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Status of SMEs in Pakistan and its Possible Uplift by PCSIRBy Dr. Nighat Afza Director Planning & Development PCSIR Laboratories Complex, Shahrah-e- Dr.

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Presentation on theme: "Status of SMEs in Pakistan and its Possible Uplift by PCSIRBy Dr. Nighat Afza Director Planning & Development PCSIR Laboratories Complex, Shahrah-e- Dr."— Presentation transcript:

1 Status of SMEs in Pakistan and its Possible Uplift by PCSIRBy Dr. Nighat Afza Director Planning & Development PCSIR Laboratories Complex, Shahrah-e- Dr. Salimuzzaman Siddiqui, off University Road, Karachi Office: Fax: Cell:

2 2  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.

3 3   Small & Medium Enterprise Development Authority (SMEDA) was formed In 1998 to provide support to SMEs in Pakistan through: 1. 1.The creation of a conducive and enabling regulatory environment Development of industrial clusters The provision of Business Development Services to SMEs in all areas of business management.

4 4 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%

5 5 DEFINITION OF SMES ACROSS THE BOARD IN PAKISTAN INSTITUTIONSMALL ENTREPRENEURSMEDIUM ENTREPRENEURS No. of Employees AssetsNo. of Employees Assets SMEDA10-35Productive Assets Rs M 36-99Productive Assets Rs M SME Bank-Total Assets of Rs 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

6 6 SME definition as suggested in SME policy Enterprise Category Employment SizePaid Up CapitalAnnual Sales Small & Medium Enterprise (SME) Up to 250 Up to Rs.25 Million Up to Rs.250 Million

7 7 Province wise Distribution of SMEs Name of area SMEs unit Pakistan 2.96 million Punjab 65.26% Sindh 17.82% NWFP 14.21% Balochistan2.09%

8 8 Total SMEs units SMEs employing 1-5 Persons SMEs employing 6-10 Persons SMEs employing Persons SMEs employing over 50 Persons 2.96 million (100%) 2.85 million (96.6%) million (2.67%) 26,000(0.87 %) 1617(0.054 %) Distribution of SMEs According to the No. of Employees

9 9 Total female employees Self- employed /proprietor Unpaid family helper Paid employed 0.46 million15%30%55% Distribution of Female Workers Force

10 10 SMEs’ Share in Sub-Sector. S.#Sub-sectors Percentage Share of SMEs 1Cotton Weaving13% 2Other Textiles6% 3Metal Products7% 4Carpets4% 5Art Silk5% 6Grain Milling16% 7Jewelry4% 8Wood & Furniture10% 9Others35%

11 11 Economic Importance of SMEs. EmploymentGDP Value Added Export Earnings 78% (6.8 million) 40%35%25%

12 12 SME Policy of Pakistan (SME policy 2007) The GoP constituted a Task Force for SME Policy Development in January The GoP constituted a Task Force for SME Policy Development in January The policy approved by the Federal Cabinet of Pakistan on January 17, The policy approved by the Federal Cabinet of Pakistan on January 17, 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. 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.

13 13 Problems Faced by SMEs of Pakistan The Problems addressed by SME Policy Business Environment/Adverse Government Policies/ inadequate infrastructure Business Environment/Adverse Government Policies/ inadequate infrastructure Access to finance & related services/ financing barriers and disincentives Access to finance & related services/ financing barriers and disincentives Entrepreneurship Development Entrepreneurship Development Human Resource Development /shortage of skilled workers, Technology Up-gradation/ Technological constraints and Marketing Human Resource Development /shortage of skilled workers, Technology Up-gradation/ Technological constraints and Marketing

14 14 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.

15 15 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.

16 16 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.

17 17 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.

18 18 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 Workers, Technology Up-gradation/ Technological Constraints and Marketing

19 19 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.

20 20 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.

21 21 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. 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. Human Resource Development & Technology Transfer/Up-gradation Through R& D Organizations

22 22 Background &Objectives of PCSIR 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. 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. 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 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. 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 well as to feed the industrial sector. Human resource / skill development for the organization as well as to feed the industrial sector.

23 23 Human Resource Development by PCSIR: Technical Training Centres of PCSIR giving years diploma course of Associate Engineering in Precision Mechanics, Instrumentation Technology and Dies & Moulds Technical Training Centres of PCSIR giving years diploma course of Associate Engineering in Precision Mechanics, Instrumentation Technology and Dies & Moulds 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 Peshawar The Dimension Stone Evaluation Centre PCSIR Peshawar Contd.

24 24 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 Textile Polymer Polymer Food Food Ceramics Ceramics Pharmaceutical Pharmaceutical Leather Leather Fuel. Fuel. Engineering Services Engineering Services Calibration Calibration Environment Environment Material Science Material Science Agriculture (Including Tissue Culture ) Agriculture (Including Tissue Culture )

25 25 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

26 26  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

27 27 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

28 28 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

29 29 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

30 30 Production in TBIC: The PCSIR provides Space/building for the production Space/building for the production One or two scientists for the supervision of work at the plant One or two scientists for the supervision of work at the plant Help in selection of machinery & equipment Help in selection of machinery & equipment Help in procurement of raw material Help in procurement of raw material Quality control of the product Quality control of the product The responsibility of Client/SME Procurement of machinery/equipment and raw material Procurement of machinery/equipment and raw material Fabrication of plant under the supervision of PCSIR scientists Fabrication of plant under the supervision of PCSIR scientists Production under the supervision of PCSIR’s scientists Production under the supervision of PCSIR’s scientists Marketing of the product. Marketing of the product.

31 31 Role of PCISR in Quality Control of Commodities Produced by SMEs PCSIR Provide analytical services to SMEs for their products in following areas. Textile Textile Food Food Pharmaceutical Pharmaceutical Polymer Polymer Material Science Material Science Leather Leather Fuel Fuel Chemicals Chemicals Engineering Goods Engineering Goods Ceramics Ceramics PCSIR also provides calibration services of SMEs PCSIR also provides calibration services of SMEs

32 32 Many SMEs do not get patent for their invention due to lack of awareness about rules and regulations of patent office. 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. 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 registration. Role of PCSIR in Improving and Enforcing Intellectual Property Rights for SMEs

33 33 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. 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 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. 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 Quality training of workers and up gradation of technologies Contd.

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