6th SAES - Presentation by Golam Moazzem (CPD, Bangladesh) on Development of the Private Sector in...

7/29/2019 6th SAES - Presentation by Golam Moazzem (CPD, Bangladesh) on Development of the Private Sector in South Asia

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Dr K G MoazzemAdditional Research Director, Centre for Policy Dialogue (CPD)

Professor Mustafizur RahmanExecutive Director, Centre for Policy Dialogue (CPD)

Development of the Private Sector in South Asia:Addressing the Challenge for Building

Competitiveness

CENTRE FOR POLICY DIALOGUE (CPD)

B A N G L A D E S H

a c i v i l s o c i e t y t h i n k

t a n k


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Contents1. Introduction and Objectives

2. Analytical Framework of Private Sector Competitiveness

3. Dynamics and Changes of the Private Sector in South Asia

3.1 Structure, Composition and Market

3.2 Policies Towards Competitive Private Sector and Their Weaknesses

3.3 Domestic Bottlenecks Impeding Private Sector

4. Supply Chains and Production Networks in South Asia

4.1 Structure of Export and Import

4.2 Major Production Networks in Operation in South Asian Countries

4.3 Challenges for Building Competitiveness in the Production Networks

5. Competitiveness of the Private Sector of Southeast Asia: Lessons for South

Asia

6. Key Messages and Policy Suggestions


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1. Introduction and Objectives

1.1 Introduction

The private sector is considered to be a key player from the perspective of economicgrowth and development in South Asia (Figure).

This is demonstrated in view of policies of deregulation and liberalizationpursued by all the countries of the region

In spite of the commendable growth, private sector in South Asia is beset withformidable problems and is confronted with major challenges

The region remained as one of the least competitive regions

Except India and partly Sri Lanka, other countries ranked at the lowest quarter.

0

10

20

30

40

50

60

70

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

GDP per capita(constant 2000US$)

Employment topopulation ratio,15+, total (%)

Gross capitalformation (% of

GDP)

Gross domesticsavings (% of GDP)

Exports of goodsand services (% ofGDP)

Imports of goodsand services (% ofGDP)

Changes in Selected Macro Indicators of South Asia: 1971-

2011


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1. Introduction and Objectives

At present, private sector in a number of South Asian economies are facingchallenges due to slow down of domestic and global economies, political unrest andother issues

Indias economy has slowed down GDP growth rate decelerated to almost halved in two years

Significant devaluation of Rupee during last 6 months

Bangladesh has experienced with deceleration in GDP growth for last three years

Domestic private investment (in terms of GDP) has decreased

Slowdown in import of raw materials, intmediate products & capital machineries

Registration of new investment projects decreased

Sri Lanka's GDP grew at 6.0% in the first quarter of 2013 - slowing down from 8.0%last year and 6.3% in the 4th quarter of 2012

Pakistans GDP growth was only 3.59% in the fiscal year 2012-13

1.2 Objectives

The objectives of this study is to provide a state of affairs picture and structure ofthe private sector in South Asia

To identify factors responsible for low level of competitiveness

To put forward suggestions about possible ways to build competitive strengths


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Private enterprises are observed mainly in manufacturing and services inSouth Asia Economic activities in the agricultural sector is still of subsistence nature

and most such activities could not be termed as entrepreneurial ones(Ritson, 2008)

Private sector covers a whole range of enterprises, ranging from those thatcompete globally and those that are of subsistence nature

Entrepreneurship in developing countries has developed with the

development of the private sector Schumpeterian entrepreneurs are those which feature the role of risk

taking, managerial ability, having wealth and preferences for the controland flexibility.

