective substitute for having and using hard results from seasoned analysts or analyses. Even so, we believe that, while not of a flawless pedigree, our recommendations are on the whole realistically actionable.

Section III

SMEs defined, and the booster sectors identified

Small and medium enterprises defined

For manufacturing industries, the Taskforce defines:

(a) an enterprise would be treated as small if, in today’s market prices, the replacement cost of plant, machinery, building, structures, and other parts/components, fixtures, support utility, and associated technical services (such as turn-key consultancy), etc, were to up to Tk. 15 million;

(b) an enterprise would be treated as medium if, in today’s market prices, the replacement cost of plant, machinery, building, structures, and other parts/components, fixtures, support utility, and associated technical services (such as turn-key consultancy), etc, were to up to Tk. 100 million;

For non-manufacturing activities (such as trading or other services), the Taskforce defines:

(d) an enterprise would be treated as small if it has less than 25 workers, in full-time equivalents;

(e) an enterprise would be treated as medium if it has between 25 and 100 employees;

(f) From both definitions above, land, once again, is excluded.

Some rationalization of this twin definition now seems to be in order. First, it is believed that most small enterprises don’t require very much of fixed capital---perhaps, in the vicinity of several tens of hundreds of thousands taka worth. For instance, in light engineering --- the archetypal kind of industry in which small enterprises abound---the cost of setting one up is almost always well within the mark of Tk. 15 million worth of investment. Second, a fabric-making establishment with a capacity say of some 5 million yards of output a year is only likely to cost up to Tk. 100 million by way of the replacement cost of plant and machinery to set up. While the first is an archetypal of the outer limit of what a small enterprise can take, the latter is representative of what a medium enterprise can take. Third, the decision to omit land from the definition of eligibility is easily defended: land in Bangladesh has been subjected to a valuation based on speculation, not market forces based on cost-based analyses: many entrepreneurs who self-select themselves into creating enterprises on their own land could be excluding themselves from legitimate public assistance if land were included. Fourthly, many entrepreneurs habitually think of the input of land into the economics of their own enterprises as a service to be bought, not owned outright.

The role of SMEs in the national economy

Table 1: Growth of Small-scale Industry Sector

Year	No. of Units		Employment
Year	Small	Cottage	Small	Cottage
1981	24,590	321,743	322,110	855,200
1991	38,294	405,476	523,472	1,331,032
2001 (end of June)	55,916	511,621	808,959	166,724
Average Annual Growth Rate	6.4%	3.0%	7.6%	4.7%

Source: Adapted from Ahmed, 2001

The highlight of Table-1 is in the fact that the growth rate, between 1978 and 2001, of employment is somewhat higher than for the number of establishments.

Table 2 Small-scale Industries: how other-than-farming drives their structure

Industry Sub-sector	No. of Units, 1978		No. of Units, 1991
Industry Sub-sector	Number	% of Total	Number	% of Total
Rice Mills	12,242	51.00	13,482	35.21
Bakery	2,157	90.2	2,765	7.22
Flour Mills	1,315	5.42	1,718	4.45
Light Engineering Works	1,120	4.66	2,252	5.88
Printing & Publishing	995	4.14	1,775	4.64
Readymade Garments	757	3.15	2,365	6.18
Saw Mills	713	2.97	1,023	2.67
Soaps	143	0.59	351	0.92
Plastic Products	74	0.31	725	1.89
Automobile Servicing & Repairing	296	1.23	550	1.44
Total	19,822	82.6%	27,006	70.5%

Note: The only aspect of this table that is hard to rationalize is the fact that the number of the establishments producing ready-to-wear garments should be as high as 757 as far back as 1978. As far as we knows, the first ready-to-garments establishment in Bangladesh was in fact established only in 19977 or 1978. We suspect that there has been a significant over count of both the number of establishments overall, and in particular, of the number of garments establishments in 1978. If correct, this would imply that the growth rate presented Professor Ahmed’s paper of the number of establishments between 1978 and 1991 is a vast understatement.

Source: Ahmed, 2001

Table-2 shows, on the other hand, is about what drives at least the numerical structure of the SSI with regard to the composition of input and output: in other words, with regard to structural change. Accepting at face value the numbers presented in that table, the proportion of establishments with their roots in agro-processing is seen to fall sharply during the period in question: from 65% to almost 46%. This is a change worth bearing in mind.

Role of SMEs in the export economy

A sector can contribute to export receipts in two ways, namely, (a) directly; and (b) through the production of intermediates, processed and semi-processed goods. How important are Bangladesh’s SMEs in terms of their contribution to the exports receipts of the country?

No credible information was available to the Taskforce to answer this question convincingly. There is however a lot of stylized evidence for other economies that suggest that SMEs are the mainstay for employment and work opportunities within Asian countries. In India, for example, SMEs account for some 80% of all enterprises, whether registered or not: they account for some 35% of the production of exportable goods of that country. In some of the most export-oriented sectors, such as ready-to-wear apparels, the percentage of the country’s exports from SMEs could reach pretty high figures (Box-1).

Box-1: SMEs in India’s export effort

Source: Mukherjee, 2002

Corresponding data are not really available for Bangladesh. Our own guesstimate is that for ready-to-wear garments and processed foods, the corresponding percentages would be close to 50-60%, and 65%, respectively. While more numerous data are not available, it will suffice for present purposes to say that SMEs in Bangladesh are also the very backbone of its economy to generate work opportunities especially for young people and females workers who want to work.

The Study by the International Consulting Group (ICG)

The only recent study which the Taskforce was able to lay its hands on is the draft report by Daniels (2003). There is no doubt that this is an important effort, as it analyzes data from 10096 enterprises throughout Bangladesh. The findings presented in this report are, however, less than usable for the report of the Taskforce: Daniels aggregates micro, small and medium sized enterprise into one catch-all category. While one has a composite category that is the direct obverse of “large” enterprises, it does not come to be very handy in the case of an analysis, as in this particular case, concerned with small and medium enterprises. Ideally, we would have liked to have the results where the “micro” enterprises have been screened out.[2]

Nonetheless, the following two tables from Daniel’s work appear to throw some light on what we have been trying to say in this report. The first of the table shows net profit earned by the sample enterprises, the latter being arrayed in order of their size (measured by the head-count). The result that leaps off the page is about an inverse association between size and net profit per worker: the large the enterprise, the less profitable it becomes. It is even correct to say that single-workers enterprises are the most profitable.

Daniel’s report as yet does not produce any cross-tabulation of net profit results in terms of both size and production of sector of origin, simultaneously. One could then delve a little deeper into these results. Daniel’s report also does not present any estimate as to the capacity utilization achieved by the various enterprises in the various situation. Absent such supporting analyses, it is not really possible to take our understanding very much farther than the fairly limited resolution of the issues that are really staring this Taskforce in the face.

This is one reason why the Taskforce believes it will be in the interest of SME policy work to have the data analyzed further, providing a breakdown between the “micro” and SME enterprises. Cross-tabulation of the data would also be of some considerable value. And finally, it will remain important to report the results of a variety of F-test on the data, in an attempt to perform testing of various hypotheses (that imply invoking null hypotheses of “no association”) on the data.

