Status of SMEs in Pakistan and its Possible Uplift by PCSIR By By Dr. Nighat Afza Dr. Nighat Afza Director Planning & Development Director Planning & Development PCSIR Laboratories Complex, Shahrah-e- Dr. PCSIR Laboratories Complex, Shahrah-e- Dr. Salimuzzaman Siddiqui, off University Road, Salimuzzaman Siddiqui, off University Road, Karachi-75280 Karachi-75280 . . Office: Office: 021 021 - - 4690349 4690349 Fax: Fax: 021-4641847 021-4641847 Cell: Cell: 0300-8218862 0300-8218862 E-mail E-mail : : klcdirectorp klcdirectorp _ _ [email protected][email protected]
Transcript
Status of SMEs in Pakistan and its Possible Uplift by PCSIR
ByBy
Dr. Nighat AfzaDr. Nighat Afza Director Planning & DevelopmentDirector Planning & Development
PCSIR Laboratories Complex, Shahrah-e- Dr. PCSIR Laboratories Complex, Shahrah-e- Dr. Salimuzzaman Siddiqui, off University Road, Karachi-Salimuzzaman Siddiqui, off University Road, Karachi-
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.
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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.
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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%
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DEFINITION OF SMES ACROSS THE BOARD IN PAKISTAN
INSTITUTION SMALL ENTREPRENEURS MEDIUM ENTREPRENEURS
No. of Employees
Assets No. of Employees
Assets
SMEDA 10-35 Productive Assets Rs. 2.0-20.0 M
36-99 Productive Assets Rs. 20.0-40.0 M
SME Bank -- Total Assets of Rs. 20.0 M
-- Total Assets of Rs. 100 M
Federal Bureau of Statistics
Less than 10 -- --
State Bank of Pakistan
Employee not more than : 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
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SME definition as suggested in SME policySME definition as suggested in SME policy
Enterprise Category
Employment Size Paid Up Capital Annual Sales
Small & Medium Enterprise
(SME)Up to 250
Up to Rs.25 Million
Up to Rs.250 Million
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Province wise Distribution of SMEsProvince 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%
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Total SMEs units
SMEs employing 1-5 Persons
SMEs employing
6-10 Persons
SMEs employing
11-50 Persons
SMEs employing
over 50 Persons
2.96 million (100%)
2.85 million (96.6%)
0.079 million (2.67%)
26,000(0.87%)
1617(0.054%)
Distribution of SMEs According to the No. of Distribution of SMEs According to the No. of Employees Employees
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Total female employees
Self-employed
/proprietor
Unpaid family helper
Paid employed
0.46 million 15% 30% 55%
Distribution of Female Workers ForceDistribution of Female Workers Force
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SMEs’ Share in Sub-Sector.SMEs’ Share in Sub-Sector.
S.#S.# Sub-sectorsSub-sectors Percentage Share of Percentage Share of SMEsSMEs
11 Cotton Weaving 13%
22 Other Textiles 6%
33 Metal Products 7%
44 Carpets 4%
55 Art Silk 5%
66 Grain Milling 16%
77 Jewelry 4%
88 Wood & Furniture 10%
99 Others 35%
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Economic Importance of SMEs.Economic Importance of SMEs.
Employment GDPValue Added
Export Earnings
78% (6.8 million)
40% 35% 25%
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SME Policy of Pakistan (SME policy 2007)SME Policy of Pakistan (SME policy 2007) The GoP constituted a Task Force for SME The GoP constituted a Task Force for SME
Policy Development in January 2004.Policy Development in January 2004.
The policy approved by the Federal Cabinet of The policy approved by the Federal Cabinet of Pakistan on January 17, 2007.Pakistan on January 17, 2007.
The objective of SME Policy of Pakistan is The objective of SME Policy of Pakistan is to provide a short and a medium to long-to provide a short and a medium to long-term policy framework with an term policy framework with an implementation mechanism for achieving implementation mechanism for achieving higher economic growth based on SME led higher economic growth based on SME led private sector development.private sector development.