Enterprise level competitiveness: An ability of the entrepreneurs to offergoods and services which are competitive in price and quality, ability torespond to changes in demand quickly through offering diversified productsand capacity to follow innovative marketing strategies Beyond comparative advantage to competitive advantage (Porter, 2000)

Source: Based on Porter, 2000


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BuyersSuppliers

Potential entrants

Domestic Industry

competitors (1)

Rivalry among

existing firms

Substitutes

Local Investment FDI

Local

Foreign

Local

Foreign

Local Imported

Small Medium Large

Small Medium Large

Domestic Industry

competitors (2)

Rivalry among

existing firms

Local

Local Investment

Small Medium

Small Medium

Elaboration of Five Forces in the Domestic Market in Developing Countries

Source: Based on Porter, 2000

Porter (2000) delineates the Five Forces model for building competitiveness at enterprise level Given the situation of prevailing segmented markets in developing countries, Porters model

could be differentiated into two segments- advanced and traditional. Development of supportive policies and institutions as a core force for building

competitiveness.

Externalpolicies &institutions

Nationalpolicies &institutions


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3. Dynamics and Changes in the Private Sector of South Asia

3.1 Trends in Investment in Manufacturing and Service Sectors

Private sector investment has now emerged as the main driver of domesticinvestment in all the South Asian countries

Peak in 2008 when South Asias domestic investment reached over 30% of GDPwhich declined afterwards mainly due to global economic slowdown after theglobal financial crisis

Most South Asian countries have experienced rise in investment-GDP ratio

Pakistan has experienced a decline in this ratio

FDI has a limited share in domestic private investment

0.0

5.0

10.0

15.020.0

25.0

30.0

35.0Gross fixed capital formation (% of GDP)

South Asia: Trends in Public and Private Investments

Source: WDI Database, 2012

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.01990 2000 2011

Investment as Percentage of GDP in South Asia


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South Asian economies have experiencedstructural transformation

Slow rise of manufacturing sectors share in

GDP A growing debate relates to whether a service-

sector led economic development is possible inSouth Asia (World Bank, 2009)?

Two group of services have been developed.

Stagnant impersonal services whereapplication of modern technologies (ICT) hastended to be lower

Progressive impersonal services wheremodern technologies are being extensivelyused (World Bank, 2009).

Rise of the service sector has come in thebackdrop of deregulation and policy reforms.

South Asias services sectors are yet to befunctionally integrated with manufacturing sectorto support advanced manufacturing supply

chains.


Country 1981-90 1991-00 2001-10

Afghanistan 18.76 27.95 46.04

Bangladesh 56.27 58.86 60.54

Bhutan 30.71 40.52 53.24

India 46.48 51.79 60.99

Maldives 82.53 87.2 86.48

Nepal 48.09 52.64 55.38

Pakistan 54.03 54.14 54.84

Sri Lanka 60.95 62.03 64.54

Contribution of Service Sector in South Asias GDP

Source: Raihan (2013)


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3.2 Composition and Structure of Private Sector Enterprises Majority of enterprises are micro, small and medium enterprises.

Horizontal expansion of enterprises has taken place in terms of number ofestablishments without major change in the pyramid-like structure

Absence of vertical expansion of enterprises upgradation from micro andsmall enterprises to medium and large ones

Rise of economic activity does not necessarily help emerging competitivemanufacturing sector. Informal activity prevails both in manufacturing and services sectors.

Entrepreneurship Entrepreneurs who operate mostly small and medium scale enterprises have yetto emerge as so called Schumpeterian entrepreneurs.

Indian small and medium entrepreneurs are struggling to build theirentrepreneurship (Bhattacharya, 2008)

Many features of developed entrepreneurship are evident in largerentrepreneurs

Self employed firms are more risk-averse and less innovative (Moazzem andKishore (2013). A large share of the enterprises operates on subsistence pressure.



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Foreign-owned Enterprises in South Asia

Investment of foreign owned enterprises in South Asia has accounted for 2-3 percent of total investment

South Asia is the lowest recipient region of FDI in the world (USD 35 billionout of USD 1.5 trillion worth of global flow of FDI in 2011)

Other than India, none of the locations in South Asia are considered to belocationally advantageous to MNEs

Intra-regional FDI is accounted for a miniscule share of FDI

None of the country except India made a significant outward investment

Despite having favourable policy environment FDI flow in the region has yet toget momentum

Pre-entry treatment phase : Limited sectoral ban, different level of caps,screening, no minimum capital requirement

Post-entry treatment phase: no employment requirement, limited performancerequirement, allowing import of technologies, no restriction on repatriation ofcapital and profits, and provision of different tax incentives; repatriation ofprofit and dividend

Consequences of tax incentives are not always positive.