Table 3: Median net profits per worker per year by gender of owner and sector
	Female Owners		Male Owners
	Actual hours (Taka/work/year)	Full - time Equivalent (Taka/work/year)	Actual hours (Taka/work/year)	Full - time Equivalent (Taka/work/year)
Agriculture	6,800	10.014	8,917	11,118
Fishing			17,583	19,265
Manufacturing	6,908	8,350	19,796	13,657
Construction			21,000	19,220
Wholesale & retail trade and repairs	10,445	6,922	23,742	13,567
Hotels & restaurants	4,646	-567	17,793	6,794
Transport, storage & communication	13,475	4,197	31,938	18,104
Real estate, renting & business activities	13,788	13,293	19,850	12,219
Education			16,436	9,042
Health and social work	12,825	18,692	21,547	19,560
Other service activities	19,370	12,870	27,013	14,671
Overall Average	6,943	7,344	19,000	13,102

Source: (Daniel, 2003)

Table4: Median profits of MSMEs by size and gender of owner
		Female Owners		Male Owners
Size		Actual hours (Taka/work/year)	Full - time Equivalent (Taka/work/year)	Actual hours (Taka/work/year)	Full - time Equivalent (Taka/work/year)
Number Of workers	1	8,209	10,108	26,800	17,269
	2-5	5,571	4,795	17,833	11,247

	6-10	21,900	9,456	11,378	15,652
	11-20	10,862	10,418	14,800	12,458

	21-50	12,067	2,449	6,667	7,679
				6,313	8,030
	51-100

Total		6,943	7,344	19,000	13,102

Source: (Daniel, 2003)

It is not a little striking that, while the smallest enterprises should be registering such above-average net profitability, they should also be the objects of such sustained discrimination compared with larger enterprises when it comes to the question of accessing bank finance, or benefiting from other kinds of patronage, or indeed other service inputs such as mentorship. If the smallest of the enterprises can return such pretty stellar performance living by their own wits and due diligence, their financial prognoses would obviously become even much promising if policy-makers and their market rivals would only allow the playing-field to be just a little more level.

Having said that, the Taskforce is obviously under no delusion that the smallest enterprises are unlikely to present the most naturally advantageous point of intervention for any service-delivery program, should one be considered. The average cost of delivery (per unit of service delivered) is likely to be much higher if the smallest enterprises were to be chosen as the focal point of the intervention. Economics would appear to dictate that it is the largest among the small enterprises, and the medium-sized enterprises in the booster industries which, by virtue of significantly greater absorptive capacities and greater scales of output would, return greater cost-effectiveness in the results obtained. The Taskforce would return later to the selection criteria to be put forward as a part of its report.

We now turn to considering the rationale for legitimate public interventions to promote the cause of SMEs in the growth of employment, investment and output in Bangladesh.

Rationale for picking booster-sectors in Bangladesh

Where others have used the coinage of thrust sectors, we have chosen to go with booster sector (as in booster rockets in a multi-stage rocket). The latter seems to resonate better with providing a boost not just to the growth rate of the sector in question but also, through backward and forward linkages, to those of the associative sectors as well.

Before proceeding any further, we must address more fully as to why we concern ourselves with establishing the rationale for publicly intervening. Aren’t these rationale common knowledge by policy-makers? Aren’t they axiomatically accepted among the community of practitioners? What can prevent the Taskforce from coming directly to a short list of promising industries in which SMEs numerically abound? Are these rationale worth the trouble?

Discussions in various past workshops on SMEs evinced relatively scant exposure to these rationales for assistance. The Taskforce consider it to be a lapse. This is because any promotional strategy is, by definition, prescriptive (and not assertive). All too frequently, promotions claimed to be legitimate and necessary were divorced from any discussion of precisely why public interventions were needed in the first place. Because some sectors need to be prescribed as more eligible than others for public assistance (which has to be earned on one reasonable criterion or the other), it is imperative that prescriptive rankings be followed up with disciplined rationalizations: they allows a structured approach to a debate. If recommendations or prescriptions were based on nothing more than personal value judgements, this would invite a failure by design of the Taskforce. Prefacing our prescription with diagnoses in terms of some failure of the system. or of some over-arching rationale (that runs in terms of providing leadership to a myopic marketplace to bring the appropriate kind of structural change in the economy) was accepted as a requirement.

We present the detailed discussion of these rationale in Appendix-1 to this report. For present purposes, we merely present these criteria of sectoral targeting, in their bold relief. We believe the following are the main operative criteria

(1) Strong comparative advantage: Sectors in which factor endowments are such as to confer strong comparative advantage compared with others qualify as a booster. Comparative advantage will be judged in terms of the sector’s domestic resource cost (DRC).

(2) Rising demand: commodities for which marginal budget shares are higher than average budget shares are those for which demand is rising at a higher-than-average rate.

(3) Backward and forward linkages: Some processing industries---agro-processing is an apt example--- can capture well forward and backward production linkages with other sectors.

(4) When the playing-field is not level: Markets virtually never perform as in the text-books, but are frequently skewed due to vast economic inequalities, asymmetric distribution of information, knowledge, and social-networking connections. Careful public interventions are needed so that a broad symmetry of resources can be made to prevail.

(5) The need for structural transformation is not transparent to the uninitiated

The technology shelf---the inputs, and how they can best be combined---and the demand-mix are not static but is evolving fairly continuously. This forces on markets the responsibility of signaling the need and, more difficult, the nature of structural transformation that can facilitate survival. In this context, Governments are supposed to have a superiority in terms of access to strategic information versus the private-sector. Based on this, the creation of new institutional delivery chains can legitimately be posited, to deal with the imperative of structural transformation in the economy.

(6) Structure of incentives: manufacturing vs. trading

The “vulnerabilities” of SMEs

Many authors, including from India, have drawn up list of various vulnerabilities of SMEs. And once again, it is clear that such lists merely recount where SMEs falter, without making a distinction between where they falter due their own intrinsic weaknesses (justifying no public interventions) compared with where they falter due to market or policy failures, or due to non-existence of markets, or due to increasing returns to scale. This becomes quite clear from an examination of the following two boxes (box-2 and box-3).

If SMEs have to make a difference, they need to be compete on an even basis. The undeniable fact however is that there is a seemingly unbridgeable chasm between the competitive situation (capital, information, access to the powerful, educational attainment, etc) between the small and large enterprises. (Markets are thoroughly imperfect. And large firms dwarf SMEs in terms of supra-market influence and power.) Besides, it is also undeniable that a collapse in the cost of communicating across vast distances has tended to unify global markets like nothing before, as has a growing homogenization of consumption preferences: both have made competitive pressures even more intense. This has transformed the market dynamics, of which large as well as SMEs are merely parts. The competition is more chillingly intense now; the product life-cycles are shorter; production batches are smaller; information and communications technologies (ICTs) are much more of defining characteristics of a contender that counts. All of these add to the pressures under which SMEs have to operate.

According to Bangladesh Enterprise Institute, the following are the constraints to the growth of SMEs:

Box-2: Common constraints to the development of SMEs in Bangladesh

Note: The headings and categorization have been suggested by the Taskforce, (even though the individual issues are the creation of Bangladesh Enterprise Institute).

Source: Bangladesh Enterprise Institute, 2004.

And now follows an Indian take on the problem.

Box-3: Vulnerabilities of SMEs---an Indian take

Source: Mukherjee, 2002.

The similarity of the two slates of “presumed constraints” is close indeed.

Only some of the entries in box-2 and 3 above have a blow-by-blow equivalence or correspondence to market failures or government failures or any of the other well-agreed raison d’etre for public interventions in markets. Not each one of these really amounts to a market failure which hobbles SMEs only and not large enterprises too. For instance, poor infrastructure in Bangladesh ails large firms too, as does the absence of an effective and transparent legal system. Of course, large firms don’t allow these generically-relevant handicaps to put a crimp on their operating results. But that may simply be because they have preferred access to credit markets or capital markets---privileges that SMEs don’t have. It is credit markets in this case that fail with sectional handicaps, thus rationalizing public interventions with sectional constituencies: not public infrastructure. The implications are crystal clear: a pitch for more investment on public infrastructure does not really belong in as SME-only slate of public interventions. A pitch for making more financial resources available for channelling into SME financing clearly belongs there.

This is not to say that SMEs won’t benefit financially if infrastructure were to be improved. They would. Point is that investment on infrastructure would benefit all sizes of enterprises: it is unlikely to remove what handicaps SMEs from competing evenly against large enterprises.

Another test is where it is possible to exclude firms in other than the target category from benefiting from the interventions in question. This test spells the difference between generic vulnerabilities (which strictly don’t warrant ameliorative interventions with sectional targets), and vulnerabilities that result from discrimination in the market-place or failures of policies (which do warrant them).

