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									Status of SMEs in Pakistan and its Possible Uplift
                   by PCSIR
                          By


                Dr. Nighat Afza
           Director Planning & Development

     PCSIR Laboratories Complex, Shahrah-e- Dr.
 Salimuzzaman Siddiqui, off University Road, Karachi-
                       75280.

          Office: 021-4690349 Fax: 021-4641847
  Cell: 0300-8218862 E-mail: klcdirectorp_d@yahoo.com
   SMEs are the backbone of a national
    economy,   particularly in developing
    countries.
   SMEs contribute to economic development in
    multiple ways.
     Creating employment for expanding rural
      and urban workforce.
     providing flexibility and innovation in the
      economy as a whole.
    The benefits, of SMEs in Pakistan have not
    been fully apprehended.                   2
 Small & Medium Enterprise             Development
  Authority (SMEDA) was formed In 1998 to
  provide support to SMEs in Pakistan through:

1. The creation of a conducive and enabling regulatory
    environment.

2. Development of industrial clusters.

3. The provision of Business Development Services to
   SMEs in all areas of business management.



                                                     3
ACCORDING TO THE ECONOMIC CENSUS OF PAKISTAN-
2005:
       business enterprises nation-wide   3.2 M
       SMEs                               2.96 M
       Establishment Units                2.8 M
       Household Units                    0.18 M
   sales below Rs.0.5M 84% sales below Rs.1.0M 93%
   19% SMEs are less than 5 Year old; 4% survive beyond
    25 years
SMEs SHARE.
       In industrial employment           78 %
       In value addition                  35 %
       Contribution in national GDP       30%
       Export earnings.                   25%      4
 DEFINITION OF SMES ACROSS THE BOARD IN PAKISTAN

INSTITUTION        SMALL ENTREPRENEURS              MEDIUM ENTREPRENEURS

                 No. of             Assets           No. of           Assets
                Employees                           Employees
SMEDA              10-35       Productive Assets      36-99     Productive Assets
                               Rs. 2.0-20.0 M                   Rs. 20.0-40.0 M
SME Bank             -        Total Assets of Rs.       -          Total Assets of
                              20.0 M                                 Rs. 100 M
Federal Bureau Less than 10            -                -
of Statistics
State Bank of   Employee not more than :
Pakistan         manufacturing 250 persons
                trade / services 50 persons
                fulfills one of the following criteria:
                1.     trade / services total assets up to Rs 50M.( excluding land
                       and buildings )
                2.     manufacturing total assets up to Rs 100 M .( excluding land
                       and buildings )
                3.     Any concern       net sales not exceeding Rs 300 M
                                                                                     5
      SME definition as suggested in SME policy



  Enterprise
                 Employment Size   Paid Up Capital   Annual Sales
  Category




Small & Medium
                                     Up to Rs.25     Up to Rs.250
  Enterprise        Up to 250
                                      Million          Million
    (SME)




                                                                    6
    Province wise Distribution of SMEs

    Name of area             SMEs unit
Pakistan             2.96 million
Punjab               65.26%
Sindh                17.82%
NWFP                 14.21%
Balochistan          2.09%
                                         7
  Distribution of SMEs According to the No. of
                   Employees

                           SMEs        SMEs        SMEs
Total        SMEs
                         employing   employing   employing
SMEs      employing
                            6-10       11-50      over 50
units     1-5 Persons
                          Persons     Persons     Persons


  2.96                    0.079
          2.85 million               26,000(0.87 1617(0.054
million                   million
            (96.6%)                      %)         %)
(100%)                   (2.67%)


                                                         8
     Distribution of Female Workers Force


                  Self-
Total female                    Unpaid         Paid
                employed
 employees                   family helper   employed
               /proprietor




0.46 million      15%            30%           55%




                                                        9
      SMEs’ Share in Sub-Sector.
S.#         Sub-sectors   Percentage Share of
                                  SMEs
 1    Cotton Weaving             13%
 2    Other Textiles              6%
 3    Metal Products              7%
 4    Carpets                     4%
 5    Art Silk                    5%
 6    Grain Milling              16%
 7    Jewelry                     4%
 8    Wood & Furniture           10%
 9    Others                     35%
                                                10
Economic Importance of SMEs.

                   Value
Employment   GDP           Export Earnings
                   Added




 78% (6.8
             40%   35%          25%
 million)


                                         11
    SME Policy of Pakistan (SME policy 2007)
   The GoP constituted a Task Force for SME
    Policy Development in January 2004.

   The policy approved by the Federal Cabinet of
    Pakistan on January 17, 2007.

