There are some positive developments for the small and medium enterprises (SMEs) in Bangladesh cutting across sectors, as stakeholders are coming in to help them when perhaps they need it the most, thanks to COVID-19!
Lately, the Bangladesh Government has decided to extend policy support to garment exporting factories falling under the SME category to improve their competitiveness during this time of the pandemic.
Sometime back, the central bank of Bangladesh, the Bangladesh Bank (BB) issued a notice underlining that such garment factories (falling under SME category) focusing on knitwear, woven items, sweaters, terry towels and home textiles would get a cash incentive.
Factories whose exports amount to up to US $ 5 million are considered as SMEs in the garment sector. So, they will enjoy the benefit.
A 4 per cent incentive would be provided on 30 per cent value addition even if the garment items were made out of imported fabrics and yarn, the notice said. The SMEs will even be able to avail the benefit on export receipts of last fiscal year, it added.
It may be mentioned here that the big units have been enjoying a 4 per cent cash incentive on export receipts on the use of local yarn and fabrics in production and manufacturing of garment export. The Government has been providing it since 2009 when the local factories underwent severe implications on account of the global financial recession of 2007 and 2008.
Thus, the Government’s move to extend support to small- and medium-sized factories that have been hit hard by the coronavirus pandemic, through cash incentives, is no doubt a very welcome move. It may be mentioned here that as per some estimates, since the country-wide lockdown commenced in Bangladesh on account of COVID-19, more than 500 small and medium garment factories have either wound up business for good or are not in a position to keep their employees under regular payrolls.
Many of these factories reportedly faced order cancellations, while others were denied payments by their buyers from overseas.
What’s more, despite the coronavirus bailout package rolled out by the Government to help pay the workers’ wages, many such factories were reportedly unable to avail the same due to stringent riders attached to it, which impacted them even more. On 25 March, the Government announced a stimulus package of Taka 500 billion (US $ 5.9 billion) for export-oriented sectors, including the RMG industry. However, to qualify for the stimulus package, factories must have exported 80 per cent of products in recent years, which effectively meant small and medium-sized enterprises that worked as subcontractors for big factories have been unable to qualify for the funding.
Under the situation, leaders of the relevant industry associations have hailed the Government’s decision to extend policy support to garment exporting factories falling under the SME category as a proactive one.
“Our small industries will be benefitted from this move,” said Mohammed Abdus Salam, Acting President, Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Currently, the small and medium units cannot compete with the bigger ones. So, the move will improve the competitiveness of the SMEs and one day they will turn into big exporters of the country, he said, adding that the new move would increase employment as well.
The export volume and value will also increase, Mohammed Abdus Salam further added.
Meanwhile, Mohammad Hatem, Vice President, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), echoing the same sentiments, added that more than 50 per cent or 1,500 factories are SMEs.
“It was our long-time demand from the Government,” said Mohammad Hatem, while A Matin Chowdhury, former President of the Bangladesh Textile Mills Association (BTMA), said the local primary textile sector would be affected a little by the move, but it was also true that the Government needs to assist the local SMEs so that they could expand and grow.
“This is a special kind of support to the SMEs from the Government,” said Matin Chowdhury, while adding that currently, the local spinners can supply nearly 90 per cent of raw materials to the knitwear sector and 40 per cent of raw materials to exporters of woven items.
Most of the industry insiders felt that this would particularly help units producing knitwear items, as almost half of the knitwear units are SMEs.
It may be mentioned here that apart from helping the factories pay workers’ wage through the stimulus package, the Government has also allocated Taka 33,000 crore for large industrial units, Taka 20,000 crore for the cottage, micro and small and medium industries, and other policy support to face the fallouts of the pandemic.
By allowing the benefit under the new arrangement, the Government has, however, stayed away from its cash incentive policy followed in the past which stipulates the use of local materials in the manufacture of apparels for export. Now, considering the hardship of the smaller units, they have been exempted from the condition, which however, may have some impact on the local textile mills.
Nonetheless, this being a special arrangement under extraordinary circumstances deserves to be appreciated, as it is directed to help the small units ride out the prevailing difficulties facing export.
Clearly, it would offer small and medium-sized units some breathing space in such difficult times, which is also expected to give them some competitive edge over the bigger players as well.
Meanwhile, in a separate development, Alibaba – in a unique effort to help the SMEs of Bangladesh – launched a landmark initiative ‘Project Sprout Up’ to help businesses go online and global.
According to a press release issued by Alibaba, the roll out of the project will help the existing and potential Alibaba.com users in Bangladesh with better access to B2B trade opportunities available in the vast global market.
This programme is part of the broader 2020 Spring Thunder initiative by Alibaba Group to help SMEs survive and thrive via digitalisation in the wake of the pandemic and to support them on their road to recovery. The project will aid SMEs in the country across three main areas – faster onboarding onto the Alibaba.com platform for establishing global reach, access to solutions designed to accelerate business growth and tailor-made training programmes to help SMEs deepen their online capabilities, read the press release.
Alibaba.com hosts more than 20 million active buyers from over 190 countries and regions, with an average of 300,000 inquiries made daily for goods ranging from raw materials to finished products in more than 30 major categories. Over 40,000 products from Bangladesh-based businesses are currently listed on the Alibaba.com platform, including items from key local industries such as apparel and textiles as well as leather products such as luggage and bags.
“This year, more and more businesses are looking for sustainable business models, and we believe that e-commerce can provide that opportunity and enable more SMEs move from recovery to tangible, sustained growth. Bangladesh is already recognised in terms of apparel and textile exports and can further accelerate their businesses through global B2B trade,” said Zhang Kuo, General Manager, Alibaba.com, adding “Unlike retailers who have adopted e-commerce more instinctively in the past few years, most B2B businesses are yet to understand the potential of this space.”
As part of this new initiative, Alibaba.com will help lower the barriers to entry for SMEs looking to kick-start or accelerate their online B2B trade operations. The solution offered will help new suppliers set up their e-commerce presence on Alibaba.com from scratch, and the Alibaba.com platform will provide special discounts for local SMEs joining the platform as supplier members before 30 September 2020.
Bangladesh-based businesses will also benefit from a new 90-day onboarding process onto Alibaba.com, which aims to boost traffic and generate additional business opportunities for new suppliers within the period. To further support the move by businesses online, Alibaba.com will enlist professional third-party partners to help newly joined suppliers create an online store from the ground up, develop product listings and conduct keyword advertising. This package will be made complimentary for participating SMEs, with costs absorbed by Alibaba.com.
Further, to provide businesses with more confidence when participating in global trade, Alibaba.com will be offering its Smart Marketing Solution, an intelligent keyword advertising tool, available for supplier members in the country. The tool draws on insights from the Alibaba.com platform and AI algorithms to help suppliers market their products with intelligent bidding without additional labour and investment required.
Apart from enabling businesses to understand the demand for a product category, the Smart Marketing Solution will also automatically adjust the bidding price for their keywords to acquire new customer traffic and fine-tune their business strategies via a simple and basic interface even for businesses new to Alibaba.com. In addition, supplier members in Bangladesh will be provided with regular training programmes and workshops to strengthen their performance on Alibaba.com while covering topics ranging from the basics in online business to online buyer behaviour, business negotiations, customer support, marketing and more.
So, to wind up on a positive note, stakeholders are extending support to the SMEs at this critical juncture to not only survive and sustain, but also further their business goals, which is, undoubtedly, not only a great move but the need of the hour as well.
Also Read: COVID-19 and the emerging facets of e-commerce in Bangladesh