The Taskforce’s own catalogue of market- and policy-failures

The Taskforce have therefore exercised its prerogative to put down a handful of handicaps which affect SMEs differentially compared with their competitors. They appear in box-4:

Box-4: The Taskforce’s own diagnosis of the most important rationale for action

Now that we have laid bare the ingredients of the Taskforce’s global view, we can now proceed to the rationalizations that lead to the recommendations that it would like to make. Our recommendations fall into three categories, based on underlying time-horizons: short (impact in 18 months); medium (18-48 months); and long.

Recommendations for Short-term

The Case for Venture Capital

The Taskforce recognizes that the knowledge-economy has greatly increased the stakes to investments that are outward-oriented, have a high degree of intellectual-property (IP) content, and a high degree of leakage in the returns to such investment. Examples are software-development, manufacture based on the development of prototypes, creation of design leading to prototyping, enterprises naturally akin to creating intellectual-property, etc. In every case, there is an intractable degree of seepage of shareholder value: in economics, this refers to externalities. When externalities are outward, private rates of return tend to be lower than social rate of return, causing relative under-investment in such products or services. Gestation lag would on that account tend to be longer. Risk-averse private venture capital would likely be stifled by such longer gestation lag. Hence the imperative in such products or services for public venture-capital participation, so as not to stymie potentially remunerative private enterprise. Information-technology and electronics---two industries who in any case are closely inter-related---are prime examples of such negative externalities and, therefore, of such public venture-capital participation.

Such social commitment to the availability of risk capital, responding to the special circumstances of technologically-nuanced fields of enterprise development, is widely accepted as effective practice in India for example. The Small Industries Development Bank of India (SIDBI) has already set up a venture capital fund. Rating for possible funding is done using a thoroughly transparent and meritocratic process, overseen by a team of subject-matter specialists, who act independently and conscientiously. Such professional vetting is not challenged by the Chief Executive of SIDBI. The Taskforce recommends something similar for adoption in Bangladesh. We recommend that BASIC Bank be selected as the custodian of all social equity funding into SME development.

The Case for a Proactive Lending Package for SMEs

The credit crunch slapping especially the small enterprises must be alleviated. Towards this end, worthy business ventures in designated SME booster sectors should be declared eligible to loans that are carefully scoped and appraised for their bank ability. We recommend that BASIC Bank be declared the Lead Bank for the delivery of such credit on concessionary terms.

The Case for restructuring the tax-package for very small manufacturers

The Taskforce believe that for SMEs, the VAT by being collected ex-factory increases the likelihood of double VAT taxation. The onus of the proof of first-time VAT payment to the tax assesses, the SMEs, leads frequently to denial of payment-credit. The small enterprise does not have enough clout vs the large trader, who had sold him the commodity, to press his need for documentary proof about VAT payment at the border. The small enterprise ends up paying the VAT twice over on account of imported inputs.

We recommend that rather than being slapped with an ex-factory VAT, small enterprises with fixed investment (without including land and building) of up to Tk. 3 million would be assessed a Turnover Tax at the rate of 1.5%. Enterprises with fixed investment ranging between Tk. 3 million and 15 million (again excluding land and building) would be assessed a Turnover Tax at the rate of 2.5%

On top of this, a further VAT at 1.5% is to be collected at retail point.

India

exempts all small manufacturing enterprises with capital

investment under Rs. 1 crore from all types of excise duty. Besides, they have formed a separate Ministry for Small Scale and Micro-Industries.

There should be no departure from the principle of duty cascading

At present, a UPS for computer is totally tax and VAT free if imported with a computer, and one has to pay only 7.5% import duty if imported separately. On the other hand for local production of UPS one has to pay 37% to 97% tax and VAT at import on different raw materials and spare parts.

VAT for imported UPS at the point-of-sale (POS) is zero. In sharp

contrast, a local manufacturer is required to pay VAT at the rate of 15% per schedules prescribed by the NBR.

The same applies for computers and solar PV generator systems, almost all of which are electronic. Again at sales (at production point), VAT is collected on the locally produced ones, while it is exempted for imported ones. Local capabilities exist to produce high quality UPS and the main electronic circuits for solar PV systems, but the Government tax policies have not only left the local producers unprotected, they did not even allow the local producers to play on a level ground. The existing policies also deterred local producers from attempting at producing or assembling any other parts of Computers and Solar PV systems. The suggested clauses will allow the local producers at least to play on a level ground, and will also deter such unreasonable reduction of tax and VAT on imported finished products.

The total incidence of all taxes at import (Import duty, Advance Income tax, Development surcharge, VAT, etc.) on the raw materials and spares of locally produced commodities must not, owing to the generally-accepted principle of cascading, exceed that on corresponding finished imported commodities. If such taxes for a finished commodity are reduced at any time, then the taxes on the raw materials and spares of that product will automatically stand adjusted following the above principle.

If VAT at sales is waived or reduced on an imported finished product, the total VAT collected for the same product at the point of manufacture and at the point of sales shall not be more than the above VAT at sales for the imported product, and this will also be activated automatically.

The Case for a Medium-term Tactical Plan of Action

A tactical plan of action is needed preparatory to ensuring that an enabling environment is created in which both extant and aspiring SME entrepreneurs find within an easy reach most of what they direly need---information, counseling, mentoring, access to finance, and marketing and technical assistance.

More specifically, the tactical plan will entail articulation of delivery chains for technepreneurship---a hybrid using functioning entrepreneurship in technologically-steeped lines of productive ventures to produce goods which enjoy high marginal budget shares but also demands mentoring in incubators---some kind of a crucible where the green young are moulded into increasingly savvy entrepreneurs under the watchful oversee of the veterans of industry.

Capacity-building

A capacity-building package will be needed to keep the process of SMEs development speeding along.

The tactical plan aiming at creating an enabling environment with regard to the availability of information, counseling, mentoring, access to finance and markets will be needed.

Fostering a supply chain for technepreneurship will be emphasized. Towards this end, mobilization campaign will need to be mounted to spur interest by intelligent and diligent people in careers of successful entrepreneurship. The SME Panel/Cell might usefully conceive programs in popular media, and motivate appropriate anchor(s) for them, modeled after some highly-regarded success stories.

The Taskforce would like to recommend a ground-breaking approach towards bonding and harnessing an entire online-community of both extant and aspiring SME entrepreneurs, to be hosted on a SME portal in the SME Cell, for the divining of technology, product and market trends, for career-counseling to benefit science/technology graduates, for technepreneurial problem-solving, for mentoring using guru-disciple symbiosis ---aiming at an end-to-end virtual-learning intellectual-property formation.

A Web-based virtual front-office providing all start-up assistance to SME entrepreneurs (application forms, FAQs, limited directory-assistance, success stories, horror stories, etc): an one-stop-service, with all interactions between the user and the system stored on databases in the interest of providing institutional memory.

Information regarding standards of labor and output pertaining to overseas markets to benefit export-oriented SMEs should be put on the Web portal.

A high-performance fiber-optics communications backbone be put in place in four of the country’s largest metro-markets (namely, Dhaka, Chittagong, Rajshahi and Khulna) so that SME entrepreneurs there can increasingly be in sync with the fundamental drivers of competitiveness in the new economy.

We all know that technology now enables the migration of the cluster eco-system(s) to Web-based structures and communities, in which the MOI and other stakeholders can be motivated to create portlets conducive to sharing of SME-friendly content or knowlets: here, information and communications technologies will need to be pressed into service.[3]

Availing of the principle of locational self-selection

The inner cities within large metropolis such as Dhaka and Chittagong hum with much small-scale production. This is where most of the production clusters in which SMEs abound can be found. Clusters are like eco-systems in which the small entrepreneurs have themselves forged a certain, mostly highly intelligible, division of functional specialization over many years of time. Sometimes, these output hubs also migrate towards the suburbs, to escape the crush on narrow roads. Either way, targeting these small, own-account proprietors, whose own lives often typify rags-to-riches stories emphasizing sheer hard work, is one way to press into service the first-principle of self-selection. The rich does not go to inner city to make a living: this in one line is the epitome of justification for what we have just said about self-selection. Entrepreneurs who try to make a living within the crush, the congestion, the crime and the foul smell of the inner cities in any of the nine booster industries certainly pass the first principle of locational self-selection to qualify for some measure of public assistance.

