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Foreword -
Dhaka: 27th July 2008

1. The small and medium scale enterprises (SME) play dominant role in industrial development: they account for 90% of firms in East and South Asia and provide employment of 75% of industrial workforce. In Bangladesh too, most enterprises are SMEs: they are usually laborintensive industries with relatively low capital intensity; they have a natural comparative advantage in a labor abundant -capital shortage environment. The sheer preponderance of SMEs, and the factor intensity suggests that industrialization of Bangladesh is inextricably linked to the success of SMEs. A large part of rising share of manufacturing sector in GDP attributable to small scale industries.

2. The lack of coordinated vision undermines linkages between SME sector and rest of the economy. Inadequate policy and regulatory framework retards development of SME. Management problems at the level of individual entrepreneurs and support programs exert deleterious impact. Lack of appropriate support institutions and service centers in the era of globalization also deter SMEs development. SMEs are vulnerable with regard to their requirements for working capital.

3. SMEs suffer from many constraints and weakness at various levels: Inaccessibility to financial resources due to rigidity in banking system; problems of quality and standard and lack of material testing facilities; lack of quality material; lack of appropriate production facilities and lower level technology; unskilled labor forces; and inadequate human development infrastructure. '

4. Access to market is the most crucial development impediment of the SMEs. Lack of knowledge about marketing technique, market segmentation, and access to market in the face of globalization are real obstacles to the sustainable growth of SMEs.

5. To ensure enabling environment for the development of SMEs, the following may be suggested: fiscal concession, lower rate of the bank interest, credit guarantee scheme (credit without adequate collateral), soft loan window in banks, proactive role of BSCIC in sanctioning loan, encouraging banks to extend small loan, funding support from multilateral agencies, start-up costs from National Budget.

(it The accompanying study by Mt. M .S. Siddiqui provides an analysis in to various high-utility dimensions pertaining to the "industrial sickness“ of SMEs. The author's treatment of the subject is logically well-knitted starting from definition of SME (section 2.2) to an analysis of the trust sector (chapter-3). Then the author provided a good analysis of industrial sickness including the possible reasons for such sickness using a diagnostic approach involving symptoms and factors (both internal and external ) associated with SMEs sickness, The test of hypotheses presented in the study is interestingboth in terms of theoretical construct and practical utility. The recommendations forwarded towards rehabilitation of sick industries in both Bangladesh and India should of high interest to the relevant policy makers. The experience of both China and Japan towards changing pertinent laws to address sick industries should also be treated as positive learning issues. The classification of defaulters and ways to handle them are interesting in their own rights. Finally the review of Banking Ombudsmanship including the relevant recommendations is well-structured.

Abul Barkat, Ph.D.
Economics Department,
University of Dhaka.