Tax holiday for small industries

Having gone through the said news item, I understand absolutely that the government formed a Committee on Developing the Small and Medium Industries (CDSMI) in 2003, headed by prime minister's principal secretary, to submit a proposal to boost the growth of small and medium industries in the country.

In the proposal the CDSMI made recommendations of rendering facility of tax holidays to small enterprises having a maximum investment of Tk 30 lakh for a period of seven years in Dhaka and 10 years in Chittagong and also vat exemption on their investments is permanent. It also recommended establishing a foundation with representation of donors, civil society, and SMEs' associations to look after the SMEs.

The Cabinet Committee on Economic Affairs approved the proposal in a meeting chaired by Finance and Planning Minister M. Saifur Rahman and shall now ask the industries ministry to work out the details and materialise the decisions.

But I wonder why while making and approving such a proposal neither the CDSMI nor the Cabinet Committee on Economic Affairs has taken into account the definition of a small industry, defined as a small enterprise which invests a maximum capital of Tk 1.

5 crore. The government redefined the capital of a small enterprise as Tk 30 lakh (from 1.5 crore). It will deprive the small industries having an investment of over Tk 30 lakh and up to Tk 1.50 crore and as such the recommendation will fail to serve the purpose of the government eager to boost the growth of small and medium industries in the country. If we take into consideration the fixed costs of a project comprising land, building and machinery, the amount of Tk. 30 lakh will be too meagre to construct a factory-shed on a piece of land, not to speak of the cost of machinery and lots of other financial requirements. So, the proposal should stick to the government definition of small industries having Tk. 1.5 crore of maximum investment or capital to enable them to enjoy tax holiday and vat exemption.

Secondly, I don't see any utility in establishing a foundation to look after the SMEs as recommended by CDSMI. We have already organisations of trade, commerce and industry at national, district and metropolitan level for this job. Above all we have the Board of Investment to look after the industries in the country. The BOI working in tandem with various chambers of commerce and industries is the most competent authority to implement the recommendations of CDSMI.

In the light of the above discussion, I would like to suggest the authorities concerned, particularly the industries ministry, to revise the proposal of CDSMI as follows:

The facility of tax holidays and vat exemption should be extended to small industries in the country having a maximum investment of Tk 1.5 crore as per government definition already in force, for a period of seven years in developed areas and 10 years in under-developed areas.

The Board of Investment should be entrusted with the task of implementing the said proposal.

Let the BOI once advertise the said proposal in the media and hundreds of thousands of offers will be pouring in to establish small enterprises in the country and of course with the financial assistance from the banks charging less rate of interest, a demand the finance minister himself advocates .

Then, only then, the real growth of small industries enjoying a lot of financial incentives will take place in Bangladesh to salvage it from painful poverty by creating employment on a large scale.