Entrepreneurial ecosystem needs improvement

Entrepreneurial ecosystem needs improvement

Md. Joynal Abdin

Published by the Financial Express on May 8, 2018

Bangladesh achieved the lower middle income country status in 2015, with the hope of graduating from the list of Least Developed Countries (LDC) by 2024. At the same time, we have a vision to become a developed nation by 2041. Bangladesh’s successes in different parameters of Millennium Development Goals (MDG) have been praised by global think-tanks and investment banks. Renowned investment banker Goldman Sachs and economist Jim O’Neill identified Bangladesh as one of the Next Eleven (N11) countries along with Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam back in 2005.

In one of his recent articles published by BARRON’S on 28 April 2018, O’ Neill praised Vietnam for its successful journey of economic development from 2005 to 2018. He described Turkey and South Korea as countries having living standards similar to the European countries. But he was completely silent about Bangladesh.

Similarly, JP Morgan identified Bangladesh as one of the Frontier Five (Frontier 5) countries along with Vietnam, Nigeria, Kazakhstan and Kenya in 2007. JP Morgan revised this list of Frontier Five in 2017 by keeping Ghana, Dominican Republic, Egypt, Peru, and Colombia in the list, which they felt have more investment opportunities and prospects. Bangladesh was again missing from this list as well. Therefore, it is time for Bangladesh to rethink its entrepreneurial ecosystem: Why we are absent from such influential global ratings? Is it because Bangladesh was more promising for investment in 2005 or 2007 than the developing Bangladesh of today? Or is it because our entrepreneurial ecosystem is becoming more complex due to absence of certain entrepreneurial tendencies or features?

Let us try to analyse entrepreneurship, factors that influence it, models of entrepreneurship development, and significance of entrepreneurship for a developing country like Bangladesh. Scholars have defined entrepreneurship in different ways. For example, Kuratko & Hodgetts defined entrepreneurship as a dynamic process of vision, change, and creation. It requires application of energy and passion towards the creation and implementation of new ideas and creative solutions. It includes the willingness to take calculated risks in terms of time, equity, or to marshal needed resources and fundamental skills towards building solid business plans.

According to Harvard Kennedy School, entrepreneurship consists of any earnest activity that starts, maintains, and develops a profit-oriented business in interactions with internal situation of the business and external situations like economic, social, and political ones surrounding the business. In simplified form, we can say that entrepreneurship is an entity to commercialise an idea or innovation with a profit motive by taking calculated risks. Entrepreneur is that risk-taker who organises all the factors of production and uses them to convert an idea into a profitable venture.

Two types of environmental factors have influence over entrepreneurship, namely internal or controllable factors and external or uncontrollable factors. Controllable internal factors are lack of efficient manpower, absence of technical knowledge or appropriate machineries, managerial know-how, cost of the factors of production etc.

One of the most important comparative advantages of Bangladesh is its young manpower. But there is a shortage of skilled manpower in the market; as a result, local entrepreneurs are employing many foreign managers and technicians in the readymade garments sector. We have a scope to develop need-based, industry-specific skilled manpower in Bangladesh. But unfortunately, all the public and private universities are generating job-seekers educated on old-fashioned curricula. As a result, they are not capable of fulfilling the needs of different industrial sectors and remain unemployed. More than three million educated young men and women are unemployed in the country now. Additional two million educated job-seekers are entering the economy every year. Therefore, there is tough competition for availing any job. The government can revise the academic curricula after consultations with the industries and incorporate current issues to mitigate this challenge. Private sector entrepreneurs can be encouraged to spend money for their employees’ training at home and abroad in order to develop their skills and improve productivity in the local industries. There can be a provision in the next national budget for allowing private enterprises to spend five per cent of their income for capacity development of their workforce by offering equal amounts of tax waiver.

Uncontrollable or external factors include inconsistency of government policies, discontinuation of policies, frequent shift of policies, unjustified taxation system, corruption in government departments, unprofessional bureaucracy, deteriorating law and order situation, extortions etc. Bangladesh is suffering from negative impacts through each of the uncontrollable factors. Therefore, doing business here is more complicated and costlier than the competing countries. As a result, it is performing miserably in the global ‘doing business’ index every year. Our complex, time-consuming and corrupt processes of business registration and approvals are discouraging local youths from becoming entrepreneurs and are also repelling foreign investors.

Bangladesh needs a healthy entrepreneurial ecosystem to sustain its status as a developing country and graduate to a developed nation status, because entrepreneurs have a significant role in the economic growth of a country in the following ways:

  1. Entrepreneurs invest their money to innovate processes and techniques for increasing productivity in respective enterprises and sectors. Thus, they contribute towards improvement of national productivity and GDP growth of a country.
  2. Entrepreneurs generate employment opportunities by establishing new enterprises and helping the government in its fight against unemployment.
  3. Entrepreneurs adopt new technologies in respective industries, and facilitate transfer of technology throughout the country.
  4. Entrepreneurs play strategic roles in commercialisation of new inventions in the society.
  5. They invest money and take risks to produce new products by utilising resources available in a society.
  6. Progress of a business venture or industry in a community helps improve the standard of living of that particular community.
  7. Entrepreneurs play a crucial role in the restructuring and transformation of an economy. For example, Bangladesh economy is now gradually changing from a traditional agrarian one to an industrial one.
  8. Balanced industrialisation facilitates balanced economic development of a country.
  9. Entrepreneurship ensures dynamism in industries by launching innovative products and services.
  10. Entrepreneurs often search for new international markets, and create new market mechanisms locally.