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Overall Observation

Lack of dynamism, expansion and upgradation of SMEs indicate that South Asianeconomies have not experienced the structural changes that the developedeconomies have undergone.

Enterprises are yet to gain the characteristics of competitive firm as suggested byPorter (2000).

Mixed experience of economic liberalisation in the context of development ofprivate sector enterprises in South Asia

A modern manufacturing sector is yet to emerge in South Asia. Most cater to thelower end of the demand curve, lack upgradation and integration with servicessector.

Intra-industry linkages between different manufacturing industries as well as intra-sectoral linkages between manufacturing and services sectors have yet to be

established.



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3.3 Performance of the Private Sector at the National Level

Productivity of capital (C-O ratio) did not show any significant improvement inmost of the South Asian countries

Better in Sri Lanka, Bhutan and Bangladesh Growth in real output and employment have accelerated in the manufacturing

and services sector in 2000-2006.

Growth in service sector in most countries has slowed down in 2000-2006.

Growth of Output/worker decelerated across the board in 2000s

Indias output growth in manufacturing largely relied on growth of capital and, inservices, on growth in total factor productivity;

In case of Pakistan, both manufacturing and services were more dependent ongrowth in TFP (World Bank, 2009).


-1.00.01.02.03.04.05.06.07.08.09.0

Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka

19811986

1991

1996

2001

2011

Capital-Output Ratio in South Asia


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Labour productivity in industrial and services sectors vary widely

Labour productivity was higher in manufacturing and services sector higherthan in the agriculture sector.

Bangladesh has the lowest productivity in service sector

Productivity differential among countries were found to be 2.5 times higher for theindustrial sector (difference between highest and lowest was: US$17760) comparedto the services sector (US$7170)

Wide divergence in activities operates in these sectors.

Productivity of service industry was higher in five South Asian countries indicatingefficient and productive services over manufacturing sector.



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3.4 Challenges for Developing Effectives Policies for the Private Sector

South Asian countries in general have pursued pro-private sector led developmentstrategies backed by supportive policies and incentives. Major policies are: Industrial Policy, FDI Policy, Export-Import Policy,

Competition Act, and SME Policy Major incentives include

Duty waiver on import of raw materials and for export diversification Financial support for support services

Provision for recruitment of foreign workers Support for international certification Subsidized credit, minimization of tax at investment stage, special scheme for

export re-financing etc. A major thrust of various supports to private sector related to measures to

Reducing production cost through various subsidies

Providing advantages over imported products Facilitating employment generation particularly through support to SMEs Fiscal-financial support to encourage raising of productivity etc.

Some support is provided at post-establishment stage. In contrast, support at pre-establishment phase for private enterprises

particularly for SMEs has been rather limited.



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Budgetary Support for the Private Sector A large part of budgetary support is targeted to domestic market oriented SMEs

to ensure better access to capital, technological readiness, protecting their interest

against imported products. Support to private sector was associated with addressing their special needs

during times of emergency arising from internal and external shocks. Overall tax expenditures tend to vary widely across countries : Tax expenditures

in India and Pakistan account for 4.5% and 0.4% of GDP in FY2005 respectively(Itriago, 2011; Mortaza and Begum, 2006).

Competition Policy Major focus had been to contain anti-competitive practices in the form of building

monopoly, price-manipulation and cartels to enable firms to operate in a level-playing field (CUTS, 2003).

Attempts have been made to address distortions in the domestic market byputting in place national competition policy

Anti-competitive practices are common in international trade and these needs to beaddressed through multilateral efforts.

Bilateral, Regional and Multilateral Policies A number of South Asian countries which are LDCs have enjoyed preferential

market access in developed and developing countries for most of their tradable

products.

