Sme Development Plan

11

SME SME DEVELOPMENT DEVELOPMENT

PLANPLAN

22

33

PUNJAB’s ECONOMIC VISION

CREATING A BETTER QUALITY OF LIFE FOR THE CITIZENS OF PUNJAB BY: -

1. GENERATING GROWTH IN THE ECONOMY TO CREATE EMPLOYMENT.

2. UPGRADING TECHNOLOGY TO ENHANCE PROFITABILITY.

3. DIVERSIFICATION FROM AGRICULTURE TOWARDS SERVICES & INDUSTRY FOR GREATER ECONOMIC

STABILITY. 4. IMPROVING THE INFRASTRUCTURE NECESSARY FOR

ECONOMIC UPLIFT.

44

PROVINCIAL POLICY

1. IT HAS BEEN PROVEN THAT THE PUBLIC SECTOR IS INEFFICIENT AT DOING BUSINESS THEREFORE BUSINESS IS BEST LEFT TO THE PRIVATE SECTOR.

2. THE PUBLIC SECTOR SHOULD LIMIT ITS ROLE TO CREATING AN ENABLING ENVIRONMENT FOR THE PRIVATE SECTOR TO GROW AND PROSPER.

3. THE RESULTING ECONOMIC ACTIVITY WILL ACHIEVE THE GOVERNMENT’S OBJECTIVES OF EMPLOYMENT GENERATION, INCREASED INCOMES AND POVERTY ALLEVIATION.

55

MISSION

“PROVIDE PRACTICAL SUPPORT AND ADVOCATE THE CASE

FOR GROWTH OF COMPETITIVE INDUSTRIES TO ACHIEVE THE FOLLOWING BENEFITS: -

a. EMPLOYMENT GENERATION IN INDUSTRIAL, SERVICES

AND AGRO SECTORS.

b. SUSTAINED GROWTH IN PRIVATE SECTOR PROFITS.

c. SUSTAINED GROWTH IN EXPORT REVENUES.

d. SUSTAINED GROWTH IN GOVERNMENT REVENUES.

66

FOR THE PURPOSE OF ANALYSIS, INDUSTRIES WHICH HAVE SIMILAR PROBLEMS HAVE BEEN GROUPED AS UNDER: -

1. LARGE & MEDIUM INDUSTRY

(ANNUAL TURNOVER RS.100.0 MILLION AND ABOVE)

2. SMALL & COTTAGE INDUSTRY

(ANNUAL TURNOVER BELOW RS.100.00 MILLION)

77

SITUATIONAL ANALYSIS LARGE AND MEDIUM INDUSTRY

Pros

1. The Managements are smart & knowledgeable.

2. Have good access to finances.

3. Have carried out BMR and are introducing new technologies.

4. Are aggressively marketing their products.

Cons

1. Limited role in development of Policy & Tariff/Tax Regimes.

2. Energy being provided is inefficient & costly.

3. Availability of skilled managers and workers poor.

4. Infrastructure (Estates & Communication) poor.

5. Lack of local production of chemicals, dyes and accessories adding 10% to costs.

6. Modern units are not labour intensive.

7. Investment per worker is high. (Rs.300,000/- per worker).

88

GROWTH OF COMPETITIVE LARGE & MEDIUM INDUSTRY

PROVIDE PRACTICAL SUPPORT FOR THE GROWTH OF LARGE AND MEDIUM INDUSTRY THROUGH: -

1. WELL DEVELOPED AND MODERN INFRASTRUCTURE. Link page 9

2. HUMAN RESOURCE DEVELOPMENT. Link page 11

3. EFFICIENT AND CHEAP SERVICES. Link page 14

99

WELL DEVELOPED AND WELL DEVELOPED AND MODERN INFRASTRUCTUREMODERN INFRASTRUCTURE

1010

Industrial Infrastructure.

a. The Government’s policy of abolishing regulating regimes has led to a mushrooming of Industries in and around cities and towns. Resultantly these scattered units cannot be provided services efficiently nor can they dispose off their effluents in a complaint manner.

b. There is a need to:-

i. Draft a law directing all industry to be established in an Industrial Estate.

ii. Declare areas where industrial units have informally clustered as Industrial Estates and provide infrastructure for such estates.

iii. Upgrade existing notified Industrial Estates.iv. Master Plan & establish new Industrial Estates and Commerce

Centers near all Cities, Tehsil Head-quarters in Punjab.v. Develop a plan for supportive communication network. (Roads, Railways,

Telecommunication)

c. Invite the Private Sector to establish and develop Industrial Estates.

