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.


Merits and Demerits of Foreign Direct Investment

Merits and Demerits of Foreign Direct Investment

Md. Joynal Abdin

The Daily Sun on May 26, 2017


There are significant reserves of foreign currency in Bangladesh. It is mounting up during the last few years. At the same time, we have a good amount of unutilised money in the banking system. It seems good to listen that we are becoming a wealthy nation with handsome cash in hand. But till now our investment in percentage of GDP is about 29%. It is 56% in Bhutan, 33.25% in India. Bangladesh’s investment in percentage of GDP is increasing day by day but the growth rate is too slow.

It is a matter of investigation whether foreign currency reserve and unutilised cash in banking system is mounting because of this poor performance in investment or not. In terms of attracting foreign direct investment (FDI) we are performing even poorer than the neighbouring or competitor countries. Bangladesh earned USD 1191, 1726, 1432, 1830 and 2001 million during the last five fiscal years. It is only 0.98, 1.19, 1.74, 1.47 and 1.73% of the GDP whereas India earned FDI of 2.00, 1.31, 1.52, 1.70 and    2.11% of its GDP during the last five years. Vietnam got FDI 5.48, 5.37, 5.20, 4.94 and 6.10% of its GDP. The Maldives received FDI 17.29, 9.05, 12.91, 10.77 and 8.70% of its GDP during the last five years.

Let’s have a look at the benefits of receiving FDI into a developing country like Bangladesh. FDI could offer the following benefits to its host country:

1    Increasing supply of foreign currency and channelise international sources of industrial funds;

2    Increases employment opportunity and help to reduce unemployment rate;

3    Increases skills of the host country’s labour and facilitate technology transfer;

4    Increases managerial knowledge of the host country’s professionals;

5    Foster economic growth, export earnings;

6    Introduces products standardisation and international exposure of other products;

7    Provides corporate tax to the government and contribute in revenue growth;

8    Creates a competitive business environment and productivity improves with the competition;

9    Develops international channel of distribution;

10    Assists in adopting international standard policies and creates a global business regime;

11    Contributes to development of backward and forward linkage local enterprises and

12    Assists in improving living standard of the stakeholders through different social responsibility measures.

Bangladesh is fighting with the development barriers like unemployment, poverty reduction, enlarging product basket, enlarging export basket etc. since its independence. It achieved significant economic advancements but till we have scope to grow further. Therefore, the government attaches the highest priority to industrialisation of the economy by any means. Already we have eight Export Processing Zones (EPZ), 78 Industrial Estate developed by BSCIC to host investment. Furthermore, the government is progressing to establish 100 Special Economic Zone (SEZ) in Bangladesh. All these arrangements are to host investment either from local or foreign sources. Bangladesh Investment Development Authority (BIDA) has been restructured by merging the Board of Investment (BoI) and Privatisation Commission together. BIDA is organising conferences, seminars, road shows abroad to draw attention of the foreign investors. The government declared a long list of fiscal and non-fiscal incentives to boost up the investment movement. But till now Bangladesh’s performance in FDI attraction is considered poor. It is because a number of other factors like good governance, political stability / understanding among the political parties, security and safety of investment, law and order situation, availability of industrial logistics, hassle-free business registration and licensing etc. are involved with an investment decision making.

Now Bangladesh has to go for a comprehensive investment services like one stop service, approaching foreign investors with specific project proposals, justification of investment policies and revision (if necessary), establishment of sector specific technical and engineering institute, establishment of sector specific testing laboratories, signing free trade agreements with existing and potential export destinations, reducing business licenses and registration requirements, activating BIDA with own manpower instead of the cadre officials deployed in deputation to activate the investment attraction measures.

Bangladesh has everything to be a good destination for foreign investment. It is located at the heart of South Asia, corridor between SAARC and ASEAN countries. It has a large number of domestic consumers. Purchasing power of local people is increasing day by day with economic growth of the country. Bangladesh has a good number of sectors to invest profitably with supply of enough manpower in competitive cost. The government keeps assisting the investors with a long list of fiscal and non-fiscal incentives. Finally export items of Bangladesh are enjoying duty-free and quota-free market access to most of the export markets other than the USA. All the LDC facilities under the WTO arrangement are enjoying by an entrepreneurs while doing international trade with Bangladesh. Therefore, Bangladesh could be considered as one of the most attractive locations to relocate global business corporations to the EPZs and SEZs being developed by the government.

It is for sure that Bangladesh needs foreign investment to boost-up its economy but we must remember that there are some adverse effects of FDI too. For example, FDI in some sectors could have an adverse effect on local employment sector. For better understanding we could imagine a scenario where a large corporation establishes a highly sophisticated readymade garment factory here in Bangladesh, where most of the tasks are completed by robotic technologies instead of human labour. Its productivity is much higher than human labour and product cost is also lower. In such cases, local factories will lose its market share. After a certain period it could be seen that local factories are reducing their manpower to adjust with the situation. Large number of people loses their employment due to that large investment. Similarly extreme competition from an FDI company may be the cause of death to many local SMEs. Repatriation of a large FDI conglomerate could have an adverse effect on foreign currency reserve or balance of payment of a country. Therefore, we must consider all these possible adverse effects of FDI into the local economy and adopt legal framework to mitigate these threats.

Finally, we could state that, Bangladesh needs FDI to functionalise its upcoming SEZs and generate employment for the growing number of job seekers. But we must reserve few product and service sectors for the local entrepreneurs. Welcoming campaign for FDI has to be increased and equipped with enough precautionary measures. Adequate preparations, practical drive and a business friendly local business environment could encourage the investors to invest here in Bangladesh. We have everything to become a middle income country by 2027 if our government, political leaders, decision makers play respective role accordingly. Otherwise piecemeal investment drive will not give us complete output up to the expectation.