3.4 Policies Towards Competitive Private Sector


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Challenges for Ensuring Private Sector Development through Policy Support

Majority of support measures target formal enterprises only.

Most of the enterprises which operate informally are often left out.

Selection of preferential sectors is often found to be biased because of thepressure of different groups (Moazzem et al., 2012).

Poor institutional linkages often create bottlenecks for SMEs in getting theintended support.

Lack of coordination among the various involved Ministries and governments

remain a major problem. At bilateral levels often countries undertake policies particularly with a view to

support domestic industries against competition of imported products or tosupport the domestic consumers.

Non-tariff barriers are increasingly becoming an issue of concern in bilateral trade

in South Asian countries. Long certification process, limited testing facilities, lack of human resource for

fast trade facilitation at the border point, limited number of border points fortrade etc. often increase the transaction cost of export at the regional level.

3.4 Policies Towards Competitive Private Sector


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Weakness in Macro Indicators

The bottlenecks that undermine private sector competitiveness include weaknessesrelating to institutions, infrastructure, macroeconomic environment, education,skills, and training, goods market efficiency, labour market efficiency, financialmarket development, technological readiness, market size and businesssophistication and innovation

Top three constraining factors which are often referred to by entrepreneurs areinadequate infrastructure, inefficient government bureaucracy, corruption, policy

instability and government instability (Table) Key Constraining Factor at Micro Level

Businesses face a wide range of problems which start from starting the businessesand its operation (Table)

Over time significant improvements have been observed in starting a business inSouth Asian in terms of reduction of procedures, time and related costs.

For most of the activities the experience was not found to be encouraging.

Dealing with construction permit, registration, access to credit and payingtaxes and undertaking trading operations involving export-import costs.

A better advantage of easier entry into business could not be fully realisedbecause of operational difficulties faced by enterprises.


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Top-3 Major Constraints Confronting Businesses in South Asia: 2007-2011

Country

2007 2009 2011

Top 1 Top2 Top 3 Top 1 Top2 Top 3 Top 1 Top2 Top 3

Bangladesh

Corruption

Inadequate

supply of

infrastructure

Inefficient

government

bureaucracy

Inadequate

supply of

infrastructure Corruption

Inefficient

government

bureaucracy

Inadequate

supply of


Inefficient

government

bureaucracy

India

Inadequate supply

of infrastructure

Inefficient

government

bureaucracy

Restrictive

labour

regulation

Inadequate

supply of

infrastructure

Inefficient

government

bureaucracy Corruption

Inadequate

supply of


Inefficient

government

bureaucracy

Nepal

Government

instability/coups

Policy

instability

Inefficient

government

bureaucracy

Government

instability/coups

Inadequate

supply of


Government

instability/coups

Inefficient

government

bureaucracy

Policy

instability

Pakistan

Inadequate supply

of infrastructure

Inefficient

government

bureaucracy Corruption

Government

instability/coups

Policy

instability Corruption

Government

instability/coups Corruption

Policy

instability

Sri Lanka

Policy instability Inflation

Inefficient

government

bureaucracy Tax regulation

Access to

financing Tax rates Tax rates

Tax

regulation Inflation



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Country Year

Acces

s to

financ

e

Acces

s to

land

Busine

ss

licensi

ng and

permits

Corrup

tion

Cou

rts

Crime

, theft

and

disord

er

Custo

ms

and

trade

regula

tions

Electr

icity

Inadeq

uately

educat

ed

workf

orce

Labor

regul

ations

Politica

l

instabil

ity

Practic

es of

the

inform

al

sector

Tax

admi

nistra

tion

Tax

rates

Transp

ortatio

nSouth Asia 15.7 5.5 2.4 5.0 0.5 5.2 1.5 27.6 3.3 3.2 15.4 4.5 2.8 4.8 2.6

Afghanistan 2008 16.8 12.2 0.4 8.4 0.0 20.0 1.1 17.9 0.2 0.2 16.4 3.4 2.4 0.0 0.6

