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Bangladesh Small and Cottage Industries Corporation () (BSCIC)

provides a package of services to private sector entrepreneurs in Bangladesh in the


small and cottage industries sector. It was created through an Act of Parliament in
1957 which was later amended in 1992.BSCIC has country-wide institution network
to provide door step services for entrepreneurs.Head Office of BSCIC located at 137138,Motijheel, Dhaka, Bangladesh.Details of BSCIC can be known from its
website:http://www.bscic.gov.bd
BANGLADESH

SMALL

COTTAGE

INDUSTRIES

CORPORATION

(BSCIC)

BSCIC was created through an Act of Parliament in 1957 which was later amended in 1992. It
provides a package of services to private sector entrepreneurs in the small and cottage industries
sector. Small industries are defined as those engaged in manufacturing or processing or service
activities whose total fixed investment is limited to Tk. 30 million (US$ 0.75 million), while cottage
industries are those engaged in manufacturing or servicing and generally run by family members
with a total investment limited to Tk. 0.5 million (US$ 12500) only.
BSCIC also provides assistance in all other matters relating to development and expansion of
small and cottage industries (SCI). Its major functions are as follows - Promotion and registration
of small and cottage industries Conducting advisory and industrial promotion services including
training of entrepreneurs, skill development of artisans and craftsmen, creation of jobs for SCIs
etc.
Bangladesh Export Processing Zones Authority (BEPZA) : The Bangladesh Export Processing
Zones Authority (BEPZA) was established to set up and operate export processing zones (free
zones) in Bangladesh under the Bangladesh Export Processing 7,ones Authority Act, 1980. To
begin with, it was decided that the country would have 3 export processing zones in phases, one
each in the port cities of Chittagong and Khulna and one air transportation based zone near the
Zia International Airport at Dhaka. BEPZA develops and services special areas where potential
investors would find a congenial investment climate free from procedural complications.
The policy making body of the Bangladesh Export Processing Zones Authority (BEPZA)) is its
Board of Governors chaired by Head of the Government. The Board consists of Ministers and
Secretaries of several relevant MinistrieslDivisions. Any decision taken by the Board of Governors
is deemed to be the decision of the government. For carrying out the day to day functions
including implementation of the Boards decisions, there is an Executive Board of BEPZA
consisting of an Executive Chairman and 3 members.
The Chittagong Export Processing Zone (CEPZ) established in 1983, has till June 1994 sanctioned
85 industries with a proposed investment of US$146 million of which 66 are wholly foreign owned
or joint ventures and the remaining 19 are owned by domestic entrepreneurs. 52 industries are
already in operation with an investment of US$ 105 million.
The Dhaka Export Processing Zone (DEPZ), created in 1993, has till the middle of 1994 sanctioned
17 industries with a proposed investment of US$ 53 million of which 13 are wholly foreign owned
or are joint ventures and 4 are owned by domestic entrepreneurs. 5 units with an investment of
US$ 0.5 million, are already in operation.
Total exports from BEPZA industries stood at US$ 76.6 million in 1991-92 and US$127.6 million in
1992-93.

Definition

Small Industry (Manufacturing): Small Industry means an industry in which


the value/replacement cost of durable resources other than land and factory
buildings is in between (.05 to 15 million) taka and employment generation is
not more than 50 persons.

Cottage Industry (Manufacturing): Cottage Industry means family an industry


in which members are engaged part-time or full-time in production and
service-oriented activities.

Medium Industry (Manufacturing): Medium Industry means an industry in


which the value/replacement cost of durable resources other than land and
factory buildings is between 15 million and 200 million taka and employment
generation is not more than 150 persons .[2]

Functions

BSCIC provides medium and long term loans to small industries, either directly, or through
consortium of commercial banks. BSCIC also provides assistance in all other matters relating to
development and expansion of small and cottage industries (SCI). The Bangladesh Small and
Cottage Industry Corporation (BSCIC) is the official body which monitors the development of
self-employment, cottage industries and small enterprises. It produces statistics on the types of
enterprises, their activities and the number of people employed.[3]
Its major functions are:[1]

Promotion and registration of small and cottage industries

Conducting advisory and industrial promotion services including training of


entrepreneurs

Skill development for artisans and craftsmen

Creation of jobs for SCIs

Construction and development


infrastructural facilities for SCI

Development of linkages between SCIs and large and medium sized


industries.