Development and Promotion of Entrepreneurship Education

Development and Promotion of Entrepreneurship Education

Md. Joynal Abdin

The Daily Sun on May 06, 2017

Entrepreneurs are considered as the most important segment of the society to generate employment opportunity, increasing GDP growth, fostering economic development around the world. Therefore, entrepreneurship development is one of the priority activities of all development initiatives. Once it was assumed that the entrepreneurship is a by-born quality to identify profitable ideas, organise factors of production, take risks to be failure so on and so forth. But through a long debate during last century scientists have succeeded to prove it that, entrepreneurship is not only a by-born quality but it could be created through proper education, training and other pro-entrepreneurial supports along with a congenial environment. Entrepreneurship creation could require hundreds of supports but the most important part of it is entrepreneurship education.

Entrepreneurship education includes both academic knowledge and practical skills to prepare young people to be job provider instead of searching for a job in the market. It provides knowledge, skills and motivation to encourage student’s young mind to become an entrepreneur. Fostering entrepreneurship attitudes and skills in secondary schools raises awareness of career opportunities, as well as of ways young people can contribute to the development and prosperity of the nation. It helps to reduce unemployment and number of jobseekers one of the major problems around the world. Entrepreneurship could be one of the mandatory subjects in all levels of education with a major specialised faculty in the undergraduate or graduate levels. Specialised curriculum as well as specialised institute/university could be established to produce entrepreneurs in Bangladesh. Neighbouring India identified this issue as one of the key requirement for industrial advancement and established the Entrepreneurship Development Institute of India in 1983 at Ahmadabad, Gujarat. EDI is a successful model replicated in most of the Indian states and around 25 countries globally. It is producing entrepreneurs the job providers since its inception.   Our government or even the private sector could replicate the model here in Bangladesh very easily and I know that EDI authorities as very helpful in this regard.

Entrepreneurship education is essential not only to shape up the mind-sets of young people but also to provide the skills, knowledge and attitudes that are central to develop an entrepreneurial culture. Entrepreneurs play the role of catalyst to achieve economic and social development, GDP growth, promoting innovation, fostering employment generation and equity development. Entrepreneurship education is similar but not the same curriculum of business education. It requires motivation, inspiration, creation of risk taking tendency, coordination, networking, competition, business secrecy, trend analysis so on and so forth along with the business courses like management, marketing, finance, accounting etc. Entrepreneurship education includes basic scientific, ICT, innovation topics too along with hands on skill development and efficiency enhancement. It could be divided into two major heads namely entrepreneurship education and entrepreneurship training.

Entrepreneurship education could be started with one or more compulsory courses from the secondary level up to the higher secondary certificates. Specialised entrepreneurship development courses could be introduced at undergraduate and graduate level under a separate faculty than that of the existing business schools. Specialised residential institutes/universities could give more output in terms of entrepreneurship development education. On the other hand entrepreneurship training could be a specialised type of practical training including apprenticeship in relevant factories started from secondary vocational level to the diploma or higher diploma/post graduate diploma levels. But for both the types of entrepreneurship study separate international standard curriculum has to be developed first. Then a sufficient number of teachers and trainers have to be developed through international standard ToTs at home or abroad. They should be selected based on open competition and previous result analysis. They have to be offered special package of benefits to ensure retention up to a certain period of time.

Producing entrepreneurship graduate is not sufficient for entrepreneurship development. An enabling environment has to be created and maintained through harmonisation of existing policies and enacting new policies of the government. Startup friendly business environment is absent in Bangladesh till today. No bank is offering loan to a startup, no tender is allowing taking part without a certain years of experience, and no government service is providing soft condition to an initiating enterprise here in Bangladesh. Probably first 1,000 days of a newly established enterprise are the toughest period of an entrepreneur here in Bangladesh. Initial business support services are absent here. Initial registrations and licenses are provided by a long lists of organisations under different ministries of the government without interlink or inter-coordination. Therefore starting a new business is the toughest job here in Bangladesh. So this starting point has to be made easy and smooth.

Initial investment, incubatory services, registrations, licenses, business networking, support services, intermediary services, and startup environment should get priority of the government policies to make the entrance easy, smooth and hassle free for a new/young entrepreneur. Otherwise next generation will not be interested to come into business in home condition rather they will migrate to abroad and brain drainage movement will get another momentum. Secondly all the government agencies like police, environment, factory, boiler, tax and customs authority, BSTI, and the local administration has to be motivated to change their mindset of existing administrative tendency into a service prodder tendency. Because nobody will go to buy harassments by investing his/her own money and brain here in Bangladesh and become an entrepreneur. Government and the private sector especially the trade organizations has to be working closely to identify existing anomalies of becoming new entrepreneurs and mitigate those factors to create a pro-investment friendly environment here in Bangladesh.

A congenial business environment will not only create local entrepreneurs but also attract foreign investment to the economy. With and united effort of both the channels of investment industrialisation of Bangladesh will be ensured and a sustainable economic development will be in place. Therefore it is the right time to look into the entrepreneurship education system seriously and create an entrepreneurship friendly business environment here in Bangladesh. Both the government and private sector joint effort could lead the initiative into a success.

