Comparative Analysis of SME Policy: The Takeaway for Bangladesh

Small and Medium Enterprises has been in attention of researchers for their potential in accelerating economic growth. Hence, SME policy is vital in ensuring the economic development of any country. Comparing the SME policy in different parts of the world can shed light on issues related to SME development. Bangladesh is trying to emphasize on SME growth and enhancement. Therefore this study aims to compare different SME policies and uncover the areas where Bangladesh needs improvement.


Introduction
One long lasting debate in global development concerns the role played by SMEs in economic development. The economic impact by SMEs across the globe can be represented in terms of employment creation, Gross Domestic Product contribution, export earnings and the output (sales volume) generation. The popular misconception that developed economies are dominated by huge corporations is proved incorrect as 99 percent of all independent enterprises in USA dominate the market, accounting for 52 percent of all workers (U.S. Small Business Administration (SBA)). According to the United States Department of State, "some 19.6 million Americans work for companies employing fewer than 20 workers, 18.4 million work for firms employing between 20 and 99 workers, and 14.6 million work for firms with 100 to 499 workers; by contrast, 47.7 million Americans work for firms with 500 or more employees." Small and medium-sized enterprises (SMEs) represent 99% of all businesses in the European Union(EU). In the past five years, they have created around 85% of new jobs and provided twothirds of the total private sector employment in the EU. The total number of SMEs in Bangladesh is estimated to be 79,00,000 establishments. Of them, 93.6 percent are small and 6.4 percent are medium. The country's SME sector has created 15 lakh jobs between 2009 and June 2014. Therefore, this study is based on a comparative analysis of policies of North America, European Union and Bangladesh's SMEs.

Objectives
The research study's main aim was to compare the policies taken for SMEs in USA, EU and Bangladesh.

Justification of the study
Bangladesh is operating in different policy environment than those in USA and EU. A comparative analysis can shed light on the areas where Bangladesh needs improvement.

Literature Review
Small and medium-sized entities (SMEs) play important roles in economic growth and sustainable development of every nation, (Moore et al., 2008). The growth of SMEs is a critical ingredient in the sustainable development of developing economies (Mudavanhu et al., 2011). According to Storey and Westhead (1994), SMEs are regarded as the seed-bed for the development of large companies and are the life blood of commerce and industry at large. SMEs have been identified as sources of innovation and business evolution (Wynarczyk et al., 1993). Globally, Small to medium enterprises are being hailed for their pivotal role in promoting grassroots economic growth and equitable sustainable development (Munyanyiwa, 2009). Literature noted that in the USA and EU countries it is estimated that SMEs contribute 40-60 percent to Gross Domestic Product and 30 to 60 percent in exports. It is also highlighted that Asian Tigers such as India, Indonesia, China, Malaysia, Japan and South Korea also have thriving SME sectors contributing between 70 to 90 percent in employment and an estimated of over 40 percent contribution in their respective GDPs (SBC,2015). Whilst in African power houses such as South Africa, Egypt, Nigeria and Kenya, the SME sector is estimated to contribute over 70 percent in employment, and 30 to 40 percent contribution to GDP (Munyanyiwa 2009). SMEs are confronted by a number of opportunities and challenges. Some of these opportunities and challenges are caused by the SMEs themselves, some are caused by the corporate world while others are caused by government policies and legislation. Of importance in this study are the opportunities and challenges that relate to government policies, legislation and actions. The government, through its policies and legislation acts as both a barrier and a facilitator of the establishment and development of SMEs.

Definition of SME in different context
Small Medium Enterprises has been defined and used differently in various contexts. Definitions vary between industries, countries and even between studies (Davidson, 1989 Govt. of Canada, Bangladesh Bank However the different variables that are widely used include the number of employees, the capital base, annual sales, fixed assets employed, level of turnover, type of business, and some combination of these. It may also vary from industry to industry (as it does in the U.S.). Because of SME contribution to the economy and greater difficulty in obtaining financing, SMEs are often given incentives and more favorable tax treatment. Governments may use a range of policies to encourage the growth of SMEs.

Policy Analysis
The "Small Business Act" for Europe (SBA), adopted in June 2008, has served as the framework for guiding SME policy-making, based on a set of voluntary policy recommendations centred on the following 10 principles: Entrepreneurship; 'Second chance'; 'Think small first'; 'Responsive administration'; State aid & public procurement; Access to finance; Single Market; Skills & Innovation; Environment; and Internationalisation. The overall objective of the SBA is to reduce administrative burdens, foster entrepreneurship, improve access to finance and markets, and overall, to improve the conditions for SMEs to develop and grow. It is a European Commission initiative to further strengthen SMEs' sustainable growth and competitiveness. SBA is a set of 10 principles to guide the conception and implementation of policies both at EU and Member State level to bring added value at EU level, create a level playing field for SMEs and improve the legal and administrative environment throughout the EU.

The Takeaways for Bangladesh
We take the 10 policy dimensions of European Commission as the benchmark to evaluate the strategies taken to promote SMEs in other locations. We can find that Bangladesh has missing policy in the following four dimensions:  Bankruptcy and second chance for SMEs  Operational environment for SMEs  SMEs in a green economy  Internationalisation of SME Of the above mentioned four, the last two policy areas can play a vital role in the SME development in Bangladesh. SMEs in a green economy means achieving economic growth without forfeiting the well-being environment.
Also, the internationalization of SMEs is very crucial as the SME performance depends on export capacity and hence contribution to economy.

Conclusion
Bangladesh is thriving to accelerate the economic growth by promoting its SMEs. A good starting point could be comparing the SME policies with those in developed economies. In this way it would be easier to identify the policy areas ignored in the policy design for SME development in Bangladesh.