Online Service for registration of Industry, Application for Industrial plots,


Application for Training facilities will be provide very soon.

of

industrial

estates

with

necessary

Current status

BSCIC has developed a total of 74 industrial estates throughout the country to foster the growth
of SCIs in a balanced manner and also construction works for good number of estates including

special type like Tannery, API (Active Pharmaceutical Ingredients) and Garments Park are under
execution

Incentives and Facilities for Private Investment :


General Incentives for both Foreign and Local Investors :
Tax Holiday : Tax holiday is allowed to industries subject to the relevant rules and procedures set
by the National Board of Revenue (NBR). Presently, it is allowed for 5, 7, 9 and 12 years for
industries set up in the developed, less developed, least developed and special economic zones
respectively. The period of such tax holiday is calculated from the month of commencement of
commercial production. The eligibility of tax holiday is to be determined by the NBR and the
commencement of production is certified by the respective sponsoring agencies.
Accelerated Depreciation : Accelerated depreciation in lieu of tax holiday is allowed at the rate of
80 percent of actual cost of machinery or plant from the year the unit starts commercial
production and 20 percent for the following year, if the industry is located in the developed area. If
the unit is set up in a less developed area, the rate of depreciation is 100 percent.
Concessionary Duty Imported Capital Machinery : Import duty at the rate of 7.5 percent ad
valorem is payable on capital machinery and spares imported for initial installation or for
BMR/BMRE of existing industries. The value of spare parts should not, however, exceed 10
percent of the value of the machinery. Out of this 7.5 percent rate of duty payable. Export-oriented
industries and industries located in the under-developed areas, may enjoy a further concession of
the import duty in the following manner For 100 percent export-oriented : No import duty or any
other tax is payable industries
Export-oriented industries in : Effective rate of duty 5 percent (Industries developed areas
exporting minimum 70 percent of the total annual production may submit a bank guarantee to the
customs authority for 33.33 percent of the total import duty payable at the rate of 7.5 percent ad
valorem. This bank guarantee will be returned after installation of the machinery and fulfilling the
conditions of export. In this case effective rate of import duty payable is 5 percent ad valorem).
Other industries
in developed : Effective
rate
of duty 7.5 percent areas
Export-oriented industries : Effective rate of duty 2.5 percent (Export outside developed areas
oriented industries, as mentioned above, located in under-developed areas may also submit a
bank guarantee to the customs authority for 33.33 percent of the total import duty. In addition to
this they may submit another bank guarantee for 33.33 percent of the total import duty payable at
the rate of 7.5 percent ad valorem for being located in an under-developed area. These bank
guarantees (33.33 percent plus 33.33 percent) will be returned after installation of the machinery
and fulfilling the condition of export. In this case effective rate of import duty payable is 2.5
percent.
Other industries outside : Effective rate of duty 5 percent (all other developed areas industries
located in under developed areas other than export-oriented, may submit a bank guarantee to the
customs authority for 33.33 percent of the total import duty payable at the rate of 7.5 percent ad
valorem. This bank guarantee will also be returned after installation of the machinery. In this case,
the effective rate of import duty is 5 percent ad valorem).
Value Added Tax (VAT) is not payable for imported capital machinery and spares. Tariff
Rationalization : Products of local industries are protected through tariff rationalization, keeping
in view the interest of entrepreneurs and consumers. Tariff protection is allowed upto 4 years to
the new industries. There is Tariff Commission to prescribe protective rate where necessary.
Incentives to Non-Resident Bangladeshis : Special incentives are provided to encourage non-

resident Bangladeshis for investment in industries. Non-resident Bangladeshi investors will enjoy
facilities similar to those of foreign investors. Moreover, they can buy newly issued
shares/debentures of Bangladeshi companies. Furthermore, they can maintain Non-resident
Foreign Currency Deposit (NFCD) account for upto 5 years.
Rationalization of Import Duty : Duties and taxes on import of goods which are produced locally
will be higher than those applicable to import of raw materials for producing such goods
Other Incentives :
- Exemption of tax on interest of foreign loans ;
- Exemption of tax on royalty, technical know-how and technical assistance fees, etc ;
- Liberal investment allowance for tax assessment ;
- Import of machinery under supplier's credit or pay-as-you-earn (PAYE) scheme on approved
terms
- Availability of long term credit facilities on liberal debt-equity ratio from industrial financing
institutions (development finance institutions, nationalized commercial banks and private
commercial banks) ;
- Income tax exemption of foreign technicians employed in approved industries for a period of 3
years ;
- Remittance of 50 percent of the salary of foreign nationals employed in approved industries ;
- Remittance of savings from earnings, retirement benefits and personal assets of individuals on
retirement/termination of services ;
and
- Remittance of approved royalties, technical know-how and technical assistance fees.