Budgetary Measures for Economic Growth and Sustainability

Budgetary Measures for Economic Growth and Sustainability

Md. Joynal Abdin

The Daily Sun on 21 April, 2017

There are about 162 million populations in Bangladesh and nearly 127 million of them are workable. There are only about 1.7 million positions in government services 18% of those are vacant.

That means government could provide employment to nearly 1% of its total population in its existing setup. What about the employment opportunity of the rest 99% populations of the country? It is stated that, there are about 30 million businessmen in Bangladesh. So government service holders and businessmen are account for 31.7 million populations. Till now there are 95.3 million workable populations of the country. As per a recent report of the ministry of finance there are about 58.1 million people are employed in private sector. As per this statistics till now there are 37.2 million workable but unemployed populations in the Bangladesh.

That means workable but unemployed populations are about 23% in our society. The percentage of total unemployed population would be more than 40% if children and over aged citizens are counted here. Alarming news is that the number of higher educated but unemployed population is rising. Low educated or uneducated people are migrating abroad as labor force. But higher educated unemployed are mostly from the middle class family. They are not able to be labor in home or abroad due to the family status but remaining burden for the family, society and the nation as non-productive unemployed. In such a complex situation increased amount of unemployed populations would be a big burden for the society if government does not take the matter as a serious concern.

As per the constitution of Bangladesh it is the government who is responsible to ensure basic needs of every citizen of the country. Obviously government will not provide services to all but government will create such a congenial environment where surplus unemployed populations will be absorbed by the existing institutions or new institutes will be emerged. Government could facilitate policy and other environmental supports where people will become entrepreneurs (self-employment and creating employment for others), involving more labors in development projects through budgetary measures, increase investment in hands-on skill development programs / projects to facilitate the idle population to be productive, facilitating import substitutions and export orientation  so on and so forth.

Now come to the first point what government could do for creating self-employment / entrepreneurship development. First and foremost initiative would be increasing general levels of confidence / developing confidence of would be entrepreneurs through building hands on capacity to influence their decision making to start a new business through providing skills, industrial location, startup financing, mentoring and other financial & non-financial incubatory supports. Special initiative has to be taken to address and overcome their fear of failure. Mentoring is required for setting up a confidence building scenario to overcome existing cloudy condition about the direction of their business.

Developing their levels of creativity and capacity to innovate has to be strengthening through undertaking newer project like existing Learning and Earning project of the ICT division of the government of Bangladesh. Undertaking local demand based development plan in our national budget could be a way forward to engage more labor force with the government development activities. For example presently government is undertaking a road construction project and provides the tender through a national level tender. As a result the tender winner may not be a local citizen of that territory. He may not know other relevant expectations / priorities of local people with this contraction project. Finally contractors are not bothering about the quality of the project implementation but he is managing the line managers and drawing the bill.

If government takes a reverse initiative that, all the peoples representatives from the union even ward levels will prioritize development needs of their territory in consultation with the citizen and prepare a priority list of development initiative for that territory. They will send the list to concern authority for allotment. Then the decision maker justify the needs and provide the budgetary allotment to the local authority for implementation then the local representatives and administration both will be equally liable for proper monitoring and implementation of the project through using local resources. Such a demand driven budgetary system could help to ensure more peoples engagement in government development projects and create employment. Another more important issue is increasing capacity of the budget implementing agencies and relevant stakeholders to ensure qualitative implementation of government development projects.

Thus government could increase personal sources of earnings through its existing mechanism. We must remember that, personal growth will lead us towards a self-sufficient burden free society. Then institutional / organizational growth will lead us toward out of poverty and sustainability of development. Finally; by ensuring the above two condition we could have economic growth and it will lead us towards job creation and safeguarding the society.

Sustainable Development Goals (SDGs) could be the best guideline to select projects and shifting from existing generalized budgetary system into a specialized one. At the same time harmonization of existing taxation system and justification of the duty structure on CKD, SKD, and finished products is required to harvest a pro-growth environment in the Bangladesh.

We are getting big amount but poorly implemented budgets during last few years. Now we are in need of demand driven, project specific, motive oriented and duly implemented national budget for economic growth and sustainability.

For sustainable economic development

For sustainable economic development

Md. Joynal Abdin

The Independent on November 3, 2016


Contribution of Agriculture, Industry and Service Sector to Bangladesh GDP in 1972 (soon after the independence) was 59.60 6.06 per cent and 34.32 per cent respectively. In the year 1980 contribution of the same sectors to Bangladesh GDP was 31.55 per cent(Agriculture), 20.63  per cent(Industry) and 47.81 per cent(Service). Similarly in the year 2000 contribution of Agriculture reduced into 23.77, industry increased into 23.31 per cent and Service increased into 52.91 per cent to the Bangladesh GDP. Current contribution (2015) of Agriculture further reduced into 15.50, Industry and Service Sectors increased into 28.14 per cent and 56.34  per cent respectively. From the above statistics we could state that, Bangladesh economy is transforming from an agriculture dependent economy into an industry dependent economy. But till now agriculture is the single largest sector for employment generation, agriculture employed 47.5 per cent of total manpower to contribute 15.50%. That means productivity of agriculture sector is lower than that of the other sectors or manpower employed in agriculture sector are underutilized.

As per Labor Force Survey 2010 conducted by the Bangladesh Bureau of Statistics there are 2.6 million unemployed populations in Bangladesh, at the same time another 2 million workable labor force is coming forward per year into the employment market. Employment generation for this large number of unemployed population is a very hard task for any government. Therefore government emphasized upon private sector development and industrialization as an effective tool for employment generation. Development and promotion of labor intensive small and medium enterprise (SME) lead industrialization could offer a better solution to this unemployment problem. If adequate policy, institutional and monetary support is available a large number of this unemployed population could be entrepreneur and employ others too.