Training

BSCIC---mainly in the form of SCITI---, BIM and BITAC are all institutions in the MOI with a great deal of past investment in equipment, infrastructure and trained human resources. It is agreed that currently a fair proportion of these resources are inadequately utilized. The OECD has emphasized that quickly enhancing human resource and institutional development capacities is a sine qua non of letting SMEs contribute their fullest towards poverty generation in the current globalization scene. BSCIC/SCITI, BIM, and BITAC should undergo a significant strategic reorientation of their own core competencies under the watchful eye of the Advisory Panel/SME Cell. In particular, the skills and competencies needed to enable SME hold their own in the booster-industries in the changed global business environment should be re-emphasized in the ensuing revamping of these institutions.

Towards this end, technical assistance and investment are both urgently needed to appropriately accent the training and motivational in these institutions so that they can become durable fixtures of technical and managerial skills can be nurtured, in a format of public-private partnership.

Section IV

The Selection of booster-industries as foci of SME development

By now, we have identified all the market and policy failures that hobble the performance of the SMEs and have clearly expanded upon the rationale for various interventions recommended. It now remains to pick the industries to be recommended as booster sectors for a time-horizon of, say, 3 years.

The following are the industries:

Rationale

Light-engineering and metal-working Linkage

effects/natural survivability

Software/IT-enabled products Structural

change/intensively requires innovation

Electronics/Electricals Rising

demand/intensively requires innovation

Plastics & other synthetics products Rising demand

Leather & leather goods Linkage effects

Knitwear / Garments Rising demand

Agro-processing/agri-business Linkage effects

Healthcare and diagnostics Structural change/rising demand

Educational services Structural change

Pharmaceuticals/cosmetics/toiletries Structural change/rising demand

What are the (various) rationale for our selecting these industry? They now follow, seriatim.

Light engineering and metal working is an industry in which local nature of the markets to be served implies that the typical output batch is fairly small, compared with minimum efficient scale (MES) of globally-branded companies. This offers a certain extent of natural protection from competition. In addition, this industry is suffused with both backward and forward linkages.

Software/IT-enabled products are worthy of selection because they intensively use knowledge of digital and/or web technologies. This is therefore easily accommodated on the basis of structural change. Furthermore, the marginal budget share of software-services in the countries in the Western world---the engines of the global division of labor---is a lot higher than the ABS. This is therefore a industry facing rising demand, too.

The selection of electronics and electricals---computer components, peripherals, stabilizers, UPS, amplifiers, switches, plugs, printed circuit boards (PCBs), etc.---is legitimized owing to rising demand, as they provide among the foundation of industrialization and urban development. Given the per capita income of Bangladesh, they are characterized by high degree of linkage effects: while their growth spurs the demand for investment goods required in their production (backward linkage), the forward linkage part is likely to come from requirement for repair/maintenance services.

Plastics and other synthetic products (such as resin) have been known to lead factor substitution, and has been selected on this basis. This sub-sector has registered among the highest growth rates of any, according to Table-2 in the above.

The selection of leather and footwear is driven by the recognition that the livestock sector in Bangladesh has ways to go in terms of matching the yield rates even in neighbouring India---not to speak of China (where they are even higher). This suggests that leather production in Bangladesh has ways to go. Clearly, the production of footwear, in large part for exports, is a natural ambition for a SME roadmap. This industry is really suffused with backward and forward linkages.

The selection of knitwear can be rationalized in terms of rising demand and strong comparative advantage.

Agro-processing/agri-business/plantation agriculture/specialized agriculture industry in Bangladesh has a future for itself. Its selection is anchored in strong comparative advantage and rising demand. However, the Taskforce would recommend that it had better be the agro-processing industries of the non-traditional type, of the kind that moves away from rice milling and flour milling. We need agro-processors who essentially meet the following criteria:

Intensively use farm produce that boast plentiful marketed surplus, and in addition are complementary to fixing nitrogen in the soil;

Have enterprises and entrepreneurs who can deal with what it takes to successfully negotiate the hurdles implied by increasingly rigorous phyto-sanitary, and other epicurean restrictions in the importing countries;

Healthcare & Diagnostics

The Taskforce recommends this subsector largely based on its rising demand domestically. Moreover, growing size of domestic market for specialized diagnostics has started to create opportunities for legitimate import substitution.

Educational Services

Bangladesh

is clearly surplus in human beings. To convert human beings into human resources must surely be a service industry worth hundreds of billion of Taka worth of potential market size. And quality education that keeps successfully following the money trail meets the bill of both rising demand, and structural change.

Pharmaceutical, cosmetics and toiletries

In 2005 and beyond, Bangladesh is one of the few countries in South Asia to benefit from an exclusion from the patent regime being globally introduced by World Trade Organization (WTO). This by bringing forth some significant competitive advantages of pharmaceutical companies will likely create opportunities, especially in the medium-enterprise category, for that industry in Bangladesh. It is important therefore to accent public assistance in that particular direction in order to take advantage of such a market possibility.

Designer, aesthetically challenging personal wear and effects

The Taskforce accepts at least one booster sector to be selected based on the need to concentrate efforts for promoting women entrepreneurs. This booster sector is called, for want of a better term, “designer, aesthetically-challenging, personal wear and effects”.

Section V

Taskforce’s Recommendations by way of Policies & Institutions, Implementation Guidelines

1. Identification of booster Sectors

Electronics and electricals;

Software-development;

Light engineering and metal-working;

Agro-processing/agri-business/plantation agriculture/ specialist farming/tissue-culture;

Leather-making and leather goods ;

Knitwear and ready-made garments;

Plastics and other synthetics;

Healthcare & diagnostics;

Educational services;

Pharmaceuticals/cosmetics/toiletries;

Designer, aesthetically-challenging, personal wear and effects;

Notwithstanding the prescriptive nature of the foregoing recommendation, non-classification as such should not disqualify an SME from financial assistance from any scheduled banks.

Short-term Policies

2.1 Framing and carrying out policies for SME development

2.1.1 An unambiguous policy statement declaring that the Government consider SMEs, especially small enterprises, as an integral and important element in the cause of economic growth and poverty alleviation in Bangladesh.

2.1.2 An SME Advisory Panel be constituted to perform the services of a specialist brain-trust for the Ministry of Industries (MOI). Likewise, an SME Cell is set up in MOI to help implement the SME policies.

2.1.3 A roadmap and a tactical plan of action, to be conceived and then detailed by SME Advisory Panel and the SME Cell.

The Panel will report to the Minister of Industries. The tactical plan of action is about what it will take to move SMEs forward the way they should.

2.2 Identification of SMEs

2.2.1 Defining enterprises for targeting purposes in terms of either fixed investment or head-count is an well-established policy practice, for instance in India. A one-attribute definition typically reduces the proportion of indeterminate cases compared with a two-attribute one. Any definition, no matter how well-thought-through is bound to involve some degree of arbitrariness.

2.2.2 For manufacturing industries, the Taskforce recommends that:

an enterprise should be treated as small if, in today’s market prices, the replacement cost of plant, machinery and other parts/components, fixtures, support utility, and associated technical services by way of capitalized costs (of turn-key consultancy services, for example), etc, were to up to Tk. 15 million;

from both definitions above, land is excluded.

2.2.3 For non-manufacturing activities (such as trading or other services), the Taskforce

defines:

an enterprise should be treated as small if it has less than 25 workers, in full-time equivalents;

an enterprise would be treated as medium if it has between 25 and 100 employees;

From both definitions above, land and structures, once again, are excluded.

2.2.4 By making the definition especially of small enterprises more inclusive with a lower threshold for assistance eligibility, the outreach of SME policy for poverty alleviation and employment generation has been augmented versus all past statements of industrial policies.

