Challenges and Opportunities in Bangladeshi SME Clusters

Challenges and Opportunities in Bangladeshi SME Clusters

Md. Joynal Abdin*

Business Consultant & Digital Marketer

Co-Founder & CEO of Bangladesh Trade Center

 

The Small and Medium Enterprises (SMEs) are considered as the engine of growth throughout the world. About 97 per cent to 99 per cent of enterprises in Asian developing countries are SMEs. This scale could, however, be slightly different for various Asian countries. In the lowest side, about 97.3 per cent of enterprises in China are SMEs, 97.3 per cent in Malaysia, 97.5 per cent in Kazakhstan, 97.7 per cent in Vietnam. But on the higher side, 99 per cent of Bangladeshi enterprises are SMEs, 99.4 per cent in Singapore, 99.5 per cent in Sri Lanka, 99.6per cent in the Philippines, 99.7 per cent in Thailand, 99.7 per cent in Japan and finally, 99.9 per cent in the Republic of Korea.

 

SMEs are playing a vital role in employment generation in respective countries. For example, these enterprises are generating 87.7 per cent of employment in South Korea (Republic of Korea) and 80.3 per cent in Thailand. Seventy-five per cent of non-agricultural employment in Bangladesh are generated by SMEs while 71.8 per cent in Cambodia etc. Similarly, SMEs are contributing to promoting GDP growth and increasing export earnings of respective countries. For example, SMEs are generating 60 per cent of Indonesian and Chinese gross domestic product (GDP); similarly, they are contributing 47.6 per cent of the GDP of the Republic of Korea, 45 per cent in Singapore, and 43.7 per cent in Japan.

 

In Bangladesh, SMEs are contributing 25 per cent of GDP. In terms of export earnings, about 42.4 per cent contribute in India. Similarly 41.5 per cent of Chinese exports come from SMEs, 26.3 per cent in  Thailand and 20 per cent in Sri Lanka. The amounts are 18.8 per cent and 15.7 per cent for Republic of Korea and Indonesia respectively.

 

What is SME?

It is a specific segment/class of enterprises in a country. These enterprises are defined with various indicators in different countries. Bangladesh considers the number of employment and replacement cost as indicators. A few countries consider revenue and asset as indicators. Definition of SMEs in different Asian countries is given in the following table:

 

Table: – 1 Definition of SMEs in different Asian Countries (Upper Threshold).

Countries	Sectors	Assets (Local currency in million)	Revenue (Local currency in million)	Assets ($ millions)	Revenue ($ millions)
Japan	Manufacturing and others	300	—	2.8	—
	Wholesale	100	—	0.9	—
	Retail	50	—	0.5	—
	Services	50	—	0.5	—
Republic of Korea	Manufacturing	8000	—	6.9	—
	Primary / some services	—	20,000	—	17.2
Singapore	All	—	100	—	73.0
China	Heavy industry	—	400	—	61.3
	Wholesale	—	400	—	61.3
Thailand	General	200	—	5.7	—
	Wholesale	100	—	2.8	—
	Retail	60	—	1.7	—
Malaysia	Manufacturing	—	50	—	12.4
	Services and others	—	20	—	5.0
Kazakhstan	All	—	5,200	—	15.7
Philippine	All	100	—	2.1	—
Indonesia	All	10,000	50,000	0.7	3.6
India	Manufacturing	300	—	4.5	—
	Services	150	—	2.3	—
Sri Lanka	Manufacturing	—	750	5.1	—
	Services	—	750	5.1	—
Vietnam	General	1,00,000	—	—	4.5
	Trade and services	50,000	—	—	2.2
Bangladesh	Manufacturing	500	—	6.25	—
	Services	300	—	3.75	—
Cambodia	All	—	—	0.5	—

Source: Asian Development Bank Institute (2016). SMEs in Developing Asia: New Approaches to Overcoming Market Failures.