Government of Bangladesh have already initiated few industry friendly policies and support through the SME Foundation, Bangladesh Bank, EPB, BSCIC, BITAC, BCSIR, BEPZA, SEZ authority, Ministry of Commerce, Ministry of Industries, finally NCID etc. institutions. Bangladesh is getting dividend of their activities by this time. As a result Bangladesh economy is growing steadily even during the global financial crisis in recent past. But Bangladesh is one of the lowest performing countries in the doing business index till now. According to a recent report Bangladesh positioned 176 out of 190 countries. Bangladesh performed most miserable at registering property (185th), resolving insolvency (151st), starting business (122nd), and paying taxes (151st) etc. indicators. All of these indicators are controllable by good governance. If there is a political commitment of the government that they will not be involved in corruption and will not allow bureaucrats to be corrupted then these problems will be solved automatically.

Bangladesh has capacity to grow even faster than the projections if good governance could be ensured. Proper implementation of existing policies and some new institutional support could lead us easily to a higher middle income country even before 2041. Following institutional support could boost up current transformation of Bangladesh economy and achieve a middle income country faster than ever:

  1. Establishment of an ‘Entrepreneurship Development Institute (EDI)’: Establishing a new institute for entrepreneurship development while we already have about 132 (One hundred and thirty two) universities in Bangladesh could sound as a stupid proposal. We have about 37 public, 92 private, and 3 international universities in Bangladesh. All of the universities are creating skilled, knowledgeable professionals including business graduates, engineers, and doctors etc. to enter into the job market after completing respective degrees. We are enlarging the list of jobseeker every year but not producing job providers academically. Entrepreneurs are just born is an old concept. It is proven that, entrepreneurs can be created through a systematic training, guidance, support and mentoring. Indian government (Government of Guzrat) has established a completely separate types of institute in 1983 (about 33 years back) to produce only entrepreneurs. The Entrepreneurship Development Institute of India is a name of enormous success into its mission. The model has been replicated by many countries including Vietnam, Cambodia, Myanmar and few African countries to establish entrepreneurship development institute. Bangladesh can easily replicate that model to establish an engine of entrepreneur creation. These types of specialized institute to create entrepreneur is also available in many other countries like, Entrepreneurship Institute of Malaysia, Entrepreneurship Institute Australia (EIA), Institute for Entrepreneurship & Enterprise Development (IEED) in UK, The Entrepreneurship Institute of Canada, and Global Entrepreneurship institute (GEI) in the U.S etc. So it is quite clear that, separate institute is required to create job providers i.e. entrepreneurs. Bangladesh government could establish or inspire relevant organizations like SME Foundation or BSCIC to establish “Entrepreneurship Development Institute of Bangladesh”. Development partners could come forward to establish an entrepreneurship development institute here in Bangladesh to produce entrepreneurs the most essential component for private sector development.
  2. Establishment of ‘SME Cluster Development Authority’: Cluster based SME development could be another vital weapon for boosting up the industrialization of Bangladesh. There are 177 SME clusters identified by the SME Foundation throughout the country, of which 129 fall under SME Booster sector and 48 under Non–booster SME sector. There are 69,902 enterprises operating in these 177 clusters employing a workforce of 1,937,809, of which 74 per centare male and the rest 26 per centare female. Total approximate annual turnover in these clusters has been estimated at 295150.66 millions. Clusters were found in 51 districts of Bangladesh. So development of SME clusters could give us another platform of balanced economic development considering geographical locations of these. Undertaking and implementing massive development interventions in these cluster is required to develop and promote the SMEs located there. Government could establish a separate body namely ‘SME Cluster Development Authority of Bangladesh” or establish specialized wing in SME Foundation with adequate budgetary and manpower support for rapid development of SME Clusters. It will increase GDP growth, make Bangladesh self dependent, increase export earnings, generate more employment and finally alleviate poverty sustainably.
  3. Establishment of ‘Sector Specific Engineering & Technology Institute’: Like my 1st proposal this one could sound stupid too. Establishing sector specific Engineering & Technology institute while we are having a number of engineering universities and polytechnics in Bangladesh. But the ground reality is this; there is a long distance between the graduates of those engineering universities, polytechnics and our industry’s demand. Industry needs operators, troubleshooters, technicians of modern machineries currently using in the sectors. While engineering universities and colleges are producing high profile graduates to deserve 5 digit salaries from the first day at job. Therefore it’s time to establish sector specific engineering and technology institutes as per sectoral needs. Currently the government of Bangladesh is helping to establish Bangladesh Institute of Plastic Engineering and Technology (BIPET), similarly we are in need of Bangladesh Institute of Agro-machinery engineering and technology, Bangladesh institute of ship building technology, Bangladesh institute of leather goods diversification technology, Bangladesh institute of Agar Ator Technology etc as per sectoral demands.
  4. Establishment of ‘Common Facility Centers (CFC) in Every Clusters’: There are 177 SME clusters in Bangladesh. Entrepreneurs in a cluster are producing similar products throughout the year. In some cases there is one or more common process to manufacture several products. Currently these tasks are doing manually as a result product quality become inferior. On the other hand single entrepreneurs cannot afford modern machineries to complete the common process due to high prices of the machines. A single testing is applicable for almost all products of a cluster to ensure products quality. But due to the same reason none can afford it. If government or development partners come forward to establish a common facility center into the SME Clusters with the machinery needed to complete the common process or test the products quality then all the entrepreneurs will be benefited from it. SME Foundation or BSCIC could be the lead organization if government takes this initiative. It will increase overall productivity of Bangladesh; quality of the products will go up. High quality products will be acceptable to the local and foreign buyers.
  5. Establishment of ‘Trade Negotiation Commission’: Till date there is no common body to negotiate bilateral, regional or multilateral trade negotiation of Bangladesh. A group of professionals including WTO Cell of the Ministry of Commerce, Bangladesh Tariff Commission, EPB, NBR etc. represent Bangladesh in different trade negotiation table. Most of them are civil servant performing transferable job. A person being specialized in any particular agreement and got transferred into a completely irrelevant position after three or four years. We can remember many officials of WTO cell get involved with the process and currently serving in totally irrelevant desks. Therefore we need a constitutional body for handling our trade negotiation issues only. It will help the professionals to be specialized with a single issue and handle it efficiently with any counterparts. Otherwise Bangladesh will be completely isolated if proper initiatives are not taken to negotiate bilateral free trade agreement with our existing or potential buyer countries. Similarly we have to maintain our involvement with regional free trade agreements and multilateral arrangement under the umbrella of WTO.
  6. Establishing ‘Product Research & New Product Development Center’: Bangladesh has a very small product basket. To enlarge the product basket and diversify export items we are in need of a product research and new product development center. It will be a separate body to conduct research with existing and potential products producing or could be produced in our industries.
  7. Establishment of ‘Manpower Export and Management Center’: Remittance is the second largest source foreign currency. In true sense it is the single largest sector of earning foreign currency without deployment of all the factors of production. Till now Bangladesh is sending unskilled workers into various destinations. Many workers are experiencing cheating in home and abroad during his migration. If government took initiative to collect visa from demanding countries and distribute these to the manpower exporters in a fixed price then these harassments could be minimized. At the same time this Manpower Export and Management Center will collect demands for professionals like Doctors, Engineers, Teachers, Business Executives, Researchers, Analyst, and Lawyers etc. and take necessary initiative to send them safely. By exporting higher educated professionals Bangladesh could easily earn hundred times more remittance than that of the present earnings.

