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MGT601 - SME Management - Lecture Handout 09

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ISSUES AND POLICY DEVELOPMENT FOR SME – I

This lecture is concerned with the different issue and other obstacles faced by the policy makers while forming an SME policy for Pakistan. This includes both long term and short term issues.

Issues and Policy Development

Pakistan’s economy is an economy of SME. Policies in the past have given a general perspective, direction and defining broad parameters of activity within the macro environment framework, but efforts have focused on large enterprises, neglecting SME, which are at the heart of our economy. Our SME suffers from variety of weaknesses, which have constrained their ability to adjust to the economic liberalization measures introduced and to take full advantage of the rapidly expanding markets of the world. But SME importance and contribution in the economic activity suggests that there is a significant potential to enhance their growth through appropriate regulations and promotion.

While SME are mentioned in some of our socio-economic strategies and policy documents, measures are not specified and prioritized for us to be able to speak of any coherent SME policy or approach. The SME Sector Development Program seeks to improve the situation by inviting all concerned stakeholders to draft Pakistan’s future SME policy.

SME promotion is an important issue for many government departments and central offices. However, there is an existing lack of coordination and regular information exchange mechanism among institutions which constraints their ability to deliver in the SME development process. The responsibility for facilitating the SME policy development lies with SMEDA, attached to the Ministry of Industry and Production. One of the major reasons for the lack of coordination is that SMEDA has not been provided with a mechanism to initiate, coordinate, monitor and evaluate initiatives of SME development outside of its own scope of activities. Therefore, cross departmental and stakeholder consultations, resulting in the preparation of our national SME policy are our key to success. A network of institutions stimulating the growth of SME is also being proposed. The issues highlighted in this lecture give a retrospective view of things while giving a current picture of the SME business environment in Pakistan. There are issues we may only solve in the long term and which therefore are beyond our current scope. And there are issues we may solve in the short to medium term. These issues should become the focus of our SME policy. Short to medium term issues revolve around three major topics:

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MGT601 - SME Management - Lecture Handout 05

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SMALL ENTREPRENEUR IN PAKISTAN AND ROLE OF SME IN GLOBAL AND REGIONAL LEVEL

This lecture will introduce the small entrepreneur in Pakistan the activities of SMEs in global and regional level. It will also reveal the role of SMEs in a developing economy.

Salient Features of Small Entrepreneurs in Pakistan

  1. Single Owner Entrepreneur
    He works with his own hands, combines the entrepreneur function of initiating the business making investments, taking decisions and performing managerial functions.
  2. Age Pattern
    The mean age of entrepreneur was found to be 42 years and of their enterprises 12 years. It is comparable to the Korean age pattern (46).
  3. Educational Level
    Differing from industry to industry 60% have school education and 30% have college or better education only 10% have professional or graduation level.
  4. Social Background
    Caste played an important role in certain industries and on the other hand heritage is dominant. But overall it is much diversified.
  5. Sizes and Investment
    Majority started in a small way with less than 10 workers and 1/2 to 2/3 of the firms started with less than 50,000 investments.
  6. Growth
    The growth was fast in case of small firms than in large firms.
  7. Profitability
    Rate of profit is higher in case of small industries in comparison with the large industries.

  8. Read more: MGT601 - SME Management - Lecture Handout 05