19
The Small and Medium Enterprises (SMEs): Bangladesh and International Perspective Dr. Engr. Syed Md. Ihsanul Karim Managing Director & CEO The Small and Medium Enterprise Foundation

Introduction to small & Medium Enterprises (SMEs)

Embed Size (px)

Citation preview

Page 1: Introduction to small & Medium Enterprises (SMEs)

The Small and Medium Enterprises (SMEs): Bangladesh and International

Perspective

Dr. Engr. Syed Md. Ihsanul KarimManaging Director & CEO

The Small and Medium Enterprise Foundation

Page 2: Introduction to small & Medium Enterprises (SMEs)

Presentation Outline:

Introduction Definition of SMEs: Bangladesh Perspective Definition of SMEs: International Perspective Definition of SMEs in some selected countries: India,

Japan, Korea, Malaysia, Thailand, China and Vietnam Contribution of SMEs in Bangladesh Economy Contribution of SMEs: International Experience Major constraints of SME around the globe. Conclusion

Page 3: Introduction to small & Medium Enterprises (SMEs)

Introduction

Bangladesh is considered as one of the Next 11 (N-11), and Frontier Five countries respectively by the Goldman Sachs and JP Morgan.

Bangladesh economy is growing up to 5-6% GDP growth during last one decade and last year in 2012-13 the growth rate was 6.03 % (BBS and National Budget Speech 2013).

Bangladesh is blessed with fertile plain land, enormous supplies of irrigation water from rivers and a large basket of agriculture products.

Agriculture recorded sustained growth for the last three consecutive fiscal years responding to favorable weather conditions, continued government support for agriculture inputs and greater access to credit.

As per Vision 2021 the contribution of industry and service sector to GDP will stand at 40 and 45 respectively in place of 28 and 50 percent as at present.

Page 4: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

Contribution of Industry and Agriculture in GDP is 21.7% and 30.4% in 1991, 25.9% and 24.1% in 2001, 28.5% and 18.6% in 2010 respectively.

At the same time contribution of Service sector to GDP is rising from 47.9% in 1991 to 53.0% in 2010…….World Bank (World Development Indicators)

Major export earning sectors are the Readymade garments, knitwear, frozen food and shrimp, tea, raw jute, jute products, leather and leather products, chemical fertilizer, ceramic tableware, naphtha, furniture, fruits and vegetables ,handicraft, light engineering products including bicycle etc.

Page 5: Introduction to small & Medium Enterprises (SMEs)

Definition of SMEs: Bangladesh Perspective

The National Industrial Policy 2010 has clearly defined the small and medium enterprises (SMEs) with two major indicators e.g. replacement cost and no. of workers. Summary of the definition is as follows:

Category Small Medium Indicators

Manufacturing

50 Lac - 10 Crore

10 Crore - 30 Crore

Replacement cost

25-99 100 - 250 No. of workers

Service5 Lac - 1 Crore 1 Crore - 15

CroreReplacement

cost10 - 25 50 - 100 No. of workers

Page 6: Introduction to small & Medium Enterprises (SMEs)

Definition of SMEs: International Perspective

OECD & EC: Currently small and medium sized enterprises are defined by their size. In the European Union SMEs are defined in the Commission Recommendation of May 6, 2003. Concerning to this recommendation an enterprise is regarded as small or medium sized if it has: ¾ not more than 250 employees and ¾ not more than 50 Million Euro turnover resp. a

balance sheet total of less than 43 Million Euro ¾ and if not more than 25% of the shares of such an

enterprise are in the ownership of another enterprise.

Page 7: Introduction to small & Medium Enterprises (SMEs)

Continued . . . Organiz

ation   Assets/turnover No. of employees Loan size

    Micro Small Medium Micro Small Medium Micr

o Small Medium

ILO         <10 10 to 49        

IFC   <$100,000

$100,000 to

$3 million

$3 million to $15 million

<10 10 to 50 50 to 300 N/A

$10000 to

$100,000

$100,000 to $1

million in LDCs;

$100,000 to $2

million in developed nations.

