What role are SMEs playing in the developing countries of the world and what more they can do?
Small and Medium Enterprises (SMEs) are considered to be one of the principal driving forces in the economic development of any country. Anecdotal evidence suggests that despite the decline in the large sector growth rate worldwide, SME sector has managed to grow; since they are relatively flexible and can adapt quickly to the changing market demand and supply situations. Their ability to generate employment and to diversify economic activity can make a significant contribution to exports and trade, create employment as well as alleviate poverty. SMEs bring more diversity to economy and facilitate technological innovation and provide significant opportunities for the development of new ideas and skills.

Which areas of SMEs need to be more focused in policy in Pakistan?
Despite their economic importance, the SMEs in Pakistan suffer from a variety of weaknesses, which have constrained their ability to adjust to the economic liberalization measures introduced by the Government of Pakistan and to take full advantage of rapidly expanding markets of the world. These weaknesses include a relatively narrow base of the formal SME sector and its focus on low value-added products; the absence of an effective business information infrastructure; the inadequacy of the existing support services for entrepreneurship development and promotion; and a relatively low level of integration in global value chains.
The large-scale industry in Pakistan has its focus on large markets and is supported by complex regulatory support systems. Small and Medium Enterprises, on the contrary, suffer from low productivity, high closure rate and small net worth. Therefore, their industrial base must be strengthened to improve the differences which exist between them and large enterprises through sustained growth, so that these SMEs can later graduate into the formal sector.

Do you think that ICT can help SMEs to play a better role in socio-economic development of any developing country? If so, in which areas ICTs have the potential?
Yes, as explained earlier SME sector is directly linked to the socio-economic development of any country and ICT can help SMEs a lot to play more effective role in this regard especially in the developing ones. However, the need of the hour is how to bridge the digital divide.
In the developing countries, SMEs can play a vital role for the augmentation of GDP if resources available to them are utilised at their best. For the utilisation of such resources and developing futuristic plans, ICT can bring the real time value addition to the SMEs in terms of bringing ease to their resource planning and providing certain authentic information and statistics for making crucial business decisions. ICT can enable and empower this sector with the right technology tools to contribute more, increase their own productivity and be more competitive.  

ICT can bring socio-economic alleviation for the SMEs in developing countries by providing certain ways of market-research and making their existence available on the Internet. This will not only help to boost their business proposition but also bring benefits to the growth of cyber economy of the SMEs of developing countries.

How much support has been provided so far in Pakistan by ICT in improving and encouraging SMEs? Please provide some specific examples.
ICT has been identified as one of the key drivers of the economy by Government of Pakistan. In last six years, the government has undertaken several initiatives to increase computer literacy to attract international investments and equip Pakistan with an
IT savvy workforce pool. Several forward looking private companies have also taken the lead and are working in conjunction with the Government’s charter of bridging the digital divide.

Government is following a compre-hensive programme to reduce the broad band rates for IT traffic, comprehensive awareness programme among the stakeholders, spreading outreach on Internet connectivity, etc. Development of Industrial Information Network (IIN) is another initiative by government which is the first B2B portal of the country.

In Pakistan, which aspects of SME policy play remarkable role in the country’s socio-economic development?
SMEs constitute over 90% of businesses (by number) in Pakistan, all of which function within the private sector. Many of the SMEs operate in the informal sector which is undocumented.

SMEs represent a significant component of Pakistan’s socio-economic development in terms of both value addition and employment generation. As they predominantly provide employment to lower income groups, they are also considered an important vehicle for poverty reduction. SMEs, in particular, play a key role in the manufacturing sector; providing 80% of the total employment, contributing over 30% to GDP, and generating one-fourth of the sector’s export earnings. The following table shows the importance of SMEs as major providers of employment and their increasing contribution towards manufacturing value added.