1111

HUMAN RESOURCE HUMAN RESOURCE DEVELOPMENTDEVELOPMENT

1212

Establishment of Polytechnics Responsive to Industrial Needs.

Capable Technicians are the back bone of any industry and are essential if industrial competitiveness is to be achieved. Presently the number of Polytechnics (26 only) are insufficient to meet the growing needs of industry i.e. in quantity, quality and equipped with industry responsive skills. This shall be achieved by deemphasizing Commercial Colleges and establishing 62 new Polytechnics. To meet the emergent needs TEVTA will examine the possibility of notifying selected Industrial units as Polytechnics and promoting Apprenticeship in Industry.

1313

Expand Vocational Training Institutes (VTIs) from 70 to 500 VTIs.

As industrial growth takes place, the need for skilled workers is multiplying e.g. with the lifting of textile quotas the textile industry is expanding. It is, however, facing an acute shortage of expert stitchers. These needs have to be met by a network of VTIs sited near industrial clusters and responding to industrial needs. To respond immediately to industry needs, selected industries will be declared VTIs, provided a budget to initiate instructions & practical training in the factory premises is allocated.

1414

EFFICIENT & CHEAP SERVICESEFFICIENT & CHEAP SERVICES

1515

Allow/Promote Power Houses for Industrial Estates.

WAPDA electricity is not efficient or dependable 11 cents at which electricity is being provided is the highest in the world. Cluster / Industrial Estate specific Power Houses be established by the Private Sector. Will provide efficient and dependable electricity at 5 cents.

Availability of Gas.

a. Ensure availability of gas to industrial estates.b. Establish links with Central Asia, Iran and/or Qatar for further supplies as present supplies are expected to level off in 3 years.

Availability of Water.

As industrialization takes place, use of water in industry shall jump from the present 2.2 MAF to 3.8 MAF by the year 2025 and shall be provided by the Irrigation Department.

PROVISION OF SERVICES

1616

SMALL & COTTAGE INDUSTRY

Pros

1. This sector employs maximum labour.

2. Investment cost per worker is low (Rs.30,000/- per worker)

Cons

1. Weak management and organization.

2. Use second or even third hand machinery.

3. Technology employed is old.

4. Workers mostly ‘shagirds’ and not educated/trained.

5. Almost no access to bank financing.

6. Marketing is poor.

7. In danger of collapse with the invasion of cheap and better products from China & India.

1717

PROMOTE SMALL AND COTTAGE INDUSTRY INDUSTRIAL GROWTH

SMALL INDUSTRY

Establish sector specific Industrial Development Centres for Small Industry which will : -

a. Provide latest technology/practices.

b. Provide access to latest machinery.

c. Provide training in new technologies and machinery.

d. Provide credit (Banks & PSIC) for BMR or new ventures.

e. Financing Plan.

1818

Establish Industrial Development Centres (IDCs) and provide Technology, Training and Credit to Small Industry to become Internationally Competitive.

Punjab has approximately 6000 units of Small Industries. The majority are based in lanes and mohallas, using second hand machinery with basic technology and skills and generally starved of funds. Resultantly their products are of poor technology and quality which will be swept away by the influx of quality products from the world as tariff barriers are lowered. At least one IDC shall be established for a specific sector e.g. leather, cutlery, sports goods etc. achieving a target of 50 by the financial year 2005-06 with the following components:-

a) Technical Assistance Wing b) Machinery Wingc) Training Wingd) Incubator for creating Entrepreneurs.

1919

INDUSTRIAL DEVELOPMENT CENTRES (IDCs)

TECHNICAL ASSISTANCE WING

1. Majority of small units using out dated technologies and designs.

2. In a competitive environment the consumer shall select a product which is the best in quality and has a competitive price.

3. With the lowering of tariffs, influx of Chinese and Indian goods are sweeping the markets.

4. It is important to upgrade the local technologies, designs and lower production costs to save the Small Industry from collapse.

5. For this purpose sector specific world class consultants shall be hired for a period of 3 years to transfer latest technologies and achieve a quantum technology jump.