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Problems Faced by SMEs of PakistanProblems Faced by SMEs of PakistanThe Problems addressed by SME PolicyThe Problems addressed by SME Policy Business Environment/Adverse Government Business Environment/Adverse Government
Access to finance & related services/ financing Access to finance & related services/ financing barriers and disincentivesbarriers and disincentives
Entrepreneurship DevelopmentEntrepreneurship Development
Human Resource Development /shortage of skilled Human Resource Development /shortage of skilled workers, Technology Up-gradation/ Technological workers, Technology Up-gradation/ Technological constraints and Marketing constraints and Marketing
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Business Environment/Adverse Government Policies/ Business Environment/Adverse Government Policies/ Inadequate Infrastructure.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.
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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.
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Access to Finance & Related Services/ Financing Access to Finance & Related Services/ Financing Barriers and DisincentivesBarriers 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.
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Entrepreneurship DevelopmentEntrepreneurship 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.
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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.
Human Resource Development /Shortage of Skilled Human Resource Development /Shortage of Skilled Workers, Technology Up-gradation/ Technological Workers, Technology Up-gradation/ Technological
Constraints and MarketingConstraints and Marketing
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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.
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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.
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As suggested in the policy a linkage between R & D As suggested in the policy a linkage between R & D
organization/ Universities/ SMEs will not only help organization/ Universities/ SMEs will not only help
SMES but LEs also in solving the problems related to SMES but LEs also in solving the problems related to
HRD and Technology up gradation. In this contest HRD and Technology up gradation. In this contest
example of PCSIR may be quoted, which is a role example of PCSIR may be quoted, which is a role
model for Technology Development /up gradation model for Technology Development /up gradation
and Human Resource Development for SMEs. and Human Resource Development for SMEs.
Human Resource Development & Technology Human Resource Development & Technology Transfer/Up-gradation Through R& D Transfer/Up-gradation Through R& D
OrganizationsOrganizations
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Background &Background & Objectives of PCSIRObjectives of PCSIR
Pakistan Council of Scientific of Industrial Research (PCSIR), a Pakistan Council of Scientific of Industrial Research (PCSIR), a premier R&D organization of the country, was established in 1953premier R&D organization of the country, was established in 1953
ObjectivesObjectives
• Optimum utilization of indigenous raw material & resources.Optimum utilization of indigenous raw material & resources.• Development of technologies based on local resources from Development of technologies based on local resources from
bench to pilot plant scale and technology transfer, for industrial bench to pilot plant scale and technology transfer, for industrial exploitation leading to import substitution and export exploitation leading to import substitution and export enhancement.enhancement.
• To conduct R&D on the problems faced by the industrial sector To conduct R&D on the problems faced by the industrial sector and extend test / analysis / calibration services to users.and extend test / analysis / calibration services to users.
• To undertake cooperative research with local and foreign R&D To undertake cooperative research with local and foreign R&D organizations and industries on the projects of national/mutual organizations and industries on the projects of national/mutual interest.interest.
• Human resource / skill development for the organization as Human resource / skill development for the organization as well as to feed the industrial sector.well as to feed the industrial sector.
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Human Resource Development by PCSIR:Human Resource Development by PCSIR: Technical Training Centres of PCSIR giving 03-04 years Technical Training Centres of PCSIR giving 03-04 years
diploma course of Associate Engineering in Precision diploma course of Associate Engineering in Precision Mechanics, Instrumentation Technology and Dies & Mechanics, Instrumentation Technology and Dies & MouldsMoulds
Karachi & Quetta.Karachi & Quetta.
Three others are almost in the final stage of completion. Three others are almost in the final stage of completion.
The Dimension Stone Evaluation Centre PCSIR The Dimension Stone Evaluation Centre PCSIR
PeshawarPeshawar
Contd.
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The Institute of Industrial Electronics Engineering The Institute of Industrial Electronics Engineering (IIEE) of PCSIR at Karachi producing graduate (IIEE) of PCSIR at Karachi producing graduate engineers in Industrial Electronics. engineers in Industrial Electronics.
PCSIR is also providing training to the workers and PCSIR is also providing training to the workers and qualified personals on sophisticated instruments as well qualified personals on sophisticated instruments as well as on management systems for the industrial sectors of:as on management systems for the industrial sectors of:
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
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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
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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.
After selection of technology the following steps for the production of the required commodity will be taken
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Methods for the transfer of technology to the Methods for the transfer of technology to the client.client.