Table-2: Definition of SMEs in Bangladesh (According to the National Industrial Policy 2016):

SI	Type of Industry		Replacement excluding land and factory buildings	Number of employed workers
1.	Cottage Industry		Below BDT 1 million	Not exceed 15
2.	Micro Industry	Manufacturing	BDT 1 million to 7.5 million	16 to 30
		Service	Below BDT 1 million	Not exceed 15
3.	Small Industry	Manufacturing	BDT 7.5 million  to 150 million	31 to 120
		Service	BDT 1 million to 20 million	16 to 50
4.	Medium Industry	Manufacturing	BDT more than 150 million to 500 million	121 to 300 / But for RMG / labor intensive industry not more than 1000
		Service	BDT more than 20 million to 300 million	51 to 120
5.	Large Industry	Manufacturing	BDT more than 500 million	More than 300 / But for RMG / labor intensive industry more than 1000
		Service	BDT more than 300 million	More than 120

 

 

Contribution of SMEs in Bangladesh Economy:

The 2013 National Economic Census conducted by the Bangladesh Bureau of Statistics shows that there are in total 7.81 million economic entities in Bangladesh. About 88 percent of these economic entities are cottage enterprises, while 11 percent are SMEs. But in reality, about 99 percent of Bangladeshi formal business enterprises are SMEs (ADB Institute, 2016). They constitute about 75 percent of non-agricultural employment and contribute about 25 percent to the national GDP. This 25 percent is contributed by only the manufacturing SMEs. However, this amount could in fact be much higher if the contribution of service sector SMEs could be calculated. Till now there has been little data available on service sector SMEs of Bangladesh, even though this sector contributes around 56.34 percent to the GDP, making it the largest contributor.

 

Industrial Sectors in Bangladesh:

A. Industrial (Manufacturing) Sectors of Bangladesh:

1. Agro-based and agro-processing industry
2. Readymade Garments Industry
3. Pharmaceuticals
4. Leather and Leather products
5. Light Engineering Industry
6. Jute and Jute products
7. Plastic Industry
8. Ship Building
9. Environment friendly ship breaking
10. Frozen Fish Industry
11. Home Textiles
12. Renewable Energy (Solar Power, Windmill)
13. Active Pharmaceuticals Ingredient Industry and Radio Pharmaceuticals Industry
14. Herbal Medicinal Plant
15. Basic chemicals/dye and chemicals
16. Radio-active (diffusion) Application Industry (e.g. developing quality of decaying polymer/preservation of food/ disinfecting medicinal equipment)
17. Development of Polymer Industry
18. Automobile Industry
19. Handicrafts
20. Energy Efficient Appliances/Manufacturing of Electronic goods/Development of Electronic materials
21. Tea Industry
22. Ceramics
23. Tissue Grafting and Biotechnology
24. Jewelry
25. Toy
26. Cosmetics and toiletries
27. Agar –Ator Industry
28. Furniture
29. Cement Industry

 

 B. Major Service Sectors: 

1. IT-based activities (system analysis, design, developing system solutions, information service, call centre service, offshore development Centre, business process outsourcing etc.)
2. Agro-based activities such as fishing, fish preservation and marketing
3. Construction industry and housing
4. Overseas Employment
5. Entertainment
6. Ginning and baling
7. Hospitals and clinics
8. Nuclear and Analytical Service (e.g. nuclear treatment etc.)
9. Horticulture, flower cultivation and flower marketing
10. Human Resource Development, Knowledge society with high quality merit and efficiency
11. Tourism
12. Testing Laboratory
13. Photography
14. Telecommunication
15. Transport and communication
16. Warehouse and container service
17. Engineering Consultancy
18. Filling Stations (Petrol pump, CNG conversion centre etc.)
19. Private Inland Container Depot and Container Freight Station
20. Tank Terminal
21. Chain Super Market/Shopping Mall
22. Aviation Service
23. Inspection and testing service
24. Regional Feeder vessel and coastal ship service.
25. Dry socking and ship servicing
26. Modernised Cleaning Service for High-rise Apartments, Commercial Building
27. Auto mobile service
28. Technical Vocational Institute
29. Production and Marketing of poultry and dairy products
30. Advertising Industry and modelling e.g. print modelling, TV commercials, ramp modelling, catwalk, fashion
31. Production, supply and distribution of power in the private sector
32. Outsourcing and Security Service (Private Security forces/manpower supply)
33. Sea-ship movement trade