   The objective of SME Policy of Pakistan is
    to provide a short and a medium to long-
    term policy framework        with      an
    implementation mechanism for achieving
    higher economic growth based on SME led
    private sector development.              12
Problems Faced by SMEs of Pakistan
The Problems addressed by SME Policy
   Business      Environment/Adverse   Government
    Policies/ inadequate infrastructure

   Access to finance & related services/ financing
    barriers and disincentives

   Entrepreneurship Development

   Human Resource Development /shortage of skilled
    workers, Technology Up-gradation/ Technological
    constraints and Marketing
                                                13
    Business Environment/Adverse Government Policies/
                 Inadequate Infrastructure.
Policy Recommendations:

   Promulgation of an SME Act: simplified fiscal, registration,
    labor and inspection laws
   Voluntary Certification of SME
   Periodic review of all fiscal laws & Labour Legislation and
    relaxation in the application of certain laws to SMEs for a
    certain period of time.
   Allocation of a minimum quota of land in the Industrial
    Estates and Export Processing Zones for SMEs
   Encouragement of participation of SMEs in all public sector
    procurement.
                                                      Contd.   14
   Regulatory compliance procedures will be widely communicated
    to SMEs in Urdu & local languages.

   SME representation      in   all   federal monitoring and dispute
    resolution schemes.

   GoP support the establishment of an SME Promotion Council
    and SME specific Trade Associations for organizing SMEs.

   Provision of adequate physical infrastructure in SME clusters.

   Specialized training for Government functionaries in tax,
    registration, labour, etc. departments to handle SME related
    issues.

   Improving and enforcing Intellectual Property Rights for SMEs.
                                                          Contd.     15
  Access to Finance & Related Services/ Financing
             Barriers and Disincentives
Policy Recommendations:
 Incorporation of SME financing in the Annual Credit
  Plan of the SBP.
 Review of Prudential Regulations to give risk cover and
  incentives for banks, so they finance SMEs.
 Support to FIs in designing and launching lending schemes.
 Introduction of Bankruptcy Laws for SME complaints.

 Awareness for formal financing and good accounting practices
  amongst SMEs.



                                                       Contd.
                                                            16
         Entrepreneurship Development
Policy Recommendations:
 Revision in primary and higher education curricula

  for promoting entrepreneurship.
 Entrepreneurship Competitions at university and at

  National level.
 Establishment of technology and business incubators

  in universities.
 Identification of investment opportunities offered by

  backward and forward linkages of successful
  services/products.

                                                     17
    Human Resource Development /Shortage of Skilled Workers,
     Technology Up-gradation/ Technological Constraints and
                          Marketing
Policy Recommendations:
1.Human Resource Development:
    Survey to identify major SME needs in HRD, technology
     up-gradation and marketing.

    Establishment of INSMED, and specific technical training
     institutes in business schools.

    Encouraging use of the technical training infrastructure by
     the private sector BDSPs serving SME sector and
     incentives for investment in setting up SME training
     facilities.
    Induction of genuine SME representatives in           private
     sector boards of the technical training institutes.

                                                              18
2. Technology Up-gradation

   Introduction of SME specific research projects supporting
    R&D and University-Industry liaison programs by Ministry
    of Science & Technology (MoST), Higher Education
    Commission    (HEC),  Pakistan    Software  Export Board
    (PSEB), Ministry of Information Technology (MoIT) and
    others.

   Establishment of Technology Innovation Centers (TICs)
    offering common facility, technology up-gradation, R&D and
    design related services to SMEs.
   Launching of pilot technology up-gradation projects for major
    SME clusters on cost sharing basis.

   Incentives for Investment in new Emerging Sectors and Skills
    up gradation.


                                                             19
3. Marketing

   Encouragement in establishment of SME sector specific
    export marketing companies. Grants for developing
    ‘world-class’ trade and product directories for major
    SME clusters.

   Establishment of SME quota in trade delegations supported
    by EPB.

   Compilation and dissemination of data on local
    markets using manufacturers, distributors and retailers
    data.

   Provision of support to SME associations in exploiting local
    market opportunities by holding domestic product
    exhibitions.

   Establishment of Annual SME Awards for recognizing
    outstanding performance in domestic and International
    markets, technology innovation, HRD practices, etc.
                                                              20
Human Resource Development & Technology
   Transfer/Up-gradation Through R& D
              Organizations
    As suggested in the policy a linkage between R & D
     organization/ Universities/ SMEs will not only help
     SMES but LEs also in solving the problems related to
     HRD and Technology up gradation. In this contest
     example of PCSIR may be quoted, which is a role
     model for Technology Development /up gradation
     and Human Resource Development for SMEs.
                                                       21
          Background & Objectives of PCSIR
Pakistan Council of Scientific of Industrial Research (PCSIR), a
 premier R&D organization of the country, was established in 1953
Objectives

   •   Optimum utilization of indigenous raw material & resources.
   •   Development of technologies based on local resources from
       bench to pilot plant scale and technology transfer, for industrial
       exploitation leading to import substitution and export
       enhancement.
   •   To conduct R&D on the problems faced by the industrial sector
       and extend test / analysis / calibration services to users.
   •   To undertake cooperative research with local and foreign R&D
       organizations and industries on the projects of national/mutual
       interest.
   •   Human resource / skill development for the organization as
                                                                      22
       well as to feed the industrial sector.
Human Resource Development by PCSIR:
    Technical Training Centres of PCSIR giving 03-04 years
     diploma course of Associate Engineering in Precision
     Mechanics, Instrumentation Technology and Dies &
     Moulds

    Karachi & Quetta.

