Cluster-based SME: An approach to achieve Vision 2021

Cluster-based SME: An approach to achieve Vision 2021

Md Joynal Abdin

The Financial Express on November 20, 2011

The small and medium enterprises (SME) are familiar as the engine of growth in developing economies. They are helping in economic development from two dimensions, firstly by producing goods/services and secondly by employing more labour with comparatively low investment. Employment generation and the gross domestic product (GDP) growth both are very much important for sustainable development of an economy.

Bangladesh has been maintaining 4.0 – 6.5 per cent GDP growth during the last two decades. However, it experienced several downturn of GDP growth in the same period. But we do not know why this downturn occurred. Sometimes we blamed natural disasters, political unrest and so on. But we actually never try to find out the real cause and take action to avoid any further downturn. As a result, till now we are in and around 5.0-6.0.

Composition of our economy is agriculture: 18.4 per cent, industry: 28.7 per cent and services: 52.9 per cent. From industry contribution to GDP viewpoint Bangladesh is the 73rd economy among 165 economies of the world. The position may be not bad due to the half length of the list. But when we compare our companions in 1980s like Vietnam (33rd), South Korea (35th) and Iran (23rd) then we can realise our progress during last two decades.

From sector wise employment generation point of view agriculture is employing 45 per cent, industry 30 per cent and services 25 per cent of Bangladeshi labour force. If we compare employment generation versus contribution to GDP then we can easily say that, agriculture is the most non-productive sector for Bangladesh. Because of 45 per cent people are contributing only 18.4 per cent of the GDP. That means we have to improve productivity in agriculture to ensure proper utilisation of resources in agriculture sector.

Industry is contributing 28.7 per cent of the GDP by employing 30 per cent of the labour force. That means we have space to improve productivity in industrial sector. At the same time industry’s contribution to GDP has to improve up to 40 per cent by 2021. According to vision 2021 Bangladesh has to achieve 8.0 per cent GDP growth in 2013, increase it up to 10 per cent by 2017 and continue in the same rate till 2021 to meet the stated goal.

Bangladesh achieved 5.0 per cent GDP growth for the first time in 1996. It turned back to 4.8 in 2001 and 2002. Till 2011 we are walking around 6.5 per cent. That means we spend long 14 years to increase 1.5 per cent GDP growth. To achieve 8.0 per cent GDP growth by 2013 we have 2 years in hand to increase the 1.5 per cent rate of GDP growth. It means 14 years achievement have to be achieved in 2 years. It is really a tough challenge for us where existing industries are facing gas rationing, providing new electricity connection is stopped for the last few years. At the same time current 1.5 per cent is bigger than the previous one. But we have to achieve it. SME can be the best option to increase GDP growth rate and generate employment with minimum investment.

We have a misconception that private sector does business for their own profit, what the government can do for them? Ensuring basic needs to all citizens is the primary duty of the state. So government will create congenial entrepreneurial environment for maximum employment generation so that basic need of a family reaches via an employed citizen.

The government of Bangladesh has enacted the National Industrial Policy 2010 and SME Policy Strategies 2005 to boost up industrial development and provide necessary assistance. But how these policies can be implemented? Who are the appropriate group to get government support? What are the appropriate fields for interventions?

In many countries specially in neighbouring India cluster based development interventions get popularity due to its effectiveness. Because cluster based intervention help us to select the most appropriate group without corruption and ensure best utilisation of limited resources. The SME Foundation, Bangladesh is currently working hard to identify micro, small and medium enterprises (MSME) clusters in Bangladesh. Primary identification of the clusters in 64 districts has been completed. Now in-depth analysis of each identified clusters and geographic information system (GIS) mapping is going on. After successful completion of the task we can easily select the most promising clusters for development interventions throughout the country. This will help to expand existing enterprises, increasing their productivity and establish new enterprises in each of the clusters. It will help us to achieve the projected GDP growth.

Now let us come to the point what is a cluster? Why cluster based intervention can be more result worthy? What is the best approach of cluster policy making?

Cluster is defined with different amount of indicator in different countries. But two parameters are common– these are located in a particular adjoining area and producing similar group of products. There was no unified definition of cluster in Bangladesh. SME Foundation along with key stakeholders reached a decision that if there are about 50 similar production units adjoining in a 5.0 km diameter then it will be termed as a cluster. Generally a cluster produces similar (not same) products. Necessary support services or inputs are available in the same location. A cluster generally develops through learn, create and upgrade process.

Cluster based development intervention can be the best possible way to ensure maximum utilisation of our existing resources. For example a central effluent treatment plant (ETP) or a lab can serve 100 enterprises of a particular industry located at same place. Similarly it is easier for the government to facilitate required services in a particular location for a group of similar enterprises.

Hopefully, SME Foundation’s initiatives will get all stakeholders attention and required support to develop MSME clusters in different locations of Bangladesh to promote employment and economic growth.

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Published by

Md. Joynal Abdin

Development Researcher, Columnist and Author

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