In conclusion, we can say that entrepreneurship plays a multidimensional role in the development of a country. Therefore, the Bangladesh government should ensure a healthy ecosystem to encourage new entrepreneurs and promote proper growth of existing players by implementing business-friendly policies, regulations, processes, ensuring law and order, and curbing corruption, extortions etc. Bangladesh has a long way to go in creating a congenial entrepreneurial ecosystem and improving its current ranking in the global ‘doing business’ index. Without effective steps that can address these issues, foreign investors are unlikely to come in a big way, while local investors may be lured to migrate to other countries.

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Industrial infrastructure development for sustainable economic growth

Industrial infrastructure development for sustainable economic growth

Md. Joynal Abdin

Published by the Independent on April 25, 2018

Infrastructure refers to the basic facility required to run the daily life of the citizen of a country or city like roads, bridges, tunnels, water supplies, sewers, electricity, gas, telecommunication system, cellular network, internet connectivity and broadband speed etc. Infrastructures are primarily classified into two brad heads namely, hard infrastructures like transportation networks like roads, airports, sea ports or river ports, railroads etc. and soft infrastructures like education system, healthcare system, law and order situation, financial system, form of government, financial service and government responses to the civil emergency etc. of a country. Bangladesh has primarily graduated from the LDC list this year and hopping to be sustainably graduating into developing countries list by 2024. To fulfill that mission we have to fight few socioeconomic inconveniences like providing employment to the existing unemployed as well as new comers in this category, improve infrastructure (hard and soft) facilities, transform the economy from agricultural based into industrialised one.

Transformation of Bangladesh economy from agricultural to an industrialised one has  started naturally during last couple of decades. For example contribution of Agriculture, Industry and Service Sector to Bangladesh GDP in 1972 (soon after the independence) was 59.60 6.06 percent and 34.32 per cent respectively. In the year 1980 contribution of the same sectors to Bangladesh GDP was 31.55 percent (Agriculture), 20.63 percent (Industry) and 47.81 percent (Service). Current contribution (2016) of Agriculture reduced into 14.77, Industry and Service Sectors increased into 28.76 percent and 56.45 percent respectively. From the above statistics it is clear that, Bangladesh economy is transforming from agricultural economy into industrial economy, but the transformation speed is too slow. Questions may be asked that, why this transformation is necessary. This transformation is necessary because per acre agricultural land a highest threshold of production. After that particular threshold further growth in agriculture is not possible. On the other hand productivity of the same size of industries is much higher than that of agriculture.

Secondly, there are above 3 million unemployed (workable) populations in Bangladesh, another 2 million newcomers are adding with this number as fresh job seekers. But Bangladesh is experiencing a job less growth during last couple of years. As a result burden of unemployment in mounting up day by day. Government alone is unable to create employment opportunities for such a huge number of citizens. Therefore; industrialisation is the most suitable options for employment generation, increasing GDP growth, enlarging export basket and finally sustainably graduating into a middle income developing country. To speed up industrialisation movement government initiated some initiatives like the honorable Prime Minister herself seat in a forum called National Council for Industrial Development (NCID), Ministry of Industries is providing secretarial support to this council. Among others Bangladesh Small and Cottage Industries Corporation (BSCIC) and SME Foundation are working to facilitate entrepreneurship development and industrialization in the country. But due to lack of industrial infrastructure facilities Bangladeshi industrialisation movement is not getting momentum. Now come to the points what is industrial infrastructure? And why these are important to increase industrialisation movement of Bangladesh?

Industrial Infrastructure is a set of physical facilities essential for healthy operations and further growth of the industrial operations in a country or city. Industrial infrastructure is also known as commercial infrastructure. Industrial Infrastructures of Bangladesh could be described as follows:

  1. Aviation Facilities: There are three international and seven domestic Airports in Bangladesh. These are Hazrat Shahjalal International Airport, Shah Amanat International Airport, Osmani International Airport (International), Cox’s Bazar Airport, Jessore Airport, Shah Makhdum Airport, Barisal Airport, Ishurdi Airport, Saidpur Airport, and Comilla Airport (Domestic). This number of only 10 airports is self descriptive that most of the districts of Bangladesh are out of air network. Airport facilities, security systems, cargo handling etc. capacity are very limited to offer a full sewing aviation service for tomorrows Bangladesh. About nine airlines operators are operating local and international flights in Bangladesh but the national carrier Biman is a losing concern. Bangladesh has a very small network of destinations connected by direct flight and cargo transport facility. This network has to be broadened and air cargo service destinations have to be enlarged to fulfill increasing demand of tomorrow’s industrialisation.
  1. Roads and Highways: Bangladesh has 3.33 lac kilometers of road network. Maximum lengths of this network are Upzila, Union and Village level road. Condition of only 19.46 per cent is good, 37.47 per cent is fair and rests are poor and very poor. Among 3.33 lac kilometers of roads national highways are only 3.5 thousands kilometers. But Dhaka Chittagong Highways (215 kilometer) carries above 60 per cent of Bangladesh’s commercial traffic and 27 per cent passengers of the country. Therefore traffic jam is a regular phenomenon here in this highway. An alternative roads between Dhaka and Chittagong is the necessity of time to promote hassle free transportation of export oriented goods and imported raw materials to and from the busiest port i.e. Chittagong port. Economic importance of Dhaka – Chittagong port is more than all other roads and highways of the country. Government has a plan to make Dhaka-Chittagong Economic Corridor functional. It would help to uplift living standard of the linked cities like N.Gonj, M.Gonj, Comilla, Feni etc. SEZ going to be established besides Dhaka Chittagong Economic Corridor like AMEZ, API Industrial Parks, and Mireshwrai SEZ etc. would be pieces of diamond of this economic corridor.
  1. Railway: There are only 2.87 thousands kilometers of railroads in Bangladesh. Most of the cities are out of rail network and its service. It is one of the busiest modes of transport in Bangladesh but losing concern due to some hidden reason. Railway could be a safe and quickest mode of transport for passengers as well as goods in Bangladesh. New railroads have to be constructed and operated in commercial mode. Government can open up this sector for private investment like the cellular phone sector. Private Investment can develop this sector and make it profitable. Mode of private investment in this sector could be BOO (build, operate and own) or BOT (build, operate and transfer) under the PPP modality.
  1. Land Ports: There are 23 Land Ports in Bangladesh namely Benapole Land Port, Burimari Land Port, Akhaura Land Port, Bhomra Land Port, Tamabil Land Port, Darshana Land Port, Belonia Land Port, Gobrakura-Karaitali Land Port, Ramgarh Land Port, Sonahat Land Port, Tegamukh Land Port, Chilahati Land Port, Daulatganj Land Port, Dhanua Kamalpur Land Port, Sheola Land Port, Balla Land Port, Sonamosjid Land Port, Hili Land Port, Banglabandha Land Port, Teknaf Land Port, Bibirbazar Land Port, Birol Land Port and Nakugaon Land Port to carry its import and exports from the neighboring countries through road transports. Infrastructure facilities in most of the land port are measurable. Carrying goods to or from most these land port is till horrible experience for the businessmen. Storage facilities, Road condition, Customs stations and other important institutions in these land port has to be developed to make these functional and effective.
  1. Sea Ports: There are only three functional sea ports in Bangladesh i.e. Chittagong Port, Mongla Port and Paira Port. A large number of private or specific service oriented port facilities are there in different locations. About 92 per cent of maritime trade traffic of Bangladesh goes to a single port i.e. The Chittagong Port. Therefore traffic congestion in Chittagong Port is rising day by day. It is increasing hidden cost of doing international business through Chittagong port. A deep sea port is under process to ease maritime trade of Bangladesh. But delay in decision making related to deep sea port may increase threats to Bangladeshi maritime trade i.e. import or export in near future. Because we have a target to increase our export volume to USD 50 billion in 2021. Current export of USD 35 billion is making congestions in our major ports how they can handle additional USD 15 billion trade by existing capacity? Not only sea ports, government have to go for capacity building of all the existing river ports of the country to make trade goods transportation comfortable through river channels. River ports activation could ease traffic jam in roads and highways too.
  1. Electricity, gas, coal, oil and renewable energy: Currently Bangladesh is generating about 10 thousand megawatt of electricity per day. This generation is fighting to supply adequate amount of electricity to the existing industries. But when 100 SEZs will be commissioned with full range of factories then what would be the demand for electricity, gas, coal, oil and other forms of energies. This could be a major challenge to make our dream into reality. All the renewable energy sources could be unable to supply the demanded amount of energies. Therefore before making land boundaries of all the SEZs, Industrial Parks, Industrial Areas and Clusters we should work out how much different forms of energies could be demanded by all these industrial states, SEZs, and industrial clusters. Do we have enough preparation for that?

Finally we could state that, we are running towards a very lucrative goal but have to be prepared enough to achieve it and feed its demands too. Not only the above mentioned industrial infrastructures (hard) Bangladesh has to supply required soft infrastructures too to make 100 SEZs functional, to sustain as a developing nation after erosion of all the existing trade preferences from 2024 and  onwards.

Private sector investors could be engaged actively to develop all of the industrial infrastructures (hard & soft) under PPP or BOO or BOT etc. modalities.

Government should open up all of the industrial infrastructure development relevant sectors for private investors to contribute. Otherwise government alone may not be in a position to supply resources for all these and measurable pain of bounce back to the LDCs could be the end result.

Post-LDC Challenges for Bangladesh Economy

Post-LDC Challenges for Bangladesh Economy

Md. Joynal Abdin

The Daily Sun on 6 February 2018

Bangladesh became a member of the least developed country (LDC) club in 1975. As a newly emerged independent country Bangladesh had to face many socioeconomic as well as geopolitical challenges at that period (soon after the independence).

But gradually we achieved remarkable progress in many fields and emerged as one of the fastest growing economic power in Asia. Continuous progress of Bangladesh economy is an example to the entire world. But we are supposed to achieve even more if political chaos, greed and immaturity is not there. Frequent change of political ideology made us bound to radical shift towards multidimensional economic paradigm. Besides shortcomings of infrastructure, industrial utility, absence of united political will towards a particular system of economy, Bangladesh achieved the millennium development goals (MDGs) with significant performance in many arenas. Bangladeshi expatriate workers and women workers in readymade garment (RMG) sector are the significant contributors of this wonderful achievement.

