Obi in Bangladesh, Says SMEs Key to Global Economic Growth, Rapid Expansion

The presidential candidate of Labour Party in the 2023 election, Mr. Peter Obi, has underscored the importance of small and medium scale enterprises (SMEs) to global economic growth.

He also explained why small businesses are the engine of growth across the globe, especially in areas of job creation, innovation, and domestic investment.

Obi’s position was contained in the remarks he made over the weekend, at a global conference organised by the Bangladesh Government in conjunction with the Commonwealth Enterprise and Investment Council, in Dhaka, Bangladesh.

The Labour Party standard bearer argued in his address at the international conference that SMEs are emerging as the undisputed engine of rapid economic expansion and growth globally.

Buttressing his position with various data, Obi noted that, “World Bank records (2020), show that SMEs account for roughly 90 per cent of businesses and more than 50 per cent of jobs created globally. While formal SMEs contribute up to 40 per cent of national income (GDP) in developing and emerging markets (DEMs), their impact and contribution are significantly higher when informal ones are included, he cited a World Bank report.

According to the former Anambra state Governor, “In Bangladesh, SMEs contribute about 40 per cent to GDP, in Nigeria 48 per cent and China 60 per cent with about seven out of every 10 formal jobs created by SMEs.

It has the same immense impact in India where SMEs account for over 40 per cent, of the total workforce, Obi added.

Obi urged the Commonwealth nations to pay very special attention to small businesses, which he said had proven to be the fulcrum upon which sustainable and inclusive growth and development can be achieved across Commonwealth countries.

He noted that, “If we enhance the functionality and impacts of SMEs across Commonwealth countries through formalisation and internationalisation, we would have done it across the world with lives, communities, and economies positively impacted.

“Endowed with a population of about 2.5 billion people, a home to over a billion young consumers and exports of over $1 trillion, the need for better support for SMEs cannot be over-emphasised.”

He further explained that small businesses, especially in developing and emerging markets, faced many challenges arising from lack of formalisation and internationalisation.

He revealed that many small businesses were not registered and licenced and lacked international affiliations, export less than large companies, and barely exploit the benefits of international trade, which limits the growth opportunities of both the SMEs and the countries.

“To harness the full contributions and impacts of SMEs, Obi admonished that reforms such as proper formalisation and internationalisation are needed to address the identified challenges.

“Formalisation involves bringing SMEs into the formal economy through registration of their businesses and complying with legal and regulatory requirements.
“Expectedly, the process of formalisation will be beneficial not only to the SMEs but the overall business environment and economic stability as significant segments of SMEs operate in the informal sector due to a lack of resources or awareness of the formalisation benefits.”

Noting that this limits their access to credit, markets, and government support which consequently results in reduced investment, innovation, and growth opportunities.

“Proper formalisation and internationalisation of SMEs particularly in today’s globalised economy therefore require urgency and full support of all stakeholders as it allows SMEs to tap into global markets, access international resources, and grow their businesses with immeasurable positive global impacts,” Obi said.
Obi further explained that this was critical especially to Commonwealth nations, as they control a combined wealth of about $150 trillion, which is over 10 times their combined GDP of about $14.5 trillion today, and over 30 times the global trade and export value of about $4.8 trillion.

Arguing further on the untapped benefits, Obi said the Commonwealth, despite controlling one-third of the global population only contributes below 15 per cent of the World GDP of $100 trillion and with a global GDP per capita of $10,700; while that of the Commonwealth is $3500.

“This shows a huge growth potential, which can be enhanced by investment in SMEs where the bulk of the youths are domiciled, especially within the Commonwealth family.

“SMEs in Commonwealth countries are essential drivers of economic development and poverty reduction. Formalisation and internationalisation are crucial pathways to unlocking their potential, fostering innovation, and increasing competitiveness.”

While noting that the challenges are many, Obi stated that supportive policies, capacity-building initiatives, and strategic partnerships could empower SMEs to thrive in the global economy.

“And by investing in the formalisation and internationalisation of SMEs, the sustainable socio-economic growth and development of Commonwealth Organisation and Countries can be significantly enhanced.”

On the sidelines of the conference Obi in a meeting with the Prime Minister of Bangladesh, H. E Sheikh Hasina, congratulated her and her team for what they have been able to achieve in their nation, with the support of SMEs in the last 15 years, noting, however, that more still needed to be done.

Obi at the meeting corroborated with the Managing Director of City Bank in Bangledesh, Mashrur Arefin, that 80 per cent of job creation and a higher percentage of growth in Bangledesh today were created by SMEs.

He said, “This shows an example of what I have said over the years. In 2009 when I visited Bangladesh, their GDP was $102 billion, with a GDP per capita of $688. Today, their GDP is $460 billion and a GDP per capita of $2700.
“Their unemployment rate in June 2009 was between nine and 10 per cent, today it is below five per cent.

“The poverty rate also greatly reduced and they have maintained growth of over six per cent within the said time.”