Could you please provide us a brief about the background of SMEDA in Pakistan?
SMEDA was formed in October 1998, through an Executive Order from the Prime Minister’s Secretariat, motivated by the need to take pro-active measures for boosting exports on one hand, as well as stimulating investments in enterprises that required low capital but had high employment opportunities. Small and Medium Enterprises (SMEs), for the first time, thus attracted the attention of the Government as potential source of achieving both the objectives. The mandate given to SMEDA’s Board was the following:

•    To be the apex policy-making body for small and medium enterprises
•    To provide and facilitate support services to SMEs
•    To serve as the key resource base for SMEs in Pakistan
•    To serve as the voice of small business within the Government
•    Kick start the economy through aggressive launch of Small and Medium Enterprises support programme
•    Generate massive employment opportunities at low cost

What areas are being mainly emphasized as a part of SMEDA activities and how are these areas being identified?
SMEDA is the flagship organisation of Pakistan which is providing the necessary services to help SMEs overcome the weaknesses that are endogenous to their very nature. It is an autonomous body working under the umbrella of the Ministry of Industries and Production and contributes towards the growth and development of SMEs in Pakistan through:

(i)    the creation of a conducive and enabling regulatory environment;
(ii)    development of industrial clusters;
(iii)     the provision of Business Development Services to SMEs in all areas of business management.

Adhering to a clear mandate and a logical path to achieve quantitatively verifiable targets, SMEDA carries out comprehensive analyses of international trends, national policies and other macroeconomic factors affecting SMEs in Pakistan for a gradual progress towards the creation of a favorable business environment for its key clients – the SMEs of Pakistan. At the same time, we also interact with the SMEs working in industrial sectors such as Agriculture, Fisheries, Textiles, Handloom Weaving, Transport, Leather, Marble & Granite, Carpets and Light Engineering. This interaction takes place at the individual as well as collective level to provide pro-active and responsive financial, technical, management and marketing services to SMEs.

At the collective level SMEDA addresses the problems and needs of SMEs in the form of an industrial cluster – a concentration of largely homogenous enterprises within a certain geographical area. SMEDA interacts with the stakeholders operating in such clusters on a regular basis and collects first hand information about their problems and needs. During this interaction, the issues are prioritised and the important problems are selected for detailed working through which the projects/programmes are identified. SME support through cluster development programmeme is provided on two fronts: Regulations and policy level support and institutional and networking support

In the policy level support, problems related to any Government department or Government policy/regulation are studied and, if found valid, are advocated with the concerned authorities. At the institutional level, SMEDA provides support to SMEs by creating networking amongst the concerned stakeholders or by directly starting development projects in the clusters. Such projects may include establishing a training institute, building a common facility centre, building a model plant with state-of-the-art technology for SMEs to emulate through reverse engineering. These projects also include upgrading technology in a particular industrial sector and starting a programme-lending scheme for this purpose in collaboration with the financial institutions.

Up to now, SMEDA has been involved in cluster development projects in the areas of Boat Modification in Marine Fishery Sector, Credit for Auto Vendors, Carpet Weaving, Marble & Granite, Dates and Apples Processing, Wooden Furniture, Leather Garments, Ceramic Kilns, Cotton Ginning, and Glass Bangles Cluster.

Number of the important cluster development projects undertaken by SMEDA is in sectors like: Textile/Apparel, Horticulture/Fruits and Vegetable, Fisheries, Granite & Marble, Gems, Agriculture. The third area of SMEDA’s functioning is the provision of Business Development Services to SMEs. For this purpose we have set up Help Desks in all four of our regional offices where any SME can simply walk in and obtain over the counter products such as Project Briefs, Pre-feasibility Studies and Regulatory Procedures, along with advice on specific problems. SMEDA Help Desk Services include: Assistance in Raising Finance, Financial Advice, Project Identification, Business Plan Development, Technical Advice, Marketing Advice (Branding, Labeling, Packaging, Distribution, Promotion, etc.), Company Incorporation, Export Registration, & Regulatory Advice, Sales Tax, Custom Duty, Excise Duty, etc, Electronic Commerce Support, Business Matchmaking, Accounting and Bookkeeping Services, Information Services (Library, Databases, Project Briefs, Pre-feasibility Studies, Business Guidebooks).

