ABSTRACT The problem of industries becoming sick, both in public and private sectors, has turned to be alarming in Bangladesh

in recent years. Although the causes for closure or divestment might be many but in most of the cases continued loss played a major role. Thus the problem of industries becoming sick deserves to be treated more seriously at Government policy level as it is related to the national economy and development. Every industry can be seen as a system, which operates amongst many external and internal factors. Various combinations of external and internal factors are responsible for industries to become sick. But these too vary from country to country, economy-to-economy, etc. Definitely, causes for industries becoming sick shall not be similar in under-developed, developing and developed countries. In this paper an attempt has been made to identify the causes of industrial sickness in Bangladesh and discuss the problems and prospects of SMEs sectors. Keywords: Sick Industry, causes of sick industry, SMEs.

INTRODUCTION Sickness in the industrial units is not a new phenomenon as is evident in the developing countries. Even in the industrially advanced countries of the world, varying degrees of sickness are found to occur. An industrial unit may face a number of odds during its implementation and operation stage because of a number of factors in the environment internal and external. If the problems perpetuate & does not permit the unit to pursue the normal course of operations leading to reasonable utilization of capacity, generation of surplus, debt servicing, etc, it can be presumed that some kind of sickness has engulfed the unit and if this trend grows unchecked, it would adversely affect production and employment in the country besides other socio-economic repercussions. However, it is also recognized that in a market economy, the survival of the fittest and weeding out of inefficient industrial units is a natural outcome which is considered useful as well. Because the exit of the non-competitive and loss-incurring units should not pose difficulty to any society. But sickness assuming an epidemic shape creates concerns to the policy makers and stakeholders. Experience suggests that small scale industries are more prone to sickness as compared to medium and large scale industries. In this context, sickness in small industry should not be left only to the market forces. Creation of objective conditions and enabling environment through suitable policy support are essential for sustained growth of the small industry sector in the developing economies. It is, therefore, imperative to diagnose the causes of sickness so that preventive measures are suggested. Even if a small unit turns sick despite taking all possible precautionary measures, efforts should be made to find out the possibility of its revival. This warrants appropriate package of restructuring and rehabilitation strategies. If the units survival is still under threat, it should be better allowed to die a natural death.

SCOPE & METHODOLOGY The purpose of this paper is to explain the incidence of sickness and causes thereof in the industry sector of Bangladesh with particular reference to small industry sub-sector and suggest policy measures, both preventive and corrective, to address the problem of sick industries in the backdrop of pursuing the rapid industrialization strategy as the major prop for acceleration of economic growth. For this purpose, extensive survey of literature has been made and relevant Govt. publications, previous studies and various initiatives taken by the successive Governments have been analysis. OBJECTIVES OF THE STUDY This study has tried to identify the prospects and possibilities of SMEs in Bangladesh and also the reasons of industrial sickness. The objectives of the study and discussion sections are in the following: To know Industrial scenario in Bangladesh To know what is industrial sickness To know the causes of sickness To study the definitions of SMEs in Bangladesh. To study importance of SMEs in Bangladesh. To examine specific problems and prospects of SMEs.

INDUSTRIAL SCENARIO IN BANGLADESH Like many other developing countries, the economy of Bangladesh though agrarian in nature is poised for industrial development. It is an admitted fact that any development strategy which aims at rising output and generating adequate employment opportunities, needs to address the rapid industrialization move. The emphasis on industrialization should not, however, be stressed by undermining the role of agriculture in the economy, rather a case of complementarily has to be established between these two fundamental/vital sectors in order to reap the relative benefits accruing to each other, resulting in acceleration of the economic growth. Again, the argument of structural shift from agriculture to industry sounds to be a welcome proposition in the context of pursuing the export-led growth strategy. The acceleration of industrial growth is thus a crucial goal for reaching the take-off stage of the Bangladesh Economy. In the days ahead, as the increasing trend of liberalization sets on, it will continue to remain as the prime mover in economic modernization, employment generation, expansion and broadening of domestic as well as export markets. The awareness of the successive governments in this regard have been reflected in various policy moves as initiated from time to time for diversification and modernization of the economy with industry and its close linkage with dominant agriculture as the major vehicle in the process.

