Big slice of public purchase pie proposed for SMEs

The industries ministry has proposed setting aside a 25% quota for small medium enterprises (SME) in public purchase – in an effort to help entrepreneurs enhance their capacity, expand business and marketing facilities.

The ministry has sent a letter to the planning ministry, requesting it to amend the government's Public Procurement Rules 2008 (PPR) to this end.  

Presently there is hardly any opportunity to get products or services from small ventures in public procurement with no special provision for doing so in the existing rules. 

The SME Policy – announced by the government in 2019 – calls for making it obligatory for government organisations to procure a certain amount of goods or services from SMEs.

In the light of this, the industries ministry wrote to the secretary of the Implementation Monitoring and Evaluation Division (IMED) of the planning ministry in October to amend the PPR to procure at least 25% of goods and services from SMEs during a government purchase.

The letter from the ministry said if SME products and services get the quota in government procurement, its financial value will stand at Tk33,600 crore.

The industries ministry thinks that the SME quota in government purchase will play a big role in increasing the capacity of SME entrepreneurs and expanding the market for their products. Many more enterprises will be set up in the country, creating huge employment opportunities.

Earlier, the SME Foundation sent a letter to the industries ministry to include SME products and services in government procurement.

According to SME Foundation's 2019 data, the number of SMEs in the country is about 78 lakh and their contribution to Gross Domestic Product (GDP) now stands at 25%. A target has been set in the SME policy to make it 32% by 2024.

Shafiqul Islam, managing director of the SME Foundation, told The Business Standard that the quota will benefit entrepreneurs, protect local industries and expand markets for their products. The most positive impact will be on employment.

He thinks that entrepreneurs will also focus more on ensuring quality of their products and services.

Md Sohel Rahman Chowdhury, director general (additional secretary) to the IMED's Central Procurement Technical Unit (CPTU), told TBS, "We are contemplating giving importance to SMEs, women entrepreneurs and start-ups in public procurement. For this, we have a plan to amend necessary regulations." 

Secretary to the industries ministry KM Ali Azam said he was aware of the matter. 

Ferdousi Begum, joint secretary (SME and BITAC) to the same ministry, said, "In the first week of this month, we have written to the IMED to amend the PPR 2008."

Many countries around the world have such quotas in government procurement to support SMEs. According to the SME Foundation, the ratio is 25% in India and 30% in China.

Lauding the government's initiative to keep a quota for SMEs in public purchase, Mirza Nurul Gani Shovon, President of National Association of Small and Cottage Industries of Bangladesh (NASCIB), said, "We have long been demanding for this facility. Many countries in the world, including neighbouring India, have specific quotas for SMEs in government procurement."

He said, "If the quota is specified in the law, the capacity of SMEs to provide quality products and services will be created automatically."

Citing a survey by the Bangladesh Institute of Development Studies (Bids), the industries ministry, in the letter sent to the IMED, said SMEs suffered a loss of Tk92,000 crore just in the two months of the Covid-led country shutdown. 

In this situation, it is necessary to expand the market for the SME sector to help it survive, the letter argued.