Bangladesh reduced poverty rate into 23.2% (up to 2016) whereas it was 31.5% in 2010. At the same period extreme poverty rate declined into 12.9 % from 17.6% in 2010. Per capita income of Bangladesh increased to USD 1610 in 2016-17 fiscal years. Hopefully, Bangladesh could be considered to graduate from the list of LDC in upcoming triennial review meeting of the Committee for Development Policy (CDP) in this year. Second review of the same committee could be in 2021 then we will be observed for another 3 years i.e. up to 2024 to be finally graduated from the LDC club. This graduation is so much expected and welcoming for the whole nation. It will increase value of Bangladesh brands, Bangladeshi passport, and Bangladesh’s position in different global platforms. Therefore every Bangladeshi is expecting this graduation as soon as possible. But before going for final celebration of this achievement we should conduct an impact assessment study by an impartial body to identify possible impact of LDC graduation on Bangladesh economy during next decade. Few impact of LDC graduation on Bangladesh economy could be as follows:

  1. Loosing preferential market access / preference erosion: Bangladesh exported USD 34.83 billion in last fiscal year. About 90% of Bangladesh’s total exports go to the export markets under different preferential market access facilities in EU (under EBA), Canada, Japan and the US, under their respective GSP schemes. Bangladesh also enjoys preferential market access in such other industrialized countries as Australia and in some developing countries, such as China, India and the Republic of Korea, under RTAs and bilateral initiatives. All these schemes are non-reciprocal in the sense that Bangladesh is not expected to offer preferential access to products originating in the preference-giving countries in response to the offer made to her as an LDC. Since developed country markets account for about 90 per cent of Bangladesh’s total exports, preferential market access in these countries is of special significance to Bangladesh. Besides GSP or EBA Bangladeshi export items are enjoying duty free and quota free market access under the following trade regime:
  • Special and Differential Treatments (S&DT) for LDCs under different agreements of WTO
  • Preferential market access for LDCs under different regional trade agreements like SAFTA, BIMSTEC, APTA etc.
  • Preferential market access for LDCs under different bilateral trade agreements.

The above mentioned discussion made it clear that, Bangladesh’s export items enjoys preferential market access in different parts of the world under different trade regime. If 90% of our export items loose preference then Bangladesh’s export performance is likely to be adversely affected. Therefore fact finding studies should be conducted to identify the financial value of preference erosion in USD, what could be its spillover effects on Bangladesh’s investment environment especially to attract FDI, what could be ways forward to minimise adverse affects of preference erosion on Bangladesh economy.

  1. Impact of Reciprocal Trade Regime Offerings: Currently Bangladesh is a member of nine (9) RTA or FTAs namely, Asia-Pacific Trade Agreement (APTA), Bangladesh-Sri Lanka Free Trade Agreement (Proposed), Bangladesh-Turkey FTA (Proposed), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area, Pakistan-Bangladesh Free Trade Agreement (Negotiations launched: 2003), People’s Republic of China-Bangladesh FTA (Proposed), Preferential Tariff Arrangement-Group of Eight Developing Countries (D-8), South Asian Free Trade Area (SAFTA), Trade Preferential System of the Organization of the Islamic Conference (OIC PTA). An LDC country is allowed not to offer reciprocal trade preference to its counter parts. But Bangladesh has to offer it while graduating from LDC. In such case signing free trade agreement could be more costly for Bangladesh after graduating from LDC list.

  1. Paradigm shift in Official Development Assistance: Bangladesh received official development assistance from development partners 90.5 % as grant and only 9.5% as loan in 1971-1972 fiscal years. Foreign grants and soft loans played a vital role in infrastructure and other development activities in Bangladesh. Still official development assistance (ODA) is a significant source of funding in various mega project of Bangladesh. Development partners are shifting their mode of financing with the wheel of local economic development. Grant amount is decreasing and loan amount is increasing day by day. For example Bangladesh received only 12.5% grants and 87.5% loan in last fiscal year. Soon after the graduation Bangladesh will be completely out of grant assistance facility, everything has to be bearded by local resources or go for foreign loans and repayment with interest. So it may have another adverse affect on development motion of Bangladesh.

  1. Other challenges: Besides the above mentioned challenges Bangladesh may face challenges in getting aid for trade, implementing IP laws, paying more subscription fee to international platforms like UN, unavailability of technical cooperation in terms of development assistance etc.

Finally; we can state that, Bangladesh’s graduation from the list of LDC is a good news for us, but could we please recheck statistical figures that we are producing now, is there any methodological errors, could we conduct an impact assessment study to identify post graduation adverse affects on Bangladesh economy, could we please evaluate economic value of those prospective adverse affects whether we could survive and prosper further or bounced back to the LDC club again. It is better to graduate later than bouncing back to the same pavilion again. We have to develop 100 SEZ, Deep Sea Port, Increase efficiency of existing sea ports, generate more power, develop internal road networking and offer load shedding free electricity connection to the mass people. Lots of mega projects are yet to be materialised. Internal resource mobilisation, confidence building of local investors and attracting foreign investors to invest here in Bangladesh is still pending. So graduation without preparation could be more painful for us if sustainability is not sure.

Journey to Competitive, Inclusive and Sustainable Economic Progress

Journey to Competitive, Inclusive and Sustainable Economic Progress

Md. Joynal Abdin

The Daily Sun on October 31, 2017

The world is going through an economic and political power shifting from the west to the east during the last couple of years. Reshape of geopolitical forces is resulting in extra tensions in the world politics. Its impact on the economic progress is becoming more visible day by day.

The world economic growth was 3.5 % in 2017 but uneven distribution of wealth increases disparity around the world. As a result, all segments of the society are enjoying the benefits of economic progress. Current economic models are not capable enough to serve needs of different segments of the society equitably. Socialist movement failed to serve its objectives even in its birth places. Similarly, limitations of the capitalism are becoming clearer to the academics and practitioners. Therefore, the World Economic Forum feels the need for a new model of human centric economic progress.