DEFINITION OF INDUSTRIAL SICKNESS People become sick and industries also become sick. Sick people suffer from various problems and if this sickness continues sometimes the life becomes threatened. If proper care is taken, people can recover. Similar is the case with industries. The term Industrial Sickness has become a buzz-word at present in industrial sectors particularly in underdeveloped or developing countries. It has become a cause of concern to investors, entrepreneurs and shareholders, policy makers, government and the society in general. If industries become sick, money and time are wasted; it brings down adverse effect on economy and social problems of various dimensions surface. So, national economy of developing or underdeveloped countries cannot afford largescale wastage of wealth due to industries turning sick. It is generally said that an industry is sick if it cannot pull on its normal activities, suffers continuous losses or if the gradual wiping out of its capital starts. A sick industry is one whose financial viability is threatened by adverse factors. Many authors defined industrial sickness in many ways. As per financial bill of India, 1977, a sick industry is one whose 50 percent or more of capital reserve were wiped out by the losses. R.V.Raman summarized industrial sickness as (i) when the company has negative working capital and the unit continue to make loss, (ii) cash inflow during the last 3 years has been progressively going down in relation to revenue commitment, (iii) cumulative loss exceeds capital and reserve and (iv) when cash inflow is less than the operational commitment and inadequate for debt servicing. CAUSES OF SICKNESS Industries might face various problems since its establishment or at early stages of life and sometimes they persist as the industry moves through the future. Problems of sickness may be classified as internal or external or can be classified as financial, technological, environmental, management and marketing related etc. This grouping and sub-grouping of problems can be extended. Whichever be the root causes, they too differ according to the type, location and

availability of cooperation and non-cooperation of financial, governmental and other related agencies, organizations or institutions. If the factors of production i.e., man, machine and material (the famous 3 Ms) and in addition management, money, method and marketing (other 4 Ms) are not properly managed various problems arise. These factors are interrelated and the very survival of the industry depends on factors related to these. Thus, we can classify causes as: A. Management related: (relating to all general management activities, personnel activities, marketing activities etc.) 1. Improper strategic management policy, lack of proper vision, determination of inappropriate path to reach goal, 2. Lack of proper training, experience and business outlook of entrepreneurs, investors, excision makers etc. 3. Improper manpower planning, over employment problems. 4. Improper organizational structure, absence of reorganizing process with business dynamics. 5. Poor managerial or administrative control. forecasted and actual demands or sales. 7. Inappropriate handling of personnel problems, CBA activities, motivation and labor related problems. 8. Lack of market planning, market survey, defective or improper sales promotion activities, defective pricing, problem with recovery of cost of products sold on credit etc. 9. Conservative attitude of managers: new managers do not try, in many cases, to take initiative to deviate from what was in the past, i.e., they try not to test anything new, 10. Improper (of course in some cases) delegation of authority and absence of accountability, 11. Non-availability of skilled labor force and management personnel, etc. 12. Absence of well developed organizational culture, etc. 6. Lack of continuous tracking of productivity indices and continuous tracking of

B. Financial: (relating to money) 1. Poor financial (capital management) management policies, 2. Poor working capital management 3. Improper managing of accounts, 4. 5. Lack of timely decisions form government, banks, financial institutions, High interest rate on loans, economy and business environment prevailing outside, 7. Improper analysis or time delay in taking decision with respect to product diversification, divestment, etc. 8. Improper financial analysis (in some cases) for investment, replacement of plants and machineries, etc. C. Technological: (relating to production) 1. Defective project planning, location, layout and material handing systems, 2. Use of defective forecasting data, use of inappropriate forecasting method, 3. Improper capacity planning, 4. Improper inventory management and management of supply chain, 5. Absence of application of Technology Management principles, 6. 7. 8. Inadequate quality control and delay in adaptation to Total Quality Management (TQM) and Quality Assurance programs, Absence of use of scientific methods in Scheduling (determination of Master Production Schedule (MPS)) and in Production Planning and control, etc. Improper or non-application of decision and optimization theories, etc., ergonomic principles 10. Non-application of Reengineering principles so as to adjust to the changed situation, etc. 9. Improper process planning, absence of application of motion and time study, and

6. Improper tracking of financial positions, time delay of adjusting to changed local, global

D. Environmental: 1. Change of local and global economic conditions, changes in money exchange rates, etc, 2. Lack of coordination between various ministries and government departments and delay in getting decisions, 3. Frequent changes in government policies with respect to investment criteria, tax determination, import and export policies, 4. Non-availability or irregular supply of required energy (electrical energy, gas), raw materials, labor force, etc., 5. Strikes, hartals and other working day losses due to political and social problems, 6. Occurrence of Natural calamities like cyclone, flood, tornado etc., 7. Attitude of mass media, etc, 8. Change of Technology and its lifecycle time.

