Cottage, micro, small, and medium enterprises (CMSMEs) are hit hard by the Covid-19 pandemic. For CMSMEs to survive the Covid-19 fallout, the government should reduce VAT from 15% to 5% for the sector in the upcoming national budget, said Mirza Nurul Ghani Shovon, president of the National Association of Small Cottage Industries of Bangladesh (NASCIB) in an interview with Dhaka Tribune's Ibrahim Hossain Ovi.
What kind of budgetary support do CMSMEs need amid the coronavirus fallout?
The countrywide shutdown due to the coronavirus pandemic has put CMSMEs in a sorry state, jeopardizing the employment of tens of thousands of people. Value added tax (VAT) is now a great burden, especially for small entrepreneurs who have financially suffered the wrath of coronavirus.
In this situation, we are urging the government to bring down VAT for the sector from 15% to 5% in the budget for fiscal year 2020-21 to help entrepreneurs. This should continue for at least two years.
SME contribution to GDP is about 25%, and 40% of the country’s employment is in this sector. According to Bangladesh Bureau of Statistics (BBS), 7.8 million SMEs employ 24.5 million people.
What kind of policy support should be there for SMEs in the budget for FY21?
In the next fiscal, the government should increase import duty on goods which are already produced locally, in order to help local industries. This will increase demand for domestic goods and help the sector survive.
The government announced the light engineering sector as the product of the year for 2020. To support the sector, the government budget should free the sector from VAT and other duties to let it grow.
Likewise, so the sector can develop further, import duties on light engineering goods and spare parts should be increased since local manufacturers are making quality products.
Access to finance is a big challenge for SMEs. What can be done in the budget to resolve it?
Prime Minister Sheikh Hasina announced a financial package of Tk20,000 crore to introduce low-interest working capital for CMSMEs, which will be disbursed through the banking system. This is a good initiative and we are grateful to her.
However, for existing SMEs, we urge the government to create a fund with money allocated in the budget at low interest rates for at least three years. From that fund, both new and existing SME entrepreneurs could manage to get working capital.
In addition, the government should keep allocation for human resource development and entrepreneur capacity building through training.