Capitalist concept not only failed in the least developed countries like Bangladesh, it also failed to reduce inequalities in the advanced economies like USA or Germany as well. The world experienced complex impact of globalization during the last decade. It is creating job in one corner but shifting job from others. Job creation versus job diversion is currently a popular debate of free market economy. The well off segment of the society is enjoying its rapid boom; on the other hand, the neglected segment is suffering more. Therefore, the world is in need of an inclusive and sustainable model of economy which will be inclusive, environment friendly and safe for future generations too. This model has to be human centric, pro-environment and create equal opportunities for all segments of the society.

To achieve the above societal features of economic progress, governments have to enact public-private collaborative policies. A joint effort of the government, business community, academia, and civil society will have to be ensured to get optimum benefit out of it. Countries have to be more competitive to face the emerging challenges of tomorrow.

Bangladesh is focusing upon the issue from different platforms. But in absence of a better coordinated effort we are failing to achieve targeted benefits in time. As per the latest report, Bangladesh ranked the 99th position of the Global Competitiveness Index. It progressed a little from 106th position earlier. But 99th position is displaying our measurable competitiveness around the world whereas we are dreaming to be among the Asian Tigers or Next 11 or Frontier 5 in economic development.

If we look at the current global competitiveness index we could find Switzerland, USA, Singapore, Netherlands, Germany, Hong Kong, Sweden, UK, Japan and Finland in the top 10 respectively. Two Asian representative Singapore and Japan are in the top ten. Our neighboring countries (other than Pakistan) are also doing quite well than us. India ranked 40th previously they were in 39th position. India’s negative growth is not for their bad performance but it is for others’ better performance. Other members of SAARC like Nepal ranked 88th previously they were in the 98th position. Bhutan ranked 82nd but previously they were in the 97th position. Pakistan ranked in 115th previously they were in 122nd and Sri Lanka ranked in 85th previously they were in 71st.

Global competitiveness index is not only a single featured ranking but it is an aggregate outcome of 12 different pillar analysis. These twelve pillars are institutions, infrastructure, macroeconomic environment, health and primary education as basic requirement of factor driven economies.

The second groups of pillars are higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness and market size as efficiency enhancer of efficiency driven economies. Finally; business sophistication and innovation are factors of innovation driven economies. Therefore, global competitiveness index is a comprehensive outlook of an economy.

Bangladesh Investment Development Authority is working out to prepare ourselves for uplifting Bangladesh’s position in the doing business index.

There is a position called Chief Coordinator for SDG affairs in the Prime Minister’s Office to ensure better coordination in implementation of the SDG related government policies. Similarly, a Commission or Board or Corporation is needed for looking after these 12 pillars related to the competitiveness index. It is more important than other stated issues here due to its coverage and wide range of the scope. Even a dedicated ministry could be established to look after the competitiveness issues to make Bangladesh competitive and face the challenges of tomorrow’s world.

Competitiveness is required not only for economic growth but also for the inclusiveness and sustainability. Economic growth without inclusiveness will increase disparity, social tension and environmental threats. Therefore, we are in extreme need of such economic policies / systems where inclusiveness will be ensured, equal opportunities could be created, and that would be environment friendly and safe for the planet. Without thinking of humanity, consciousness of environmental safety no economic advancement should be acceptable because pro-human and pro-planet policies are demands of the time now; otherwise social chaos and adverse reaction of the nature is waiting for us in near future.

 

Economy: Facing the challenges

Economy: Facing the challenges

 

Md. Joynal Abdin

The Independent on September 25, 2017

Bangladesh economy was flourishing during last couple of decades with on an average 5-6 per cent growth. As a result, we are hopeful that, Bangladesh could get place of middle income country from existing lower middle income country status by 2021, graduate from LDC by 2030 and finally become a developed economy by 2041. With this view in mind our political leadership offered vision 2021, vision 2030 and vision 2041 from respective platforms. More or less policy reforms have been initiated to align with the vision and create a pro-growth environment. Entrepreneurship development and private sector growth got attention of the government to be promoted and prosper.

As a least developed country (LDC) Bangladesh has few built-in barriers like poverty, unemployment, limited resources, shortage of technical knowhow, absence of good governance, corrupt bureaucracy, absence of true sense democracy etc. towards its development. But recently we are in front of few external barriers like recent flood in the northwest, Rohingya crisis in the southeast and upcoming national election in 2019. These three crisis could be well managed if concerned authorities play a respective role with dedication and neutrality. Each of the above mentioned crisis could create unrecoverable damage in the way of our economic prosperity if these are not being managed with professionalism and liability to the nation.

 Around 20 districts of the northern and northwest region of the country affected by the massive flood in 2017. This year flood has broken record of the historic flood of 1988. About 1 million people have directly been affected due to this flood. A good number of agro-farms including poultry, fisheries, and dairy farms has been destroyed by the flood. Exact monetary value of this damage is not calculated yet but no doubt that it is a severe damage to the economy of flood affected people. Poor people of the flood hit districts already loss their livelihood. Damage of will be more painful with the passage of time. This pain will be feeling more when water goes out and new irrigation season starts. Currently farmers are continuing with their savings of crops and cash, but his savings will be ended up if waterlogging period extended than that of the normal phenomenon. Government has to continue relief and other social safety net support in the flood affected area till new crops comes up. This is not less than a six months’ period. Providing relief to 1 million flood affected people for long six months is really a challenging tasks for the resource scarcity nation like us.