Definitions of SMEs in Bangladesh The definition of what constitute an SME varies between countries. According to circular no.403 dated June 12, 2008 of Ministry of Industries (MOI), Government of Bangladesh (GOB); the definition of SME is following tables 1-2 with compared to Industrial Policy (IP) 2010: Table 1: Manufacturing SMEs in Bangladesh Criteria : any one of the two to be met Value ( replacement cost) of fixed assets excluding land and building in million BDT Nos. of Workers Small Industries 2008 0.5-15 10-50 Small Industries (IP 2010) 5-100 25-99 Medium Industrie s 2008 15-200 50-150 Medium Industries (IP 2010) 100-300 100-250

Table 2: Non-Manufacturing SMEs in Bangladesh Criteria : any one of the two to be met Value (replacement cost) of fixed assets excluding land and building in BDT Nos. of Workers Source: http://www.moind.gov.bd/ Small Industries 2008 0.5-5 10-25 Small Industries (IP 2010) 0.5-10 10-25 Medium Industrie s 2008 5 -10 25-50 Medium Industries (IP 2010) 10-150 50-100

According to Public policy 2010, SMEs definition can be generally implemented as a system of laws, regulatory measures, courses of action, and funding priorities concerning a given topic promulgated by a governmental entity or its representatives. Hence, a government entity of Bangladesh can be created for executed the SMEs definition properly. The Importance of SMEs The SMEs can share in manufacturing value added varies from 20 to 25 percent. Their contribution to national exports is also significant. The greater proportion of the SMEs (58 percent of establishments and 55 percent of jobs created by them in 2006) is in rural locations which offer better prospects for industrial dispersal. However, their location in certain administrative divisions/districts reflects regional concentration. There has been increased womens involvement in SMEs, especially home-based micro enterprises engaged in the

production of clothing and textiles (boutiques and handicrafts, weaving and spinning), livestock and dairy, and retail sales. Relatively small enterprises owned by women entrepreneurs are mostly of the sole proprietorship type which needs low investments. The SMEs are now considered as the main engine of the economy in Bangladesh. The SMEs contributions in Bangladesh are illustrated in following table 3. Table 3: SMEs contribution in Bangladesh Aspects National Gross domestic product Gross manufacturing output Industrial Jobs Total labor force Total exporting earning Percent of business Absorbed industrial workers Source: http://beioa.org.bd [16] Role of SMEs 25% 40% 85% 25% 89% Over 95% 70% to

The Present Problem and Prospects of SMEs in Bangladesh The SME sector continues to suffer from lack of access to finance, infrastructure bottlenecks, unreliable power and low levels of technological competence, difficult market access and regulatory barriers. Other important challenge includes sharp market competition both in existing and new markets. Sophisticated consumer preferences and market standard and various non-price factors such as quality, health and safety and ecological compatibility of products and processes which determine competitive advantage also pose significant challenge. In the changed market perspective, introduction of new products and processes, more innovative design, shorter product cycles and smaller output batches, greater mass customization, and more just-in time delivery etc have become the critical determinates of survival and growth of the SMEs. According to Saha, Sujit R. (1997), Industrial/SMEs sickness: A study of the selected projects financed by the DFIs in Bangladesh PhD Thesis (unpublished), Rajshahi University, has presented following data in table 4 and 5.

Table 4: Internal causes of sickness Aspects of causes Marketing problem Management inefficiency and lack of entrepreneurial skills Faulty project planning and appraisal Imbalance of machinery and inappropriate technology Implementation delay ( mobilization of equity, etc) Others ( diversions of funds labor problem, etc) Table 5: External causes of sickness Aspects of causes Delay in loan sanction and disbursement Non-availability/ shortage of working capital Power problem Changes in govt. policy ( import liberalization) Non-availability/irregular supply of raw material and other critical inputs Natural calamities Smuggling, political unrest Others In percentage (%) 22 21 15 13 11 05 05 9 In percentage (%) 31 22 14 12 12 9

According to Bhattacharya, D et al (1998), Sick Industries in Bangladesh- A report of the study was commissioned by ministry of industries, GOB and Bangladesh Institute of Development studies, Dhaka reveals that the highest incidence of sickness are shown in table 6.

Table 6: List of sick Industries

Name of Sick Industry The manufacturing of textiles Food manufacturing Textile manufacturing Non electrical machinery Leather and its product

In percentage (%) 19.6 14.3 8.8 5.7 5.4

T ex tile F ood Ga rm ents nonelectrica lm a chinery Lea ther a nditsproduct

Portion of Sick Industry It was appeared from that study is shown in table 7. Table 7: According to small, medium and large scale basis sickness in percentage Scale of the Industry Small Medium Large Sickness in percentage (%) 72.5 19.7 4.1

S m a ll Medium La rg e

Portion of Sick Industry According to Alam, Z. (2007), SMEs in Bangladesh: A roadmap for economic development, the problems by the sample respondents for SMEs in Bangladesh are following in Table 8.

