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.

SMEs and our development goals

SMEs and our development goals

Md. Joynal Abdin

The Daily Star on February 25, 2017

Small and medium enterprises (SMEs) are the most important segment of any economy in the world. SMEs are getting the highest priority from policymakers due to their already proven multidimensional contribution to the socioeconomic environment of a country. These enterprises are easy to start, require only minimum capital, employ a comparatively higher number of people, and produce goods that meet local demands as well as contribute to export earnings. Definition of SMEs is based mainly on indicators of replacement cost (invested amount), number of people employed, yearly revenue, etc. Size of the indicators varies based on the socioeconomic condition of the country or even the region. Table 1 shows how the government of Bangladesh has defined SMEs in its latest industrial policy, the National Industrial Policy of 2016.

Table – 1: Definition of SMEs in Bangladesh.  

Type of Industry Replacement Cost

(excluding land and factory building’s cost)

Number of employed workers
Small Industry Manufacturing BDT 7.5 million  to 150 million 31 to 120
Service BDT 1 million to 20 million 16 to 50
Medium Industry Manufacturing BDT more than 150 million to 500 million 121 to 300 /

But for RMG / labor intensive industry not more than 1000

Service BDT more than 20 million to 300 million 51 to 120

  Source: National Industrial Policy 2016.

Contribution and significance of SMEs

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

The significance of SMEs can be clearly observed if we take a look at the contribution of SMEs in some select Asian countries. For example, about 97.3 percent of enterprises in China, 97.3 percent in Malaysia, 97.5 percent in Kazakhstan, and 97.7 percent in Vietnam are SMEs. Furthermore, about 99.4 percent of enterprises in Singapore, 99.5 percent in Sri Lanka, 99.6 percent in the Philippines, 99.7 percent in Thailand, 99.7 percent in Japan, and finally, 99.9 percent in the Republic of Korea are SMEs.

SMEs also play a vital role in employment in these countries. For example, SMEs make up 87.7 percent of employment by enterprise in the Republic of Korea, 80.3 percent in Thailand, and 71.8 percent in Cambodia. Similarly, SMEs are contributing to GDP growth and increasing export earnings of these countries. They generate 60 percent of GDP in Indonesia and China, 47.6 percent in the Republic of Korea, 45 percent in Singapore, and 43.7 percent in Japan.

In terms of export earnings, about 42.4 percent of export earnings in India comes from SMEs, 41.5 percent in China, 26.3 percent in Thailand, 20 percent in Sri Lanka, 18.8 percent in the Republic of Korea, and 15.7 percent in Indonesia.

Targets of Bangladesh in Vision 2021

Vision 2021 has eight broad objectives that are to be achieved by 2021, the golden jubilee of our independence. Objectives of this perspective plan include: (i) caretaker government, democracy, and effective parliament; (ii) political framework, decentralisation of power, and people’s participation; (iii) good governance through establishing rule of law and avoiding political partisanship; (iv) transformation of political culture; (v) a society free from corruption; (vi) empowerment and equal rights for women; (vii) economic development and initiative; (viii) branding Bangladesh in the global arena, etc.

As the election manifesto of the current Awami League government led by Prime Minister Sheikh Hasina during the national election of 2008, it aims to transform the socioeconomic environment of Bangladesh from a low income economy to the first stages of a middle income economy. Along with higher per capita income, Vision 2021 lays down a development scenario where citizens will have a higher standard of living, be better educated, enjoy better social justice, have a more equitable socioeconomic environment, and the sustainability of development will be ensured through better protection from climate change and natural disasters. The associated political environment will be based on democratic principles, with emphasis on human rights; freedom of expression; rule of law; equality of citizens irrespective of race, religion and creed; and equality of opportunities. The Bangladesh economy will be managed within the framework of a market economy, with appropriate government interventions to correct market distortions, ensure equality of opportunities, and ensure equity and social justice for all.