Bangladesh 2007 34.9 4.1 0.3 4.3 0.0 0.1 0.5 42.7 0.5 0.0 11.4 0.4 0.3 0.6 0.1

Bhutan 2009 21.7 2.8 7.3 3.5 1.8 3.7 3.3 0.6 10.5 9.7 0.2 6.5 6.9 12.6 9.1

India 2006 6.5 3.5 1.0 10.7 0.5 0.8 2.5 35.2 4.5 4.0 1.5 1.6 8.5 16.8 2.5

Sri Lanka 2011 14.1 9.8 6.4 2.0 0.5 2.1 2.7 11.4 6.4 6.6 1.0 16.0 6.1 11.9 3.1

Nepal 2009 2.5 0.5 0.0 0.3 0.0 0.0 0.4 26.5 1.6 2.6 62.1 0.3 0.6 0.3 2.4

Pakistan 2007 3.9 3.6 0.0 11.7 0.5 5.5 0.9 66.7 0.7 0.1 1.2 0.3 0.7 3.7 0.5

Source: Enterprise Survey, World Bank, Different Years (available at: http://www.enterprisesurveys.org/

Severity of Constraints according to Various Factors

http://www.enterprisesurveys.org/http://www.enterprisesurveys.org/http://www.enterprisesurveys.org/http://www.enterprisesurveys.org/http://www.enterprisesurveys.org/http://www.enterprisesurveys.org/http://www.enterprisesurveys.org/http://www.enterprisesurveys.org/


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4.1 Major Supply Chains in South Asia and Their Competitiveness Participation in the global value chain is rather limited

About 51% South Asian firms used 35% of inputs of foreign origin formanufacturing output; this is indicative their moderate linkage of the globalproduction process

Major exporters are still export more resource-based and low tech manufacturingproducts.

A considerable proportion of large firms of Bangladesh, Sri Lanka, Pakistan andIndia export a major share of their products in international markets Participation of small firms in the GVCs is rather limited

Expansion and upgradation of value chains in South Asia has contributed to risesocial upgrading related to workers rights, work place safety and security etc.

4. Supply Chains and Production Network in South Asia

8268

5236 40 36

5637

0

20

40

60

80

100 GVC participation rate


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4.1 Major Supply Chains in South Asia and Their Competitiveness

Services export in the form of remittance sent by temporary migrant workersconstitute major export of services for most of the South Asian countries

30.8% in India, 81.6% in Bangladesh, 59.3% in Pakistan and 58.3% in Sri Lanka

A number of non-traditional services are also getting into services export basketsin some countries

Computer services in case of India and Sri Lanka, profession and technicalservices in Bangladesh, Pakistan and Sri Lanka, financial services in India, sea

transport freight for India and Sri Lanka, air transport for Sri Lanka. Some non-traditional services cater to the need of manufacturing sector value

chains in the region.

Transport, logistics, banking, insurance and ICT etc.

South East Asian countries are well ahead in terms of participation in the global

value chains compared to that of South Asia. Participation rate of major countries of South East Asian region is double

compared to that of South Asian region.

South East Asias major exporters export more of mid-level and sophisticatedmanufacturing products.

4. Supply Chains and Production Network in South Asia


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4.2 Major Obstacles for Building Supply Chains in South Asia

Operational Challenge

Trade related barriers including tariffs continue to undermine intra-regionaltrade and discourage development of regional supply chains.

Large number of products continues to remain in the sensitive lists of membercountries in spite of the SAFTA Accord and these are traded at MFN tariffs.

These lists ought to be pruned in a speedy manner based on an acceptablemethodology (Moazzem, 2013).

NTBs including complicated customs procedures, problems of productstandardization, requirement of time consuming testing and expensive andpoor border trade facilitation etc.

Logistic Challenge

Poor state of trade facilitation at border points increases the lead time inregional trade and thus undermine competitiveness of producers.

A large part of intra-regional trade in South Asia is carried out through land,whilst trade with outside world is carried out mainly through waterways.

4. Supply Chains and Production Network in SA


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Infrastructural Challenge

Most of the countries have experienced improvement in physicalinfrastructural facilities over the years in terms of better road, port and air

infrastructures. Further improvements will need to be made, particularly in terms of labour

and capital productivity.