Table 8: A survey of SMEs for sickness Sl. No 1 2 3 4 5 6 7 8 9 10 Particulars Inadequate government policy High rate of interest on bank loans Lack of accurate data Lack of skilled technicians and workers Lack of government subsidy Inadequate supply of power Poor quality of product Insufficient marketing information Lack of research and development facilities Absence of integrated package assistance No of respondents 45 40 30 35 42 44 46 38 25 48 % 90 80 60 70 84 88 92 76 50 96

World Bank survey for SMEs are shown in table 9 Table 9: Issues identified in percentage Particulars Lack of finance Shortage of skill labor Getting business site Bribes Orders/Marketing of product Lack of Knowledge Government interference Raw material License for work New Technology In percentage, % 55 39 38 21 28 12 12 10 8 8

Contribution of SMEs in Bangladesh to GDP by sector are shown in table 10 Table 10: Contribution of SMEs in Bangladesh to GDP by sector Particulars Agriculture Fishing Manufacturing Total contribution in % 24 4 38

Construction Wholesale & retail trade and repairs Hotel & restaurants Transport, storage and communication Real-estate, renting and business activities Education Health and social works Other service activities Total Source: http://www.bbs.gov.bd/Home.aspx [19] Causes of Sickness of SMEs in Bangladesh

1 23 4 1 2 0 0 2 100

In these aspects, the lists of Problems of SMEs in Bangladesh are shown in table 11. Table 11: Problems of SMEs in Bangladesh Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Name of Problem Disorder market intelligence Innovation in management, design and production process with flexible mechanism are not complying with competitive market. In Bangladesh has not proper access facility to technological networks to meet international standard due to know how and skill difficulty. Lack of credit/finance/capital Lack of Training/Skill requirement/ Human Resource Development based on Technology Require of Research and Development Limited information on potential markets and clients Need special incentives for export oriented industries from GOB Lack of Market penetration Lack of Infrastructure Lack of Measurement of SMEs performance The existing information asymmetry between funds providers and a SMEs management No unified well-specified system of the Government of how and why SMEs fail In identifying industrial sickness, not only financial criteria , while also some important non-financial criteria cannot be taken presently consideration

Overall Measure Requirement for SMEs The following measures can be implemented as soon as possible to sustainable SMEs Development in Bangladesh: 1. The government can establish an SME bank to provide collateral-free bank loans to SME entrepreneurs. 2. Transfer of modern technology can support for upgrading the product quality.

3. The appropriate infrastructure facilities such as water, electricity and gas can be ensured for SMEs. 4. The government can be taken initiatives to promote SMEs products abroad or help establish cooperatives to conduct marketing in the same sector, then the sector can be facilitated to achieve sustainable growth. 5. Small and cottage industry sector can be separated from the SME sector for competitiveness achievements for sustainability. 6. Law and order situation can be regulated for sustainable SMEs Development in Bangladesh. 7. Illegal imports and non-tariff barriers can be removed for SMEs development. 8. A research and development (R&D) can be run in the BIM. 9. SMEs related policy can be made as an Act/law like Government of Japan, India etc for sustainable development of SMEs.

REMEDIAL MEASURES TO PREVENT SICKNESS Occurrence of industrial sickness might come up at various phases of business cycle. Although "survival of the fittest" is a very much well known proverb, but here in Bangladesh the industrial sickness problem cannot left over to the market forces as it will bring down adverse repercussions to the national economy. Moreover, industrial sickness might also become

responsible for many social problems particularly in a developing or underdeveloped country. The following measures can be considered for combating the Industrial sickness: 1. Elimination or trying to eliminate the causes, which have been described earlier, 2. Cooperation of financial institutions in giving and recovering loans and interest, easier and acceptable loan disbursing policy and supply of working capital, 3. Favorable government policy with respect to import, export, project appraisal, tariff etc., 4. Assurance of the uninterrupted power, water and gas supply and raw material supply, 5. Proper market planning through accurate forecasting and customer survey, 6. Controlling some of the environmental factors like labor unrest, strikes, political instability, 7. Conservative government policy to save the national industries, etc.

Conclusion Both developed and developing countrys industry face sickness problem for different macro and micro factors. If business man can take lesion from previous business failure than they can easily identify and overcome the causes of sickness. Bangladesh can be achieved proper industrialization to remove hinders or overcome the present sickness of different industrial

sector. For this reason both Government and business people have to take some protective measure. Government has to create suitable business environment for attracting business to start new business by providing different types of facilities to the existing and upcoming new Business man. And business people have to ensure quality full management team before start the business. Because quality full management only can give appropriate decision in adverse situation. The results obtained from the present proposed research can be expected to bring new insights in the development planning of our industrial and service sectors especially SMEs, which will help in increased industrial output and exports. It will change the total economic condition of our country by increasing GDP, per capita income and employment etc. Therefore, SMEs can make to economic development of Bangladesh to achieve the vision 2021 to overcome the above crucial problems by developed a generic mathematical model for SMEs.