Levelling Trading Field for SMEs

Levelling Trading Field for SMEs

 

Md. Joynal Abdin

 The Daily Sun on April 2, 2017

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Creating Investment-friendly Business Environment

Creating Investment-friendly Business Environment

Md. Joynal Abdin

The Daily Sun on March 15, 2017

 

Bangladesh is a land of unutilised opportunities and untapped potentials. Traditionally Bangladesh was an agriculture driven economy but during last few decade it is shifting its agriculture dependency into industrial economy. At the same time a steadily growing service sector is backing the industrial development of the country. According to a recent report contribution of agriculture, industry and service sector to Bangladesh economy was 51.03%, 7.69 % and 41.28% respectively in the year 1971.  Contribution of agriculture decreases into 31.55% and industry increases into 20.63% in the year 1980. Service sector contributed 47.82% to Bangladesh economy in the same year. Since then contribution of industry and service sector to Bangladesh economy is increasing and agriculture is decreasing day by day. It does not mean that the agriculture sector is losing its importance but it indicates industry and service sector is becoming stronger but agriculture is contributing as before. Agro processing industry is fully dependent upon agriculture sector; therefore no way to underscore agriculture sector too. Currently (2015) contribution of the same sectors to the Bangladesh GDP is 15.50% (Agriculture), 28.14% (Industry) and 56.34% (Service). From the above discussion it is quite clear that the economy of Bangladesh is going through a transformation from agriculture dependent economy into industrialized economy.

Agriculture has a highest limit of production per acres of land. But industry and service sector have the liberty to produce unlimited number of units or value by using the same piece of land. Therefor government of Bangladesh took parallel initiatives for agriculture and industrial development.

Foreign Recognitions of Bangladesh:

Prospect of Bangladesh economy is not recognised by the Bangladeshis only. Today it is widely recognised by the global think-tank and investment Banks like Goldman Sachs. The Goldman Sachs Investment Bank described Bangladesh as one of the Next – 11 countries (N-11) due to its prompt growth potentials (Lawson, Heacock, and Stupnytska, 2007). Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea and Vietnam – identified by Goldman Sachs investment bank and economist Jim O’Neill in a research paper as having a high potential of becoming, along with the BRICS countries, among the world’s largest economies in the 21st century.

Regulatory Environment for Investment in Bangladesh:

Indian subcontinent inherited the British legal system since the colonial period. As a result Bangladesh has a very structured legal system since its inception. It has about 45 laws relevant to the investment, business, trade and commerce in various sectors. There are more than 10 policies with different incentives and supports of the government to promote private sector investment in various sectors.

The foreign private investment (promotion and protection) Act, 1980 has been passed that ensures legal protection to foreign investment against nationalization and expropriation. It also guarantees repatriation of capital and dividend; and equitable treatment with local investors with regard to indemnification, compensation, restitution, or other entitlement as is accorded to investment. The government has made bilateral agreements for avoidance of double taxation with 26 countries and negotiations are going on with 23 countries.

Investment treaty for promotion and protection of investment between Bangladesh and twenty countries have been concluded and negotiations are going on with 9 other countries. Besides these, Bangladesh is a signatory to MIGA (Multilateral Investment Guarantee Agency), OPIC (Overseas Private Investment Corporation) of USA, ICSID (International Centre for Settlement of Investment Disputes) and a number of WIPOs (World Intellectual Property Organisation) a Permanent committee on development and cooperation related to industrial prosperity. Adequate provision is also made available for intellectual property rights, such as patents, design and trademarks and copy right.

The government has already enacted bankruptcy law. A law commission has been constituted with a view to identify the anomalies and weaknesses in the existing laws and legal system. One of the main tasks of this commission is updating the existing laws in relation to industries, trade and business.

All these are expected to improve general business environment along with the environment of FDI. Efforts are being made to reform the bureaucratic administration in order to make it efficient and supportive of better services for inflow of FDI and economic development oriented activities. Substantial modifications have been made to up-date the laws dealing with financial sector. The Companies act 1994 and labour Act 2006 have been enacted for facilitating inflow of FDIs in Bangladesh.

In order to improve the environment of private foreign investment and FDI, several EPZs have been established in Chittagong, Dhaka, Khulna under the Bangladesh Export Processing Zones Authority (BEPZA) in 1980. The private Export Processing Zones (PEPZs) Act has also been enacted to encourage the establishment of “Private Export Processing Zones” by the local and foreign investors. These EPZs are well enriched with the necessary infrastructural facilities and are completely protected from any law and order problems or union activities.

The BEPZA approves all projects to be located in the EPZS and offers “One window same day service” to the investors in the EPZs. The government has also approved the private power generation policy of 1996 and tax exemption on income of the company for 15 years from the date of commercial production is allowed.