Finally we could summarize that, Bangladesh economy is moving forward with many limitations due to our resource constraints. We can move faster if the government took timely initiative to establish few institutes which are very essential for industrialization and economic development. Only economic growth may not make us happy without inclusive, balanced and sustainable development. During this transforming period it is time for the policy makers to formulate and implement inclusive economic development policy to ensure every body’s stake into this prosperity. Otherwise social disparity will be higher and create chaos a new threat to sustainability of this development.


Selecting appropriate approaches to industrialization

Selecting appropriate approaches to industrialization

Md. Joynal Abdin

The Financial Express on July 30, 2016

Industries are playing a vital role in entrepreneurship development, self-employment, and new-employment opportunity creation and increasing economic growth throughout the world. Therefore governments are keen to promote industrialisation for fostering economic growth, fighting unemployment and reducing poverty. The government used to establish an organisation for promoting and developing industries. But due to lack of specialised knowledge to select an appropriate approach for industrialisation these organisations are becoming less productive or ineffective in this regard.

Bangladesh classified industries / enterprises into five different categories (based on size), namely; Cottage, Micro, Small, Medium and Large enterprises / industries. At the same time Bangladesh segmented up the industries into seven different segments (based on purposes) namely; Handicraft, Hi-tech, Creative, Reserved, High Priority, Priority and Control industries. Size-based classification of industries in Bangladesh is as follows:

Sl. Type of Industry Replacement cost and value of fixed assets, excluding land and factory buildings (in BDT) Number of employed workers
1. Cottage Industry Below 1 million not exceed 15
2. Micro Industry 1 million to 7.5 million 16 to 30
3. Small Industry Manufacturing 7.5 million to 150 million 31 to 120
Service 1 million to 20 million 16 to 50
4. Medium Industry Manufacturing 150 million to 500 million 121 to 300
Service 20 million to 300 million 51 to 120
5. Large Industry Manufacturing More than 500 million More than 300
Service More than 300 million More than 120
Source: Ministry of Industries, Government of Bangladesh, (2016). National Industrial Policy.

Development / promotion agencies are generally categorised as enterprises according to the following approaches:

  1. Classification of industries as per the basic raw materials used: One of the most common approaches of classifying the industries as per their basic raw materials used. For example, the enterprises use primary agricultural crops to produce their products. These crops are known as agro-processing industries / sector; such as producers of jam jelly or chutney, rice, flour etc. Similarly, the enterprises use leather to produce shoes, bags; belts etc. These are known as leather goods industries or sectors.

  1. Clusters-based classification of industries / as per location: Development agencies are often identifying the industries based on their location at any specific pre-determined industrial clusters. This cluster-based approach to industrialisation could be one of the most effective tools for their development for many reasons such as serving maximum enterprises with minimum resources, promoting inclusive and geographically balanced development etc.

  1. Classification of industries based on entrepreneur’s gender: Industries are often getting priority for special treatment based on the gender of the entrepreneurs. For example, women entrepreneurs are usually lagging behind the men-owned enterprises. Therefore, governments are offering special treatment for the women entrepreneurs-owned enterprises to inspire women to become entrepreneurs.

  1. Classification of industries based on owner’s race and ethnicity: Another most important approach to differentiating enterprises to the based on the race or ethnicity of the owners. For example, tribal community or minority group could get special attention to bring them economically forward or to the mainstream.