2.2.5 Our proposed definition sets the threshold smallness at a much lower level compared with the treatment in the existing Industrial Policy of Bangladesh. The Taskforce recognizes that there will remain a need for National Board of Revenue (NBR) and other implementation arms of the government to incorporate the definitions in the declared SME policy within their own operating environment.

2.3 Setting criteria for deserving enterprises

2.3.1 Enterprises which, as well as meeting the size requirement proposed by the Taskforce, must have (i) proven credentials as an entrepreneur (for example, membership in well-recognized social occupational groupings) with requisite presence and facilities on the ground; (ii) an above-average insiders’ equity participation; (iii) certifiable professional specialization of top-management in relevant production skills; (iv) the stamp of approval from globally-recognized quality-assurance bodies (ISO 9001:2000, for example); (v) high management commitment to innovation. Women entrepreneurs will be accorded preference, wherever appropriate.

2.4 Rationalization of VAT and other budgetary measures

2.4.1 We recommend that very small manufacturing enterprises with fixed investment of up to Tk. 3 million (three million), should be completely exempt from any obligation to pay VAT. For manufacturing enterprises with fixed investment greater than Tk. 3 million and less than Tk. 15 million, the corresponding turnover tax will be 2.5% (two and a half percent).

2.4.2 We recommend that such very small enterprises (with up to Tk. 3 million in fixed assets not counting land and building) should be given a tax holiday for 7 (seven) and 10 (ten) years from their initiation, for enterprises in the cities of Dhaka/Chittagong and all other areas/locations respectively. Both recommendations will, we propose, be applied in all industries, not just the boosters.

2.4.3 Small industries in technologically-nuanced industries take substantial degrees of risk in new products through R&D. They crucially assist in developing technology base of Bangladesh. Arguably, these grounds warrant that Government help by granting resources to alleviate the pain, at least in part, from such R&D. This is why we have recommended that public sector should make available equity resources to SMEs.

Exceptions:

2.4.4 The above two facilities will not be given to : i) Joint Venture industries with foreign partners, ii) Sectors that should be discouraged based on health, environment, or other grounds such as Tobacco, liquor and narcotics related industries.

Two blanket clauses to protect local industries from irrational tax policies

2.4.5 The total incidence of all taxes at import (Import duty, Supplementary Duty, Regulatory Duty, Development surcharge, VAT, etc.) on the raw materials and spares of locally produced commodities cannot exceed that on corresponding finished imported commodities. If such taxes for a finished commodity are reduced at any time, then the taxes on the raw materials and spares of that product will automatically stand adjusted following the above principle.

2.4.6 VAT on imported products shall not be less than that on like domestic products. Any reduction in existing VAT on imported products shall be automatically matched by an equal reduction on VAT on like domestic products.

3.0 Levelling the playing-field in credit and venture-capital markets

3.1.1 A credit-distribution package will need to be worked out by the Ministry of Industries. An innovative scheme---rather like a two-stage screening mechanism---that can really probe for the bone fide of the applicants as entrepreneur materiale will be deployed. Donor financial resources made available specifically to help with implementation of SME policy being enunciated here would only be allocated to competitively-selected enterprises within the booster industries here being prescribed. Of the total resources available, no more than 20% may be earmarked for medium enterprises, while the remainder, 80%, will be earmarked for small enterprises. Within each division, the resources will be divided up into a public-sector venture-capital fund (10%), approximately on the lines of the currently-implemented EEF at the Bangladesh Bank. The remainder will be allocated to a credit fund. (This does not have anything to do with debt-equity ratio relevant in discussions of enterprise financing.) In the short run, the distribution of the credit fund and venture-capital fund will be the task of the BASIC Bank, which is here being recommended as the lead bank, it being borne in mind that BASIC Bank will closely work with the Advisory Panel. (Over the medium term, this responsibility will devolve to the SME Foundation.) The Ministry of Industry and the SME panel/Foundation, as the case may be, will determine modalities of how to implement both the credit-fund and the venture-capital fund. Projects to be funded from the venture-capital fund will be evaluated by a team of experts---a handful of subject-matter specialists---which will be constituted as a part of the implementation of SME Policy.

3.1.2 A publicly-mandated venture-capital scheme be created in deference to the rationale cited in the main text. It will also give a stimulus to the morale of entrepreneurs who commit in-house capital to projects with novel and potentially innovative processes and technologies with demonstrable potential for commercial success. Such projects have a-typically high risk and high returns. This recommendation is rationalized in terms of the private under-investment based on extensive, even potentially crippling, negative pecuniary externalities in certain among the booster industries prescribed here, with regard to the leaching of shareholder’s value outward from the enterprise.

3.1.3 The Advisory Panel working together with the Lead Bank in the short-term, and the SME Foundation in the medium- and long-term, would implement a transparent and meritocratic arrangement for steering public equity and debt resources into a genuinely deserving selection of enterprises. The development of human resources in both the BASIC Bank and the SME Foundation with regard to effective targeting of resources made available under public equity funding would remain imperative.

4.0 SMEs need for quality-assurance (QA) stamp-of-approval

4.1.1 Bangladesh Starndards and Trademark Institute (BSTI) with its accountability to SMEs fundamentally enhanced through appropriate SME representation in its governance might become the focal point for offering assistance with regards to securing quality-assurance (QA) certification from registrars of QA. Such association(s) would be eligible to grants from Government towards the cost of setting up testing laboratories.

4.1.2 Small, out-right co-financing grants may be available for registration with globally branded QA registrars (say with ISO 9001:2001 or equivalent).

5.0 The urgent need for a major overhaul of the availability of reliable and current data about the characteristics of SMEs

5.1.1 The Taskforce recommends that the Ministry of Industries immediately take up the conception and implementation of a multi-stage sample survey of SMEs in the metros and the district headquarters. Ideally, there should be a complete enumeration of all SMEs, the data from which should be of use in drawing up a survey methodology for a systematic stratified random sampling.

Medium-term Policies

6.0 The formation of a small and medium enterprises (SME) Foundation

6.1.1 Over the medium term and beyond, the Government must remove all remaining obstacles impeding the formation of an SME Foundation as a pivotal platform for the delivery of all planning, developmental, financing, awareness-raising, evaluation and advocacy services in the name of all SME development as a crucially-important element of poverty alleviation. This should be a PKSF-like foundation

6.1.2 The Foundation would, it is recommended, strive to ensure the provisioning of one-window delivery of all legal, administrative and regulatory facilities for SMEs in Bangladesh.

7.0 A tactical plan of action that leads to enabling environment

7.1.1 The tactical plan is needed to move from gap analyses to skills upgrading based on the product(s) in the booster-sectors identified in this report, paying careful attention to the requirements of the production clusters in the inner cities (such as Dholai Khal, Mirpur,and the like).

7.1.2 An enabling environment in which both extant and aspiring entrepreneurs find within an easy reach most of what they direly need---information, counseling, mentoring, access to finance, technology and the means to market.

7.1.3 A serious effort is recommended for fostering a supply chain for technepreneurship. Bangladesh needs role models who can get intelligent and diligent people excited about creating value through successful entrepreneurship. It is recommended that the SME Panel/Cell and the SME Foundation conceive programs in popular media, and anchor(s) for them to match, modeled after some widely-accepted success stories.

7.1.4 An online-community, availing of relevant information and communications technologies, of both extant and aspiring SME entrepreneurs, to be hosted on a SME Web portal in the SME Cell/SME Foundation, for the divining of technology, product and market trends, for career-counseling to benefit science/technology graduates, for technepreneurial problem-solving session(s), for mentoring using guru-disciple symbiosis. (The Taskforce is fully aware that pulling off such innovation would require careful planning and nearly flawless execution).

7.1.5 A Web-based virtual front-office providing all start-up assistance to SME entrepreneurs (application forms, FAQs, limited directory-assistance, success stories, horror stories, etc): an one-stop-service, with all interactions between the user and the system stored on databases in the interest of providing institutional memory.

7.1.6 Information regarding standards of labor and output pertaining to overseas markets to benefit export-oriented SMEs should be put on the Web portal.

