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, Karachi75280.
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 PAKISTAN2005:

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
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
-
-
-
Federal Bureau Less than 10
of Statistics
State Bank of
Pakistan
Total Assets of
Rs. 100 M
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
5
SME 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
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
Total
SMEs
units
SMEs
employing
1-5 Persons
SMEs
employing
6-10
Persons
2.96
million
(100%)
2.85 million
(96.6%)
0.079
million
(2.67%)
SMEs
employing
11-50
Persons
SMEs
employing
over 50
Persons
26,000(0.87 1617(0.054
%)
%)
8
Distribution of Female Workers Force
Total female
employees
Selfemployed
/proprietor
Unpaid
family helper
Paid
employed
0.46 million
15%
30%
55%
9
SMEs’ Share in Sub-Sector.
S.#
Sub-sectors
Percentage Share of
SMEs
1
2
3
Cotton Weaving
Other Textiles
Metal Products
13%
6%
7%
4
5
Carpets
Art Silk
4%
5%
6
7
Grain Milling
Jewelry
16%
4%
8
9
Wood & Furniture
Others
10%
35%
10
Economic Importance of SMEs.
Employment
GDP
Value
Added
78% (6.8
million)
40%
35%
Export Earnings
25%
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 longterm 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
Policies/ inadequate infrastructure
Government

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
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.
in
all
federal monitoring and dispute
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
sector boards of the technical training institutes.
private
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
Peshawar
Stone
Evaluation
Centre
PCSIR
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
Polymer
Food
Ceramics
Pharmaceutical
Leather
Fuel.





Engineering Services
Calibration
Environment
Material Science
Agriculture (Including
Tissue Culture)
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
Food
Pharmaceutical
Polymer
Material Science
Leather
Fuel




Chemicals
Engineering Goods
Ceramics
PCSIR also
provides calibration
services of SMEs
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
33
technologies
Contd.
34