2020

INDUSTRIAL DEVELOPMENT CENTREs (IDCs)

COMMON PROCESSING FACILITY

1. The machinery being used by the Small Industry are normally of old vintage producing poor quality products.

2. The IDC shall acquire the latest machinery for demonstration, training and use as a common facility.

2121


TRAINING IN NEW TECHNOLOGIES

1. The managers, supervisors and workers of small units have, generally, not received formal training and are mostly ustad & shagird.

2. It is proposed that the Consultancy Wing will prepare the training programs which shall be made available to the managers and supervisors using the latest machinery and process to upgrade their technology levels.

2222


CREDIT FACILITY

1. Small industrial units face considerable difficulty in accessing to credit. Some surveys indicate that 90% units avail either expensive credit from the market or use retained savings. In both cases the small units cannot generate sufficient earnings to grow and enlarge their businesses.

2. Each IDC shall provide space for the Banking Sector to provide credit for BMR or Venture Capital.

2323


FINANCING PLAN

1. Generating employment opportunities in the private sector is a vital strategy of the Government.

2. Only successful industrial units shall generate resources to expand, grow and create employment.

3. The establishment of IDCs shall be a public sector investment program in the nature of a development grant for supporting small scale industry.

4. For transfer and acquisition of technology for the Banking Sector and PSIC shall provide credit for BMR or New Entreprizes.

2424

COTTAGE INDUSTRY

About 60 to 70% of Punjab’s population is village based. Structurally 30% of each village have been landless workers who provided services to the landed class. This under privileged group is still at the bottom of the income range and most prone to poverty.

It is proposed to establish a Rural Enterprise Support Organisation (RESO) which shall have the outreach to create entrepreneur organizations, identify and redesign local products to international standards, find markets and market these products, thus generating employment and improving incomes in rural areas.

2525

COTTAGE INDUSTRY

RURAL ENTREPRISE SUPPORT ORGANISATION (RESO)

1. The RESO shall be structured as a Public Limited Company owned by the Government of Punjab to generate accelerate value added and contemporary enterprise in the rural areas. The initial grants shall be provided by the Government of the Punjab/Donors which shall cover the overhead costs of the Organization and a revolving pool of funds for credit. Later as on the venture succeeds, the Banking Sector is expected to enter the market and lend to the cottage industry for which RESO shall provide credit guarantees.

2. The RESO shall comprise Institution Building, Sales and Marketing, Contemporary Design and Credit Wings. Their duties shall as under: -

a. Institution Building Wing

Visit villages and organize the Entrepreneurial class of villages into

Entrepreneur Organizations who shall have regular meetings and a

Capital Building program.

2626

b. Sales and Marketing Wing

Village entrepreneurs lack the ability to market their products and are at

the mercy of middle men. RESO shall establish external linkages and

outlets for marketing and sales of the EO products.

c. Contemporary Design Development (CDD) Wing

Village products are extremely traditional in concept, colour and design

and may not appeal to the modern mind. The CDD Wing shall redesign

local handicrafts/products for the modern markets.

d. Credit Wing

Village entrepreneurs have no access to credit and generally obtain raw

materials and capital form middleman. Therefore, their returns are minimal and

are not a justified return for the hardwork, skill and effort invested. RESO shall

provide the necessary credit on personal guarantees/ EO savings to cut out the

middleman and ensure a just return to the entrepreneur.

e. Sustainability

As the Eos mature and their capital grows, greater responsibilities shall be

transferred to the members. Eventually the ownership of RESO shall be

transferred to the Eos carrying out operations based on their accumulated

savings and Bank lending.

2727

Focused Funding of SMEs.

While the Large Industry can access funds from the Banking Sector (BS), Small & Micro enterprises have considerable difficulty. The Banking Sector is not comfortable with funding below Rs.2 crores thus smaller units remain starved, stunting the growth and development of Small & Micro Enterprises. There is a need to direct the Banking Sector to strengthen their Investment Wings and achieving targets. PSIC has to be strengthened to finance the Small & Cottage Industry who the Banking Sector is not entertaining.

EASY ACCESS TO FINANCES

2828

TO SUM UP

The biggest problem facing the Government is employment generation. There is a need to create 1 million jobs a year to achieve a growth of 7 to 8% per annum. The Government of Punjab will recruit only 25,000 persons in the CFY. The remaining jobs have to be generated in the services, industry and agriculture sectors.