Vision
To be the leading Organisation in Developing Small, Medium & Cottage Industries that
contribute to the economic growth and to create vibrant and resilient SMCIs that enhance
Bangladesh is competitiveness in the world market. To transform SMCIs into an economic
powerhouse of the country by 2025.
Mission
To materialize the vision following mission may be followed :
i)
ii)
iii)

Providing latest technical and managerial assistance to enterprises and communities


for the improvement of productivity, quality and environment
.Promoting strategic alliance with clients as well as national and international
professional bodies in pursuit of economic development.
Molding a work place that encourages creativity, innovation, professional growth and
positive value.

iv)
v)
vi)

To instill and eventually ingrain deeply the concept of learning organisation into
SMCIs and encourage them to be export-oriented.
Sharing the rewards of own endeavors with our communities, customers, employees,
suppliers, management and our stakeholders.

Goal
a. To assist private entrepreneurs for establishing new Small, Medium & Cottage Industries
(SMCIs) unit.
i) Total

: 0.409 million unit

ii) Small Industry

: 0.086 million unit

iii) Medium

: 0.008 million unit

iv) Cottage Industry

: 0.315 million unit

b. To create labour force employment facilities through new Small, Medium & Cottage
Industries (SMCIs).
i) Total

: 3.06 million

ii) Small Industry Sector

: 1.54 million

iii) Medium

: 0.52 million

iv) Cottage Industry Sector

: 1 million

v) Percentage of new labour force employment


: 3.80%
(Total L/F 2005-2025, will raise 59-80 million)
vi) Percentage of total labour force employment

: 8.28% (6.63 million)

c.
Contribution
to
GDP
:
30%
(Tk.1050
billion
)
(To raise GDP in Small, Medium & Cottage Industries sector from 5% to 30%)
d. To raise daily income of employed poor labour force people in SMCIs sector from 1 US$ to 3
US$ through poverty alleviation programme/projects undertaken by BSCIC and through private
sector investment.
Cumulative Small, Medium & Cottage Industry unit and employment will reach by 2025
(figure in million).
Category of Industry Unit

Employment

Small

0.171 2.915

Medium

0.013 0.863

Cottage

0.904 2.852

Total

1.088 6.630

Role for development of SME:


The BSCIC functionaries are deliberated up on the organizational objectives having rellevance to
the BSCIC charter (Act xvii of 1957) and subsequent jobs assigned to the BSCIC. The objectives
and key results areas have been identified and described below:

Objectives

Key result areas

1. TO
ENSURE a. Promoting the establishment of industrial units, with priority for
ACCELERATED GROWTH agro-support, agro-processing, import substitution and export
OF THE SMALL, MEDIUM oriented enterpriese utilizing indigenous raw materials.
AND
COTTAGE
INDUSTRIES
IN
BANGLADESH
(CREATION
OF
NEW
CAPACITY)

b. Promoting establishment of small, medium industry through


ancillary units and sub-contracting arrangements.

c. Promoting area/regional development through establishment of


small scale industries on the basis of locally available raw material,
skills and growth potential as per district development plans.

d. Providing information to target people on industrial investment


opportunities through mass media (including Radio, Television and
News Papers) and publications.

2. TO
INCREASE a. Assisting existing enterpriese to operate at optimum capacity.
PRODUCTIVITY OF THE
EXISTING
SMALL,
MEDIUM AND COTTAGE
INDUSTRIAL UNITS IN

BANGLADESH
(RESOURCE
MAXIMIZATION
OF
EXISTING CAPACITY)

b. Providing counselling and extension service including in-plantadvisory services, group services and training programmes on
technical quality control, marketing and financial management
exports.

c. Supplying statistical information and operational data for inter-firm


comparison on productivity.

3. TO ENSURE OPTIMUM a. Providing advisory services to the enterpreneurs for proper


UTILIZATION
OF utilization of financial resources of their industrial units.
FINANCIAL RESOURCE

b. Proper financial analysis and pre-investment feasibility for proper


utilization of loan and equity financing resources.

c. Ensuring timely loan recovery for further investment.

