Group Members

Umer Gill

Nazish Batool

Tasneem Khalid

Syed Bilal imdad shah

Arslan Saqib Butt

Small and Medium Enterprises (SME)

SME entity is defined as:

“ A business with an investment in productive assets ranging

between rupees 2 to 40 million and employing 10 to 99

workers.”

There are three parameters that are generally used to define

SME.

i. Number of worker employed.

ii. The level of capital investment.

iii. The volume of production or business turnover.

SME’s in Pakistan

Pakistan economy is an economy of SME’s.

Policies in the past have given a general perspective, but

efforts have focused on large enterprises.

SME’s are being mentioned in some of our socio-economic

strategies, but measures are not sufficiently supplied.

There are some issues we may solve to improve our SME’s .

Issues for SME policy formulation

Shot term issues

Business Environment.

Delivery of Assistance and Access to Resources.

Monitoring Developments.

• Market and industry information.

• Harmonizing Enterprise size categories.

• Measuring our success.

Long term issues

Literacy.

Law and order.

Intellectual Property Rights(IPR).

Infrastructure.

Short term issues

Business environment includes:

• Relationship between government and SME.

• Taxation issues.

• Labor issues.

Labor

“The total number of people employed or seeking employment in a country or region. also called work force.

Regarding labor there are several issues those need to be solved for the development of SME”.

These issues are:

• Irregularity of labor on work.

• Labor law and regulations in Pakistan. There are all most 56 labourlaws with which honors of SME have to deal.

• Labor unions and other teams who use their authorities illegally e.gstrikes.

• Increased demands of labor force e.g. labor market security, protection against loss of employment, and increase in income etc.

• International labor standards.

Effort by Government

Ministry of labor and man power has initiated some

favorable rules so that both industrial promotion and

protection of workers rights and interest should be saved.

56 strict labor laws have been tried to be simplified into six

basic laws.

For the promotion of corporation among government

employer and employees government has establish a forum

that is “Workers Employers Bilateral Council of Pakistan”

(WEBCOP).

Delivery of Assistance and Access to

Resources

Competitive advantage is determined by the productivity with which a country, region or cluster uses its human , capital and natural resources.

Pakistan’s international competitiveness is decreasing over past few years.

Report by World bank

• Development policy review 2002shows that Pakistan's total export are almost 12% to 18 % of those countries whose

combined exports were less then Pakistan in the mid 1960’s.

• It’s really shocking for already dying economy of Pakistan.

Delivery of Assistance and Access to

Resources

• Increased trade liberalization, new levels of information and

advanced technology all these factors are great challenges for

Pakistan’s SME.

Increase competition and structure of market demand is

becoming complicated day by day.

Decreased awareness for World market is another challenge

for our economy.

Finance

“A branch of economics concerned with resource allocation as well as resource management, acquisition and investment. Simply, finance deals

with matters related to money and the markets”.

Finance relating issues that SME in Pakistan are following:

• Access to equity and formal debt financing is one of the constrained to SME growth and development.

• Conservative policies by Commercial banks in issuing loans .

• Most bankers prefer to hold risk in lending loans to SME but it is un attractive due to several factors.

Finance

• Statistical measures shows that 57% of new investment for small and

medium enterprises and 67% of working capital finance come from

internal finance and only 7% of funds for the investment come from

banks.

Reports by SMEDA

“A survey conducted by World Bank Investment Climate Assessment

between May and November 2002 in collaboration with SMEDA

covering random selection of 965 manufacturing business (90% being

SME drawn from largest cities of Pakistan shows that even supplier

contribute only 4.5% of working capital” .

Finance

• An other report shoes that SME in facing rationalized behavior in the credit market . However financing SME is one for the key pre-requisites foe the future development of national economy.

Increasing unemployment can only be controlled by promoting SME s sector.

Government has introduce self employment scheme through Small Business Finance Corporation(SBFC)in 1992 that grant loans to small business and has disbursed almost 12 million by June 1998 catering to the needs of 157, 162 unemployed persons.

Some other scheme were Youth Investment Promotion Society, Yellow Cab scheme (Apni Gari).

But the negative point is institutions lacked coherence and absence of any national policy resulted in corruption.

Finance

Unrecoverable loans:

Financial sector accumulated a huge portfolio of non

recoverable loans under these schemes.

The SME sector need to be restructured again.

Flaw is that if future financial sectors are showing

disinterest for supporting SME.

Out of reach will remain a problem especially in the rural SME

market.

Market and industry information

Market and industry information can be defined as:

“To be having full information of existing customer needs and demands, advancement in technology , competition of international markets etc”.

Access to market and industry information is very important to successful business strategies.

By developing association with foreign countries institutions we can have better information on foreign market .

Our half SME belongs to business and industries.

