Selecting appropriate approaches for industrialisation
If any organisation being tagged with a set of predetermined approaches, they may not be able to face newly emerging challenges and needs of the sector
Md. Joynal Abdin
Industries are playing a vital role in entrepreneurship development, self-employment, and new-employment opportunity creation and increasing economic growth throughout the world. Therefore governments are keen to promote industrialization for fostering economic growth, fighting unemployment and reducing poverty. Government used to establish an organization for promoting and developing industries. But due to lack of specialized knowledge to select appropriate approach for industrialization these organizations are becoming less productive or ineffective in this regard.
Bangladesh classified industries / enterprises into five different classes (based on size) namely; Cottage, Micro, Small, Medium and Large enterprises/ industries.
1. Classification of industries as per the basic raw materials used: One of the most common approaches of classifying the industries as per their basic raw materials used. For example the enterprises used primary agricultural crops to produce their products are known as agro-processing industries / sector; such as producers of jam jelly or chutney, white, rice, and flour etc. Similarly the enterprises used leather to produce shoes, bags; belts etc. are known as leather goods industries or sectors.
2. Clusters based classification of industries / as per location: Development agencies are often identifying the industries based on their location at any specific pre-determined industrial clusters. This cluster based approach of industrialization could be one of the most effective tools for their development for many reasons such as serving maximum enterprises with minimum resources, promoting inclusive and geographically balanced development etc.
3. Classification of industries based on entrepreneurs gender: Industries are often getting priority of special treatment based on the gender of the entrepreneurs. For example women entrepreneurs usually lagging behind than that of the men owned enterprises. Therefore governments are offering special treatment for the women entrepreneurs owned enterprises to inspire women to become entrepreneurs.
4. Classification of industries based on owners race and ethnicity: Another most important approach of differentiating enterprises based on the race or ethnicity of the owners. For example, tribal community or minority group could get special attention to bring them economically forward or mainstream.
5. Classification based on output of the enterprises: Primary classification of the enterprises could be determined based on the output of the enterprises i.e. it is producing a product or performing service. Manufacturing and service enterprises have different attributes than that of the others. Therefore, policy makers identify them differently under manufacturing or service sector heads.
6. Objective oriented classification of enterprises: Promoters often differentiate the enterprises based of the objective of their products; such as domestic enterprises vs. export oriented enterprises. Domestic centric enterprises produced products for the local market. On the other hand, export oriented enterprises used to produce product only for export. Mixed types of enterprises could be there but they are not eligible to get special treatment offered by the government for exporters or others.
7. Special purpose approach of classification: Enterprises working for rehabilitating any special groups like disabled population, autistic group could be described as special purpose enterprises.
A country may have a series of policies like, National Industrial Policy, SME Policy, Export Policy, Import Policy order, Fiscal Policy, ICT Policy, Women Development Policy, Education Policy, Investment Policy, Skilled Development Policy, Credit Policy, Different Sectoral Policies like agriculture, handicraft, poultry and livestock policy etc. Government usually formulates policies to focus on any specific group or problem or purpose. But industrialization / entrepreneurship development is such an important issue that could address multiple objectives at a time. Therefore, enterprise development agencies usually select approaches to achieve specific goal of different government policies at a time. For example, one action plan could address employment generation, promotion of any specific sector as well as increasing export earning of the country through a single intervention. Therefore, designing development intervention by addressing multiple objectives requires appropriate selection of perfect approach for industrial development of a country.
India is providing more emphasis on SME development by having a specialized ministry namely; the Ministry of Micro, Small Medium Enterprises. This ministry is implementing Five Year Plan for Economic Development. Indian SME promoters are working with Trade Promotional Programs, Connectivity with MNCs and Government, Inbound and Outbound Investment, Strategic Business Alliances, Delegations and Study Tours, and Restructuring and Revival of stressed SMEs etc. issues additional to the Bangladeshi practices (SMBDC, 2016). India has several acts namely the Micro, Small and Medium Enterprises Development Act, 2006, Khadi Village Industries Commission Act, 1956 - 17 March 2008, Re-establishing Khadi Village Industries Commission dissolved in October 2004 - 19 July 2006, Notification regarding implementation of provisions of Khadi and Village Industries Commission (Amendment) Act, 2006 and The Industries (Development and Regulation) Act, 1951.
India has a long list of sector specific policies, laws, bylaws etc. for promoting respective sectors. While a single act is missing in Bangladesh for promoting SME development or industrialization.
Small and Medium Enterprises Development Authority (SMEDA) is the premier institution of the Government of Pakistan under Ministry of Industries Production. SMEDA is implementing different projects namely; Prime Ministers Youth Business Loan, Common Facility Center projects, Cluster Development, and the Multi Donor Trust Fund (MDTF) project Economic Revitalization of Khyber Pakhtunkhwa and Federally Administered Tribal Areas (FATA) etc. for promoting SMEs in Pakistan.
Iran Small Industries and Industrial Parks Organization (ISIPO) is focusing more on cluster development as well as development of Industrial Parks and Industrial Areas to promote industrialization in Iran. They have specialized approach for SME cluster development throughout the country.
The Small and Medium Enterprises Development and Support Administration of Turkey are generally known as KOSGEB. Their distinguishable programs for SME development are Entrepreneurship Support Program, Cooperation Join Forces Support Program, R D, Innovation and Industrial Application Support Program, International Incubation Center and Accelerator Support Program, Emerging Enterprises Market SME Support Program, Thematic Project Support Program, and Laboratory Services etc. (KOSGEB, 2016). They are working in much more wider scale than that of the above mentioned institutions.
From the above discussion it is clear that different countries have different approaches for SME development. Some of the above mentioned approaches are quite different than that of the others. Countries like Bangladesh, Pakistan or Iran have a lot to replicate from the countries like India or Turkey. We would like to recommend few approaches of SME Development for a least developed country like Bangladesh:
1. Cluster based development intervention: Cluster is defined in many ways by the experts around the world. There are a large number of homogenous enterprises located at a particular geographical area is a cluster. Therefore trained manpower, raw materials, buyers and other factors of production are available at that particular place. A development agency could easily implement interventions for promoting and developing entrepreneurs of that cluster with limited resource deployment. Therefore, it could be one of the best approaches for industrialization in a least developed even in a developing country.
2. Objective oriented classification approach: We would like to offer this new approach for better output within a limited timeframe. For example; an SME promotion agency could identify few promising sectors with export potentials. Special export oriented intervention could be developed and implement to make the sector capable to export as well as competitive in the targeted international markets.
3. Special purpose projects: A development agency shall have special purpose projects to rescue declining local sectors, promoting newly developed sectors, mainstreaming any particular race or ethnic groups etc. Thus an organization could contribute in achieving national goals of the country.
4. Available skilled based enterprise development approach: Government could facilitate new sectors based on the available skills of the general people. For example, currently Bangladesh is producing a remarkable numbers of computer engineers every year. So IT / ICT based industries like Software development, Outsourcing, Freelancing etc. sectors could be promoted for their self-employment or employment generation.
Industrial promotion agencies of a country have great role to play. But if any organiszation being tagged with a set of predetermined approaches then they may not be able to face newly emerging challenges and needs of the sectors. Therefore, such institutions shall have a live, flexible set of targets to undertake newer approaches and interventions as and when required for promoting and development of the industries of that particular country.
We must remember that, effectiveness of the output and usefulness of the result of an organization depends upon its approaches of designing, implementing, delivering their services to the clients. Appropriate methodology selection shall get the highest priority before devising strategy, undertaking interventions and implementation of the plans.
The writer is Deputy Manager, SME Foundation