4. TO
PROVIDE a. Setting up the infrastructure such as Industrial Estates and Common
INFRASTRUC-TURAL
Facility Centres, Design Centre etc.and ensure their optimum
FACILITIES
utilisation required by the industrial units.

b. Maintaining efficiently the facilities such as electricity, gas, water,


roads etc. for uninterrupted production of the units set up in the
Industrial Estates.

5. TO
CREATE
AND a. Assisting in the creation of market (local and foreign) through
DEVELOP MARKETING appropriate sales promotion measures.
FACILITIES INCLUDING
MARKET INFOR-MATION
FOR
PRODUCTS
OF

SMALL, MEDIUM AND


COTTAGE INDUSTRIES

b. Providing assistance and advisory services to small enterprises for


maintaining quality product by fixing appropriate standard.

6. TO INNOVATE PRODUCT a. Collecting and disseminating information on new and appropriate


PROCESS
AND technology for the sector as a whole.
TECHNOLOGY

b. Promoting research work for the development of product, process


and technology.

c. Making and supplying designs and prototypes for the cottage


industry sub-sector.

d. Designing and supplying prototype of product, machinery,


equipment and tool for small industries.

7. TO
ENSURE a. Developing knowledge and skills of artisan/ crafts, technicians and
DEVELOPMENT
OF managers through training.
SKILLS

b. Designing,
developing
and
conducting
entreprenuership
development programme for small and cottage industries.

8. TO
HELP
ECONOMIC
DEVELOPMENT

SOCIO- a. Promotion of pilot projects in association with private entreprenuers


in areas or fields of national interest where private investment is shy
and hand them over at an appropriate private time.

b. Creating linkage with Youth Welfare, Women affairs, Social Welfare


and other organisation engaged in the promotion of income
generating activities, with the aim of achieving integrated rural

development.

c. Assisting and advising in the promotion of industrial homes


adjacent to industrial areas for the Welfare of family members of
industrial workers.

d. Generating income among disadvantaged target people and in


geographically under-developed areas by setting up cottage
industries.

In the light of globalization, BSCIC refix its objectives in the following manner :
i) To create a healthy business environment that promotes and supports the establishment and
growth of SMCIs.
ii) To nurture high growth, resilient, innovative SMCIs that adopt best business practices.
iii) To enhance the technological, managerial, marketing, financial and entrepreneurial
capabilities of SMCIs to become globally competitive.
iv) To encourage enterprises and entrepreneurs to harness technology and knowledge in
developing high value-added products and services and moving up the value chain.
v) To facilitate and assist SMCIs to gain access to market by forming linkages and business
opportunities network, both locally and internationally.
vi) To foster the formation of a competitive and vibrant supply base to attract FDIs into the
country.

Strategy
Strategy 1: Upgrade technological and management capabilities of SMCIs.
Develop an enterprise diagnosis system as a tool for the promotion of SMCIs.
Enhance consultancy system for business improvement and problem solving.
Support the adoption of modem facilities and management systems such
as ISO 9000 and TQM. Support the efforts of companies to improve their product quality.
Improve the efficiency of R&D institutes and facilitate their networking with private
companies.

Strategy
2:
Develop
SMCIs.
entrepreneurs
and
human
resources
Foster
new
entrepreneurs
and
incubate
existing
entrepreneurs.
Enhance
the
efficiency
and
flexibility
of
training
services.
Improve the efficiency and coverage of industrial skill standards and certification systems.
Improve educational curriculum and teaching methods to meet industry needs.
Strategy 3: Enhance SMCIs access to markets
Improve
SMCIs
access
to
government
procurement
systems.
Promote subcontracting and linkages with large enterprises. both domestically and
internationally.
Strengthen
the
export
promotion
activities
of
SMCIs
Promote
cross-border
trade
and
linkages
with
trading
companies.
Strategy 4: Strengthen financial support system for SMCIs
Expand
and
develop
credit
guarantee
system
Establish
venture
capital
funds
for
the
development
Establish
SMCIs
Promotion
Strengthen financial advisory services for' SMCIs

for'
SMCIs
to
SMCIs
Fund.

