A driving force to reckon with
Wednesday, 21 December 2011
Mahmudur Rahman
If there is one cold fact emerging from all the economic mess of the world it is that domestic consumption will have to prop up economies especially in the developing world. The days of sops are over; the luxury of generous donor support is fast becoming extinct; exports and remittances aren't likely to do the trick anymore. This was what cushioned India and China from the searing effects of the global economic meltdown and from where there is so much to learn from. In the face of the loud, abrasive voice of multi-national companies (MNCs) and powerful conglomerates the concept of big industries as being the sexy proposition has overwhelmed sense and sensibility to the extent that even reality becomes obfuscated. While all management experts will nod knowingly whenever confronted with the proposition 'a chain is as strong as the weakest link', the acknowledgement ends there. There is a tendency to overlook the important, nay crucial element of backward linkage. There was a time in the past when there was a lot of talk about encouraging backward linkage industries to emerge so as to provide support to the larger industries. Unfortunately the tendency was to align this linkage only to the growing garments industry alone. That was a necessity but the story doesn't end there. The driving force of these backward linkages has been and always will be the small and medium enterprises (SMEs). To their credit, these industries have battled ahead even in the midst of the ignominy of neglect both from policy planners and financial institutions. It wasn't too long ago that banks and such would essentially frown at the prospect of providing loans to these industries simply because they didn't have all the hoity-toity finesse of organisation. In the end it was the regulator that literally forced the banks to introduce SME packages. The overnight transformation was significant. From branding through advertising to special desks the SMEs were the much sought after client. That, of course because firstly bigger clients with their confidence badly dented weren't found wanting loans and secondly the new dawned opportunity was simply mind boggling. Apart from a few how serious the initiative has been is another discussion altogether. Even though statistics may differ it is hard to understand how and why a sector that actually makes up more than 80% of the country's industrial output could never be featured at the top of any list. So there's talk of industrial parks for industries, garments and IT villages but never for the SMEs. The initial attempts through the Bangladesh Small and Cottage Industries Corporation faded from priority somewhere down the line leaving the plucky industrialists to face the challenges on their own. Almost every sector of industry today appears to be looking for some form of sop be it through tax breaks, tax holidays, incentives and the like. The exception of course is the SMEs. Without the sophisticated marketing approaches these organisations have achieved a brilliant positioning of their own; that of carving out a niche in the minds of the consumer. So how did they do what the bigger ones moan and groan about? They provided products at a quality affordable to the consumer and allowed a small trickle of the huge 'informal wealth' to be channelled in. The government always ponders of ways to get a larger part of the 'informal economy' back into the formal sector and the specific policy support has largely favoured the stock market and the real estate sector mainly because they shouted the loudest. Women entrepreneurs who have long lamented the lack of support and funding towards their small enterprises were successful in getting commitments from the Bangladesh Bank for a reserve fund to be generated. That was a good starting point. What happened to the implementation in disbursement is another question altogether. In terms of possibilities the SME sector provides opportunity that is astounding. They have on their own developed a distribution system that reaches deep in to the remote areas, their locations aren't dictated by silly considerations such as societal amenities and above all they have resilience that is admirable simply from the perspective of little or no support at all. Policy planners have been frothing at the mouth for diversification of exports and this is where the greatest opportunity lies. Being small means the SMEs are lithe and can move far quicker than the big guns. Their ability to adapt and change allows for quicker response to consumer needs. A case in point is the growing concern over food adulteration giving rise to so many home based catering services and fast food business. Value addition to agri-produce in terms of pulp and even packaged munchies isn't a new concept. And there are ample examples of the imports of such produce from Thailand and Malaysia that suggest there is a way of reversing the import bill laden. The business environment and forecasts for the future make for pretty gloomy reading. 2012 promises further uncertainty in the developed economies and that by itself is a warning for the export plans. What could change and make a difference is a stream of products that fall in to the 'must have' category and that certainly will be more affordable than what is on offer in those countries. SME cost of production is much lower than for the larger corporations. But the platform has to be created. Their passage in to neighbouring countries has to be eased. They require addresses of their own in terms of zones or parks by whatever name. They require emerging from the backyards and alleys and be known for what they are. Above all they require support to challenge the big guns in emerging with cost effective products that is acceptable to the consumer. They know all about competition and all the rigours of doing business. They just need a chance. ............................................... E-mail: mahmudrahman@gmail.com