  1. Classification based on output of the enterprises: Primary classification of the enterprises could be determined based on the output of the enterprises i.e. it is producing a product or performing service. Manufacturing and service enterprises have different attributes, this than that of the others. Therefore, policy makers identify them differently under manufacturing or service sector heads.

  1. Objective-oriented classification of enterprises: Promoters often differentiate the enterprises based on the objective of their products; such as domestic enterprises vs. export-oriented enterprises. Domestic enterprises produce products for the local market. On the other hand, export-oriented enterprises produce products only for export. Mixed types of enterprises could be there but they are not eligible to get special treatment offered by the government for exporters or others.

  1. Special-purpose approach of classification: Enterprises working for rehabilitating any special groups like disabled population or autistic group could be described as special-purpose enterprises.

A country may have a series of policies like, National Industrial Policy, SME Policy, Export Policy, Import Policy, Fiscal policy, ICT Policy, Women Development policy, Education Policy, Investment Policy, Skilled Development Policy, Credit Policy, Different Sectoral Policies on agriculture, handicraft, poultry and livestock etc. The government usually formulates policies to focus on any specific group or problem or purpose. But industrialisation / entrepreneurship development is such an important issue that could address multiple objectives at a time. Therefore, enterprise development agencies usually select approaches to achieve any specific goal of different government policies at a time. For example, one action plan could address employment generation, promotion of any specific sector as well as increasing export earning of the country through a single intervention. Therefore, designing development intervention by addressing multiple objectives requires appropriate selection of perfect approach to industrial development of a country.

India is providing more emphasis on SME development by having a specialised ministry, namely, the Ministry of Micro, Small & Medium Enterprises. This ministry is implementing Five-Year Plan for Economic Development. Indian SME promoters are working with Trade Promotional Programmes, Connectivity with MNCs and Government, Inbound and Outbound Investment, Strategic Business Alliances, Delegations and Study Tours, and Restructuring and Revival of stressed SMEs etc. issues additional to the Bangladeshi practices (SMBDC, 2016). India has several acts namely the Micro, Small and Medium Enterprises Development Act, 2006, Khadi & Village Industries Commission Act, 1956 – March 17, 2008, Re-establishing Khadi & Village Industries Commission dissolved in October’ 2004, July 19, 2006, Notification regarding implementation of provisions of Khadi and Village Industries Commission (Amendment) Act, 2006 and The Industries (Development and Regulation) Act, 1951. India has a long list of sector-specific policies, laws, bylaws etc. for promoting respective sectors, while a single act is missing in Bangladesh for promoting SME development or industrialisation.

Small and Medium Enterprises Development Authority (SMEDA) is the premier institution of the Government of Pakistan under Ministry of Industries & Production. SMEDA is implementing different projects namely; Prime Minister’s Youth Business Loan, Common Facility Centre projects, Cluster Development, and the Multi Donor Trust Fund (MDTF) project ‘Economic Revitalisation of Khyber Pakhtunkhwa and Federally Administered Tribal Areas (FATA)’ etc. for promoting SMEs in Pakistan (SMEDA, 2016).

Iran Small Industries and Industrial Parks Organisation (ISIPO) is focusing more on clustre development as well as development of Industrial Parks and Industrial Areas to promote industrialisation in Iran. They have their specialised approach to SME clustre development throughout the country.

The Small and Medium Enterprises Development and Support Administration of Turkey is generally known as KOSGEB. Their distinguishable programmes for SME development are Entrepreneurship Support Programme, Cooperation Joint Forces Support Programme, R & D, Innovation and Industrial Application Support Programme, International Incubation Centre and Accelerator Support Programme, Emerging Enterprises Market SME Support Programme, Thematic Project Support Programme, Laboratory Services etc. (KOSGEB, 2016). They are working on a much more wider scale than that of the above mentioned institutions.

From the above discussion it is clear that different countries have different approaches to SME development. Some of the above mentioned approaches are quite different from the others. Countries like Bangladesh, Pakistan or Iran has a lot to replicate from the countries like India or Turkey. We would like to recommend few approaches to SME Development for a least developed country like Bangladesh:

  1. Clustre-based development intervention: Clustre is defined in many ways by the experts around the world. There are a large number of homogenous enterprises located at a particular geographical area as a clustre. Therefore, trained manpower, raw materials, buyers and other factors of production are available at that particular place. A development agency could easily implement interventions for promoting and developing entrepreneurs of that clustre with limited resource deployment. Therefore, it could be one of the best approaches for industrialisation in a least developed or even in a developing country.

  1. Objective-oriented classification approach: We would like to offer this new approach for better output within a limited timeframe. For example; an SME promotion agency could identify few promising sectors with export potentials. Special export-oriented intervention could be developed and implemented to make the sector capable of export as well as competitive in the targeted international markets.

  1. Special purpose projects: A development agency shall have special purpose projects to rescue declining local sectors, promoting newly-developed sectors, mainstreaming any particular race or ethnic groups etc. Thus an organisation could contribute to achieving national goals of the country.

  1. Available skill-based enterprise development approach: The government could facilitate new sectors based on the available skills of the general people. For example, currently Bangladesh is producing a remarkable number of computer engineers every year. So IT / ICT-based industries like software development, outsourcing, freelancing etc. could be promoted for the sake of their self-employment or employment generation.

Industrial promotion agencies of a country have a great role to play with. But if any organisation is tagged with a set of predetermined approaches, they may not be capable to face newly-emerging challenges and needs of the sectors. Therefore, such institutions shall have a live, flexible set of targets to undertake newer approaches and interventions as and when required for promoting and development of the industries of that particular country. We must remember that effectiveness of the output and usefulness of the result of an organisation depend upon its approaches to designing, implementing and delivering their services to the clients. Appropriate methodology selection shall get highest priority before devising any strategy, undertaking interventions and implementing the plans.