C. Agriculture (agro-processing) Sectors:

1. Processed fruit products (jam, jelly, juice, pickles, asrbat, syrup, sauce etc.)
2. Fruits processing (tomato, guava, sugarcane, jackfruit, lichie, pineapple, coconut etc.) vegetables and lentil
3. Processing of bread and biscuits, vermicelli, laccha, chanachur, noodles etc.
4. Manufacturing of flour, sujee
5. Processing of mushroom and spirulina
6. starch, glucose and other dextrose product
7. Milk Processing (pasteurization, milk powder, ice-cream, condensed milk, sweet, cheese, butter, ghee, chocolate, curd etc.)
8. Processing of Potato products (chips, potato, flex, starch etc.)
9. processing of powder spice
10. Refining and hydrogenation of edible oil
11. Salt processing
12. Processing of prawn and other fishes and freezing
13. Manufacturing of herbal cosmetics
14. Manufacturing of Unani and ayurvedic medicines
15. Fish feed and fish meal processing for poultry and livestock
16. Seed processing and preservation
17. Manufacturing of jute products (rope, thread, twain, canvass, bag, carpet, sandals etc.)
18. Production of silk textile
19. Manufacturing of agro-equipment’s
20. Manufacturing of rice, puffed rice, chirra etc.
21. Production of flavored rice
22. Tea processing
23. Production of coconut oil
24. Processing of rubber tape, shellac
25. Cold storage (processing and preservation of edible potato and seed potato, fruits, vegetables etc.)
26. Production of wood, bamboo and cane furniture (exclusive of cottage industry)
27. Flower preservation and export
28. Meat processing
29. Production of Bio slurry, mixed manure and urea
30. Production of bio-pesticides, neem pesticides etc.
31. apiculture
32. Particle board
33. Sweetening products
34. Soya food production & processing
35. Mustard oil producing industry (if local variety is used)
36. Rubber goods making project.
37. Rice bran oil.
38. Seed industry
39. Milk and poultry production and supply.
40. Horticulture, floriculture, flower cultivation, flower and vegetable marketing (lemon, mushroom, battle leaf and honey is included in this industry).

11 SME Booster Sectors:

1. Electronics and electricals,
2. Software development,
3. Light engineering and metal-working,
4. Agro-processing/agri-business/plantation agriculture/ specialist farming/tissue-culture,
5. Leather-making and leather goods,
6. Knitwear and ready-made garments,
7. Plastics and other synthetics,
8. Healthcare and diagnostics,
9. Educational services,
10. Pharmaceuticals/cosmetics/toiletries and
11. Designing and aesthetically challenging, personal wear and effects.

 

SME Clusters in Bangladesh:

Based on the above definition SME Foundation identified 177 SME Clusters in 51 districts of Bangladesh. There are maximum 38 Handicrafts & Miscellaneous clusters followed by 34 Agro-Processing/Agri-business/Plantation, 31 Light Engineering and Metal working, 22 Knitwear & Readymade Garments, 16 Fashion Rich Effects, Wear & Consumers Goods, 13 Leather Making & Leather Goods clusters, 10 Handloom & Specialised Textiles clusters, 5 Healthcare & Diagnostics clusters, 3 Plastics & Other Synthetics, 3 Electronics & Electrical, and 2 Educational Services clusters in Bangladesh. These clusters are located in 51 different districts and there are 13 districts namely Netrokona, Rajbari, Narail, Meherpur, Lalmonirhat, Sunamganj, Barguna, Bhola, Patuakhali, Noakhali, Bandarban, Rangamati and Khagrachari where no clusters are found.

 

There are about 69,902 SME enterprises employing approximately 1,937,809 workforces. Their annual turnover is about BDT 573,510 million per year. A major portion of government revenue in different forms (Income tax, VAT, Customs duty etc.) comes from these sectors. But no significant government support is visible to develop or promote SME Clusters / entrepreneurs.

 

What is Cluster?

