SMEs: Upskilling workers, reducing costs

Muhammad Abdul Mazid | Published: October 31, 2018 21:35:04 | Updated: November 01, 2018 21:40:24

Amidst the tightening measures and unfavourable external factors such as a full-blown trade war, ensuring a stronger SME sector is crucial for strengthening the Bangladesh economy. The government has acknowledged the need to continue developing SMEs to achieve an inclusive and balanced growth, and to realise the desired growth, it is crucial that right incentives and policies are in place. As part of the government's efforts to strengthen sectoral growth and structural reforms, encouraging SMEs to move up the value chain will be among the key areas of focus to support economic expansion for the remaining part of the Seventh Five year Plan (SFYP) .

It has been articulated in the SFYP that the government intends to increase export capacity, improve market efficiency and facilitate doing business as part of its strategies for reforms. These will include measures to accelerate modernisation of economic sectors, increase export readiness and internationalisation, promote fair competition as well as improve regulatory and trade practices. The government thus needs to provide a more business-friendly policy in order to make it easy to do business in Bangladesh and increase efficiency and transparency in public service. This could help reduce the cost of doing business in the long run.

It is an expectation from concerned quarters that there will be substantial allocations for growth of  SMEs, especially in the area of export. While export enhancement funds are available but lying idle in the Bangladesh Bank, export contribution by SMEs is still low at the moment. Another item on the budget wish list is incentive to help SMEs reduce their reliance on manual labour.

There is thus the need for incentives in the area of automation and skills training. SMEs are looking for ways to move forward with automation. But cost of automation is still a challenge. And they need guidance on how to go about it. A business-friendly policy and better government delivery system are the key to the sector's growth. There is the need for tax free incentives for start-ups and e-commerce businesses to help new companies shore up liquidity in the early years. This will help SMEs invest in technology and innovation to build and boost their business. Factors that can drive exports of SMEs through e-commerce are improved productivity, building of capabilities, larger customer base and lower operating costs.

The Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) emphasises that all direct tax incentives that will be tabled must come with minimum red tape to support, not only new, but also existing businesses in their efforts to expand, upgrade and diversify. There has to be greater certainty and transparency in direct tax benefits. However, manufacturers are generally positive, albeit cautious, about the future amid the downside risks in the global economy.

SMEs are looking to upskill their workers, reduce operating costs, seek new markets and introduce new products and services over the next years. Among their concerns over the next years are to skill the workers, reduce operating costs, seek new markets, introduce new products and services as well as step up productivity training.

For SMEs, the emphasis is always on being more efficient in using their existing resources which include operating costs and managing pricing to remain competitive. Concurrently, they are also to seek new markets for existing as well as new products and services. For the larger companies, the emphasis is more on improving production efficiency through reduction in operating costs and higher capacity utilisation by increasing production.

The policy makers should note the issues that need attention to aid SMEs to continuously enhance capacity building and accelerate technology adoption to grow at a faster rate and expand market outreach. These include enhancing quality infrastructure and efficient utilities, integrating different transport modes, strengthening logistics and trade facilitation and improving digital infrastructure. As competition continues to heat up, there have been increased calls for SMEs to look at the export market. Increasingly, the adoption of e-commerce among SMEs will help widen their market across borders. There is still room for growth in the domestic market and for the government to look into its own procurement policy to encourage growth of local suppliers. Buying local could also provide cost savings in government procurement.

It is needed to review the context as to how SMEs can work with the government to develop the country's economy. Establishing an enabling environment to build businesses and having a business-friendly policy and better government delivery systems are important for that. The government needs to ensure a business-friendly investment climate and policies by reducing the unnecessary regulatory burden to address the threat of deindustrialisation. A pragmatic and a friendly regulatory environment with simple, more transparent, reliable, easy to comply, consistent and fair regulations is the foremost need for development of SMEs in Bangladesh. Bangladesh Small Cottage Industries Corporation (BSCIC), BASIC Bank and SME Foundation were the three institutions established absolutely for facilitating the SME sector. But the works in place are is yet to address the problem areas. The role these organisations have been playing should be scanned again and again to roll out appropriate measures that will help their strategies to boost SMEs to fruition.

Dr Muhammad Abdul Mazid, former Secretary to the Government and Chairman NBR.

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