Vision 2021 comprehensively lays down milestones for the country on its path to middle income status. In the sphere of education, the government targeted100 percent net student enrolment at primary level by 2010; free tuition up to degree level by 2013; full literacy by 2014; and a population skilled in information technology by 2021. In water and sanitation, the government aimed to supply pure drinking water for the entire population by 2011, and bring all households under hygienic sanitation by 2013.By 2012, they hoped to attain self-sufficiency in food production; and by 2021, 85 percent of the population are targeted to have standard, nutritional food.

The ten-year plan aimed for eight percent annual growth by 2013, and sustained 10 percent growth by 2017. Agriculture is to constitute 15 percent of the GDP, industry 40 percent, and services 45 percent by 2021. Employment in agriculture is to reduce to 30 percent in 2021 from the present  48 percent; while employment in industry is to rise to 25 percent from the present 16 percent; and employment in services is to rise to 45 percent from the present 36 percent. Unemployment is targeted to decrease to 30 percent in 2021 from the present 48 percent, and poverty rate is to decrease to 15 percent from the present 45 percent. 7,000 megawatts of electricity was set to be produced by 2013, 8,000 megawatts by 2015, and 20,000 megawatts by 2021.

All contagious diseases are targeted to be eliminated and longevity is to rise to 70 years by 2021. Infant mortality is to drop to 15 per thousand from 54 per thousand in 2010, maternal mortality to 1.5 percent from 3.8 percent, while the use of birth control will rise to 80 percent.

So where do we stand on the path to realising Vision 2021? Though we have had remarkable achievements in power generation, we failed to achieve eight percent GDP growth by 2013, and it will be tough increasing the contribution of industry up to 40 percent by 2021. The only way forward is to promote SME growth, entrepreneurship development, and industrial cluster development, through a congenial investment-friendly policy. In this regard, establishing 100 special economic zones (SEZ) was a praiseworthy initiative and a step in the right direction. However, experience shows that making an SEZ functional takes up to ten years or even more. While we may be lagging behind in achieving our aspirations, the ball has begun to roll, and late is better than never.

Ecology of SME development and challenges

Chapter 5 of the National Industrial Policy of 2016 concentrates on the development of micro, small, and medium enterprises and cottage industries. Special initiatives by the government are in place to eliminate the still existing barriers to SME development. Major commitments include the provision of collateral-free, single-digit SME loans; refinancing of SMEs; cluster-based SME development; a 15 percent quota for women entrepreneurs taking SME loans; continuous training for capacity building of SME entrepreneurs; special drive to increase market access and market linkage of SME products; special incentives for procuring environment friendly and productive machineries; priorities for export oriented SMEs to get fiscal and non-fiscal incentives, etc. The National Council for Industrial Development (NCID) headed by the Prime Minister, Executive Committee of National Council for Industrial Development (ECNCID) headed by the Minister of Industries, Bangladesh Small and Cottage Industries Corporation (BSCIC) and SME Foundation are among the various entities working hard to create and maintain an SME friendly policy regime in Bangladesh. Despite so many achievements till now, there remain some mentionable challenges toward SME development in Bangladesh. These have been laid out in Table 2.

Table – 2: Challenges of SMEs in Bangladesh

Core challenges Issue specific challenges
1.       Absence of skilled manpower 1.1    Absence of modern machine operator and trouble shooters.

1.2    Absence of qualified managers and innovators.

1.3    Absence of trained designers and research people.

1.4    Higher educated but unemployed young generation.

2.       Use of old machineries    2.1    Poor quality of products.

2.2    Low productivity.

2.3    Higher cost of production.

2.4    Wastage of raw materials and other resources.

3.       Lack of products diversity and new products design and development 3.1    Same products being saturated over time.

3.2    Small products basket.

3.3    Lack of product diversification.

4.       Lack of information 4.1    Lack of market access.

4.2    Lack of market share.

5.       Poor quality of products 5.1    Inability to achieve quality certification.

5.2    Limited ability to meet buyer’s specification.

5.3    Losing market share to imported products.

6.       Limited and complicated access to finance    6.1    Absence of promotional schemes like startup financing, credit guarantee, export guarantee, modernization of machinery, innovative product development etc.