European

Commission (EC)

& OECD

 Up to

€2 million

Up to €10

millionN/A <10 <50 N/A N/A N/A N/A

 Developin

gN/A N/A N/A <5 5 to 19 20 to 99 N/A N/A N/A

UNIDO                    

 Industrialized

N/A N/A N/A   <99 100 to 499 N/A N/A N/A

Page 8: Introduction to small & Medium Enterprises (SMEs)

Definition of SMEs in some selected countries

1. India: According to the Micro, Small and Medium Enterprises Development Act 2006, enterprises engaged in manufacturing were defined as: A micro enterprise, where the investment in plant and

machinery does not exceed twenty five lakh rupees ( $50,000);

A small enterprise, where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees ($1 million); or

A medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees ($2 million).

Page 9: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

Enterprises engaged in services were defined as: A micro enterprise, where the investment in

equipment does not exceed ten lakh rupees ($20,000);

A small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees ($40,000); or

A medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees ($1 million).

Page 10: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

Industry Small

and Medium Enterprises

Small enterprises benchmark only

  Capital No. of regular employees No. of regular employees

Manufacturing, construction, transport and

other industries

Up to ¥ 300 million Up to 300 Up to 20

Wholesale Up to ¥ 100 million Up to 100 Up to 5

Services Up to ¥ 50 million Up to 100 Up to 5

Retail Up to ¥ 50 million Up to 50 Up to 5

2. Japan

Source: Japan Small Business Research Institute (2009)

  SMEs   Small BusinessMicroenterp

rises

 No. of

workers Capital & Sales No. of

workers           

Manufacturing

Less than 300

Capital worth $8m or less Less than 50 Less than 10

3. Korea:

Source: Small and Medium Business Administration (SMBA, 2009).

Page 11: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

 Micro-enterprise Small enterprise Medium

enterpriseManufacturing, Manufacturing-

Related Services and Agro-based

industries

Sales turnover of less

than RM250,000 OR full time employees

less than 5

Sales turnover between RM250,000 and less than RM10 million OR full time employees between

5 and 50

Sales turnover between RM10

million and RM25 million OR full

time employees between 51 and 150

4. Malaysia:

Source: SME Corp, Malaysia.

Industry Small enterprise Medium enterpriseManufacturing

IndustryEnterprise which corresponds to

any of the following; with employees of up to 50 or with

assets of up to 50 million bahts.

Enterprise which corresponds to any of the following; with 51-200 employees or with assets of no less than 50

million bahts and up to 200 million bahts.

5. Thailand:

Source: OSMEP (2006).

Page 12: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

Size Category Industries

Employment based Total assets Business revenue

Small Industry <300 <¥ 40 million <¥ 30 million Construction <600 <¥ 40 million <¥ 30 million Wholesale <100 <¥ 30 million

Retail <100 <¥ 10 million Transport <500 <¥ 30 million

Post <400 <¥ 30 million

 Hotel &

restaurant <400   <¥ 30 million

Medium Industry 300-2000<¥ 40 million-

400million<¥ 30 million-300

million

Construction 600-3000

 <¥ 40 million-

400million<¥ 30 million-300

million  

Wholesale 100-200<¥ 30 million-300

million

Retail 100-500<¥ 10 million-

150million

Transport 500-3000<¥ 30 million-300

million

Post 400-1000<¥ 30 million-300

million

 Hotel &

restaurant 400-800  <¥ 30 million-150

million

6. China:

Source: SME Promotion Law of China, 2003.

