Book Review

Focusing SMEs as critical tools for sustainable development

Asjadul Kibria | Published: April 18, 2019 21:23:05 | Updated: April 23, 2019 21:46:14

Inclusive development is the most-discussed objective among the long-term development plans of Bangladesh. Policymakers and experts are also focusing on inclusive development which is ultimately represented as inclusive growth in the country's medium term development planning document. Inclusive growth is defined 'as growth that is both sustainable, broad-based in terms of employment opportunities and reaches out to people on the margin.' But inclusive growth as well as inclusive development is a continuous process that requires a number of tools to make these more effective. One of the tools is Small and Medium Enterprises (SMEs) which requires serious policy attention. Dr Momtaz Uddin Ahmed, now an honorary professor of the economics department at University of Dhaka, has been vigorously promoting the proposition for a long time.  In fact, he is well known for being a champion of SMEs and his latest book 'Selected Readings on the Strategies for Inclusive Development in Bangladesh' clearly reflects this.

Though the primary theme of the book is inclusive development, it ultimately argues that SME development constitutes the backbone of the economy and so needs to be nurtured with comprehensive promotional support. Currently, SME sector contributes around 23 per cent of Gross Domestic Product (GDP) and generates around 80 per cent of industrial jobs. Being a compilation of 36 short articles and essays, the book mostly intertwines roles and functions of SMEs with industrial as well as overall economic growth of Bangladesh.

The author rightly points out that SME sector in Bangladesh is 'widely discussed but inaptly identified.' There have been a number of discussions and debates on SMEs and its prospects and challenges for the last four decades but the sector is still in grey areas of policy. Dr Ahmed thus argues: "It is not fault of the SME enthusiasts, the problem lies in the inappropriate definition of SMEs used by the policymakers in the country. In fact, the problem starts with using the phrase 'SMEs'(introduced by the development partners ) in Bangladesh context. Since the sector is overwhelmingly dominated by micro and small enterprises in Bangladesh, we should ideally use the term MSMEs instead of SMEs."(P-32) Though the use of MSMs is quite visible now, it appears that policymakers are still confused about the issue. That is why the Seventh Five-Year Plan (7FYP) placed focus on SMEs, not MSMEs! The author also notes the lack of adequate data on SME sector by stating: "Next comes the most fundamental issue of the absence of a comprehensive and authenticate national level data base on the SME sector. This undoubtedly affects pragmatic policymaking for the sector which is at the centre stage of policy making by concerned ministries and their departmental agencies." (P-34) Moreover, he further expresses concern on the 'lopsided definition' of SME.

In other articles on SMEs, Dr Ahmed, who also served as a member of the country's planning commission, tries to briefly outline strength and weakness of SMEs and barriers to SME growth. Financial constraints to SME growth are discussed. The author dedicates a piece on non-financial barriers like licensing and registration, tax and VAT (value added tax) related complexity and environmental clearance.  Regarding financial constraints, he puts the blame on lenders' anti-SME bias and argues: "Banking system in Bangladesh as a whole is unmotivated to practice pro-active SME financing habits and does not consider such financing as part of their core banking activities." (p-152) This argument may be disputed by the central bank which has been promoting SME financing with a set of policy and guidelines. The latest statistics available with Bangladesh Bank, however, showed that SME loan disbursement dropped to Tk 1.59 trillion in 2018 from Tk 1.61 trillion in 2017. Besides better access to finance, Dr Ahmed recommends adopting better production technology and internationalisation of the sector to 'sustained the SME growth' in the long run.  Internationalisation of SMEs will appear as a big challenge as several steps have been taken to bring SME under the multilateral trade rules through World Trade Organisation (WTO).

The book also focuses on the country's export sector especially on ready-made garments (RMG) and stresses on better industrial relations. Dr Ahmed thus says: "Instead of cutting corners on worker's wages and ultimately their safety for higher profitability and wealth accumulation must be discontinued and prosperity must be shared with the workers as a humanitarian gesture." (p-127)   

In another piece, Dr Ahmed very briefly highlights the concept, issues and characteristics of market economy. He argues: "Both theoretical underpinnings and practical lessons derived from various country examples tend to  suggest that market mechanism is likely to fail in the developing countries in the presence of widespread imperfections and special circumstances prevailing in these countries." (P-78) The argument is particularly relevant for Bangladesh as market-oriented development policy of the country is yet to reap optimal benefits especially in terms of growth distribution. In this context, Dr Ahmed, in another piece, cautions that there is a limited success of the 'growth-only' approach to achieve participatory, equitable and socially inclusive development. 

The book has some shortcomings. As all but three articles from the book were already published in newspapers at different times. If  the original publication date or time were mentioned at the end of each article of the book, that would have helped readers to contextualise the write-ups and avoid some confusion regarding the latest development. Moreover, the author could have provided  case studies of different sub-sectors or units (like light engineering) to make the case of SMEs stronger. In fact, there is such an article on handicrafts and its export potential.

Nevertheless, the book is a reflection of thoughtful understanding of the different dimensions of the country's development pattern with a wide focus on SMEs.  Those who want to know and understand about the SMEs in a broader context, needs to go through the book.


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