The first-ever SME policy, with the consensus of
the four provinces, will be announced by the government by the end of
Shahab Khawaja, Chief Executive Officer (CEO),
Small and Medium Enterprises Development Authority (SMEDA), told PAGE
that draft document had been prepared after extensive consultations
with all the stakeholders of the four provinces.
A final workshop would soon be conducted in
Islamabad for finalizing the detailed recommendations to be submitted
to the federal Cabinet for its approval. He said that Federal Minister
for Industries and Special Incentive, Jahangir Tareen, would chair the
SMEDA chief said that seven priority sectors have
been encompassed for the upcoming SME policy, including marble &
granite, dairy, gem & jewelry, fisheries and surgical goods.
Shahab regretted that SME sector in Pakistan had
not been able to realize its full potential and continued to suffer
for a number of weaknesses, hampering their ability to take full
advantage of the opening up of economy and the increasingly accessible
world markets. He said that areas of constraints were normally
identified as labor taxation, trade capacity, and finance and credit
Talking about the document prepared for SME policy
he said that a public-private partnership company, Pakistan Dairy had
been created to finance the technology up-gradation by providing
chillers, milking and fodder cutting machines at subsidized prices.
SMEDA chief said that Rs 2.5 billion company,
Public-Private joint venture, would provide ways in developing 11,000
rural entrepreneurs till 2015. He said that the company would provide
50 per cent cost of the value addition instruments like chillers,
milking machines and fodder cutters in the shape of grant while rest
of the 50 per cent would be provided as an easy loan. He said that
loan would be adjusted against the milk supplies from these
Shahab said that company was calculating the means
and modes of working and those of intending dairy farmers but
initially we would be considering only those farmers, who have 10 to
100 cows and buffaloes. He said that the government was also working
for developing a standardized cotton-ginning sector, besides a small
engineering sector would be developed to improve standard of ginning
cotton in the country.
Talking about the new initiatives being floated in
the policy, he said that a grant agreement with USAID for $10 million
for setting up Enterprise Competitiveness Support Fund had been signed
to provide a boost to this sector.
He said that complete cognizance of the issue had
been taken in consultation with all the stakeholders, believing that
SMEs in Pakistan could not grow without a paradigm policy shift. He
said that implementing change was required in the formulation of a
policy for SME development. He said that the SME Task Force had been
constituted in January 2004 of the Ministry of Industries and
Production, which was to define the basic elements of SME policy.
Shahab asserted that four working committees had
been setup to carry out technical analyses and deliberate the findings
on following core issues of business environment, creating favorable
business environment for SME in Pakistan's economy and eliminating
unnecessary obstacles enabling the SME Task Force work effectively.
Dispelling impression that the SMEs were producing
increase in the non-performing loans (NPLs) of the banks and prone to
default, SMEDA chief said the chances of default in small and medium
entrepreneurs were less than large enterprises. Citing the examples of
the role of SMEs in the development of Thailand and Japan, he said
that the latter, the second major developed country of the world, had
52 per cent role of the SME sector.
Q: When you
took over as CEO, SMEDA was in the process of restructuring and
alignment. What strategy had you adopted for its reorganization?
SK: When I
took over SMEDA in 2003, I found staff highly demotivated and
demoralized. The then Minister for Industries and Production, Liaqat
Ali Jatoi, was also not satisfied with the performance of this
organization. The board of directors had also been endorsing the
communal idea of SMEDA being detracted.
We started by reducing the top management size and
injected new core of young qualified professionals in the
Q: Is it
right that SMEDA was at the verge of collapse when you took over it?
Absolutely yes. As I said earlier SMEDA staff was completely
demoralized. There was the kind of an atmosphere at SMEDA when the
staff were apprehending its closure. I got this impression in my fist
meeting with the staff. But all of us pledged to ourselves that day to
give SMEDA a new vibrant life and resounding.
Q. What do
you think as to why you were inducted in SMEDA at such a crucial
S.K: I think
the government wanted to experiment a public sector CEO after
experiencing two chiefs from private sector. Since I had been
coordinating with SMEDA right from the date of its creation as
Secretary Livestock, Punjab, to evolve dairy strategy as dairy was on
priority list of the sectors identified for SMEDA's intervention and I
was selected for the slot among three other candidates.
SME development agenda is at the forefront of
present economic policy pursuits. The government has clearly given the
manuscript for developing the SME sector as a tool for employment
generation and poverty alleviation. SMEDA has been recently
repositioned to help realize the goal of making SMEs the vehicle of
We are now more focused and committed to reach out
for SMEs operating in neglected and deprived areas. Fourteen Regional
Business Centers have been established and strategically located all
over the country to serve this purpose. SMEDA is more responsive to
SMEs' business development needs as well, particularly in the areas of
human resource training, access to finance, market and product
development, legal services and sector and cluster development.