Business ideas for entrepreneurship development in Bangladesh

Business ideas for entrepreneurship development in Bangladesh

Md. Joynal Abdin

Corporate Watch, Bangladesh on April 05, 2016

The actual number of population who live in Bangladesh today is a debatable figure. But it is not at all debatable that Bangladesh is one of the over most populated countries of the world. The growth trend about population makes it all too clear that we are becoming the most dangerously densely populated country soon, if the rate of increase is not reversed. Every year two million educated young men and women are coming to the job market. It is nearly impossible to absorb this active workforce in the existing job market either in public or in private sector.

We are not giving any serious thought about creating adequate job opportunities for this new educated workforce in time. Our unemployment rate is increasing and a vast army of frustrated Youngman is swelling in its size. A good number of such unemployed youths are getting them involved in different kinds of activities in the ‘crime world’ or are being used in overt or covert ways by various groups and creating social hazards.

In the coming days, this problem would worsen further and the government – whosoever remains in power — will face a very serious threat to integrate them into the normal social life. Time is running out to mobilize this huge unemployed educated workforce in particular in productive activities. It is not expected that every one of them will serve as a civil servant or an executive in any private establishment. Proper planning has to be made to motivate people in self-employment through small entrepreneurial initiatives. Until now, there is no proper institute in Bangladesh to help develop entrepreneurship. The government needs to actively think about establishing such institutions, by further streamlining and expanding the existing facilities for technical and vocational education.

Indeed, technical and vocational education facilities need to be strengthened to produce skill labor, instead of producing a large number of so-called educated people in general line. We are not pleading here for neglecting any faculty of education but we are just emphasizing the need for entrepreneurship development studies in particular. Through the latter type of facilities, graduates will come out of higher seals of learning to become entrepreneurs.

Thinking with realistic business ideas can be the first step to becoming an entrepreneur. Selecting a suitable business idea to move forward with entrepreneurial efforts is important. We know that it is easy to say this but if is difficult to do that. But what is the harm if we can show a list of business ideas to the unemployed graduates who know that a single job-seeker, out of several thousands that come out of universities with “high” degrees in general and other lines, that may be motivated and take the initiative to start a small business and achieve success as a self-employed entrepreneur? It we, can do thus, we will largely be able to reduce the number of jobseekers and guide the nation towards a better future.

A short list of business ideas can be noted below:

1. Establishing a poultry hatchery: Bangladesh is lagging behind many other comparable developing countries, in terms of per capita protein production. Most poultry items are still outside the reach of the majority of the families in their daily curry list. Establishing small hatchery with Taka 0.2 million (two lakh) investments may help employ one graduate, along with another unskilled labour, to produce one thousand hens or ducks per month. A hatching machine is not so expensive in today’s market. Of course, the non-availability of uninterrupted electricity supplies is one of the major constraints here. But we can overcome such problems it we really try hard. Only collecting eggs and hatching the same for selling them as little hens or ducks, may be one type of business. Broiler firms can be the second, and the layer firms, the third option here. The marketing opportunities are enormous and there is also a large scope to export such items as well.

2. Establishing a dairy firm: A small dairy initiative can be started with three to five cows only. Selling milk is easier in the market in Bangladesh. Whether it is a village or a town, the demand for pure milk is strong, far in excess of existing supply capacities. So it can be a lucrative option to ensure a better livelihood to two to five people through the income earned from an average-sized dairy firm. Initial investment in this sector is also within the reach of average people and it is obviously lower than what is needed to send a son to the Middle East as a laborer. It may take only Taka 0.2 million – Taka 0.3 million to start a small dairy firm, owning three to five cows.

3. Fishing hatchery: One village pond can help generate an annual income of about Taka 0.25 million, if proper management and care can be ensured. Establishing a small hatchery may not take more than Taka 0.5 million for investment which can offer a monthly income of Taka 30 – 50 thousand to an unemployed young man. Being a local agent of a company: There are many companies in Bangladesh which do not have proper distribution outlets around the country.

4. Being a local agent of a company at the upzilla level can be a profitable business. For this, only a small van or auto van can be the prime carrier and a person can be employed to distribute the products in the surrounding markets.

5. Establishing showroom: Establishing a showroom of any company at upzilla level or in a sub-urban area can be yet another way for becoming an entrepreneur by investing an amount of Taka 0.3 million – Taka 0.5 million. It may be a single company showroom or multi-company showroom of electronics, consumer items or even bakery products. One educated young man, along with three to five working assistants or labourers, can be employed in that showroom.

6. Establishing a channel of distribution: Companies can take the initiative for operationalising commission-based agreements to distribute their products effectively at low cost by using a local distributor group. A graduate can organize five vans and engage them to distribute products in the local market. This distribution channel can sign agreements with various companies to serve as a local channel of distributors on thier behalf and distribute their products in time.

7. Establishing a school: A small primary school can help absorb five graduates to educate children and to earn their livelihood. Of course, a suitable place for setting up a primary school has to be selected and initially an amount of Taka 0.2 million – Taka 0.5 million has to be invested to procure necessary tools and instrument.

8. A retail shop with membership card: A departmental shop, having a membership card arrangement, can be a successful model for entrepreneurship on the part of a graduate. Every grocery item will be available there and members can buy such items at the wholesale rate from this shop. Home service may be offered at a nominal charge. Online order placement facility with payment system can be an additional feature of such a kind of shops.