The Government has undertaken several steps to make import liberalization and industrial deregulations more effective including announcing its strategy of reducing effective protection over the medium term, continuing its efforts to lower and simplify tariffs, publishing a clear tariff schedule, developing an action plan for legal reforms and a blue pint for deregulation, and putting an action plan for implementing its exports development strategy. These efforts have improved the investment environment in Bangladesh.

Bangladesh is one of the promising economies with a large domestic market, availability of labour with competitive price, low utility charges, two seaports and a potential deep seaport facility, long-term tax holiday, 100% repatriation facility, and easy access to largest regional market like India and China.

Investment Friendly Facilities and Incentives: 

Tax  exemption  on  royalties,  technical  knowhow  and  technical  assistance  fees  and  facilities  for  their repatriation, tax exemption on interests on foreign loans, tax exemptions on capital gains from transfer of shares by the investing company, remittances  of  up  to  50%  of  salaries  of  the  foreigners  employed  in  Bangladesh  and  facilities  for repatriation of their savings and retirement benefits at the time of their return, no restrictions on issuance of work permits to project related foreign nationals and employees, facilities for repatriation of invested capital, profits and dividends, provision of transfer of shares held by foreign shareholders to local investors, reinvestment of remit table dividends would be treated as new investment, and foreign owned companies duly registered in Bangladesh will be on the same footing as locally owned ones etc. facilities are available for foreign investors.

Besides the above facilities Bangladesh is offering corporate tax holiday of 5 to 7 years for selected sectors, reduced tariff on import of raw materials capital machinery, bonded warehousing, accelerated depreciation on cost of machinery is admissible for new industrial undertaking (50% in the first year of commercial production, 30% in the second year, and 20% in the third year), tax exemption on capital gains from the transfer of shares of public limited companies listed with a stock exchange, reduced corporate tax for 5 to 7 years in lieu of tax holding and agricultural deprecation, Cash incentives and export subsidies ranging from 5% to 20% granted on the FOB value of the selected products, At best 90% loans against letters of credit (by banks), and permission  for  domestic  market  sales  of  up  to  20%  of  export-oriented  companies  outside  EPZ  (relevant duties apply) etc. fiscal benefits to the local or foreign entrepreneurs.

Additionally Bangladesh is offering 100% foreign equity allowed, unrestricted exit policy, remittance of royalty, technical know-how and technical assistance fees, full repatriation facilities of dividends and capital at exit, and an  investor  can  wind  up  investment  either  through  a  decision  of  the AGM  or  EGM, he  or  she  can repatriate the sales proceeds after securing proper authorisation from the Central Bank etc. benefits to a foreign investor.

Investment Friendly Factors of Production:

  • Largely a homogenous society with no major internal or external tension Bangladesh has a population with great resilience in the face of adversity.
  • The people of Bangladesh, a liberal democratic country irrespective of race and religion are living in harmony for years.
  • Bangladesh enjoys broad non-partisan political support for market-oriented reforms and offers the most investor-friendly regulatory regime in South Asia.
  • This country has a large trainable, enthusiastic, and hardworking low-cost labour force suitable for any labour-intensive industry.
  • A bridge between ASEAN and SAARC nations, the Geographical location of Bangladesh is ideal for global trades with very convenient access to international sea and air routes.
  • Bangladesh is endowed with abundant supply of natural gas, coal, water and very fertile soil.
  • Although Bangla is the official language. English is widely spoken as second language.
  • Increasing trend of per capita forecasting its purchasing power is increasing in the local market.
  • All Bangladesh products other than armaments enjoy complete duty and quota free access to EU, Japan, Canada, Australia, Norway and most of the developed countries. However, for apparel export to USA, Bangladesh has a quota regime which ended on 1st January 2005.
  • Export earning is continuously increasing.
  • Increasing trend of remittance earning.

Challenges and Recommendations:

With all of the above benefits Bangladesh have few limitations and challenges to attract further investments. Government could consider following recommendations to make the business environment sustainable and attractive to foreign investors:

  • Decreasing number of permissions / registrations / licenses requirements with a predetermined time frame / one stop investment services.
  • Ensuring hassle free and in-time delivery of industrial utilities like Electricity, Gas and water etc.
  • Making Bangladesh Investment Development Authority functional and effective with adequate resources.
  • Special investment attraction drive with specific project proposals to attract local and foreign investment.
  • Activating entrepreneurship promoters like better business forum or regulatory reform commission.
  • Developing infrastructure as per requirement of tomorrow’s business world.
  • Developing sector specific demand driven skilled manpower with specific technical knowledge.