As a part of its Business Development Services, SMEDA also provides Human Resource Training services by conducting extensive training need analysis of different SME clusters. SMEDA has so far conducted more than 550 training courses and workshops focusing on developing sector specific skills.
SMEDA is aimed to become a model of public-private partnership for better facilitation of the small and medium enterprises in Pakistan through the creation of a more equitable, transparent and conducive regulatory environment.

While we frequently focus on globalisation, what viewpoints need to be modified to make the SMEs more effective and active in socio-economic development, locally as well as globally?
Promotion of SMEs entails enhancement of the competitiveness of the economy and generation of additional employment. A thriving SME sector has long been recognized as one of the key characteristics of any prosperous and growing economy.

However, there has been concern that the SME sector has not been able to realize its full potential. The SMEs continue to suffer from a number of weaknesses, which hamper their ability to take full advantage of the opening of economy and the increasingly accessible world markets. The areas of constraints are normally identified as labour, taxation, trade capacity, finance and credit availability. (Glocal ‘Global information but local wisdom’) is the solution for socio-economic development.

What is your viewpoint regarding the extent of SME led economic growth in Pakistan in comparison to other South Asian countries?
It is not far from reality to call Pakistan’s Economy as Economy of the SMEs. SMEs constitute nearly 93% of all the enterprises in Pakistan; employ 78% of the non-agricultural labor force; and their share in the annual GDP is 35%, approximately. However, unlike large enterprises in the formal sector, a small and medium enterprise is constrained by financial and other resources. This inherent characteristic of an SME makes it imperative that there should be a mechanism through which it may get support in different functions of business including technical up-gradation, marketing, financial and human resource training and development.
SME development has the potential to broaden Pakistan’s export base both in terms of product range and geographical spread. SMEs fit in this scheme since they can produce non-traditional items for export into new markets where quality standards are not critical and volumes are low. The large scale industry in Pakistan has its focus on large markets where they avail quota opportunities and are supported by complex regulatory support systems.

What is the role of technology upgradation in entrepreneurship development?
Technology is a defining factor for any country’s economic growth. World economy is now no longer restricted by geographical barriers and only by manufacturing high quality cost-effective products can make industry compete globally.

Assimilation of technology upgrades to industry help expedite value-addition while enhancing productivity. Mass production of high-value products will ultimately bootstrap the economy to increase the Gross Domestic Product (GDP). Technology upgrades  can take them to the next development curve.
Technology up gradation refers to rapid induction and assimilation of technology which causes a quantum improvement of an existing level. Technology Upgradation and Skills Development Company (TUSDEC) has been established by Government of Pakistan to emulate successful experiences of South East Asia in Technology Upgradation and Skill Development. TUSDEC upgradation initiatives are aimed to cause measurable jumps from an existing technology/time curve to a higher curve thus closing the gap between Pakistan and developed countries. This means improved productivity, quality, skill, environmental conditions including the work environment in industry.

In India, the introduction of Technology Upgradation Fund Scheme (TUFS) and the establishment of Tools, Dies and Moulds (TDM) centres have given impetus to the pace of industrial activity especially in the engineering sector. There are 126 TDMs across India, contributing to industrial growth while in Portugal, similar steps were taken for the development of its engineering industry.

Do you think there is need of linking ICTs with entrepreneurship development to eradicate the problem of unemployment in the developing nations with large population?
Yes, there is a dire need of bringing ICT tools in practice in entrepreneurship development as it brings the awareness among the young potential entrepreneurs to have their own business and get them employed as well as create additional employment.

In your point of view what should be the role of the government to develop SMEs with the help of ICT?
Government of Pakistan has been doing a lot however still lot more needs to be done. Creating awareness among the SMEs about ICT benefits in their day to day working as well as business planning is an uphill task. SMEs are technology shy and their adoption to ICT tools is also slow. Government should take on board all the stakeholders like equipment manufacturers/suppliers, ISPs, etc and announce a comprehensive ICT package for SMEs where they could be getting necessary training, equipment and technology on attractive rates. Once hand full of SMEs know the benefit of going digital, it would be easy for rest of them to get convinced.