1. Michael E. Porter, who is recognized as the founder of industrial cluster concept, defined the cluster as “geographic concentration of interconnected businesses and associated institutions in a particular field”[1].
2. United Nations Industrial Development Organization (UNIDO) defines industrial cluster as: “Cluster can be defined as concentration of micro, small and medium enterprises in a given geographical location producing same or a similar type of products or services and these enterprises face similar type of opportunities and threats. The cluster is known by the name of the product being produced by principal firms and the place they are located in”.
3. SME Foundation (Bangladesh) has defined cluster as “A Cluster is a concentration of enterprises producing similar products or services and is situated within an adjoining geographical location around 5 km radius and having a common strengths, weaknesses, opportunities and threats”[2].
4. Rosenfeld (1997) defined cluster as “Geographically bounded concentration of similar, related or complementary businesses, with active channels for business transactions, communications and dialogue, that share specialized infrastructure, labour markets and services, and that are faced with common opportunities and threats.”
5. Enright (1998) defined cluster as “Regional clustering has been used to describe industrial districts of small crafts firms, high technology centers, agglomerations of financial and business service firms in cities, company towns, and large branch plants and their supply chains.” “…clusters at least must be characterized along relevant dimensions if appropriate policies are to be devised … (these include) …density. Breadth depth…activity base…growth potential…innovative capacity”[3].
6. Cluster Development Program of the Ministry of MSME (Government of India) defined it as “A cluster is a group of enterprises located within an identifiable and as far as practicable, contiguous area and producing same/similar products/services”[4].
7. Government of Gujarat (India) defined cluster as “A minimum of 50 industrial units, indulging in the manufacture of the same or related products and located within a radius of 10 km in a particular location, is referred to as a cluster”.

 

Almost all of the above definition considered the following factors to define a cluster:

• A cluster displays a shared identity and future vision.
• A cluster is an arena of dense and changing vertical input-output linkages, supply chains and horizontal inter-firm networks.
• Products or services should be similar or homogenous along with related products
• Enterprises must be production or service units with colocation, interlinked, and interdependent
• Adjoining geographical location: several villages, wards, unions and industrial estates
• Over time, clusters can reveal features of emergence, dominance and decline.

 

Classification:

Clusters can be categorized in different perspective, feature, origin, function, stage of development, market orientation, as follows:

1. Classification based on origin: Clusters are classified into two major categories based on their origin. These are naturally grown clusters and man-made clusters.
2. Classification based on stage of development: Clusters are classified into three major categories based on the stage of development. These are growing cluster, matured cluster, declining cluster.
3. Classification based on activity performs: If the enterprises of a cluster manufacturing oriented is known as Manufacturing Cluster. While enterprises of a cluster provide service the cluster is termed as Service Cluster.
4. Classification based on size of cluster enterprises: Clusters could be termed as SME cluster if the enterprises of that cluster represent small and medium segment of the industry. Export oriented cluster dominated by exporters.
5. Classification based on technology used: Categorization can also be made based on the technology they use. There could be family-based Artisan clusters if they are using indigenous technology, whereas the enterprises in a cluster using modern technology and labor force outside the family members can be termed as. Industrial cluster.

 

Importance of Cluster:

Enterprises of a cluster are collocated, interdependent, interlinked, and shares common strengths, weaknesses, opportunity and threats. As a result an invisible competition is there among the enterprises to produce qualitative products in competitive price. Firms are always in thinking of additional feature of a common product to get comparative advantage in the market. New innovation and higher productivity provides economies of scale where large numbers of buyers are available at a cluster. Enterprises located at a cluster enjoys following positive impacts:

• Higher productivity
• Better quality
• Economies of scale
• Availability of buyers
• Availability of high standard raw materials
• Availability of skilled labors
• Knowledge about newer technology
• Shared vision
• Competitive tendency
• Innovation
• New product development
• New features in existing product line
• Collective negotiation (with government and policy makers) power
• Collective action / joint effort etc.

 

SME Clusters in Bangladesh:

Based on the above definition SME Foundation identified 177 SME Clusters in 51 districts of Bangladesh. There are maximum 38 Handicrafts & Miscellaneous clusters followed by 34 Agro-Processing/Agri-business/Plantation, 31 Light Engineering and Metal working, 22 Knitwear & Readymade Garments, 16 Fashion Rich Effects, Wear & Consumers Goods, 13 Leather Making & Leather Goods clusters, 10 Handloom & Specialised Textiles clusters, 5 Healthcare & Diagnostics clusters, 3 Plastics & Other Synthetics, 3 Electronics & Electrical, and 2 Educational Services clusters in Bangladesh. These clusters are located in 51 different districts and there are 13 districts namely Netrokona, Rajbari, Narail, Meherpur, Lalmonirhat, Sunamganj, Barguna, Bhola, Patuakhali, Noakhali, Bandarban, Rangamati and Khagrachari where no clusters are found.

