SMEs propel economy to higher growth

The number of economic units has doubled between 2003 and 2013 riding on the fast expanding non-farm activities across Bangladesh, according to the government's latest census.

In 2003, the number of economic units was 37.08 lakh. It swelled to 78.18 lakh in 2013, according to the Economic Census of 2013.

The economic units have increased 71 percent since 1986, when the first economic census in the country took place.

The census, which was conducted between March 31 and May 31 of 2013, was released yesterday by the Bangladesh Bureau of Statistics in Dhaka. It does not include farm activities. 

Economic units went up 62.61 percent to 23.21 lakh in the last decade, while those in the urban areas rose 71.48 percent to 55.89 lakh.

Households with economic units also increased over the period -- from 9.23 lakh in 2003 to 28.21 lakh in 2013.

Although still at a low level, the number of female-headed households increased five times since 2003 to 5.63 lakh in 2013.

The number of permanent establishments rose 50 percent to 45.14 lakh in 2013 from 29.91 lakh a decade ago, showing that the base of the economy is getting stronger, according to BBS.

More women are engaged in economic activities. In 2003, 12.29 lakh women were involved in economic activities, which more than tripped to 40.51 lakh in 2013.  Speaking at the unveiling of the report, Wahiduddin Mahmud, a noted economist, said the census has captured all non-agricultural economic activities taking place in the informal and formal sectors.

It has given a clear picture of the employment situation in the non-agricultural sector, he added.

Non-agricultural employment rose 6 percent on an average every year between 2001 and 2013, whereas permanent establishments went up 4 percent, he said.

“What is more striking is it has been clear that the micro, small and medium enterprises are the main forces of the economy.”  

Mahmud, who teaches economics at Dhaka University, said rural in other countries means largely agricultural activities. But in Bangladesh, it is not only farm activities but many more, he added.

The number of household-based economic units increased 6 percent on average per year in the decade. The increase is 7 percent in rural areas and 5 percent in urban areas.

More non-farm jobs were created in rural areas compared to urban settings, said Mahmud.

On average, 2.6 persons used to work in an economic unit in rural areas in 2013. A decade later, it stood at 3.6 persons, he said.

“It means that it is not a proliferation and overcrowding of subsistence activities. Rather, it is a dynamic sector. The census shows us that Bangladesh's economy is very dynamic compared to other countries.”

Unlike in the past, rural families are no longer engaged in farm-based economic activities alone.

“As a result, the division between the rural and the urban settings is diminishing. Microcredit has played a role to this effect.”

The economist also said, as a result of the increasing non-farm economic activities, GDP growth would not go down below 6 percent.

Planning Minister AHM Mustafa Kamal said micro, small and medium enterprises are not getting enough attention in Bangladesh, the way they receive in other countries.

So, all necessary assistance should be provided to them so they can flourish, he said.

MA Mannan, state minister for finance and planning, said the economy is growing so fast that there is a little bit of anxiety over slowing down in future. “So, we have to take preparations to tackle any potential slow-down,” he added.

Hossain Zillur Rahman, also an economist, said the census showed that 88 percent of the economic units have capital base below Tk 500,000.

This reflects the need to reform policies in their favour and put more emphasis on how they can have adequate access to financing.

The country's economy can withstand global shocks and stand its ground riding on, among others, the increasing number of thriving small economic units, he said.

“They do not sit idle when any global shock arrives -- it is one of the aspects of the economy's resilience.”

Citing the census, Rahman, also the executive chairman of Power and Participation Research Centre, said the country's economy would be determined by the middle-tier economic units.

So, there has to be a lot of thinking about these middle-tier economic units, because entrepreneurs are taking risks and utilising whatever resources are available at this stage, thus laying the foundation of the economy's future. “It will be our duty to provide them support. If we can do it, we will be able to achieve our broader economic objectives.”

Rahman said the country's transformation towards a high-income country from a middle-income one will be determined by how much support the country is extending towards the middle-tier economic units.

There has been another development in the economy, he said. “Family-owned units are the dominant part. New entrepreneurs are emerging. There is also demonstration effect: yesterday's full-time workers are opening an economic unit today. This is one of the pictures showing how the economy is flourishing.”

He said there is a lot of focus on large enterprises but entrepreneurs operate through middle to lower levels.

The first economic census took place in 1986 and the second one in 2001-2003.