Finally, we could conclude here with a statement that, Bangladesh has long lists of sectors and wide feature to promote local and foreign investment. But in absence of an effective and functional investment promotion agency (not regulator) Bangladesh is performing not as per the expectations. There are several entrepreneurship development, SME Development and Industrial Promotion agencies of / establish by the government. But due to lack of manpower, financial ability, technical and professional knowledge most of the organisations are less performing. Activating those organisations with right person at the right place could be one of the ways forward to strengthen investment attraction movement of Bangladesh.

Fighting with unemployment

Fighting with unemployment

Md. Joynal Abdin

The Independent on March 03, 2017

Bangladesh is a developing country. With so many development requirements it is fighting to reduce unemployment and provide employment opportunity to all of its workable population. There are about 160.41 million people in Bangladesh. The median age of Bangladeshi population is 26. That means it is dominating by the young for14ce. It is high time to take the population dividend for Bangladesh. But the matter of fact is that, there are about 3 million workable people unemployed, they are neither in education nor in job. Additional 2.2 million educated young forces are entering into job market every year. Another 10.6 million people are day labourers doing odd jobs without any job security for tomorrow’s tasks. Therefore till now 24.8% of the total population is living under the poverty line and extreme poor people are about 6.5% of its total population.

Huge workable population, growing number of higher educated population; population dividend etc. are not matching with its 25% poverty affected people. It is because we have workable hands but government is failing to provide jobs to them. It is impossible for any government of the world to provide jobs to all of its population. But government has a great responsibility to create such a congenial environment in which a person will go for self-employment through entrepreneurship development and employ another five persons in it. Government could inspire private sector for more investment and expansions which will lead to more employment generation, faster GDP growth, increased value addition and export earnings.

A decently employed person can free a family from poverty. On the other hand, an unemployed young man may be a liability for a family and the society. Many skilled but low paid workers want to be entrepreneurs but cannot do so for lack of capital.

Banks can help him with loans on easy terms and conditions. In many cases banks’  authorities do not come forward due to the security of depositor’s money. In such a condition it is only the government that can come forward. Refinancing, pre-financing, credit guarantee, seed financing etc. can be the weapons for the government to fight this tough condition. Government has limitations in terms of its treasury balance. But recent reports are not supporting its treasury balance argument. Because we have gone through the report that, Bangladesh has about USD 35 billion foreign aid in hand but failed to utilize it. We had to deposit back the foreign aids due to our inability to utilize the funds. On the other hand, according to a Bangladesh Bank report idle funds with banks and non-banking financial institutions stood at Tk 1263.24 billion on January 31, 2017.

From the above two statements it is clear that, government can source the fund if a positive thinking is there. So it is the peak time for the government to take necessary initiatives for creating an entrepreneurial friendly environment in Bangladesh for promoting self-entrepreneurship and expansion of existing ventures to increase the movement of employment generation. Along with the entrepreneurship development trained manpower export / formal migration of skilled workers can be another very fruitful tool for the government to fight unemployment and poverty. Following recommendations can be considered by the government and the central bank of Bangladesh:

  1. Easy Formal Channel to Receive Remittance: Bangladesh received USD 15.27 billion as remittance in 2015. In the years 2016 it reduced into USD 13.60 billion. Does it mean the remittance earning is really reducing? No. It is only because sending remittance through formal banking channel is complicated, time consuming and complex to the illiterate or little literate expatriate workers. Whereas using informal channels like Hundi is much easier, quicker and safe. In such way government is losing revenue. Therefore,  the government and the central bank have  to think over the issue of introducing an easy, quick and hassle free way of sending remittance through formal channel by our illiterate labourers from abroad.
  1. Easy Formal Credit for Expatriate Labourers and Professionals: There is a bank to provide bank loan against a labour visa to help expatriate manpower of Bangladesh. But, what is their capacity? How many branches do they have? How much money is being offered by them? How many expatriate labourers are migrating from Bangladesh per year? In the year 2016 about 7, 57,731 labourers and professionals migrated from Bangladesh. If 5% of them want to get bank loan for three to five lac per person then 38,000 probable clients are there to receive more than thousand crore taka.  How much money do they receive from that single bank? Therefore, it is time to think with the issue of offering bank loan to the second largest contributory sector of the country with hassle free bank loans  by the commercial banks and Bangladesh Bank has to come up with a new loan product for them.
  1. Easy Formal Channel to Receive Freelancer’s Earning: According to a recent report published by oDesk there was about USD 3.2 billion freelancing market in 2014. USA, India, Ukraine, Australia, Canada even Pakistan is earning a significant part of that amount. Bangladesh has every possibility to be a significant partner in the global freelancing market. But due to complexities in banking channel to receive freelancing earnings many qualified professionals and unemployed young men are getting frustrated. Digital Bangladesh will be meaningfully digital when common people of the country will easily receive their free-lancing earnings through their ordinary bank account. It is the Bangladesh Bank that has the responsibility to mobilize this process and offer a great service to the local freelancers.
  1. Startup Financing/Seed Financing for Entrepreneurs: There are about 2 million educated people unemployed in Bangladesh. Another 2.2 million graduates are entering into the job market every year. It is impossible for the government to ensure employment to this huge number of population without promoting entrepreneurship and industrial development. Entrepreneurship is the only solution to this unemployment problem of Bangladesh. But till now there are no startup financing / seed financing mechanism for promoting entrepreneurship in Bangladesh. So government can rethink the issue and come up with a mechanism to provide startup financing for the new / would be entrepreneurs.
  1. Promotional Package for Venture Capital Sector: Venture capitalism is a proven tool for supplying interest free loan facility to the entrepreneurs. It is widely received by the entrepreneurs and potential entrepreneurs of Bangladesh as well. But due to the shortage of adequate fund this sector is not booming up as expected. Therefore it is the peak time for the government to inspire venture capital sector for the sustainable industrialization in Bangladesh.
  1. Export Guarantee Scheme: There are about 7.8 million industrial entities in Bangladesh. Most of these are cottage and small in categories. Few of these enterprises are producing excellent quality products having export potentials. But due to lack of knowledge and shortage of finance to operate international trade they are not going to export. To inspire such enterprises Bangladesh Bank/ government can introduce export guarantee scheme and boost up export earnings of the country.
  1. Credit for Export Diversification and Market Expansion: Bangladesh earned USD 34.24 billion in last fiscal year (2015-16FY). It is almost 10% more than that of the previous year. But we have capacity to earn even more than that. We have to diversify our export basket and explore new export destinations to do so. Government can offer credit facilities for export oriented product diversification (procurement of machineries) to the existing exporters. Thus Bangladesh’s export basket could be enlarged and increase amount of export earnings.
  1. Credit Guarantee Scheme: Commercial banks are offering loan by investing depositor’s money. All types of bank loan have risk of return. As a result commercial banks have hesitation to provide bank loan. In such a situation Bangladesh Bank can offer credit guarantee scheme for providing guarantee of loans so that commercial banks’  hesitations go down. Thus government can  promote the industrialization movement of the country.
  1. Security Issues in Online & ATM Banking: Recent ATM Scamming and Bangladesh Bank’s reserve issues created panic among the mass people. As a result people are feeling insecure even to draw money from ATM Booth and deposit money to a bank. Therefore,  it is time for Bangladesh Bank to take necessary measures to stop ATM scamming and ensure security of depositor’s money. Online banking system should be 100% secured and people’s awareness could be developed to relief the panic.
  1. Entrepreneurship Loan for Technical Graduates: There are about 2 million unemployed graduates in the country. Additional 2.2 million graduates are entering into the job market each year. Both the government and private sector does not have ability to offer such a huge number of jobs per year. Therefore government / Bangladesh Bank can offer entrepreneurship loan for the technical graduates and developing them as entrepreneurs in respective fields.
  1. Professional Management of Idle Reserve / Bank Deposit: A recent report showed that the idle reserve / bank deposit is mounting up in the banking sector (BDT 1140 billion) especially there are BDT 1420 billion statutory deposits to the Bangladesh bank. No return is coming out from this huge amount of idle money in comparison with its opportunity cost. Therefore, it is time for thinking to invest at least a portion of this money through professional money managers. Thus a reasonable return could be ensured out of this idle money.

Finally we would like to hope that, the government and the central bank along with other responsible agencies will consider the above recommendations and create a pro-entrepreneurship regime in Bangladesh for fighting unemployment effectively and create a poverty free middle income country before the end of SDG deadline.

Fighting Unemployment and Poverty

Fighting Unemployment and Poverty

Md. Joynal Abdin*

The Daily Sun on March 1, 2017

Bangladesh is a least developed country (LDC). With so many development requirements it is fighting to reduce unemployment and provide employment opportunity to all of its workable population. There are about 160.41 million people in Bangladesh. The median age of Bangladeshi population is 26. That means it is dominating by the young force. It is high time to take the population dividend for Bangladesh. But the matter of fact is that, there are about 3 million working age people unemployed; they are neither in education nor in job. Additional 2.2 million educated young forces are entering into job market every year. Another 10.6 million people are day labourer / doing odd job without any job security. Therefore till now 24.8% of the total populationis living below the poverty line and extreme poor people are about 6.5% of its total population.