6.2    Limited investment capacity.

6.3    Higher interest rate.

7.       Limited support from regulatory government agencies 7.1    SME are yet to receive proper support from law enforcement agencies, department of environment, department of inspection for factories and establishment, and NBR etc. government agencies.
8.       Absence of harmonized tariff and non-tariff policies. 8.1    Tariff on raw materials and finished goods yet to be harmonized.

8.2    Many investment promotion commitment of the government is yet to be implemented by NBR and other regulators.

9.       Absence of export orientation of capable SMEs 9.1    Single product dependency to export.

9.2    Rural SMEs are out of export business circle.

9.3    Limited export destinations.

10.    Absence of sector demanded skills in academic curriculum 10.1 Unavailability of required skills.

10.2 Higher educated but unemployed young generation.

10.3 Absence of product specific manufacturing skill training.

Source: Author’s research findings.

We could sum up the findings in this article on the note that SMEs are important for self-employment, generating employment opportunities for others, increasing GDP growth, contributing to export earnings, supplying livelihoods to stakeholders, and poverty alleviation of the country. Cluster-based SME entrepreneurship development could be an effective tool to accomplish Vision 2021. But existing challenges like creating skilled manpower as per sectoral demands, providing product-specific manufacturing skills to the youth, improving productivity and product quality by adopting new technologies, increasing investment capacity by creating and maintaining an enabling environment through harmonisation of government policies, must be addressed if we are to achieve our development goals.

Progressing from MDGs towards SDGs

Progressing from MDGs towards SDGs

Md. Joynal Abdin*

The Financial Express on December 12, 2015

In September 2000, global leaders signed a historic declaration and agreed to achieve eight measurable targets by the year 2015 which is commonly known as the Millennium Development Goals (MDGs).  Several countries took multi-prong strategies and techniques to achieve the goals. As a result, the world has observed few remarkable achievements in many of the goals.

It is observed in a recent report of the United Nations (UN) that, the world achieved following results in respect of each of the MDGs:

Goal-1: Extreme poverty has declined significantly over the last two decades. In 1990, nearly half of the population in the developing world lived on less than $1.25 a day. The proportion dropped by 14 per cent in 2015.

Goal-2: Net enrolment rate in primary schools in the developing nations has reached 91 per cent in 2015, up from 83 per cent in 2000. The number of out-of-school children of primary school age worldwide has fallen by almost half, to an estimated 57 million in 2015, down from 100 million in 2000.

Goal-3: Women have gained ground in parliamentary representation in nearly 90 per cent of the 174 countries over the past 20 years. The average proportion of women in parliament has nearly doubled during the same period. Still only one out of five members in Parliament is a woman.

Goal-4: The global under-five mortality rate has declined by more than half, dropping from 90 to 43 deaths per 1,000 live births between 1990 and 2015.

Goal-5: Maternal health: Since 1990, the maternal mortality ratio has declined by 45 per cent worldwide, with most of the reduction since 2000.

Goal-6: Combating HIV/AIDs, malaria, and other diseases: New HIV infections fell by approximately 40 per cent between 2000 and 2013, as number of cases came down from an estimated 3.5 million cases to 2.1 million.

Goal-7: Environmental sustainability: About 1.9 billion people have gained access to piped drinking water since 1990. 98 per cent of ozone-depleting substances has been eliminated since 1990.

Goal-8: Global partnership for development: Official development assistance from developed countries increased by 66 per cent in real terms between 2000 and 2014, reaching from $ 81 billion to $135.2 billion.

Bangladesh’s achievements of the Millennium Development Goals could be shown as under:

  1. Eradication of extreme poverty and hunger: Extreme poverty reduced from 56.7 per cent in 1991-92 to 31.5 per cent in 2010. It is estimated that, percentage of extreme poverty could be reduced to 24.8 per cent by the end of 2015.

  1. Universal primary education: Bangladesh has had remarkable achievements in this area, but a large part of the physically and mentally retarded children still remains out of the schooling system. Improvement of quality of education is also a challenge at the primary and higher secondary levels that need to be taken care of on priority basis.

  1. Gender equality and empowerment of women: It is stated that Bangladesh has already achieved the targets of gender parity in primary and secondary education at the national level. But till date security, safety, equality of opportunity for the women in every field especially in terms of career or entrepreneurship development, is an issue to ponder about.

