Why is Bangladesh poor and Taiwan rich?

It is a fact that small and medium size companies are the back bone of developed countries. They create socio-economic changes which drive democratization and these enterprises also are an essential tax base for nations. Nevertheless there is an increasing effort to promote micro-enterprises, both through NGO"s but also through commercial interests. Will this help poor nations? How come Bangladesh (a micro-enterprise country) is still poor and Taiwan (an SME country) is rich? Wouldn"t it be better to focus on small and medium size enterprises, SME"s? Professor Milford Bateman wrote recently in Financial Times about the danger of microenterprises. Short term you may see successes for individuals and families, but long term it risks to keep societies in poverty."Put simply, to the extent that local savings are intermediated through microfinance institutions, the more that country or region or locality will be left behind in a state of poverty and under-development. This is an "iron law of microfinance". Focusing on isolated cases of microenterprise success simply does not add up to economic development. The reason microfinance is supported is overwhelmingly political/ideological – the economic rationale is simply not there."Professor Bateman sees two harmful results. 1) It usually creates a serious shortage of capital for small and medium-sized enterprises, "which is deeply damaging because SME"s have by far the most sustainable growth and development potential". 2) Microfinance accelerates the proliferation of the informal sector like traders, kiosks and subsistence farms. Professor Bateman goes on to show how Bangladesh – the spiritual home of microfinance – has not been lifted out of poverty despite its enormous "success" in microfinance; which was also recognised by the Norwegian Nobel Committee by awarding Muhammed Yunus and his microloan program the peace price. "The East Asian countries managed to develop brilliantly through channelling much, if not most, of their savings into serious growth-oriented sustainable business projects. This is why many East Asian countries may have started at similar GDP levels as Bangladesh in the 1970s but have since then massively outpaced Bangladesh in terms of growth and development. Economics 101 shows conclusively how critical savings are to development, but only if intermediated into growth- and productivity-enhancing projects. If it all goes into rickshaws, kiosks, 30 chicken farms, traders, and so on, then that country simply will not develop and sustainably reduce poverty."http://www.ft.com/cms/s/0/2180597
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