Huge working age population, growing number of higher educated population and population dividend etc. issues are not matching with its 25% poverty affected people. It is because we have working hands but the government is failing to offer job to them. It is impossible for any government to offer job to its all population. But the government has a great responsibility to create such a congenial environment in which a person will go for self-employment through entrepreneurship development and employ another five persons in it. The government could inspire private sector for more investment and expansion which will lead to more employment generation, faster GDP growth, increased value addition and export earnings.

A decently employed person means a family is out of extreme poverty. On the other hand, an unemployed young man could create unaffordable situation for the society. Many skilled but low paid workers wanted to be entrepreneurs but cannot have access to high rated and complex bank loan. Bankers not coming forward due to the security of depositor’s money. In such a condition it is only the government that could play the game to move forward with the issue. Refinancing, pre-financing, credit guarantee, seed financing etc. could be the weapon for the government to fight with this tough condition. The government has limitations in terms of its treasury balance. But recent reports are not supporting its treasury balance argument. Because we have gone through the report that, Bangladesh has about USD 35 billion foreign aid in hand but failed to utilise it. We had to deposit back the foreign aids due to our inability to utilise funds. On the other hand, according to a Bangladesh Bank report idle funds with banks and non-banking financial institutions stood at Tk 1263.24 billion on January 31, 2017.

From the above two statements it is clear thatthe government could source the fund if a positive thinking is there. So it is the peak time for the government to take necessary initiatives for creating an entrepreneurship friendly environment for promoting self-entrepreneurship and expansion of existing ventures to increase employment generation. Along with the entrepreneurship development trained manpower export / formal migration of skilled workers could be another very fruitful tool for the government to fight unemployment and poverty. The following recommendations could be considered by the government and the central bank of Bangladesh i.e. the Bangladesh Bank for installing the following tools in this regard:

Easy Formal Channel to Receive Remittance:

Bangladesh received USD15.27 billion as remittance in 2015. In the years 2016 it reduced to USD13.60 billion. Does it mean the remittance earning is really reducing? No. It is only because sending remittance through formal banking channel is complicated, time consuming and complex to the illiterate or less literate expatriate workers. Whereas using informal channels like Hundi is much easier, quicker and safer. In such way government is losing revenue. Therefor the government and the central bank has to think with the issue of introducing an easy, quick and hassle-free way of sending remittance through formal channel by our workers from abroad.

Easy Formal Credit for Expatriate Labours and Professionals:

There is a bank to provide bank loan against a labour visa to help expatriate manpower of Bangladesh. But, what is their capacity? How many branches do they have? How much money is offering by them? How many expatriate workers are migrating from Bangladesh per year? In the year 2016 about 757,731 labours and professionals migrated from Bangladesh. If 5% of them want to get bank loan for three to five lakh per person then 38,000 probable clients are there to receive more than thousand crore taka.  How much money do they received from that single bank? Therefore it is time to think with the issue of offering bank loan to the second largest contributory sector of the country with hassle-free banks loan by the commercial banks and Bangladesh Bank has to come up with a new loan product for them.

Easy Formal Channel to Receive Freelancer’s Earning:

According to a recent report published there was about USD3.2 billion freelancing market in 2014. USA, India, Ukraine, Australia, Canada even Pakistan is earning a significant part of that amount. Bangladesh has every possibility to be a significant partner in the global freelancing market. But due to complexities in banking channel to receive freelancing earnings many qualified professionals and unemployed youths are becoming frustrated. Digital Bangladesh will be meaningfully digital while mass people of the country could easily receive their free-lancing earnings through their ordinary bank account here in Bangladesh.

It is Bangladesh bank who has the responsibility to mobilise this process and offer a great service to the local free lancers.

Startup Financing / Seed Financing for Entrepreneurs:

There are about 2 million educated people unemployed in Bangladesh. Another 2.2 million graduates are entering the job market every year. It is impossible for the government to ensure employment to this huge number of population without promoting entrepreneurship and industrial development. Entrepreneurship and entrepreneurship is the only solution to this unemployment problem. But till now there are no startup financing / seed financing mechanism for promoting entrepreneurship. So the government could rethink with the issue and come up with a mechanism to provide startup financing for the new / would-be entrepreneurs.

Promotional Package for Venture Capital Sector:

Venture capital is a proven tool for supplying interest free loan facility to the entrepreneurs. It is widely received by the entrepreneurs and potential entrepreneurs of Bangladesh as well. But due to shortage of adequate fund this sector is not booming up as expected. Therefore it is the pick time for the government to inspire venture capital sector for the sustainable industrialisation in Bangladesh.

Export Guarantee Scheme:

There are about 7.8 million industrial entities in Bangladesh. Most of these are cottage and small in categories. Few of these enterprises are producing excellent quality products having export potentials. But due to lack of knowledge and shortage of finance to operate international trade they are not going to export. To inspire such enterprises Bangladesh bank / government could introduce export guarantee scheme and boost up export earnings of the country.