Military of neighbouring Myanmar (Burma) is operating a genocide against its citizen in Rakhine State (Arakan). This military operation aims an ethnic cleansing in Rakhine against the Muslim majority Rohingya community. Rohingyas were ancient citizen of independent Arakan in seventies. Burmies king conquered Arakan and made it a state of Burma (Myanmar) and rename as Rakhine. Burmies ruler never provided minimum humanitarian rights of Rohingya community as their citizen. Current military backed government of Myanmar is ignoring citizenship of Rohingya community and pointing out them as outsiders. They are operating an ethnic cleansing program against the Rohingya community. Myanmar military forces are killing Rohingya men, raping Rohingya women, burning their houses, destroying wealth without any causes. As a result, Rohingyas are fleeing out and became refugee in the neighbouring countries mainly in the Muslim majority Bangladesh to save their lives. Total 1 million Rohingya entered into Bangladesh in different times mostly (about 0.7 million) in last two months.

Bangladesh offered them food and shelter due to a humanitarian reason. But over populated and flood affected Bangladesh could not bear their liability for a long time. Ensuring basic needs of a human being for 1 million Rohingya is beyond the capacity of a least developed and already over populated country like Bangladesh. International community as well as regional powers like India and China is playing role of underworld don with this Rohingya crisis. Another big brother Russia is supporting the war criminals in this case. Global geopolitical stakes of these big brother could be motivational factor in this case. But we (Bangladeshi) are not responsible for this crisis we do not want regional or global geopolitical game with this humanitarian issue. We want that global community will come forward to ensure humanitarian needs of this largest number of refuses and get them back to their home with safety, security and dignity. This Rohingya crisis could be another big whole towards projected economic prosperity of Bangladesh.

Current legal government is ruling the country with 154 uncontested (without peoples voting mandate) members in the parliament. Legal validity of this government is declared by the court. But ethical standard of this government is still questionable in home and abroad. Therefore, current prime minister Sheikh Hasina wants an unquestionable election in 2019. Similarly, general people of the country is also waiting for a free, fair, credible and participatory election in 2019. But ensuring that free, fair, credible and participatory election is still a big challenge for the nation. Ruling party has completed all legal arrangements to hold the national election under their regime. But it is quite impossible to hold a fair election under any political party in the power. Dhaka city corporation election and elections of last few years proved this assumption. Therefore, same scenario of 2014 could be seen again in 2019. Government could use the law enforcement agencies to hold a partial election and oppositions may go for strikes and other damaging programs. Which may be cause of mass destruction of people’s wealth and life.

Finally; we could state that, massive flood, Rohingya crisis and upcoming national election etc. could be nightmare before the economic prospects of Bangladesh. Flood affected people have to be rehabilitated in time through ensuring their basic needs and rehabilitating supports. Rohingya crisis has to be resolved with support of international community, global platforms, and our friends in the Europe, America and Muslim worlds. Regional big brothers may not play a friendly role here in this regard. We may play the same role which was played by our great neighbouring friend India in 1971. If India have done a great job for the Bangladeshi in 1971 why not Bangladesh could adopt the same policy for the Rohingya community in 2017. Finally, we have to work out and reach into a way forward to hold the national election 2019 peaceful, free, fair, credible and participatory by leaving hock and cook instruments away. Otherwise, our vision 2021, 2030, and 2041 will remain in the paper and never be in practice.

Trade Organisations in Sustainable Economic Development

Trade Organisations in Sustainable Economic Development

Md. Joynal Abdin

The Daily Sun on April 26, 2017

There is no alternative of individual and institutional income generation for economic development and poverty alleviation of a country. Ensuring employment is the most effective tool for facilitating individual and institutional income generation. There are about 162 million populations in Bangladesh and about 120.70 million of them are in workable age group. For providing employment to such a huge number of populations government has only 1.7 million positions in civil service, a mentionable percentage of this government positions remain vacant forever; for example 18% of government positions are vacant now in Bangladesh. As per a recent report there are 58.10 million people involved with private sector jobs.

There are no exact data regarding the total number of businessmen in the country but it is stated that, there are about 30 million businessmen in Bangladesh. From the above statements we could find out a summery that there are about 37.20 million unemployed people in Bangladesh now.

Another recent report shows that there are more than 3 million higher educated unemployed populations in Bangladesh with 2.2 million newcomers in the job markets every year. It is easier to manage and employment opportunity for a low educated or uneducated youth but difficult to manage a career opportunity for a higher educated one. Uneducated or lower educated manpower could migrate into Middle East as a labour but higher educated youth could not do so. Thus the number of unemployed higher educated people is rising day by day. If such a trend continues for next few years they could be another burden for the society as well as for the nation.

Before meeting a terrible situation of the above mentioned problem we must have to identify a way out of it. The government has to take the issue as a new challenge and come out with appropriate solutions. The government could mitigate this problem with professional education system, skills development through practical training, creating entrepreneurs through entrepreneurial education, creating entrepreneurship friendly policy regime, creating start-up friendly fiscal and economic policies, self-employment oriented education / training, hands-on training for creating freelancers etc. Such types of projects should get the highest priority in the upcoming national budget of the government.

There are few problems which are impossible to solve by individual or organisational initiative. These problems are subject to be dealt with collective power and unity. To apply that collective power of the business community, effective trade organisation is required. There are about five hundred trade organisations in Bangladesh; among these 101 are chamber of commerce (district chambers, metropolitan chambers, joint chambers, international chambers etc.) and about 379 sectoral associations are mentionable. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is the apex institution that represents all the trade organisations of Bangladesh.