1.1. Total Transfer of Know How of the Technology:Total Transfer of Know How of the Technology:
PCSIR KLC helps the client in the following PCSIR KLC helps the client in the following respect:respect:● Selection of space/building, construction Selection of space/building, construction
of of building building ● Selection of machinery & equipment Selection of machinery & equipment ● Procurement of raw materialProcurement of raw material● Selection of manpowerSelection of manpower● Training in production & quality control Training in production & quality control
of the of the productproduct
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2.2. Production at PCSIR Site by the PCSIR Production at PCSIR Site by the PCSIR Scientists: Scientists:
PCSIR responsibilitiesPCSIR responsibilities
The production, either at pilot scale or at industrial The production, either at pilot scale or at industrial scalescale
Setting up of the plant, purchase of raw material Setting up of the plant, purchase of raw material Quality control Quality control
The client will market the productThe client will market the product
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Production in TBIC:Production in TBIC:
The PCSIR providesThe PCSIR provides
• Space/building for the productionSpace/building for the production• One or two scientists for the supervision of work at the plantOne or two scientists for the supervision of work at the plant• Help in selection of machinery & equipmentHelp in selection of machinery & equipment• Help in procurement of raw materialHelp in procurement of raw material• Quality control of the productQuality control of the product
The responsibility of Client/SMEThe responsibility of Client/SME
• Procurement of machinery/equipment and raw materialProcurement of machinery/equipment and raw material• Fabrication of plant under the supervision of PCSIR scientistsFabrication of plant under the supervision of PCSIR scientists• Production under the supervision of PCSIR’s scientistsProduction under the supervision of PCSIR’s scientists• Marketing of the product.Marketing of the product.
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Role of PCISR in Quality Control of Role of PCISR in Quality Control of Commodities Produced by SMEsCommodities Produced by SMEs
PCSIR Provide analytical services to SMEs for their PCSIR Provide analytical services to SMEs for their products in following areas.products in following areas.
Chemicals Chemicals Engineering GoodsEngineering GoodsCeramicsCeramicsPCSIR also PCSIR also
provides calibration provides calibration services of SMEsservices of SMEs
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Many SMEs do not get patent for their invention due to Many SMEs do not get patent for their invention due to lack of awareness about rules and regulations of patent lack of awareness about rules and regulations of patent office.office. Due to this reason both economically and academically Due to this reason both economically and academically the benefits for novel patent and design is not been the benefits for novel patent and design is not been obtained and a lot of innovative talent of our country has obtained and a lot of innovative talent of our country has been wasted. been wasted. The Ministry of Science and Technology funded the The Ministry of Science and Technology funded the project and the patent advisory cell has been set up in project and the patent advisory cell has been set up in PCSIR Labs. Complex, Karachi. The established Patent PCSIR Labs. Complex, Karachi. The established Patent Advisory Cell is providing a complete protection to the Advisory Cell is providing a complete protection to the process/ technologies developed in Pakistan. The cell process/ technologies developed in Pakistan. The cell helps the SMEs start from writing the patent up till its helps the SMEs start from writing the patent up till its registration. registration.
Role of PCSIR in Improving and Enforcing Role of PCSIR in Improving and Enforcing Intellectual Property Rights for SMEsIntellectual Property Rights for SMEs
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CONCLUSION CONCLUSION Recommencing the discussion above, the possible strategy Recommencing the discussion above, the possible strategy for productivity improvement in Pakistan, through SMEs, for productivity improvement in Pakistan, through SMEs, has to follow a four step approach. has to follow a four step approach. A conducive regulatory environment, balanced A conducive regulatory environment, balanced regulatory burden, provision of adequate regulatory burden, provision of adequate infrastructure, infrastructure, supporting attitude from provincial supporting attitude from provincial and federal and federal government levels.government levels. Short to long-term funding and access to capital Short to long-term funding and access to capital Pakistani society is an employee society, to shift it Pakistani society is an employee society, to shift it
to an entrepreneurship society we have to bring to an entrepreneurship society we have to bring reforms by taking revolutionary steps in our reforms by taking revolutionary steps in our education education system and have to fascinate our system and have to fascinate our educated youth towards educated youth towards entrepreneurship.entrepreneurship. Quality training of workers and up gradation of Quality training of workers and up gradation of technologiestechnologies