 

There are about 69,902 SME enterprises employing approximately 1,937,809 workforces. Their annual turnover is about BDT 573,510 million per year. A major portion of government revenue in different forms (Income tax, VAT, Customs duty etc.) comes from these sectors. But no significant government support is visible to develop or promote SME Clusters / entrepreneurs.

 

Product producing in SME Clusters:

Major products producing in the SME clusters of Bangladesh are as follows:

1. Agro-Processing/Agri-business/Plantation Clusters: Major products are rice, Brocken rice (commonly known as khud), husking dust (commonly known as kura), burning wood (commonly known as lakri), oil, and oil cake (commonly known as khail) etc.
2. Light Engineering and Metal Working Clusters: Major products are Door and window grille, door and window frame, collapsible gate, iron and steel furniture, Motor parts, engine repair, pump, Machine tools, Agricultural equipment, automobile body building, repairing, and colouring, ship breaking etc.
3. Knitwear and RMG Clusters: Major products are thread, pants, jackets, ladies’ three piece sets, towels/gamchas, shirts, tape/ nima, frocks, baby set, suit, and cloths etc.
4. Fashion-rich Wears, effects & Consumption Goods Clusters: Major products and services are Jewellery made by Gold / Silver / other metals, hair spa, hair protein, party makeup, facial, eye-brow pluck, Herbal facial, haircut, and orange facial etc.
5. Leather and Leather goods clusters: Major products are gent’s shoes, ladies shoes, baby shoes, sandal shoes, and Slippers etc.
6. Healthcare & Diagnostics Clusters: Major services are X-ray, ultra-sonogram, ECG, different pathological tests, haematological tests, biochemical tests, echo-cardiogram, CT scan, and surgery etc.
7. Plastics & Other Synthetics Clusters: Major products are Mugs, Bowls, Buckets, Bodna, and many other home appliances.
8. Electronics & Electrical Clusters: Major products are Electrical Board, Switch, Socket, Holder, Cut-out, Anti cut-out, Coil, Battery, TV, Pluspain base, and electric cables etc.
9. Educational Services Clusters: Major services are education services/counselling.
10. Handloom & Specialized Textiles Clusters: Major products are Blouse, Sari, orna, three piece, farnet, towel, Panjabi, cushion cover, bed sheet, and pillow covers etc.
11. Handicraft & Miscellaneous Clusters: Major products are dining table, Mat, Bamboo net, Large bamboo basket (commonly known as Dhol), tabla, Nest, kula, candle stand, cup-plate, clay piggy-bank, flower vase, different dices, mud cover, tub, oil-based perfume, incense sticks, curry and rice cooking pot, bamboo goods, tray set, bowl set, file set, ruler set, cylinder set, and partition set, Wooden Furniture boxed bed, normal bed, dressing table, reading desk, computer desk, Sofa set, dining table, and chairs, etc.

Challenges of SME Clusters:

SME clusters are mostly naturally grown due to availability of raw materials, skilled labour in competitive price lead by daily needs of local people. There are few clusters growing faster to meet local or international demands, few of the clusters are going to be abolished due to wrong government policy, or absence of necessary support from the government. Clusters are playing a vital role in employment generation and balanced development of the country but till now they are neglected by the governments or donors in terms of policy support, technology development, infrastructure development, electricity and other utilities supply, market linkage with local or foreign buyers. Development barriers of SME Clusters are very much location specific and sector dependent. Therefore it is quite difficult to describe challenges of SME Clusters in a particular document or article. With this limitation in mind we could describe major challenges of Bangladeshi SME Clusters as follows:

1. Absence of appropriate technology: Most of the clusters are using old technology adopted in 1950 – 60s. Therefore productivity is lower than that of their competitors. As a result the quality of the products is inferior. Entrepreneurs are losing market share to imported products or failing to get market access in target market at home and abroad. For example; entrepreneurs of the Coconut Oil Cluster located at Bagherhat Sadar are using a semi auto technology imported from Japan in 1952. Local workshops were copied it and producing the same machine during last 60 years. Major limitation of this machine is that, it is unable to extract 100 per cent oil from the coconut and quality of the oil produced is crude graded. Till now there is no refinery machine at Bagherhat Coconut Oil Cluster as a result their oil is losing market share to imported coconut oil marketing by various multinationals in Bangladesh. Similarly; hundred years old technology is using at Sataranji Cluster at Nishbetgaonj, Rongpur and different handloom clusters all over the country.

 

2. Inadequate raw materials supply in justified price: Most of the clusters are dependent on imported or purchased raw materials from a third party. There are middlemen / intermediary traders / importers in each of the sectors supplying raw materials to the clusters. Sometime these intermediaries used to charge illogical price of the raw materials without any valid reason. For example; there are more than five thousand electrical and plastic goods manufacturing enterprises in Bangladesh. Raw materials of these sectors are mainly import dependent or recycle based. Small entrepreneurs of the sector could not import raw materials directly due to their limited financial and technical ability. They used to purchase raw materials from local trader / importers. In few cases importers used to charge higher price of raw materials which is not justifiable with the international market. Syndication is responsible for this unusual price hike in these sectors. Not only in plastic or electrical sector same scenario is happening with the handloom or power loom entrepreneurs in home textile cluster at Kumarkhali, Kustia and Hosiary cluster at Gobindagaong, Gaibandha while they used to purchase threads or dye. These irrational price hicks of raw materials make the whole sector uncompetitive in the market. A large number of entrepreneurs, workers have to suffer to give undue cost of raw materials into the pocket of a fractional number of middlemen.

 

3. Absence of modern designing knowledge and technology: Most of the SME clusters in Bangladesh are using old technologies and producing almost similar products throughout their life. On the other hand customer’s choice is changing every day and they are not willing to purchase the same design, same quality or same shaped products with a higher price. As a result they are attracting by the imported good looking products even lower quality products with higher price. Limited deign knowledge and technology is a common problem in almost all the SME Clusters in Bangladesh.

 

4. Absence of testing facility: Testing products is a prerequisite to classify or grading up the products. But we have absence of testing facility in almost every cluster in Bangladesh. For example there are no testing machines in Bangladesh to test quality of Agar – Ator producing at Agar Ator Cluster located at Barolekha, Moulvibazar. Gold testing facilities is very rare in any Jewellery clusters in Bangladesh, Wood seasoning and testing facility of the wood producing Cricket Bat is absent in Baldia Cricket Bat Cluster at Nesarabad, Pirojpur. Without out a very limited cluster this is a common problem everywhere in Bangladesh.

 

5. Access to finance: Access to finance is one of the oldest problems for Bangladeshi entrepreneurs either in any cluster or outside. So many initiatives were taken by the central bank to facilitate access to finance at door step of the entrepreneurs. But till now it is a major challenge for any new entrepreneur or unable to pay mortgage. But today we will see sector specific or location specific format of the same problem in different forms. For example entrepreneurs of Bhairab shoe clusters faces a dry season for three months in every year. At that point of time their product reaches lowest sales and lowest revenue generation. As a result they are unable to pay bank instalment during that period. But they are willing to pay whole year’s instalment in rest eight months. But no bank is offering that tailor made loan products to them to address their ground reality. Entrepreneurs of Agar-Ator Cluster located at Barolekha, Moulvibazar are getting bank loan for BDT 5-50 lac easily. But they need up to BDT 10 – 20 Crore while government Agar garden / forest used to call for tender. If a third party (do not have ator producing plant) win in the tender then either original entrepreneurs having Ator producing factories have to purchase the trees with much higher price or the tree will be exported to neighbouring country. Thus Bangladesh losses its own wealth to add value and export in a much higher price. There are no banks who can give that BDT 10-20 Crore loan for a shortest period of time to the Agar-Ator entrepreneurs at Barolekha Agar Ator Cluster at Moulvibazar. Another unique form of this access to finance problem could be seen at Nawgah Jewellery Cluster, Banks usually do not provide loan to Jewellery business. Though our nearest neighbour India is exporting Jewellery products worth of millions of Dollars to Dubai and other Middle East countries. Till now Bangladesh government is not providing any support to Jewellery sector. Even official import of gold is banned or strictly controlled by our government. On the other hand Bangladesh is importing a significant amount of artificial Jewellery / stone Jewellery from India and China to meet its internal demand.