If there is one cold fact emerging from all the economic mess of the world it is that domestic consumption will have to prop up economies especially in the developing world. The days of sops are over; the luxury of generous donor support is fast becoming extinct; exports and remittances aren't likely to do the trick anymore. This was what cushioned India and China from the searing effects of the global economic meltdown and from where there is so much to learn from. In the face of the loud, abrasive voice of multi-national companies (MNCs) and powerful conglomerates the concept of big industries as being the sexy proposition has overwhelmed sense and sensibility to the extent that even reality becomes obfuscated. While all management experts will nod knowingly whenever confronted with the proposition 'a chain is as strong as the weakest link', the acknowledgement ends there. There is a tendency to overlook the important, nay crucial element of backward linkage. There was a time in the past when there was a lot of talk about encouraging backward linkage industries to emerge so as to provide support to the larger industries. Unfortunately the tendency was to align this linkage only to the growing garments industry alone. That was a necessity but the story doesn't end there. The driving force of these backward linkages has been and always will be the small and medium enterprises (SMEs). To their credit, these industries have battled ahead even in the midst of the ignominy of neglect both from policy planners and financial institutions. It wasn't too long ago that banks and such would essentially frown at the prospect of providing loans to these industries simply because they didn't have all the hoity-toity finesse of organisation. In the end it was the regulator that literally forced the banks to introduce SME packages. The overnight transformation was significant. From branding through advertising to special desks the SMEs were the much sought after client. That, of course because firstly bigger clients with their confidence badly dented weren't found wanting loans and secondly the new dawned opportunity was simply mind boggling. Apart from a few how serious the initiative has been is another discussion altogether. Even though statistics may differ it is hard to understand how and why a sector that actually makes up more than 80% of the country's industrial output could never be featured at the top of any list. So there's talk of industrial parks for industries, garments and IT villages but never for the SMEs. The initial attempts through the Bangladesh Small and Cottage Industries Corporation faded from priority somewhere down the line leaving the plucky industrialists to face the challenges on their own. Almost every sector of industry today appears to be looking for some form of sop be it through tax breaks, tax holidays, incentives and the like. The exception of course is the SMEs. Without the sophisticated marketing approaches these organisations have achieved a brilliant positioning of their own; that of carving out a niche in the minds of the consumer. So how did they do what the bigger ones moan and groan about? They provided products at a quality affordable to the consumer and allowed a small trickle of the huge 'informal wealth' to be channelled in. The government always ponders of ways to get a larger part of the 'informal economy' back into the formal sector and the specific policy support has largely favoured the stock market and the real estate sector mainly because they shouted the loudest. Women entrepreneurs who have long lamented the lack of support and funding towards their small enterprises were successful in getting commitments from the Bangladesh Bank for a reserve fund to be generated. That was a good starting point. What happened to the implementation in disbursement is another question altogether. In terms of possibilities the SME sector provides opportunity that is astounding. They have on their own developed a distribution system that reaches deep in to the remote areas, their locations aren't dictated by silly considerations such as societal amenities and above all they have resilience that is admirable simply from the perspective of little or no support at all. Policy planners have been frothing at the mouth for diversification of exports and this is where the greatest opportunity lies. Being small means the SMEs are lithe and can move far quicker than the big guns. Their ability to adapt and change allows for quicker response to consumer needs. A case in point is the growing concern over food adulteration giving rise to so many home based catering services and fast food business. Value addition to agri-produce in terms of pulp and even packaged munchies isn't a new concept. And there are ample examples of the imports of such produce from Thailand and Malaysia that suggest there is a way of reversing the import bill laden. The business environment and forecasts for the future make for pretty gloomy reading. 2012 promises further uncertainty in the developed economies and that by itself is a warning for the export plans. What could change and make a difference is a stream of products that fall in to the 'must have' category and that certainly will be more affordable than what is on offer in those countries. SME cost of production is much lower than for the larger corporations. But the platform has to be created. Their passage in to neighbouring countries has to be eased. They require addresses of their own in terms of zones or parks by whatever name. They require emerging from the backyards and alleys and be known for what they are. Above all they require support to challenge the big guns in emerging with cost effective products that is acceptable to the consumer. They know all about competition and all the rigours of doing business. They just need a chance. ............................................... E-mail: mahmudrahman@gmail.com