FBCCI used to negotiate, cooperate and support the government in enacting trade related policies on behalf of the private sector of the country. It represents all the trade bodies in different committee forms by different ministries, agencies, departments, and other organs of the government. It assists all the 500 trade bodies of the country in holding election and other regulatory purposes. FBCCI used to negotiate budgetary facilities for different sectors, products and customs structures with the national board of revenue (NBR) on behalf of the private sector.

To perform all of the above mentioned duties an efficient and functional FBCCI is our national requirement. To make it functional and effective its current manpower has to be increased, professional skills of existing manpower has to be improved and financial capacity of the federation has to be uplifted. There are many countries in the world where federation / national chambers are getting budgetary support from the government.

But till now FBCCI has to depend upon its members’ subscription, building rental and donation of business community. It is not sufficient to employ and retain efficient professionals and expand its services to the economy of Bangladesh. FBCCI will get its new leadership through the upcoming election in next month. We are hopeful that the new management will take necessary initiative to take the organisation as well as its member bodies into new height and serve the nation better. Competing business leaders are supposed to declare respective election manifesto soon. We would like to offer few recommendations as follows for their consideration and include into the election manifesto for making the federation as well as other trade bodies (chambers and association) for functional and effective:

  1. Taking necessary initiative to get budgetary support for operating FBCCI from the government.
  2. Pursuing the government to involve district chambers closely with the development project implementing in respective district.
  3. Undertaking projects to ensure hassle-free visa facility for the business community in consultation with all the foreign missions working here in Bangladesh. It will increase movement of our foreign trade into a new destination.
  4. Increasing research based capacity of the federation through undertaking visible interventions along with a time bound action plan
  5. Increasing capacity of the federation to undertake projects for private sector development and pursue government and other development partners for funding.
  6. Making the initiative of establishing Entrepreneurship Development Institute (EDI) a reality (initiated earlier but failed to get finance). Indian model of EDI, located at Ahmedabad, could be replicated here in this regard.
  7. Capacity building of different trade bodies to provide business support services, registrations and licenses. Negotiating with the government to hand over trade license, small and cottage industry registration etc. responsibilities to the trade bodies.
  8. Participating in foreign investment / trade fairs with own stall of FBCCI to facilitate B2B business matchmaking.
  9. Establishment of product research and new product innovation centre, testing laboratory, and undertaking product diversification initiative to enlarge export basket.
  10. Perusing the central bank and other ministries of the government to inspire the corporate houses, banks, NBFIs to support FBCCI development 10fund from respective CSR budget.
  11. Developing a research fund for conducting a certain number of systematic researches by the FBCCI research team every year.
  12. Providing FBCCI Award to the best growing company, most employment creator company, most Donor Company, best exporting company etc. to recognise their contribution to the society and inspire them to donate most at FBCCI development fund.
  13. Establishment of FBCCI’s branches in important business hubs at home & abroad and fixation of an FBCCI contact point in relevant ministries.
  14. Opening a news department in FBCCI and all major chambers and associations to assist local entrepreneurs to get quality certification of respective products from respective international or foreign authorities. It will help to get more acceptances of Bangladeshi products to the foreign buyers.
  15. Establishing business incubation centre to support new entrepreneurs, perusing the government for start-up financing.
  16. Establishing technology and engineering institute to produce skilled manpower as per demand of different business sectors.
  17. Motivating government for creating an environment to commercialise local inventions.
  18. Undertaking regular research on different international trade arrangements under the WTO, RTA or BFTA to make local entrepreneurs aware about our trade benefits under different agreements and facilitating to utilise the benefits in international trade.
  19. Playing more visible role in creating freelancers and adopting outsourcing friendly infrastructure in Bangladesh by the government.
  20. Undertaking projects to facilitate adoption and utilisation of e-commerce and e-business facility to make the digital revolution fruitful.

Finally we could state that the private sector has to play a visible role to achieve SDGs by 2030. This role could be played more effectively from a common platform like trade bodies instead of personal or institutional level. Therefore the government has to play its due role for capacity building of the trade bodies. New elected panel of FBCCI leaders could play the role of catalyst here in this regard. A common vision of the business community, government and the development partners is required to ensure sustainable development of the economy and achieving a developed Bangladesh as per our national target.

Levelling Trading Field for SMEs

Levelling Trading Field for SMEs

 

Md. Joynal Abdin

 The Daily Sun on April 2, 2017

There is a common debate that Bangladeshi SMEs are “Missing Middle” or “Excluded Middle” categories of enterprises of the economy. The first phrase i.e. the Missing Middle is mainly used by the donor communities and few Bangladeshi economists closely working with the donors.

It means that the SMEs are the middle segment of the enterprises which are missing either microfinance facilities i.e. exclusively for the cottage, and micro enterprises operated by the NGOs. On the other hand upper medium to large enterprises are enjoying every facilities of the institutional support offered by the government agencies and other institutes like banks, leasing companies, and multinational or regional trade negotiation platforms etc. Similarly in the second phrase Excluded Middle the concept is the same but only different is that, missing middles are out of service by error or unknowingly.