1. An enabling and supportive environment is necessary for the private sector to establish competitive industries which will generate growth and employment.

2. The Large & Medium Industry can compete but need good infrastructure, services, skilled manpower and need to be provided a single forum where policy and taxation proposals can be decided.

3. The Small & Cottage Industry, which is 60% of the Industry is un- prepared for the forthcoming challenges and needs hand holding support from the Government to improve their technology levels, skills, marketing and access to finances.

4. In order to support the Industrial Sector a number of proposals are suggested for the MTBFR.

2929

PROVINCIAL MEDIUM TERM PROVINCIAL MEDIUM TERM BUDGETARY PROPOSALS BUDGETARY PROPOSALS PROMOTING SUPERIOR PROMOTING SUPERIOR

TECHNOLOGIESTECHNOLOGIES

3030

The Government’s policy of abolishing regulating regimes has led to a mushrooming of SMEs in and around cities and towns. Resultantly these scattered units cannot be provided services efficiently nor can they dispose off their effluents in a complaint manner.

There is a need to:-

i. Draft a law directing all industry to be established in an Industrial Estate. ii. Declare areas where industrial units have clustered as Industrial Estates and provide infrastructure for such estates. iii. Upgrade existing Industrial Estates to become complaint.iv. Establish new Industrial Estates and Commerce Centers near all Cities, Tehsil Head-quarters in Punjab.

•Seed Money•Private Sector •Banking Sector

Rs.20.5 billion

•PIEDMC•Industrial Estates Management Boards.

INDUSTRIAL EFFICIENCY

3131

Capable Technicians are the back bone of any industry and are essential if industrial competitiveness is to be achieved. Presently the number of Polytechnics (26 only) are insufficient to meet the growing needs of industry i.e. in quantity, quality and equipped with industry responsive skills. This shall be achieved by deemphasizing Commercial Colleges and establishing 62 new Polytechnics. To meet the emergent needs TEVTA will examine the possibility of notifying selected Industrial units as Polytechnics and promoting Apprenticeship in Industry.

Govt. of Pakistan through PSDP for capital works and Govt. of Punjab/TEVTA through the Annual Budget for recurring costs.TargetsPolytechnics -48Tech Trg Inst.– 42 (Men)Voc Trg Inst.- 34 (Female)Rs.14.0 billion

TEVTA

ESTABLISHMENT OF POLY TECHNICS RESPONSIVE TO INDUSTRIAL NEEDS

3232

As industrial growth takes place, the need for skilled workers is multiplying e.g. with the lifting of textile quotas the textile industry is expanding. It is, however, facing an acute shortage of expert stitchers. These needs have to be met by a network of VTIs sited near industrial clusters and responding to industrial needs. To respond immediately to industry needs, selected industries will be declared VTIs, provided a budget to initiate instructions & practical training in the factory premises.

Zakat Fund

Rs.740.0 million over 4 years.

Vocational Training Institutes

Council (VTIC)

EXPAND VOCATIONAL TRAINING INSTITUTES (VTIs)

FROM 70 TO 500 VTIs

3333

SUPPORTING GROWTH OF SUPPORTING GROWTH OF COMPETITIVE SMEsCOMPETITIVE SMEs

3434

Establish 50 sector specific IDCs near industry clusters such as leather, sports, ceramics, furniture, cutlery etc. Each IDC shall comprise of Technical, Machinery, Training and Credit Wings to achieve the objective of transferring latest technology to operative units a new ventures thereby producing quality goods.

ADPPSDPEDFDONORs

Rs.2.0 billion

Department of Industries

INDUSTRIAL DEVELOPMENT CENTRES (IDCs)

3535

The Government shall establish RESO as a Government owned Public Limited Company with Institution Building, Sales and Marketing, Design Development and Credit Wings. Initially there shall be a Provincial Head Quarter and 7 District Branches working with 50 villages each. Successful models shall be developed and RESO expanded to 34 Districts of the Province to achieve the objectives of employment generation in the rural areas and poverty alleviations.

ADPPSDPDONORs

Rs.1.0 billion

Department of Industries

RURAL ENTREPRISE SUPPORT ORGANIZATION (RESO)

3636

Business

Sme Development Plan