Challenges in the Business Processes

Business enabling environment in South Asia is often in a poor state in SouthAsia, specially in the weaker economies.

Cost of business start ups is still high particularly for small and medium scalesuppliers.

Complex and burdensome customs procedures have also constrained these

economies in participating more extensively in the GVCs (Bhattacharya andMoazzem, 2013).

4. Supply Chains and Production Network in SA

5 C i i f h P i S f S h A i


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5. Competitiveness of the Private Sector of Southeast Asia:

Lessons for South Asia

South East Asian economies have advanced in the backdrop of strong growth both inmanufacturing and services over the last decades

Manufacturing sector contributes the major share of value added in a number of SoutheastAsian economies including Brunei, Indonesia, Thailand and Vietnam.

Traditional services are the major sources of value added in Cambodia, Lao and Myanmar

Non-traditional services are the major sources for Malaysia, Singapore and, to some extent,in Philippines.

Manufacturing sectors share has increased over time in most of the economies except

Singapore, Timor-Leste and Philippines.

0

10

20

30

40

50

60

1990 2000 2005 2009 2010 1990 2000 2005 2009 2010

Industry Services

ASEAN

SAARC

Sectoral Value Added in GDP

5 C titi f th P i t S t f S th t A i


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Strong regional integration under the ASEAN Free Trade Area has significantlycontributed to raising intra-regional export and import.

South East Asias major services export originated from transport and travel whereasin case of South Asia major services export related to ICT (mainly India).

There is a wide prevalence of corporate practices in the operation of businesses.Unlike South Asia, a considerable share of firms is owned by foreign entrepreneurs(about 10%).

Large presence of the multinational companies (MNCs) in South East Asiacontributes to development of production networks within and outside the region

Strong regional value chains are in operation for a number sectors as intra-regionalexport of non-oil goods, manufactured goods and parts and components accountedfor over 50 per cent share of total trade

The share has increased over the past years.


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Labor Productivity of Selected South Asian and South East Asian Countries, 2005

Sources: World Bank (2009)



Labour productivity in South East Asian countries are much higher compared tothat of South Asian countries

A well-developed manufacturing sector, which is in large part export-oriented, wasable to ensure higher labour productivity both in manufacturing and service sectors.

Growth of labour productivity has experienced considerable improvement innumber of countries such as Indonesia, Malaysia and Thailand

0

10,000

20,000

30,000

40,000

50,000

60,000

Total

Industry

Services

5 C titi f th P i t S t f S th t A i


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Favourable Macroeconomic Performance

Strong performance of the private sector in South East Asia is reflected in theirsound macroeconomic indicators (De Mel and Jayaratne, 2009).

Most of the countries of Southeast Asia maintain better price stability compared tothat of South Asian countries

Average rates of inflation in most countries of South Asia is higher than those of

South East Asian countries. In general try to keep the interest of the private sector in the purview on managing

the interest rates.

Several Southeast Asian countries (such as Thailand and Malaysia) follow acoordinated exchange rate policy in order to stabilize the currency against external

shocks



5.2 Factors Behind Better Performance of South East Asian

Enterprises



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Supportive Policies for Private Sector Development in Southeast Asia

National Policies

South East Asian countries promote private sector through various kinds of

incentives and supports. These incentives have been provided to different kinds of industries.

The structure of incentives and supports in East Asia, from the point of view ofprioritisation of particular sectors and instruments used, are significantlydifferent compared to what is observed in South Asia.

Preferential support is provided targeting more on activities than on sectors In case of sectors, number of sectors which are considered for support israther limited.

Taking into account the level of development and domestic requirement,facilities are provided more to machinery industries which are more value-added and capital intensive industries.

Enterprises operate their businesses in the backdrop of a good benchmarkcondition where enhancement of efficiency is the key consideration.


Asia


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Regional Policies

Development of the private sector of Southeast Asian countries has been facilitatedthrough a number of regional policies.