7.1.7 Such structures of electronic-governance should be supplemented, at least for a time, by human touch, with adequate budget to match, to physically attend to the needs of small entrepreneurs who take recourse to them. This is based on the recognition that a totally hands-off delivery of all requisite services to SMEs is an ideal whose achievement was likely to only happen in stages.

7.1.8 A high-performance fiber-optics communications backbone be put in place in six of the country’s largest metro-markets (namely, Dhaka, Chittagong, Rajshahi, Khulna, Sylhet and Barisal) so that the launch of some serious ICT-centric applications to benefit e-governance to the profit of SME development is not unduly handicapped by woefully inadequate bandwidth.

7.1.9 Technology-exchange programmes between countries with similar stages of development, and with a similar maturity of the infrastructural development for SME development, in the interest of rapid technology transfer.

8.0 Formulation of a package of capacity-building and training

8.1.1 Specialized professional expertise in carefully-chosen niches that the Panel of Advisors recommends has potential for a broad-based replication. Such training can be so packaged to such high standards that the recipients feel motivated to pay up user charges, however minimal.

8.1.2 Re-skilling boot camps would need to be organized for each of the booster industries by rotation, with a view to provide periodic technology grounding in efficacious skills among workers in SMEs.

8.1.3 (a) BSCIC/SCITI, BIM, and BITAC---where a lot of equipment, infrastructure and other resources are in place---should undergo a significant strategic reorientation of their own core competencies under the watchful eye of the Advisory Panel/SME Cell. In particular, the skills and competencies needed to enable SME hold their own in the booster-industries in the changed global business environment should be re-emphasized in the ensuing revamping of these institutions.

8.1.4 The selection of such training courses and then the delivery of such training is an important instance of public-private collaboration.

8.1.5 R & D that lead to prototypes with a scope for replication in potentially high-impact product niches (eg in the field of mobile games, 3-D animation, or bio-optics, or the manufacture of computer-controlled industrial and medical appliances, or spurring the use of resin in new production applications, etc);

8.1.6 Curriculum of vocational training institutes be revised and reviewed to make it SME

development friendly.

9.0 Evolving of an SME eco-system: Issues of Institutional Delivery Chains

Two kinds of institutions are recommended, preferably for adoption by civil society role models/ catalysts, bearing in mind that these institutions will not be in the employ of the government.

9.1.1 The mission of the first kind is in trying to render stakeholders out of indigenous

9.1.2 The mission of the second is to achieve mastery over a rapidly-changing slate of

9.1.3 Efforts to accelerate the retention and promotion of women entrepreneurs should be

strengthened.

9.1.4 Greater stakeholder involvement in the entire gamut of activities by way of SME

development while maximizing the extent of ownership to be promoted.

10.0 Mitigating Impediments in clusters

10.1.1 One should make an effort to identify three or four promising lines of production in a handful of clusters in the metros of Dhaka and Chittagong, where small enterprises abound. Gap analyses that lead to the diagnoses of weaknesses that stymie their productivity should then be launched. Several technical assistance studies should then be aimed at these problems.

Long-term policies

11.0 Education and Generational Ethos

11.1.1 Bangladesh should increase the number, and enhance the quality of technical education in, the country’s polytechnic institutes in the interest of increasing the number of entrepreneurs.

11.1.2 Content of a kind that seeds, early on in the global-view of the children, the

attractiveness of entrepreneurial careers should be pressed into service.

11.1.3 Similarly, the accent on mathematics, science and technology fare should be made

stronger in the educational curricula of schools and colleges in Bangladesh.

11.1.4 A census of all small and medium enterprises in Bangladesh should be conducted.

This is likely to require a very large investment.

11.1.5 The legal and contractual framework prevailing in Bangladesh often increases

11.1.6 A small-claims court needs to be instituted, with requisite resources and mandate to

match.

Appendix-1

Criteria for Sectoral Targeting

The following are some of the major criteria that could be used for ranking various sector or sub-sectors in order of degree to which they were entitled to public assistance (bearing in mind that the Taskforce was severely constrained by the lack of firm data in terms of sectoral characteristics):

Strong comparative advantage: Sectors in which factor endowments are such as to confer strong comparative advantage compared with others qualify as a booster. Comparative advantage will be judged in terms of the sector’s domestic resource cost (DRC). DRC is the ratio between what it takes, in terms of nontradeable domestic resources, to produce a unit of output, to the net value added, in border prices, created by the latter. Agro-processing would be one such sector.

Rising demand: Pedagogically, commodities for which marginal budget shares are higher than average budget shares are those for which demand is rising at a higher-than-average rate. Marginal budget shares by exceeding the average budget shares over a period of time gradually augment the latter themselves. Just as the tide is said to be raising all boats, rising demand especially calls attention to items of assistance needed to ensure that all requisite and material inputs are available on hand, so that the opportunity represented by rising demand is not lost upon the entrepreneurs in the sectors in question. Electronics and electricals and metal-using sectors come to mind as examples here, as do software development.

Backward and forward linkages: Some processing industries---agro-processing is an apt example--- can capture well forward and backward production linkages with other sectors. Examples of backward linkages include manufacturing industries for meat conservation, machinery, and equipment, packaging materials and intermediate goods used in the processing (of meat, milk, to give just two examples). Examples of forward linkages include tanning operations, manufacture of footwear and other leather goods based on hides and skins. Light engineering come to mind as an example, as does agro-processing.

Investment in agro-processing not only adds value to agricultural commodities, but often makes them more tradable than they would be otherwise. Commercialization requires investment in processing of commodities to turn largely non-tradable rural economies into market-based economies. Improved processing of food and other farm produce can help improve the elasticity of supply of items that urbanites mostly want, and which are otherwise not always available, or are in limited supply, as urban income increases. Such improvements allow growth gains from increased exports to be converted more fully into further new employment and production, as opposed to inflation in food prices. “Consumption growth linkages” can be many times more important to growth than technical backwards production linkages (Delgado et al., 1998).

When the playing-field is not level: Markets virtually never perform as in the text-books, but are frequently skewed due to vast economic inequalities, asymmetric distribution of information, knowledge, and social-networking connections. Careful public interventions are needed so that a broad symmetry of resources can be seen to prevail.

If markets could be counted upon to deliver results that met Imperatives of good economics,

period after period, there would be no need for policy interventions. Market, however, fail,

and they fail often—hence public-sector interventions are needed. Sometimes, as well as

market failures, there will be government failures as well to worry about.

Yet another dimension of inequality is that a complete set of markets often don’t exist in some industries. For instance, insurance markets, adapted to the requirements of small-enterprise products, are often not available. Markets for knowledge-enhancing, knowledge-let, products are nascent or non-existent completely. And yet, while small enterprises have to adjust as best they can for a less-than-complete range of markets, large firms can avail of their access to the control-panels of governance in order to conjure up “by-passes” that suit them.

The Taskforce has a responsibility to identify industries in which such market failures are to be found.

At times, there will be government failures as well, to worry about. This happens when various government policies work at cross purposes, aggravating, on net basis, the market failures they were supposed, in the first place, to eradicate, or at any rate, to mitigate.

The returns to scale are sometimes increasing

Returns to scale are said to be increasing, when monetary economies are reaped as the scale

of output ramps up. This is anecessary condition for increasing concentration of ownership

in any industry. When technologies are such that they kick-in increasing returns toscale,

public interventions are usually called for so as to prevent growing concentration of market

power.

The need for structural transformation is not transparent to the uninitiated

For example, rising incomes, growing middle-class consumerism, and demonstration-effects-in-consumption translate into an output-mix weighted towards durable consumption items. For the same reason, there is a growing shift towards designer or branded items in personal consumption. Innovative, trendy design and “fashion” content are the key to success in this very fluid niche space: both put a premium on knowledge and continuous technical innovation. For small enterprises, to take advantage of this shift puts a premium on foresight and innovation. Information and sure grasp of knowledge as to how to make the transition is the challenge: such things call for custom-built structures of public delivery mechanism, as markets don’t exist for these inputs or resources.

Again, these days, knowledge coefficient in all manners of production is growing: the international division of labor is also reflecting this fact.