Page 13: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

  Micro-Enterprise Small Enterprise Medium Enterprise

   No. of Total Capital

(C)No. of

Employees (N)

No. ofEmployees

(N)  Employees (N) Total Capital (C)            

Agriculture <10 <20 Billion

VND10<N<20

020<C<100 Billion VND

200<N<300Forestry

Fishery     

Industry<10 <20 Billion

VND10<N<20

020<C<100 Billion VND

200<N<300Construct

ion     

Services <10 <10 Billion VND 10<N<50 10<C<50 Billion

VND50<N<10

0

7. Vietnam:

Source: Government's Decree No. 56/2009/ND-CP

Page 14: Introduction to small & Medium Enterprises (SMEs)

Contribution of SMEs in Bangladesh Economy

SMEs are the engine of growth in Bangladesh. There are about 6 million SMEs in Bangladesh.

About 90 per cent of all industrial units in Bangladesh are SMEs generating about 25 per cent of the GDP, employing about 31 million people and providing 75 per cent of household income. Various categories of SMEs together contribute between 80% to 85% of industrial employment and 23% of total civilian employment in Bangladesh.

About 60%–65% of SMEs are located outside the metropolitan areas of Dhaka and Chittagong. SMEs are providing job opportunities to about 70%–80% of the nonagricultural labor force. The SME share in manufacturing value added to GDP varies at 28%– 30%.

Page 15: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

The services sector is primarily composed of SMEs, which is responsible for the bulk of employment growth. SME contribution to national export is significant through different industries such as ready-made garments, jute, and leather etc.

By producing exportable surpluses of commodities together with fulfilling local demands SMEs are making significant contribution to the economy of the country. This sector is a potential sector in terms of local value additions and creation of employment opportunities.

Page 16: Introduction to small & Medium Enterprises (SMEs)

Contribution of SMEs: International Experience

  Micro(<5

employees)

Small(5-19

employees)

Medium(20-99

employees)

All SMEs

Australia 25.9 20.9 19.2 66.0Hong King,

China31.1 13.0 24.8 59.4

Japan 13.1 29.9 26.9 69.9Korea 31.2 11.3 36.2 78.7Mexico 36.2 13.9 15.2 65.2New Zealand 23.0 18.0 19.0 60.0Peru 62.5 16.6 8.8 87.9Philippines 36.7 25.8 7.1 69.5Singapore 7.1 16.8 19.2 43.1USA 5.2 13.6 17.9 36.7

Source: The current state and future direction of manufacturing SMEs in Bangladesh, The SME Foundation (2012)

Role of SMEs in employment generation

Page 17: Introduction to small & Medium Enterprises (SMEs)

Major constraints of SME around the globe

Limited access to finance. Lack of appropriate technology. Limited of market access. Lack of adequate investments Fierce competition Scarcity of knowledge.

Conclusion Though so many initiatives were taken, till now SMEs are fighting with few challenges like, inadequate access to finance, inadequate access to technology, limited resources, shortage of skilled manpower, absence of international standards testing laboratories, absence of R&D facilities, product development center, technology incubation center etc.

Page 18: Introduction to small & Medium Enterprises (SMEs)

Question / Answer Session

Answer as per National Industrial Policy – 2010 of Bangladesh:

1. Mr. and Mrs. X produce paper cone / cartoon box in their residential primacies. Replacement cost of their business is BDT 4.5 lac. Which industrial segment they are? A. Large. B. Small.

C. Micro D. Cottage

2. Thomson and Company produces pen and distribute all over the country. Replacement cost of their business including land and machinery is BDT 1 Crore. Total 50 workers are serving in the company. Which industrial segment they are? A. Large. B. Small.

C. Micro D. Cottage

Page 19: Introduction to small & Medium Enterprises (SMEs)

Continued . . .

3. Pavel and sons is a renowned publisher of the country. There are 150 workers serving at Pavel and sons. They have separate factories located in five divisions. Which industrial segment they are? A. Large. B. Small. C.

Micro D. Cottage 4. Replacement cost of a business entity is BDT 75 Core. Only 5 engineers are working there. Which industrial segment they are? A. Large. B. Small. C.

Micro D. Cottage 5. Alif and company used to produce bread and biscuits. It’s replacement cost is BDT 8 Crore. They have 750 workers serving all over the country. Which industrial segment they are? A. Large. B. Small. C.

Micro D. Cottage