Intra-regional trade has been facilitated through ASEAN Free Trade Area

It has contributed to the rise in trade in goods and parts and components etc.

Regional initiatives have been further extended to reduce NTBs by signingagreements for product certification and standardization.

Intra-regional investment has been facilitated through a number of agreements atregional level which include Agreement on the ASEAN Investment Area (AIA).

To integrate trade, investment and production-related activities within the region,it has put emphasis on three core integration schemes

ASEAN Investment Area (AIA)

ASEAN Free Trade Area (AFTA) and ASEAN Industrial Cooperation (AICO)

Such integration of investment related schemes under strong trade integrationbetween countries could facilitate greater regional integration and make theregional production networks more competitive.

5. Competitiveness of the Private Sector of Southeast Asia:Lessons for South Asia

5 Competitiveness of the Private Sector of Southeast Asia:


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Lessons for South AsiaPolicies on SMEs ASEAN Policy Blueprint for SME Development : Strategic work programme,

policy measures and indicative outputs. Mission: to develop a culture of entrepreneurship and innovation; outward

looking enterprises; collaboration and networking among SMEs within ASEAN.;enhance competitiveness by facilitating programmes; strengthen the resilience ofASEAN SMEs

Timeframe: Short term (3 years), medium (5 years) and long term ( over 5 years) Focus Programme and Activities

1) Human Resource Development and Capacity Building: Entrepreneurshipdevelopment programme, enhancing skills in management and organisationon self-reliant basis, fostering SME capabilities for inter-firm networking,tracking and benchmarking capabilities

2) Enhancing SME Marketing Capabilities: setting up regional networks,

enhancing SME capabilities in ICTs and e-commerce; tracking andbenchmarking SME readiness as sub-contractors3) Access to Financing: Capability to access to finance; financial institutions

capacity building for SME financing; deepening SME access to credit4) Access to Technology: SME technology upgrading5) Creating Conducive Policy Environment: Simplification, streamlining and

rationalisation of the procedures for SME registration

6 S ti f O i C t i t


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Suggestions Revisiting the policies targeting private sector development

Policies should support development of value chains, promoting

entrepreneurships and development of SMEs and corporate sector Policies should be developed for horizontal and vertical expansion of enterprises Policies should promote services which facilitate manufacturing activities Favourable macro-policies are required: exchange rate, inflation adjustment and

interest rate Access to credit, policy stability, less corruption, improvement of supply of

electricity and gas and other physical infrastructure Formalisation of informal enterprises in order to ensure their access to various

incentives and support Strategic trade policy could be promoted with a view to achieve the targets

Strong institutional linkages are required for implementing policies Participation of SMEs in the GVCs should be increased

Programme for entrepreneurship development with a view to develop moreSchumpeterian entrepreneurs in South Asia

FDI policies should be revisited: Put more focus on pre-establishment phase SAARC countries to open up their capital accounts on a limited scale/selective

basis for allowing investment in regional investment projects

6. Suggestions for Overcoming Constraints

6 K M d S ti f O i C t i t


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Suggestions

A major constraint for prospective regional investment is very limited knowledgeabout investment potentials in different SAARC countries.

A major area of interest of the SAARC Chamber should be to provide support todevelop an institutional framework for investment cooperation.

Taking precedence from ASEAN, effective operation of SAFTA is highlyimportant for regional value chain development

Initiatives should be taken for formulating South Asia Investment Area

Introduction of Industrial Cooperation Schemes Identification of regional value chains

Policies for upgradation of GVCs - product, process and social upgradationshould be ensured

National and global policies/measures on GVCs should be revisited

Corporate structure in South Asia should be strengthened with incentives forcorporatisation of firms.

Corporate sector should follow market principles, basic code of conduct, businessethics and corporate social responsibility.

Major chamber bodies of South Asia have an important role to play in this

transformative venture.

6. Key Messages and Suggestions for Overcoming Constraints


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Thank you.

6th SAES - Presentation by Golam Moazzem (CPD, Bangladesh) on Development of the Private Sector in...

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