  1. Reduction in child mortality: The under-five mortality rate was 151 per 1000 live births in 1990 which came down to 41 per 1000 live births in 2013 and thereby achieving the target ahead of the stipulated time.

  1. Improvement in maternal health: The Maternal Mortality Ratio (MMR) in Bangladesh in the 1990/91 was 574 per 100,000 live births, which was one of the highest in the world. According to Bangladesh Maternal Mortality Survey (BMMS), maternal mortality declined from 322 in 2001 to 194 in 2010, a 40 per cent reduction in nine years.

  1. Combating HIV/AIDs, malaria, and other diseases: Bangladesh has performed well in halting communicable diseases. Available data show that the prevalence of HIV/AIDS in Bangladesh currently is less than 0.1 percent and thus is still below an epidemic level. Besides, religious, family and social forces are playing a vital role in controlling extra marital sexual relationship. Awareness campaign of the government played a vital role to develop awareness of mass people about HIV/AIDS in Bangladesh.

7.Environmental sustainability: Data show that without considering the issue of arsenic contamination, 97.9 per cent of the population of Bangladesh is using improved/safe drinking water and 55.9 per cent people are using improved sanitation in 2012-13. However, access to safe water for all is a challenge, as arsenic and salinity intrusion as a consequence of climate change fall out will exacerbate access to safe water especially for the poor.

  1. Developing a global partnership for development: During the last twenty four years, Bangladesh, on an average, received US$ 1.74 billion overseas development assistance (ODA) per year. The disbursed ODA as a proportion of Bangladesh’s GDP has declined from 5.69 per cent in FY 90-91 to 1.78 per cent in FY 13-14, implying an annual average of 2.84 per cent.

From the above discussion it is clear that Bangladesh has made progress in terms of MDGs, but we have limitations in quantifiable statistics. In few cases our progress is not measurable against the global progress due to lack of quantitative information. Till now a large number of people live below extreme poverty line. Economic disparity is rising. A particular segment of the society is becoming richer and the poor remains poor. Positive growth is not reducing economic disparity in the society. Inclusive growth is not taking place. Disparity in terms of quality of education between the poor and rich is noticeable. We have had remarkable progress in terms of reducing child mortality and reducing maternal mortality rate. We have to negotiate with the developed world to assist us to cope with the adverse effects of climate change. We have to go for further deeper integration in terms of getting development assistance and creating global development partnership.

Following a rigorous consultation process and several international conferences and working group discussions, the UN General Assembly approved Sustainable Development Goals (SDGs) in September 2015 to be achieved by 2030.  Total 17 SDGs are as follows:

Goal – 1: End poverty in all its forms everywhere

Goal – 2: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture

Goal – 3: Ensure healthy lives and promote well-being for all at all ages

Goal – 4: Ensure inclusive and equitable quality education and promote life-long learning opportunities for all

Goal – 5: Achieve gender equality and empower all women and girls

Goal – 6: Ensure availability and sustainable management of water and sanitation for all

Goal- 7: Ensure access to affordable, reliable, sustainable, and modern energy for all

Goal- 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment, and decent work for all

Goal – 9: Build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation

Goal – 10: Reduce inequality within and among countries

Goal – 11: Make cities and human settlements inclusive, safe, resilient and sustainable

Goal – 12: Ensure sustainable consumption and production patterns

Goal – 13: Take urgent action to combat climate change and its impacts

Goal – 14: Conserve and sustainably use the oceans, seas, and marine resources for sustainable development

Goal – 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, halt and reverse land degradation, and halt biodiversity loss

Goal – 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all, and build effective, accountable and inclusive institutions at all levels, and finally

Goal – 17: Strengthen the means of implementation and revitalise the global partnership for sustainable development.

Given the both extensive and intensive nature of the SDGs, most countries will have to work out elaborate plans and mechanisms for attainment of the goals with quantifiable means and parameters.

*Mr. Md. Joynal Abdin is a Deputy Manager at SME Foundation in Dhaka, Bangladesh. Could be reached mdjoynal@gmail.com