‘Small, cottage industry needs fresh stimulus package in budget’

To ensure a sustainable recovery for the country’s cottage, micro, small and medium enterprises, the government should offer a fresh stimulus package in the national budget for the upcoming 2022-23 financial year as this sector suffered the most during the Covid-19 pandemic, Mirza Nurul Ghani Shovon, the president of National Association of Small and Cottage Industries of Bangladesh (NASCIB), told The Business Post’s Abdur Razzak Sohel in an interview

The small and cottage industry was sharply affected by the pandemic. How is the recovery going?

The informal sector, including small and cottage industries, is responsible for a major chunk of the economy. This industry also employs millions of people. The pandemic’s impact on this huge industry has been a big one.

We are yet to ensure the proper recovery process. Many entrepreneurs are still suffering from Covid’s impacts while many are suffering for capital.

The industry dreamt to turn things around riding on the government stimulus package of Tk 20,000 crore. But it could not recover as the package did not come into effect appropriately due to the negligence of the authorities concerned.

The Ukraine-Russia war has also become another big challenge as the prices of products are continuously rising and affecting the overall production and export.

What do you want in the next budget for this industry?

The small and cottage industry demands special attention to recover from the losses due to Covid and generate employment. The more we will focus on this industry, the more jobs will be created which will ultimately boost the economic growth.

We want another stimulus package to make the recovery sustainable and steadily boost the industry’s growth. Apart from this, it should focus on rescheduling loans for 10 years. If we provide these policy supports to the entrepreneurs, the industry will bounce back to what it was before the pandemic.

It will strengthen the wheel of the farms that were badly affected by the pandemic or even shut down. Besides, this will also increase investment in this industry.

Many SME entrepreneurs tend to avoid paying VAT. Why is that?

SME entrepreneurs want to pay VAT. But they face discrimination in many ways. We do want to pay the necessary VAT and taxes following the rules. But how will we pay if they are not tolerable?

If we manufacture a product, we have to pay 15% VAT. But the authority never considers whether we make any profit or not from that product. VAT should be imposed on the profit, not on product manufacturing. Suffering entrepreneurs feel discouraged to pay VAT because of this.

The existing VAT structure should be amended and made friendlier for businesses and entrepreneurs to boost revenue collection. No development will be possible if that does not happen.

So the upcoming budget needs to focus on making VAT and taxes tolerable and business-friendly to increase revenue.

What are the challenges this sector is still facing?

Entrepreneurs face different challenges, including VAT discrimination, access to credit, lack of information access, lack of sufficient training and lack of coordination among relevant authorities.

But the biggest challenge in our industry is the lack of skilled workers. We won’t see sustainable development if we fail to find skilled workers.

Lack of access to credit or finance is always a major one. But it’s not the only thing that’s hindering this industry’s development.

We also lack proper access to information, due to which entrepreneurs and their businesses suffer all the time.

The government is training the entrepreneurs to boost the industry. But that is yet to meet the need due to some limitations.

We have many good policies but the lack of coordination among the authorities concerned — including the Department of Environment, BSCIC (Bangladesh Small and Cottage Industries Corporation), Bangladesh Bank, and the authorities responsible for trade licence, export, import and trademark — are hurting us.

What can be done to break these barriers?

Bangladesh exports many products to many countries. But there are still a huge number of products that we cannot export because they lack quality. To boost export, we need to improve the quality, diversify the products, improve the designs and use international standard raw materials. Otherwise, we may increase export for a while but it will not be sustainable.

At trade fairs nowadays, entrepreneurs pay a huge amount of money as rent for stalls to display their products. The fee was reasonable before but now it is very high. It should be brought down to a reasonable level.

We also need public-private partnerships to give our industry a boost. The government provides policy support but the areas need to be expanded more. The SME Foundation needs to provide more support to diversify the products.

If we want to introduce product diversification, we will need more training for the employees and need more institutional support. We need to work in collaboration and develop institutions to give the industry a leg up.

Also, the trade bodies working to develop the SME sector need budgetary support. If the government provides that, we will be able to perform better than before.

Has the industry benefitted from e-commerce?

Yes. Technology has opened up a new door for doing business. SME is one of the sectors that have benefitted most from Digital Bangladesh.

Entrepreneurs from remote areas are now selling products across the country. They also managed to sell products during the pandemic through digital marketing on different online platforms.

The Fourth Industrial Revolution is knocking at the door. Is the industry ready?

The Fourth Industrial Revolution is ahead of us and the government is going to set up 100 economic zones around the country.

Many major industries will move to these zones. But we will need to come up with the necessary skilled manpower to meet the challenges.

The government and NASCIB are working together to provide training to workers and improve their skills.