Credit for Export Diversification and Market Expansion:

Bangladesh earned USD34.24 billion in last fiscal year (2015-16). It is almost 10% more than that of the previous year. But we have the capacity to earn even more than that. We have to diversify our export basket and explore new export destinations to do so. The government could offer credit facilities for export oriented product diversification (procurement of machineries) to the existing exporters. Thus Bangladesh’s export basket and increase amount of export earningscould be enlarged.

Credit Guarantee Scheme:

Commercial banks are offering loan by investing depositor’s money. All types of bank loan have risk of return. As a result commercial banks have a shyness to provide bank loan. In such a situation Bangladesh Bank could offer credit guarantee scheme for providing guarantee of loans so that commercial banks’ shyness goes down. Thus the government could promote the industrialisation movement of the country.

Security Issues in Online & ATM Banking:

Recent ATM scamming and Bangladesh Bank’s reserve issues spread up a panic among the mass people. As a result people are feeling insecure even to draw money from ATM booths and deposit money to a bank. Therefore, it is time for Bangladesh Bank to take necessary measures to stop ATM scamming and ensure security of depositors’ money. Online banking system should be 100% secured and people’s awareness could be developed to relief the panic.

Entrepreneurship Loan for Technical Graduates:

There are about 2 million unemployed graduates in the country. Additional 2.2 million graduates are entering the job market each year. Both the government and private sector does not have ability to offer such a huge number of jobs per year. Therefor the government / Bangladesh Bank could offer entrepreneurship loan for the technical graduates and developing them as entrepreneurs in respective fields.

Professional Management of Idle Reserve / Bank Deposit:

A recent report showed that the idle reserve / bank deposit is mounting up in the banking sector (BDT 1,140 billion) especially there are BDT 1420 billion statutory deposits to the Bangladesh Bank. No return is coming out from this huge amount of idle money in comparison with its opportunity cost. Therefor it is time for thinking to invest at least a portion of this money through professional money managers. Thus a reasonable return could be ensured out of this idle money.

Finally we would like to hope that, the government and the central bank along with other responsible agencies will consider the above recommendations and create a pro-entrepreneurship regime in Bangladesh for fighting unemployment effectively and create a poverty free middle income country before the end of SDG deadline.

* Writer is a Development Researcher, Columnist and Author. He is serving at SME Foundation as Deputy Manager. Could be reached through mdjoynal@gmail.com

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.

Digitisation of SMEs – Opportunity or Challenge

Digitisation of SMEs – Opportunity or Challenge

Md. Joynal Abdin

Daily Sun, 15 February 2017

 

The small and medium enterprises (SMEs) are considered as the most significant part of an economy. They are labour intensive and low capital investment in nature. Due to their labour intensive feature they used to contribute more in employment generation and assist the government to fight unemployment. SMEs are the mother of heavy industries and the backbone of the economy. In many countries, SMEs are the feeder organisation of large corporations. Big branded companies used to get part of their products from SMEs through outsourcing or subcontracting.

SMEs are a significant part of the product’s value chain in those economies. Till now subcontracting / outsourcing business has not being popularised / formalised / institutionalised in Bangladesh. As a result value chain concept of product manufacturing has not developed here in the real sense. Outsourcing concept started its journey in readymade garment sector during the last few years. But it is not widely practiced method in any other sector in Bangladesh.

Global business environment is changing its dynamics every day. Rapid development of science and technology is supplying fuel to the movement of business dynamics changing motion. For example, if we look back to one decade we will see that SMEs were using record books with pen or pencil for keeping record of materials or financial transactions. Using postal / courier services to send documents were the only means. Physical visit was necessary to test a raw material’s quality and final decision of purchase. But today, within a decade, big revolution happens in this arena due to the rapid progress of information and communication technology. Today sophisticated computerised record keeping is available at affordable cost. Internet communication changed the dynamics of manual communication and physical presence became unjustified here. Email communication replaced the postal or courier services, video conferencing technology ensured audio visual communication without physical presence, mobile communication has just created a revolution in this sector. Robotics with artificial intelligence made the previous dynamics completely irrelevant within this one decade. We do not know what the next miracle is waiting for us in the coming decade(s).

With the advancement of science and technology industrial community adopted the best possible solutions and ensured justified progress of the sectors as required. For example, steam engine was invented in 1780s and business factories started to mechanise themselves with water power and increase productivity at highest rate at that time. With the invention of electricity in 1870s manufacturing assembly line concept was initiated by the entrepreneurs with the use of electricity and productivity increased into the next step. Later on they adopted computerised automation concept while computer was invented in 1969. Similarly today in 2017 industrialists are fighting to adopt digital technologies for digitisation of respective enterprises by using cyber physical systems, robotics with artificial intelligence even the 3D printing technologies for ensuring productivity, products quality, and well acceptance of the consumers.