Strong imperatives to or compulsions for structural transformation or structural change---which necessitate compensating variation in stakeholder behavior or conduct or responses---provide a rationale for public interventions.

Structure of incentives: manufacturing vs. trading

In globalization, the formidable market power of global brands result in a structure of economic and financial incentives in the market place that is inimical to the domestic manufacturer versus the importer. It is arguable that a similar shift in the business mindset is enveloping Bangladesh: trading is a safer, smarter, richer and bulkier business than domestic manufacturing is. Managing workforces is nightmarishly difficult, as technical workers are exceedingly foot-loose, and manually-skilled workers are fractious. Manufacturing requires a much greater presence on the ground, and visibility invites extortion in the semi-anarchic conditions in Bangladesh. The Taskforce members heard this refrain again and again during its deliberations. Globalization and liberalization were often likened in these deliberations to exceedingly sharp, surgical knives: they can save precious lives only if they are wielded by highly-specialized and –experienced surgeons. The probability of unsuccessful invasion is quite high. Besides, as Pradhan and others have shown, successful globalization requires more than merely significant liberalization: it also requires large and growing investment in infrastructure, financial intermediation, education, and country branding ---all if-fy prerequisites in resource-poor and debt-dependent Bangladesh.

It is really moot if some of the failures cited in the foregoing are about to kick-off comparative de-industrialization in Bangladesh of a kind that will hurt SMEs.

Bibliography

Ahmed, M. U., 2001. “Small-scale Industry of Bangladesh”, Dhaka, Bureau of Economic Research, June.

Bangladesh Enterprise Institute, “ Issues in the Development of SMEs in Bangladesh”, Dhaka.

Chowdhury, Nuimuddin, 2003. “Tele- and Data-communications Infrastructure and Competitiveness in Bangladesh: Imperatives for Policies, Institutions, Infrastructure and Mindset”, a consultant’s report prepared for the Asian Development Bank, Dhaka, August.

Daniel, Lisa, 2003. “ National Private-sector Survey of Enterprises in Bangladesh, 2003”, prepared for United States Agency for International Development (USAID), Swiss Agency for Development and Cooperation, and Swedish International Development Cooperation Agency, September.

Wattanapruttipaisan, T., 2003. “Promotion of Small and Medium-sized Enterprises Development: Some Issues and Suggestions for Policy Consideration”, Bangkok, UN ESCAP (http://www.unescap.org/pdd/publications/bullentin2002/ch5.pdf).

[1] It is also true of course that some entrepreneurs have also floundered on the alter of setting up domestic firms oriented towards exports. Both refer to intrinsically difficult problems. However, domestic SMEs seeking to make a living off domestically producing manufactures for domestic sales have met up with potentially withering competition. Unless something is done to stanch this growing malaise, this could well become an epidemic, with clear implications for social harmony and political continuity.

[2] The Taskforce contacted Ms Lisa Daniel in an effort to explore whether it might be possible for results to be made available separately for SMEs and for the “micro”---the other subsector. DFID has finally pointed the database to the Taskforce: it is on the cards now that the Taskforce will make albeit limited use of this database. In fairness, though, “small” on our own definition include both “micro” and “small” enterprises.

[3] A portlet is a section of a portal---essentially a large Web site---that parlays specialized content to viewers: many portlet can be integrated to yield a complete portal as a content-delivery platform, such as Yahoo! or MSN, for example. Knowlets are knowledge-capsules that can assist in disseminating or mining or archiving knowledge. Using ICTs as a hand-maiden of fostering technepreneurship effectively would no doubt enjoy the earliest start among technologically demanding boosters on our selection, such as electronics, software/ information technology enabled services (ITES), and educational services.

Planning for entrepreneurship development in Bangladesh

2011-06-07T14:56:00.000-07:00

The entrepreneur development is an important issue in Bangladesh. History says that Bangladeshi are more interested in farming and fishing than venturing business. so its very difficult to develop entrepreneur quality from senior family members. Most of the person went to business without any choice available. Which lead to a business failure? The academic education mainly prepares a person for doing risk free jobs rather a risk taking entrepreneur.

The aim of this project is to develop person inherent entrepreneur quality and continue support for becoming a successful entrepreneur by creating a entrepreneur resource centre.

The propose resource centre will consist of following functional units:

1. library: a) publications b) Data

2. Collections of information, linking of information, analysis of information and creating economic value of such information’s(regular and on demand)

3. disseminating information’s which will help entrepreneurs and their concern persons

4. Advisory and counselling.

5. Conduct training for entrepreneurs

6. Networking among persons, organizations and authorities concerning entrepreneurs and their developments

7. Highlighted and draw attentions to GOB, BB and others regarding issue of entrepreneurs.

8. Creating regional resource centre and developing local resource persons.

Steps for creating a resource centre for entrepreneurs:

• Building on initial feasibility study and need assessment, develop program for entrepreneurship development in the present context. Survey and research will be integral part to ensure highest effective methods and tools are used.

• Develop suitably adapted training packages for people with a range of capacities and expectations focusing on key SMEs and self employment sectors in their area

• Deliver training through a fully accessible Resource Centres, to be established as part of this initiative

• Create opportunities for transforming a good idea into an earning venture and provide linkages to market and financial institutions with up-to-date information.

• Coordination among the entrepreneurs, educational Institutes, policy makers, market and FIs

• Set up Gateway, and support entrepreneurs to build links with financial institutions, market and community stakeholders in order to access opportunities for self employment by establishing and developing enterprises.

Structure of Resource centre

One stop crisis centre to serve on demand

Information centre with library and data bank

Entrepreneurs’ Gateway

Structure of Entrepreneurship Development Program

R&D

• Design of training curriculum, specifically in locations targeted participants, explore the possibility of leveraging existing internal resources for the program

• Assistance with marketing and fund raising events, creation of external resource linkages

Pre start-up

• Pre-incubation program for the potential entrepreneurs

Start-up

• Incubation program for the young entrepreneurs

The Needs

• Entrepreneurship as a global issue

• National context of entrepreneurship

• Limitations of existing response

The Opportunity

• Access to Entrepreneurs:

• Access to economic wealth

• Access to social capital

• Access to rights and ensure dignity

Sectors

– Trading:

– Production:

– Value addition and services

GOAL

To support people to access better and more diverse opportunities for self employment by establishing new and developing existing SMEs.

OBJECTIVES

• To develop suitably adapted training package that will be delivered training in accessible spaces, i.e. easily accessible Resource Centres, where everybody including people with disabilities will have access to adaptive technology and comprehensive one to one support

• To ensure people have access to career counselling and work plan during their training and are provided with market and funding linkages

• To promote greater employment of people in the SMEs sector by promoting entrpreneual culture among the stakeholders

• To raise awareness of successes, share best practice and ultimately change attitudes to entrepreneurship

PHASE ONE OF IMPLIMENTATION

Deliverables and targets

• Develop training packages designed to offer candidates a structured learning pathway into their chosen SMEs or self employment sector

• Identify, screen and select the first ‘intake’ of the pilot program

• Deliver pilot program to 200 candidates and support them to start and manage new ventures.

• Set up the Gateway to register and match participants to opportunities available

• Organise networking events - for potential and young entrepreneurs to meet potential funding sources, market actors and community stakeholders

• Hold seminar and sharing meeting with local/regional/national policy makers, educational institutes, market actors, financial Institutes and community stakeholder

• Raise awareness of the program achievements through the media

• Conduct Phase 1 review; feeding back recommendations for Phase 2

PHASE TWO OF IMPLIMENTATION

Deliverables and targets

• Set up Resource Centres; recruit centre staff and equip centres with adaptive technology and accessible workspaces

• Refine and update training packages following practical experience of delivering them in Phase 1

• Deliver training to 500 participants and support them to undertake new ventures

• Deliver training to 200 participants and support them to develop existing ventures

• Carry out follow-up meetings with participants from the first intake of pilot, to support them as they start new ventures and set up their businesses.