On the other hand, Excluded Middle are the missing part who are deliberately excluded by the policy makers, decision markers, government, development partners etc. to offer more benefits to the other segments. I would like to be with the second groups i.e. SMEs in Bangladesh are “Excluded Middle” segment of enterprises. Manufacturing SMEs are not getting any extra privilege over the trading and service sector enterprises from any policy aspects. SME loan are draining away by the traders or defaulter large enterprises that are included in the SME categories by the new definition of SMEs mentioned in the National Industrial Policy 2016 of the government. They are destroying reputation of the manufacturing SMEs through becoming defaulters in repayment of bank loans in time.

That means including trading, service and large enterprises into the categories of SMEs through broadening its threshold in the definition became harmful for the real entrepreneurs, I mean manufacturing SMEs from both the sides. Firstly they are competing with the manufacturers to grab benefits and destroying their reputations by becoming defaulters. Not only for these two reasons but due to many other reasons time has arrived to examine whether we are providing policy support to the real entrepreneurs i.e. local manufacturing enterprises those are creating jobs for the unemployed population in mass scale or their benefit is going to somewhere else due to policy gap of the government. To ensure optimum use of the government incentives and benefits definition of the manufacturing SMEs should be revisited and redefined by the government of Bangladesh.

To ensure inclusive and sustainable development of the economy it is not enough that the government will be happy with the GDP growth and increased amount of export earnings.

But government has to ensure stakes of every segment in the growth and export earnings as well. Large companies have competitive advantage over the SMEs in terms of organisational capacity, technical ability, access to finance, and negotiation capacity etc. aspects. As a result they are dominating in the national as well as the global trade of a country. But it is proved that the SMEs could have a vital stake in national and international market if proper policy support is available from the government. Japanese large companies are outsourcing required tools and equipment’s from their SMEs whereas Bangladeshi large companies are importing these from abroad to assemble or manufacture their products for national or international market. It could be said that the SMEs in Bangladesh are not capable of producing quality goods for supplying to the large companies. The question is how Japanese SMEs are being capable to produce qualitative goods? Why large enterprises, donors and government are not helping Bangladeshi SMEs to overcome their limitations and produce qualitative products for supplying to the large companies?

Arguments could come up survival to the fittest, why government should offer them extra benefit? The answer is quite simple that SMEs are contributing two-thirds of formal non-agricultural private employment around the world. They are contributing 63% of the total employment in OECD countries. In most of the developing countries and LDCs, SMEs are contributing more to employment generation than that of their GDP contribution. It is because SMEs are mainly labour intensive and using traditional low productive machineries due to their inability of further access to technology. But In Japan, Korea, and China it is proved that the SMEs could play the role of feeder organisation and supply qualitative intermediary goods for boosting up mass production of the large entities. On the other hand export orientation of SMEs could increase demand for their products and help them to go for large scale production.

Export orientation of SMEs could be facilitating in various forms like direct exports, indirect exports, non-equity contractual agreements, and foreign direct investment (FDI) etc. A recent study shows that, only 7.6% of the SMEs involved with export around the world are mostly from developing countries. On the other hand 14.1% of the large enterprises of the developing countries (that means double of the SMEs) are involved with export business. In terms of LDCs SMEs export involvement is about 3%, but direct export of manufacturing SMEs is a negligible, where 0.09% of service SMEs are export linked, this figure is 31.9% in case of large enterprises. That means SMEs are missing a level playing field in terms of international trade around the world. But for fostering inclusive and sustainable development a level playing field has to be created for the SMEs in international trade.

In terms of direct export Bangladeshi SMEs have limitation in trade negotiation with the potential buyers, limited ability to go abroad for buyer searching, limited managerial knowledge to handle export procedures and documentation etc. Therefore indirect export through large companies or group wise export could be encouraged here in Bangladesh. For example, one or two SMEs are unable to bear initial export costs but if ten SMEs become united and export under on single brand name and export documentation then it could be worthwhile in terms of export cost bearing and procedure handling. But till now buyer searching and proper positioning of products remains as challenges. In this case all the Bangladeshi embassies located outside Bangladesh could organize Bangladeshi product fairs once a year and display our SME products by inviting local chamber of commerce and business leaders and play the role of match makers in this case.

SMEs participation in indirect export is much better around the world. About 90% of export earnings of developing countries are indirectly contributed by the SMEs. The same report shows that, 78% of global enterprises are SME representative but only 34% of these are involved with direct or indirect international trade. That means SMEs have ability to further contribute in international trade around the world. If a level playing field could be ensured. Major obstacles to create a level playing field for the SMEs are:

SMEs are facing high tariff even more than the large firms due to the existing market mechanism. They are facing double even triple taxation due to their inability to maintain or obtain required tax relevant documents.

Adverse effects of the Non-tariff measures imposed by the importing country hit the SMEs much. Because large companies could adopt newer measures to address NTM requirements and enter into the market as a compliance company. But due to their limited capacity SMEs could not.

Cumbersome boarder procedures and delay shipment or clearance effect the SMEs more due to their inability of bearing highly charged boarder storage cost.

Access to information and distribution channel development is also another major challenge for export orientation of SMEs. Difficulties in access to required amount of trade finance is another major challenge for SMEs export orientation.

Most of above challenges require government policy intervention for creating and maintaining a level playing field for SMEs in national as well as international market. Adoption of ICT, e-marketing, e-commerce adoption could give them advantage over few of the above mentioned challenges but finally it is the government who has to come up with kind heart to support SMEs to grow further and contribute more in employment generation, GDP growth, export earnings and ensure an inclusive and sustainable development of the economy. Otherwise they will remain Missing Middle or Excluded Middle as mentioned.