Now come to the point how many SMEs are capable of adopting all these new technologies in terms of Bangladesh? How much modernised our SMEs are? Whether rapid progress of technology is an opportunity or a threat to the Bangladeshi SMEs?

I have the opportunity to visit SMEs throughout the country. I have optimistic observation regarding the enterprises located in Dhaka, Chittagong, and other divisional cities or BSCIC industrial areas. I found them at least updated to the millennium technology or later. But in most of the cases SMEs located at old clusters or district level are lagging behind in terms of technology up gradation. As a result they are losing market share and becoming sick. With those old fashioned technologies of the 1970s SMEs are less productive, product qualities are not up to the expectations of buyers, product designs and shape are too old. They are unable to diversify products due to technical limitation. They are unable to enter the new segment of market due to lack of knowledge. They are just waiting for death. I saw this measurable situation in coconut oil cluster at Bagherhat, in few cases the story is similar to some SMEs of Bogra light engineering cluster, Cox’s Bazar ship building cluster, Rangpur satoronji cluster and many jewellery or pottery clusters all around Bangladesh.

According to a recent report (November 2016) of the World SME Forum, it is expected that the global B2B trade of SMEs will be USD6.7 trillion by 2020 and B2C trade will be USD3.2 trillion by this time. That means a bigger opportunity is waiting for Bangladeshi SMEs to be a part of that bigger cake and capture a reasonable share of it. But, question is that could we think about our readiness to grab this opportunity? Are Bangladeshi SMEs ready with quality products and world class services in their basket? How much share is our target? What are the preparatory activities we have to finish up by this time?

To analyse current scenario of Bangladeshi SMEs we will find out that till now Bangladeshi SMEs do not have access to global market; they are disconnected from global value chain. We do not have information about global market demand of our products and current available supply chain. What are the standard we have to comply with labour, environmental, social, and quality standards to grab a justified share of that market?

Bangladeshi SMEs are suffering from scarcity of skills required in various specialised fields. Those are suffering from limited availability of managerial skills, specialised skills such as technology and language that are crucial for reaching global markets. Finally, SMEs are suffering to get formal bank loans with competitive rate of interest.

Digitisation and expansion of ICT skills could offer a very unique solution to most of the above mentioned challenges. For example, an SME entrepreneur or manager could easily identify global demand of his / her product by using ITC Market Access Tools from his / her office or residence. They could at least identify what types of skills is required to improve their capacity and which institutions home or abroad are offering these skills for students or professionals by using internet. They could easily collect information of SME loan products offering by different banks by searching into respective website. They could search buyers from global business directory by becoming members of respective network online. Thus we could see that ICT / digitisation is an opportunity for the SMEs but they have to be trained up accordingly to utilise this opportunity.

The government could play a very vital role in training entrepreneurs / professionals / upcoming professionals about how to utilise ICT tools to collect required information and from where; because another recent study shows that, ICT skilled SMEs are making 13% more revenue than that of an ordinary SME. They are getting 10% more buyers than that of the ordinary ones. That means we have knife in hand but that needs to be sharpened. The government has to come up to provide this sharpness to the SME entrepreneurs / professionals of Bangladesh for making them globally competitive. To digitise SMEs internet bandwidth should be free or with a minimum cost. Internet speed is required for satisfactory performance of outsourcing / freelancing sector. Few adjustments are required in banking sector for making them SMEs friendly. Thus the government, yes it is government that can bring the change and promote the revolution for economic liberty of Bangladesh by 2021.

Challenges of Global Economic Integration

Challenges of Global Economic Integration

Md. Joynal Abdin

The Daily Sun on February 1, 2017

Economic integration is a process of harmonizing trade and investment related policies and reducing/withdrawing tariff and other non-tariff trade and investment barriers between two or more countries. GATT (1947) agreement is the mother of almost all multilateral trade agreements under WTO platform to manage and foster international trade around the world. Besides the World Trade Organization (WTO) arranges a long list of bilateral and regional free trade agreements provided motion toward the economic integration movement.

The European Union (EU) could be termed as most successful integration arrangement of the globe. The North American Free Trade Agreement (NAFTA, 1994) is another successful platform to facilitate free trade between the USA, Canada and Mexico. NAFTA supported more than three million American jobs creation and U.S. trade with NAFTA partners has unlocked opportunity for millions of Americans by supporting Made-in-America jobs and exports.