• Set up the Entrepreneurs’ Gateway

• Organise further networking opportunities

• Hold enhanced seminars/sharing with the local/regional/national level to meet beneficiaries, hear about their challenges/successes and share best practice from the Entrepreneurs pilot program

• Share successes through media campaigns and case studies

• Conduct Phase 2/ end of project impact evaluation, developing best practice materials for circulation to the public, private and third sectors.

• Finalise plan to roll out programme and seek support from corporate sponsors, charities and international development aid organizations

• Compile final report and organise meeting to showcase successes of flagship.

Action Plan

Component

Phase 1

Phase 2

Year 3

Develop training packages

Screen & select candidates (1^st intake)

Deliver training

Set up Access to Entrepreneurs Gateway

Facilitate employment linkages

Follow up visits

Monitoring and Evaluation

Build sustainability: share best practice with CHRSD livelihood programmes as well as public, private and NGO sector

Refine training packages

Deliver training

Establish Resource Centres

Screen & select candidates (2^nd intake)

Setting up Entrepreneurs Gateway

Facilitate professional linkages

Follow up visits

Screen & select candidates (3^rd intake)

Deliver training

Facilitate employment linkages

Follow up visits

Monitoring and Evaluation

Sustainability: highlight success in media, promote government buy in and attract further funding

Budget

Breakdown ($)/ Year 1	Travel	Salaries	Admin/ Overhead	Educational Materials	Tech/ Equip	3^rdParty Services*	Other*	Total
1. Develop & deliver training packages	8,350	25,700		51,200	12,150	3,130	2,900	103,430
2. Establish and maintain Livelihood Resource Centres		11,000	34,400		12,550			57,950
3. Set up Access to Entrepreneurs Gateway and create linkages to wage and self employment		15,300		12,000	7,950		16,800	52,050
4. Monitoring and Evaluating			12,000			5,570		17,570
Year 1 Total	8,350	52,000	46,400	63,200	32,650	8,700	19,700	231,000
Breakdown ($)/ Year 2	Travel	Salaries	Admin/ Overhead	Educational Materials	Tech/ Equip	3^rdParty Services*	Other*	Total
1. Develop and design training packages	16,600	27,100		19,500	19,600	3,400	2,900	89,100
2. Establish and maintain Livelihood Resource Centres		13,200	26,750					39,950
3. Set up Access to Entrepreneurs Gateway and create linkages to wage and self employment		16,630		16,450	7,980		30,900	71,960
4. Monitoring and Evaluating			12,000			5,990		17,990
Year 2 Total	16,600	56,930	38,750	35,950	27,580	9,390	33,800	219,000
Overall Total	24,950	108,930	85,150	99,150	60,230	18,090	53,500	450,000

*Budget Notes

Cost for training, creating external and internal linkages is USD 600 per person trained during the pilot.

3^rd Party Services: Capacity building of project staff by external trainers and evaluation by external consultants

Other: Total $53,500 is split as follows:

Component 1 - Development of accessible material on local employment opportunites : $5,800
Component 3; total $47,700 broken down as follows

Creating linkages with local business, financial institutions, community stakeholders : $16,490
Supporting candidates to attend training and work placements/apprenticeships : $21,290
Sharing best practice with policy makers and in the media : $9,920

Project Sustainability

CHRSD will ensure sustainability of the project by:

• Integrating learning: CHRSD aims to roll out comprehensive Livelihood programmes, modelled on the Access to Entrepreneurs pilot, in over 50 countries around the world. In the second year of the pilot it will begin draw out key leanings and absorb these into programme plans and budgets for its six regions including the Americas, East & North Africa, West Africa, Southern Africa, East Asia & Pacific and South Asia.

• Promoting government buy in: CHRSD will look to promote the widest possible use of training packages developed in this pilot, by actively sharing best practice with other training providers in the public, private and NGO sector. In particular, CHRSD will be engaging with policy makers from local and national government throughout the pilot and anticipate that in many locations, the State will consider subsidising components of the Access to Entrepreneurs programme or the Livelihood Resource Centres in recognition of their wider benefit to mainstream society

• Leveraging funding: CHRSD already has significant experience of leveraging its donor funding to attract further support for its programmes. Recent examples include: leveraging Microsoft support for their ‘Discover IT’ Centres to raise a further $180,000 from the City Bridge Trust, and accessing $450,000 from Alliance Boots to supplement a Big Lottery Fund grant that is assisting disabled people to access non-verbal forms of communication. In the same way, CHRSD will look to leverage Accenture’s support by attracting international/intergovernmental donors as well as other companies, foundations and individual donors, by highlighting the success of this pilot through awareness raising programmes and in the media.

Monitoring and Evaluation

Some of the quantitative and qualitative indicators that will be applied for the evaluation of the project are as follows:

Year of Measurement/ Metric (Quantitative)	Year 1	Year 2	Year 3
5 Livelihood Resource Centres set up	✓
12 suitably adapted training packages developed	✓
750 disabled people identified to take part in the Access to Entrepreneurs pilot	✓	✓
12 events organised for candidates to network with potential employers, financial institutions and community stakeholders	✓	✓
At least 80% of candidates successful in completing training	✓	✓
At least 80 to 85% of candidates across all pilot locations successfully linked to employment/ self employment opportunities	✓	✓	✓
Metric (Qualitative)
Changes of policy at local/national/regional level		✓	✓
Changes in attitude to disabled people – e.g. case studies/ personal accounts	✓	✓	✓
Improvement in quality of life for disabled people	✓	✓	✓

Independent Monitoring

Independent consultants, based locally, will carry out a parallel evaluation which will be checked against the results from the pilot, as measured by those running the pilot programme.

Conclusion

The Access to Entrepreneurs pilot is expected to prove that the provision of suitably adapted training packages, delivered alongside life skills training and supplemented with work experience opportunities, will significantly improve disabled people’s chances of finding meaningful employment. CHRSD’s experience is that, once this has been achieved, many benefits will follow, such as greater economic empowerment, more personal confidence and a stronger voice in society. This proposal is for the Global Giving program to play a key role in launching this initiative in South Asia, bringing to disabled people a new perspective on the practical possibilities of generating sustainable entrepreneurs. We would see this proposal bringing new opportunities to people who have long been excluded from mainstream economic activity by prejudice about their abilities and in many cases assumptions about their allotted role in society.

Strategic planning for entrepreneurship development program in Bangladesh: special attention to SME

2011-06-07T13:23:00.000-07:00

The entrepreneur development is an important issue in Bangladesh. History says that Bangladeshi are more interested in farming and fishing than venturing business. so its very difficult to develop entrepreneur quality from senior family members. Most of the person went to business without any choice available. Which lead to a business failure. The academic education mainly prepares a person for doing risk free jobs rather a risk taking entrepreneur.

The aim of this project is to develop person inherent entrepreneur quality and continue support for becoming a successful entrepreneur by creating a entrepreneur resource center.

The propose resource center will consist of following functional units:

1. library: a) publications b) Data

2. Collections of information, linking of information, analysis of information and creating economic value of such information’s(regular and on demand)

3. disseminating information’s which will help entrepreneurs and their concern persons

4. Advisory and counseling.

5. Conduct training for entrepreneurs

6. Networking among persons, organizations and authorities concerning entrepreneurs and their developments

7. Highlighted and draw attentions to GOB, BB and others regarding issue of entrepreneurs.

8. Creating regional resource center and developing local resource persons.

Steps for creating a resource center for entrepreneurs:

Component 1: Building on initial feasibility study (already completed), develop training packages for pre-identified wage and self employment sectors
Component 2: Establish a fully accessible Resource Centre in each location where training will be delivered. Supplement training with work placements and apprenticeships. The Bangalore Livelihood Resource Centre will serve as a flagship centre for other CHRSD Resource Centres in South Asia.
Component 3: Set up the Access to Livelihoods Gateway, and support candidates to build links with local employers, financial institutions and community stakeholders in order to access opportunities for wage or self employment
Component 4: Evaluate pilot, share best practice and develop models for roll out in further locations in South Asia and beyond