    Three others are almost in the final stage of completion.

    The Dimension Stone Evaluation Centre PCSIR
     Peshawar


                                                     Contd.      23
The Institute of Industrial Electronics Engineering
(IIEE) of PCSIR at Karachi producing graduate
engineers in Industrial Electronics.
PCSIR is also providing training to the workers and
qualified personals on sophisticated instruments as well
as on management systems for the industrial sectors of:

        Textile                Engineering Services
        Polymer                Calibration
        Food                   Environment
        Ceramics               Material Science
        Pharmaceutical         Agriculture (Including
        Leather                 Tissue Culture)
        Fuel.
                                                          24
    Commercialization of R & D in Pakistan

 Technology commercialization is a process of
  converting research to successfully marketable
  products.


 PCSIR has the main objective of technology
  development and successful transfer and
  commercialization of technology to SMEs




                                                   25
    Development of any technology starts with
     the market survey of that product. The
     process     involves any of the following
     routs for the     selection of technology
     which has to be developed:

1.   Scientist / technologist search the market
     about the need of that particular commodity
     which has to be developed

2.   Client / SME contact the organization/
     scientist for the development of technology

                                              26
        After selection of technology the following steps for the
         production of the required commodity will be taken

    1.   Summary of the method has to be prepared.

    2.   Selection of a group of scientists/technology for R & D of that particular
         job.
    3.   Details of the method has to be discussed among the group.

    4.   Start of R&D in the lab.
    5.   Completion of R&D and preparation of pre-feasibility report based on
         the findings of lab scale production.
    6.   Fabrication of pilot plant for the economically feasible lab scale
         developed technology, start of production at pilot plant and preparation
         of feasibility report based on the findings of pilot plant production.
    7.   Submission of this report to the client/SME.


                                                                                27
 Methods for the transfer of technology to the
                     client.
1. Total Transfer of Know How of the Technology:
  PCSIR KLC helps the client in the following
  respect:
   ● Selection of space/building, construction of
      building
   ● Selection of machinery & equipment
   ● Procurement of raw material
   ● Selection of manpower
   ● Training in production & quality control of the
      product
                                                       28
2.   Production at PCSIR Site by the PCSIR
     Scientists:
     PCSIR responsibilities
        The production, either at pilot scale or at industrial
         scale
        Setting up of the plant, purchase of raw material
        Quality control

     The client will market the product




                                                             29
                     Production in TBIC:
The PCSIR provides

       •   Space/building for the production
       •   One or two scientists for the supervision of work at the plant
       •   Help in selection of machinery & equipment
       •   Help in procurement of raw material
       •   Quality control of the product

The responsibility of Client/SME

       •   Procurement of machinery/equipment and raw material
       •   Fabrication of plant under the supervision of PCSIR scientists
       •   Production under the supervision of PCSIR’s scientists
       •   Marketing of the product.


                                                                            30
       Role of PCISR in Quality Control of
        Commodities Produced by SMEs
PCSIR Provide analytical services to SMEs for their
products in following areas.

    Textile                   Chemicals
    Food                      Engineering Goods
    Pharmaceutical            Ceramics
    Polymer                   PCSIR also
    Material Science           provides calibration
    Leather                    services of SMEs
    Fuel
                                                       31
       Role of PCSIR in Improving and Enforcing
         Intellectual Property Rights for SMEs
   Many SMEs do not get patent for their invention due to
    lack of awareness about rules and regulations of patent
    office.
     Due to this reason both economically and academically
    the benefits for novel patent and design is not been
    obtained and a lot of innovative talent of our country has
    been wasted.
    The Ministry of Science and Technology funded the
    project and the patent advisory cell has been set up in
    PCSIR Labs. Complex, Karachi. The established Patent
    Advisory Cell is providing a complete protection to the
    process/ technologies developed in Pakistan. The cell
    helps the SMEs start from writing the patent up till its
                                                            32
    registration.
              CONCLUSION
Recommencing the discussion above, the possible strategy
for productivity improvement in Pakistan, through SMEs,
has to follow a four step approach.
      A conducive regulatory environment, balanced
       regulatory     burden,    provision   of    adequate
       infrastructure, supporting attitude from provincial
       and federal government levels.
      Short to long-term funding and access to capital
      Pakistani society is an employee society, to shift it
       to an entrepreneurship society we have to bring
       reforms by taking revolutionary steps in our
       education system and have to fascinate our
       educated youth towards entrepreneurship.
     Quality training of workers and up gradation of
      technologies                                 33
                                                Contd.
34

								
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