A Comparative Study on Clusters and non-Clusters Based SME Development in Bangladesh

In Bangladesh, there are nearly 7.9 million SMEs including micro enterprises contributing to Gross Domestic Product (GDP) at an estimated 25% (Asian Development Bank (ADB) 2015) . SMEs account for 11% of the country’s industrial establishments, 30% of industrial employment and 40% of the manufacturing output (Economic Census 2013). While SMEs have been considered as one of the few sectors that will drive the economy to a higher growth trajectory without compromising the perverse distributional impact, these sectors are still not competitive domestically and globally in Bangladesh. The government of Bangladesh (GoB) has put forward several strategies for the development of SME sector and these include identification of areas of comparative advantage, creating an enabling environment for private investment, hassle-free indirect tax system, easier access to imported inputs, greater access to financing facilities, and cluster-based SME development. Along with the GoB, the United Nations Industrial Development Organization (UNIDO) is also working for cluster development in Bangladesh. UNIDO is the specialized agency of the United Nations that promotes industrial development for poverty reduction, inclusive globalization, and environmental sustainability. “The cluster/network development programme is one of the SME programmes managed within the Private Sector Development Branch of UNIDO”.  Following the spirit of the 7th FYP of the government and UNIDO’s effort to develop an efficient and productive SME sector, the SME Foundation, the apex body for the development of the SME sector in Bangladesh, is going to conduct a study on the comparative performance of the cluster-based SMEs vis-a-vis non-clustered SMEs. This study is expected to provide important insight on how clustered SMEs are different from non-clustered ones and the rationale for differential treatments highlighted in 7th FYP.