 

6. Lack of knowledge about product’s quality and quality certification: Our entrepreneurs have very limited knowledge about product’s quality and international quality certification system. As a result they are lagging behind even with qualitative products in few sectors.

 

7. Limited number of skilled labour and absence of qualified technicians: Most of the clusters have potentials to grow further but availability of skilled manpower is very limited. As a result labour turnover is higher and entrepreneurs are not willing to develop skills with their own cost. Entrepreneurs are not adopting new technologies due to not available of technicians of modern machineries in local market. As a result productivity and quality of products is not increasing up to a satisfactory level.

 

8. Non-cooperation from relevant government agencies: In most of the cases Tax-VAT, police, environment, consumer rights etc. officials are not cooperating with the entrepreneurs. There could have an orientation gap between these officials and entrepreneurs. Government could orient these officials that, all entrepreneurs are not dishonest so everybody shall not be treated as a thief. They must remember an entrepreneur’s role in the economy by paying taxes / VAT, generating employment and increasing GDP growth of the country.

Way forward:

So many development projects are being implemented by the government, donor agencies and NGOs in different sectors of Bangladesh. There could be a development project to update existing technologies of different SME clusters for increasing productivity and product quality. Government could allow sectoral associations to import raw materials with bonded warehouse facility to facilitate export of SME products producing in different clusters throughout the country. Government may consider allowing minimum import duty on raw materials using SME clusters and give protection of SME products against importing. The central bank have to inspire the scheduled commercial banks to offer tailor made loan products based on local needs in different SME Clusters. Government has to take the lead in establishing sector specific testing laboratories and training institutes to promote world class product and efficient labour / technicians in Bangladeshi business arena. Today or tomorrow we have to face the reality that without producing qualitative products of international standard certification no one will buy our products. Therefore government could inspire entrepreneurs to achieve global standard quality certification for respective products.

 

Moreover cluster development activities shall get priority in government development agenda for balance development of Bangladesh. At this stage SME clusters are in need of government’s intervention for prompt growth and sustainable development. It will facilitate industrialisation, employment, poverty reduction, increase in export earnings, and balanced development of each district of Bangladesh. Government shall not control industrialisation may be anywhere without ensuring proper facilities into a particular location. Otherwise we will see that no natural clusters are growing due to extreme government controlling mechanism. It could increase our import dependency in many sectors.

SME Clusters in Bangladesh: Challenges and Opportunities: SME Clusters in Bangladesh: Challenges and Opportunities

*Author’s Short Profile:

Mr. Md. Joynal Abdin is a Business Consultant & Digital Marketer based in Dhaka, Bangladesh. He is also Co-Founder & CEO of Bangladesh Trade Center. Previously he served at Dhaka Chamber of Commerce & Industry (DCCI) as Executive Secretary; DCCI Business Institute (DBI) as Executive Director; SME Foundation as Deputy Manager; and the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) as Assistant Secretary.

 

The list of services Mr. Abdin is offering includes but not limited to Business Research and Documentations like Feasibility Study, Project Proposal Preparation, Writing Business Manual, Standard Operating Procedures etc.; Export Market Selection and Product Positioning at Home and Abroad; Buyers-Sellers Matchmaking; Website Development; Search Engine Optimization (SEO); and Social Media Marketing etc.

 

SME Clusters in Bangladesh: Challenges and Opportunities: SME Clusters in Bangladesh: Challenges and Opportunities

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[1] Porter, M. (1998) On Competition. Harvard Business School Press.

[2] SME Foundation (March 2013). Clusters in Bangladesh, 1-176 pages.

[3] OECD 2007, Cluster Policies Whitebook 2004 & Enright (1998)

[4] Singh, A (2010). Clusters in India, Foundation for MSME Clusters (FMC)