Similarly a good number of economic integration initiatives were taken by the Asian countries For example Asia-Pacific Trade Agreement (APTA, 1976), ASEAN Free Trade Area (AFTA, 1993), South Asian Free Trade Area (SAFTA, 2006), Economic Cooperation Organization Trade Agreement (ECOTA, 2008), Commonwealth of Independent States Free Trade Area (CIS FTA, 2012) etc. in regional as well as in bilateral level. A positive impact of all these initiative is visible today. For example; interregional trade between Asian countries rose from 53% in 2001 into 57% in 2015, similarly Asian countries are the world’s top destination for foreign direct investment, attracted $527 billion in 2015, in terms of financial integration Asia’s cross-border portfolio investment and bank claims increased from $3.0 trillion in 2001 to $11.0 trillion in 2015, migration from Asia increased between 2010 and 2015 although the increase was directed more to outside Asia than within the region.

A recent study shows that SAFTA is indeed a net trade-creating bloc. The Asian, European, and North American regions responded affirmatively to the SAFTA bloc. As a result Intra-bloc exports are stimulated on average by 23 percent because of SAFTA, while intra-bloc imports raised by 25 percent. A time series analysis from 1981 to 2010 shows that, the regional export share of India, Nepal and Sri Lanka increased under SAFTA regime but regional export share of Bangladesh is decreasing day by day. Bangladesh’s used to export 8.81% of its total export to SAARC states in 1981 – 1985 periods whereas currently Bangladesh is exporting only 2.55% of its total export to the SAARC countries. That means Bangladesh’s has not been able to utilise the export benefits of SAFTA accordingly.

Bangladesh’s import from regional countries is increasing day by day. Bangladesh used to import only 3.36% of its total imports from South Asian countries in 1981 – 1985 periods whereas currently Bangladesh imports 15.21 % of its total imports from the neighbouring states. It is clear that, SAARC exporters are capturing Bangladeshi market and increasing their exports to Bangladesh. At the same time Bangladeshi exporters are failing to retain their existing market share in SAARC countries. Bangladeshi policymakers shall seriously think about the issue that, signing bilateral or regional free trade agreements is not that important, rather taking adequate preparation to utilise the benefits out of those agreements is required.

Not only in international trade but economic integration has to be spread up into free movement of people as well. South Asian countries are lagging behind in terms of peoples’ mobility. India is offering on arrival visa facilities to more than 50 countries but it is not opening up its door for the closest neighbour and major trade partner like Bangladesh. Bangladesh is the destination of a very significant Indian exports, Bangladeshis are one of the top contributors of Indian tourist earnings, but why Indian government is not offering us on arrival visa or easy access to India? It is because we are unable to negotiate it. We are failing to assure that the general people of Bangladesh are not harmful to Indians.

Few bilateral issues of South Asian countries put SAARC into intensive care unit (ICU). India – Pakistan – Bangladesh issues are old and complex but not unsolvable. Leaders of the respective countries shall remember that a regional platform like SAARC has been created after so many struggles with an aim to uplifting socioeconomic condition of South Asian people through mutual/regional cooperation. If such an initiative is abolished due to ego problems of current South Asian leaders then the future generation may not forgive them. Tomorrows people will be much wiser and open hearted than today. They could reinstall mutual cooperation among themselves and condemn us due to our egoistic decision today.

Not only in South Asia, economic integration is facing threat throughout the world. Brexit (2016) is the biggest blow to the European Union as well as to the global concept of economic integration. Endless calculation is going on to measure positive and negative impact of Brexit on British economy and rest of the world. On the other hand US President Donald Trump calls for 20% tax on Mexican imports to help pay for the border wall. Further such initiative of the new American President could lead the NAFTA agreement into inactive position. Similarly he has canceled the potentials of TPP agreement with an executive order. Sri Lanka and Nepal is going to reconsider their existing trade regime with India due to their protectionist feelings. Thus a global movement of protectionism could be weaved further and hit the multilateral system of economic integration and free market economy.

In such a confusing situation Bangladesh has to be proactive to nurture and maintain a congenial trade regime with its existing export destinations and import partners. Bilateral free trade agreements could be signed to assist our export growth as and when required (if necessary). New export destination could be in Latin America, Soviet states, or the Far East countries like Japan, China, Mongolia and South Korea etc. has to be explored to maintain an uninterrupted export growth. Skilled manpower export to existing and newer destination could supply additional Dollars for Bangladesh economy to maintain a stable economic condition in any types of negative changes in global system of free market economy. Without prior preparation and proactive response to the emerging condition of global system Bangladesh may be in trouble in near future. Promoting local entrepreneurship with the aim of self-sufficiency, developing existing SME clusters and new special economic zones, maintaining congenial trade regime with major partners, attracting FDI for facilitating employment generating and technology transfer, involvement with potential arrangement etc. could be useful techniques for Bangladesh to cope up with the emerging change and sustain in the long term.