There role is limited to negotiations with the government only 12% perceived their association to be a source of information on new developments.

Harmonizing Enterprise size categories

This issues is related about the size of SME.

There is no legal definition for defining SME in Pakistan.

Various government department and public sectors have adopted their own definitions.

Examples:

1. Stake holder consider enterprise with 100 or more employees as large, less than 5 employees as micro.

2. Statistical system classifies enterprise with more than 10 employees as large.

3. State bank of Pakistan consider those enterprises as large which are having 250 employees.

Harmonizing Enterprise size categories

This issues is related about the size of SME.

• There is no legal definition for defining SME in Pakistan.

• Various government department and public sectors have adopted their own definitions.

Examples:

1. Stake holder consider enterprise with 100 or more employees as large, less than 5 employees as micro.

2. Statistical system classifies enterprise with more than 10 employees as large.

3. State bank of Pakistan consider those enterprises as large which are having 250 employees.

Harmonizing Enterprise size categories

International practices shows differentiation among

industrial wholesale retail and services related enterprises.

There is a need of harmonized definition for the development

of SME sector.

Measuring our success

Public sector resources are as scared as private sector resources.

We need to ensure honesty of the sectors whether they are being used in

more efficient ways or there is corruption.

There is no mechanism for measuring our success.

System of sport is incoherent .

There is wastage of recourses.

No current overview of activities.

Gender development

Each of the two genders of any society constitutes roughly half of the

population.

People of both genders embody not only labor force but also knowledge

to raise economic standard of their nation.

Pakistani women has been engaged in production process for ages.

They are not only participating in agricultural sector but also in local

economy.

Women's are increasingly migrating to urban areas for employment in

cottage industries such as carpet weaving, taxi tail and handicrafts.

They are also seeking self opportunities of self employement in small

businesses.

Gender development

• Women have also started business as entrepreneurs.

• Our social cultural traditional and religious elements reflects a complex

interplay for the women participation in business.

• There is a gender biasness in our society.

• The government of Pakistan is well aware of the potential of the

women in our society and is encouraging their entrance in the business

stream.

Environmental Issues

Environmental issues are more frequently a result of interaction

between human activities and the environment.

Increased competitive pressure has created difficulties to cover basic

needs of enterprises and individuals.

One of the environmental issues is externalities.

Many benefits can be achieved by creating friendly environment.

1. Reducing material waste can be one way of reducing cost.

2. Saving resources such as water and energy.

There is a ling between technology transfer and stabilization of global

climate.

Environmental issues

High transaction cost is also major constraint in effectiveness.

Developing countries are unable to compete by introducing new

technologies.

Feb 15 2007

The OECD (Organization for Economic Co-operation and

Development) is an international organization of countries with highly

developed economies and democratic governments.

OECD countries like Japan, Canada, France, Italy, Germany etc have

started special crated line and specific training courses to achieve

improvements for environment.

Long term issues

These issues includes those issues those are routed in multiple

cultural structures of our society and those need a long time

for completion they have great impotence for the development

of SME. These includes

i. Literacy.

ii. Law and order.

iii. Property rights.

iv. Infrastructure.

Literacy

“The ability to read and write at an adequate level of proficiency that is necessary for communication”.

The literacy rate of Pakistan is 49.9% .

SME finds it extremely difficult to grow due to untrained staff.

Low literacy level shows that our labor force has how much potential.

Literacy rates are essential to enhance the quality of production.

Law and order

The condition of law and order in Pakistan is always

regarded as worrisome.

Due to bad law and order situation NWFP spends 4.5%

Sindh and Punjab spent 1 to 2% of their revenue on security.

It weaken investors decision to invest.

Foreign avoid to visit Pakistan.

Property rights

IPR means right to protect and idea , peace of righting or design for

copying.

Intellectual Property Rights (IPR) is a vital issue to be noticed.

Many developing countries have attracted Foreign Direct Investment

(FDI) in research and development areas.

Benefits that Pakistan has achieved by adopting IPR culture is the

protection of products such as rice, kinno, pottery, traditional

knowledge etc.

IPR includes licenses to use patents , trademarks and copyrights

combined with the transfer of known how in the form of training.

Infrastructure

Infrastructure is the basic physical and organizational structures needed

for the operation of a society or enterprise, or the services and facilities

necessary for an economy to function. The term typically refers to the

technical structures that support a society, such as roads, water supply,

sewers, power grids, telecommunications, and so forth.

Estimation shoes that a typical business in Pakistan loses 5.6%

In annual sales revenue du to this factor.

Smaller firms are hard hit in comparison with larger ones. Because of

inability to arrange alternate resources.

Poor telecommunication facilities and transport is also an other

problem.

Infrastructure

Pakistan can save up to 16.5% of their revenue by improving

transport logistic system.

Due to poor transport system R.S 320 billion cost is bared.