9. Real state company at village level: Bangladesh is a very small but heavily densely populated country. Its cultivable land is reducing every year due to building of houses for an increasing number of families. If this trend continues, then after fifty to one hundred years, land for cultivation would become acutely scarce. This is time now to come up with the idea of forming real-estate enterprises in villages, where multi-storied building can be built and distributed among the stakeholders. Establishing a real-state company needs large scale investment but formation of effective associations provides here a sustainable solution to overcome this problem.

10. Producing handicraft: Ten (10) village women can be organized initially and trained up for one week to produce five handicraft items and selling those at a single store. This can be a very profitable business in any locality. Handicraft has a very potential export market with a promising local market, too. A group of families can be the beneficiaries of such an initiative.

11. Boutiques & fashion design: Block, boutique, embroidery and carchopee items can be made in a small factory to serve a chain of shops. Or sales in a show-room can be another way to establish a small business in any urban or suburban area or even for a village market.

12. A fitness centre: As people are becoming very much busy with their materialistic pursuits, the scope for physical work is reducing. As a result, obeisity is becoming a problem with many people. Demand for fitness centers is increasing. Establishing a modern fitness center can be one of the sustainable ways for becoming a successful entrepreneur. A chain of fitness centres at different locations of a city or different towns of the country may be a brand of fitness centre.

13. Establishing a software development firm: Website and software development may be a good entrepreneurial initiative for a software graduate. Local demand for software is increasing and it has an export market, too.

14. Procurement houses: Procuring crops in the peak season for selling the same in off the season may be one good way of doing business. For example, procuring rice, potato, tomato etc., during their peak season and selling those in the off-season, after three or four months, may be a profitable business for a graduate.

15. Cable TV & Broadband internet: Providing cable TV connections or broadband internet connections to the members of the community can be a profitable business for an unemployed graduate.

16. Internet Café: Establishing an internet café may be a promising way for earning one’s livelihood, instead of queuing up for jobs. VOIP services are value added products for an internet café.

17. Community-based FM radio: Starting community-based FM radio station broadcasting may provide self-employment opportunities for a group of engineering students.

18. Service centers: Establishing a service center for trouble-shooting of TV sets, computer instruments, refrigerators, air conditioners, wovens, blenders household appliances etc., can open up opportunities for self-employment opportunities for the diploma engineers.

19. Home-service laundry: There is a continuous growing market for branded chain laundry in Bangladesh. As such, a modern home-service laundry provides be the best opportunities for employment creation among groups of workable manpower.

20. Voice-activated keys: Producing and installing voice-activated keys may be a successful way of doing business.

21. Day-care centers: Establishing day-care centers for minor children and the aged may be a new business concept in Bangladesh. Mainly the metropolitan cities are lucrative places for establishing such centres.

22. House-rent information centers: The maximum number of city dwellers are living in houses/apartments on a monthly on rental basis. Many people search for rented apartments or houses every month. It is a very tough job to search an affordable apartment or house for the service-holders, particularly of the couple-types. House-or apartment-owners face also problems in making arrangements for renting out their premises to suitable persons. Both who look for hiring apartments or houses and renting out their premises will find it easier to get their jobs done, with the services provided by related information centres at a minimum charge. A membership system may be introduced for rent-seekers and owners of premises for the match-making purpose.

23. Feasibility study centres: There is a good scope good possibility for establishing feasibility study centers in Bangladesh. Such centers may conduct feasibility studies of new products; new businesses etc., and provide business plans to the prospective entrepreneurs which are essential to get bank loans.

24. Call centers: Establishing a call center can become an attractive business in Bangladesh. It is not necessary that all call centres would serve the foreign companies. Days are coming when many Bangladeshi companies will outsource call center services to serve their local customers.

25. Commercial Cleaning Centers: Commercial cleaning may be a good business in Bangladesh. The centers, catering to the demand in this field, can wash cars, and carpets, and clean apartments commercially. They can offer cleaning services also to corporate customers.

26. Animal health clinics: Clinics for domestic animals are emerging as a demand-based business opportunity in the country. Such clinics can offer services to both individual and corporate clients.

27. Franchise shops: Having a franchise show-room of a reputed company at district or upzilla level may be a source of good business for newly graduated students.

28. Beauty parlors: Establishing a beauty parlor is also a profitable business for a female graduate. It will cost Taka 0.1-0.2 million as initial investments and there is a growing market for its services in any town in Bangladesh.

29. Relocation of service centers: Every month increasing numbers of families are relocating their households to different parts of towns. Relocating furniture and fixture safely from one place to another may become a professional service in the near future.

30. Tax preparation service centers: Preparation of tax-related documents can be a promising area for providing professional services by the law graduates.

Besides the afore-mentioned areas, many more business ideas can come up for widening the scope for self-employment opportunities in the context of to-day’s vastly changing socio-economic realities in Bangladesh. But we must remember one thing: Business is not suitable for people of all backgrounds. So identifying the most suitable business proposition for implementation is important and this has to be done by analysing the background of an individual, the society, investment ability and even mental make-up of concerned persons.

Establishing specialized training centers to develop new entrepreneurs may also be a successful business idea. Our academic curricula may add a feature in this context so that more people are inspired to become entrepreneurs rather than swelling the ranks of job-seekers. In this way, we may achieve the goal of having a self-employed generation well placed to shoulder their responsibilities and, thus, build a self-reliant Bangladesh in order to ensure sustained growth of the national economy.