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MGT601 - SME Management - Lecture Handout 12

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SHORT AND MEDIUM TERM ISSUES FOR SME POLICY FORMULATION – II

This lecture is a continuation of the lectures No 9&10 and 11 dealing with the short term, medium term and long term issues. These issues are pre-requisites for forming a comprehensive SME policy.

Human Resource Development

One of the major challenges that SME have to face is the emergence of the knowledge-based economy. People must continue to innovate, change and upgrade. There is a need to nurture the entrepreneurial spirit and skill development for adopting innovative technologies. The low-literacy level of our population poses an immense challenge to our competitiveness. Yet, it is a fact of life, which we will not overcome, in the short run. It is therefore imperative that we seek intelligent short and medium-term solutions to bridge the literacy gap.

One aspect of the Government’s strategy is to strengthen non-formal skills and entrepreneurship development, to better prepare workers for employment and to improve population’s general capacity of self-employment. But are there other ways by which we can enhance the skills of our workforce in such a way that we need not despair when facing external competition?

The government has established a number of institutions that impart training and skill development. These institutions, Pakistan Institute of Management Science (PIMS), Provincial Vocational Training Councils Authority, Technical Training and Vocational Authority (TEVTA) Government Universities and various other support institutions have however remained rather passive regarding the shaping of human resource development for SME.

A frequent complaint is the mismatch of the output of our human resource development institutions with the demand of SME. There are also only limited options for the training of the middle management. Low skills of workforce, inadequate vocational training facilities yet remain out of the scope of the reforms agenda. Are there any mechanisms by which we may achieve effective consultation between supply and demand sides of our vocational training system so as to attain a maximum benefit for our economy?

Entrepreneurship does not breed in a vacuum. For a healthy, growing business environment, it is necessary to foster entrepreneurial culture in Pakistan, which goes beyond the inclination to trade in goods. Entrepreneurial skill development programs can boost this.

Technology Transfer and Up-Gradation

Developing SME based on local skills/resources has now been rightly recognized as a means of promoting economic growth and a very effective tool for providing productive employment in a country. But up to date technology also plays a vital role in the vertical integration of the firms, moving them up the ladder in terms of firm productivity enhancement.

In our country, growth oriented export firms still have problems sourcing quality inputs due to the lack of a network of reliable suppliers. This adds to their transaction costs. Likewise, the SME are not large enough to furnish sufficient demand to be an incentive for a big high quality input supplier.

The government in its efforts to facilitate technology transfer for indigenous SME initiated a program with the United Nations Development Program (UNDP) to promote Technical Cooperation between Developing Countries (TCDC)22. The scope of Phase 1 remained narrow and focused on capacity building of various public sector organizations through training programs. The intended final beneficiary, SME, has not yet been able to benefit from the program.

In its other efforts, the government used to offer cash grants23 for ISO certification to those enterprises that choose to be growth oriented internationalized SME. The government also set up a National Productivity Organization as a resource center and a research institute to enhance industrial and labor productivity in Pakistan.

Similarly, other organizations like Pakistan Council for Scientific Industrial Research (PCSIR), Pakistan Industrial Technical Assistance Center (PITAC), Ministry of Science and Technology (MOST) etc. established to facilitate industrial growth still need to adopt an active approach to provide their services to SME in an effective manner.

Major technology up-gradation obstacles include:

  • Inability to acquire sophisticated testing equipment and R&D facilities. (SME see it as a financial problem).
  • Lack of skills/experience to operate high-tech machinery.
  • Insufficient information on technological cooperation opportunities.
  • Lack information on target market quality requirements and lack of knowledge on how to achieve these quality levels.
  • Absence of appropriate metrology and testing equipment and related infrastructure as common facility centers.

References

  1. SME Issues Paper by SMEDA (policy planning & strategy department)
  2. World Bank survey (Gallop)
  3. Financial issues &SMEs (paper read by Dr Ishrat Hussain)
  4. Small Entrepreneurs in developing countries By Dr Asghar S. Nasir

Book Recommended

Small Entrepreneurs in developing countries By Dr Asghar S. Nasir

Key Terms

  1. ISO certification (International Standards organization certification like ISO 9000 Quality certification)
  2. R&D (Research and Development)
  3. SBP (State Bank of Pakistan)

Related Content: MGT601 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of SME Management