Strategy 5: Foster an environment conducive for business development


Establish
and
strengthen
local
information
center
for
SMCIs
Develop
mechanism
to
review
and
revise
laws,
regulations
and
administration
procedures
to
redress
problems
facing
SMCIs
Strengthen support to equip SMCIs to prepare for the IT revolution.
Improve
the
efficiency
of
various
distribution
channels.
Strengthen the planning capabilities and services of regional and local authorities
and
organizations.
Promote
the
establishment
of
SMCIs
parks.
Strategy 6: Develop micro-enterprises and community enterprises
Incubate
"strategic"
micro-enterprises
and
community
Promote
commercialization
of
indigenous
Upgrade the managerial capabilities of micro-enterprises and community
Encourage the formation of business associations among these
Strategy

7:

Develop

networking

among

SMCIs

and

enterprises.
know-how.
enterprises.
enterprises.
clusters

Conduct studies of various industrial clusters to promote their efficiency collectively.


Support pilot projects to develop industrial cluster(s) in each region.
Encourage the formation of business associations to serve as platforms of fostering
cooperation among members.
Provide infrastructural support and financial incentives to promote the development SMCIs

Key Issues and challenges

The following are key issues and challenges faced by SMCIs.

Liberalization and Global competition

Multilateral and regional trade and investment liberalization policies have made markets more
accessible and competition more intense among local producers. It is becoming increasingly
imperative to be internationally competitive in order to function effectively even in domestic
markets. In a dynamic environment market by fast technological changes, achieving and retaining
competitive edge is a necessity and a challenge. Many SMCIs could be efficient exporters if they
were properly motivated and assisted in acquiring the necessary skills supported by a strong
infrastructure and given the right advice and assistance.

New Emerging Technologies.

Most SMCIs donot see the importance of ICT applications in their daily operations. They do not
realize that emerging technologies and advances in ICT have contributed to productivity growth
and economic competitiveness. The increasing use of ICT in business is making it possible for
large companies to secure multiple suppliers. These suppliers have to meet the requisite product
quality, cost and speedy delivery with in a compressed time frame with competitiveness being
increasingly determined by leading edge technologies, it is crucial that SMCIs rapidly develop
their capacity to adopt and adapt technologies that are appropriate to their industries.

Skill Development.

Most SMCIs are labour intensive. Skills upgrading and knowledge acquisition, which are all
critical to long term competitiveness. SMCIs have a negative attitude towards investment in
training. They fear losing well trained staff to other companies and their investment. There is a
need to change this perception and mindset and to inculcate a training culture among SMCIs. The
in sufficient supply of skilled and knowledgeable workforce impedes output expansion. Therefore,
the ultimate objective is to produce skilled and knowledgeable workers for SMCIs to be

competitive in quality price and delivery.

Finance.

The most cited problem confronting SMCIs is the inadequacy of finance. A key reason is SMCIs
are seen as high-risk by the average banker, SMCIs traditionally finance their operations through
own savings, loan from families and friends, as well as supplier credits. New start-ups face
difficulties in securing credit, as they have little collateral and no track record. In addition, their is
the problem of long processing time for loan application, while their shoud be a balance between
meeting the needs of SMCIs and prudent banking practices. The solution still lies in improving
access to institutional credit for SMCIs. This is a critical factor because a loan delayed is vartually
a loan denied.

Information.

The ability to seek and apply information in business operations will help SMCIs to be efficient in
the new business environment. As knowledge is pivotal in modern manufacturing, SMCIs need to
acquire critical knowledge and skill to mermain competitive. Technology and knowledge
investments have provided significant competitive edge to companies especially in design, product
research, process, innovation and management information system, SMCIS thus, need a referal
centre to which they can turn for information and advice on the various areas concerning their
operations.

SMCIs need the following policy support

Ensure flows of public expenditure (research, extension, training and market promotion)

Stimulate private investment through proper guidance and pre-investment counseling.

Rationalize tax structure (by raising ceiling of exemption limits as regards taxation and by
lowering the VAT rates )

Provide marketing assistance

Stimulate sub-contracting activities (support for ancillary activities and producers of spares
and machinery need to be ensured in light of GOBs sub-contracting policy, including through
procurement and purchase policy of the government).

Design a credit guarantee scheme for agro-based small-scale entrepreneurs who do not have
the necessary collateral.

Create a database for the small and medium scale industries

Channel funds to the small entrepreneurs without collateral through innovative banking.

Increase of the limit of collateral free loan and keep interest rate low 10%.

Formation of cluster village

Establish a training and design centre.

Ensure more collaboration/partnership among the organization/agencies.