SME sector needs action plan to meet LDC graduation challenges

Bangladesh's SME sector needs a concrete action plan to meet the challenges of graduating from LDC to a developing country, experts have said.

Along with this, experts also suggested reducing the production cost of the products as well as increasing the quality and bargaining power to get a competitive advantage in the global market.

Experts made the remarks while attending a programme titled “LDC Graduation of Bangladesh: Challenges and Opportunities for SMEs” organized by the SME Foundation and the German development organization Friedrich-Ebert-Stiftung (FES), Bangladesh at Agargaon area in the capital on Wednesday.

State Minister for Planning Dr Shamsul Alam was the chief guest at the seminar. SME Foundation Chairperson Prof Masudur Rahman presided over the programme while its Managing Director Dr Md Mofizur Rahman delivered the welcome speech.

While presenting the keynote paper, Professor Abu Hena Reza Hasan of Dhaka University's Department of International Business said, “Bangladesh's SME sector lacks skilled manpower, managers and technology. To solve these problems, specific action plans are needed to develop training, technology development and skilled managers in the development of the SME sector.

“Along with this, it is necessary to strengthen quality control institutions to ensure product quality, and to establish separate authorities for SME institutions to ensure intellectual property,” he added.

Reza Hasan said in his keynote paper, “The government failed to develop a national quality policy for the Small and Medium Enterprises (SMEs) sector as well as provide a sound support system and could not establish a national quality certifying authority.”

“Export subsidies, tariff protection of raw materials and import substitutions, as well as quantitative restriction to the benefit of the market enterprises, are all evidence of the economic inefficiencies of enterprises,” as mentioned in the keynote paper.

“Essentially, these inefficiencies constitute the comparative advantage of SMEs in international business and these must be ended after graduation from LDC in Bangladesh,” stated Reza Hasan’s paper.

Regarding how the LDC graduation will impact SMEs, Reza Hasan states, “SMEs will experience declining comparative advantage in international trade and dominance in the domestic market. Higher production costs, shrinking profits or losses from the sale, and declining market access with poor quality products will push them under challenging realities.”

“Without active support from the government to enhance their capabilities quickly, many SMEs may have to cease operations,” he added.

Reza Hasan recommended that the government should invest in producing human resources for the manufacturing and service sector as SMEs have an acute shortage of skilled workers, technicians and managers.

“Training programs, especially related to technology and production management must be arranged for the owners and managers of SMEs because they lack skills in these issues which make them unable to improve productivity,” he also recommended.

Bangladesh Standards and Testing Institution (BSTI) must be upgraded to provide technical services to SMEs to develop quality procedures and standards, he recommended.

Free trade deal with eight countries stressed

Meanwhile, State Minister of Planning Dr Shamsul Alam said that it is necessary to make free trade agreements with at least eight countries urgently.

“So far only Sri Lanka and Bhutan have been able to make this agreement. Therefore, the Ministry of Commerce needs to take the necessary steps in this regard. Besides, it is necessary to create an SME database to take a specific action plan for the development of the SME sector,” he said.