Q: What do
you say of the main constraints the SME sector is facing and what kind
of strategy are you working on in this regard?
growth of SMEs has mainly been hampered by the non-availability of
credit in the past. SMEDA is endeavoring to become a model of
public-private partnership for better facilitation of the Small &
Medium Enterprises in Pakistan through the creation of a more
equitable, transparent, and conducive regulatory environment for the
businesspersons. I believe in synthesizing home-grown solutions to the
problems of SMEs, based on global information and local wisdom
achieved through cross-country analysis, experience of indigenous
entrepreneurs and constraints of the government.
A need was felt for sometime to redefine SMEDA's
long term role and its scope of activities. This area was completely
uncharted in Pakistan, where national benchmarks did not exist, this
making SMEDA a unique organizational experiment from the government.
The task necessitated translation of knowledge into action through a
well designed, effective SMEDA and efficient plan of approaching
schemes and taking SMEDA's services to their doorsteps (cluster and
chambers etc.). At this stage a fine tuning of SMEDA functions was
Realizing this constraint, the government has
opened two specialized micro-credit banks - the SMF Bank and Khushali
Bank (KB). In addition to this State Bank (SBP) has issued a separate
set of SME-friendly Prudential Regulations with a view to encourage
banks/DFIs to develop financing techniques and innovative products
which cater to financial requirement of SMEs. The micro enterprise
development initiatives by the provision of credit through banks are
expected to spur economic activity mainly in the self-employed segment
of the population. Over a period, this sector will transform into
formal SME entity.
SMEDA is doing right now for providing business development services
is working as a resource base for providing expertise, information,
data and statistics necessary for SMEs related research and decision
making, as well as to provide, arrange and facilitate support services
necessary for SMEs. SMEDA was also responsible to initiate, take,
continue, implement and perform any and all activities for encouraging
and facilitating the growth and development of SMEs.
SMEDA has prepared pre-feasibility studies on 85
business ventures so far, and the number is increasing. The purpose of
these documents is to provide key information of specific businesses
to potential investors. Pre-feasibility studies not just facilitate in
project identification but also briefly describe managerial,
financial, technical, marketing and regulatory requirements of setting
up that business.
Business Plan Development Service: Our business
plans provide information and recommendations on key business areas
including market size and growth projections, suitable management
structure, technology and machinery selection, comprehensive financial
analysis with projections and strategic business options. Business
plan is exclusive for a client and is custom prepared to meet
objectives of specific entrepreneurs. SMEDA charges fee for the
service to screen out non serious SMEs.
Training and development training initiatives and
programs are based on demands identified by stakeholders. An extensive
Training Need Assessment (TNA) exercise is conducted regularly to
assess specific training needs of various clusters. In order to keep
track of changing industry needs and to improve the quality of
contents delivered in these programs, an elaborate feedback and
evaluation mechanism process is followed by involving relevant
Awareness workshops on various business related
topics are conducted to enhance entrepreneurs' capabilities to handle
their day to day business problems and optimize their potential.
Cluster Development Programs: Besides providing
consultation to individual clients through helpdesk, outreach also
caters to clusters of businesses under Cluster Development Programs.
Identifying problems faced by a specific cluster and developing
solutions to overcome those problems is a continuous process at SMEDA.
Common Facility Centers (CFCs): Common facility
centers are established with an objective to provide at least one
critical service to the cluster for improving overall performance of
the sector. This service is not ordinarily available to SMEs for
reasons including lack of funds, technical constraints and lack of
trained HR. By making available CFCs it is expected that the SMEs
within the cluster will benefit by increasing their production,
improving quality of products and reducing their costs.
Lending Schemes: Financial institutions including
commercial banks are assisted in designing and developing sector
specific lending schemes with the objective to fulfill financial needs
of the entire value chain within a sector.
Technological Up-gradation: Technology transfer and
up-gradation is essential for SMEs to compete in the globalize
economy. This intervention when adopted by one or two SMEs, due to its
quality, cost-effectiveness and other benefits, spreads fast through
demonstration effect leading to widespread economic development.
Donor coordination is the first point of contact in
SMEDA for donor agencies and international organizations dealing with
SME development. The main function of DC&IL is to design and
develop SME projects. DC&IL have initiated projects with a number
of donor agencies, such as World Bank, PVDB, USAID, ILO, UNIDO, JICA
2 .Industry Support Cell (ISC) was established in
May 2004, to develop a counterpart team to JICA Senior Volunteers for
providing support to industry and to ensure transfer of knowledge and
expertise from Japanese experts to local professionals working in
In order to keep track of all SMEs visiting SMEDA's
Helpdesks, SMEDA has developed an in-house computer based program
Helpdesk Database System. Development & Supervision of Helpdesk
Services is an activity, which involves coordination with the regional
helpdesks and generating monthly reports. This facilitates
identification of the needs of SMEs for future interventions, such as
development of new business plans, Pre-feasibilities, Over the Counter
(OTC) products and training programs.
SMEDA training programs contribute significantly
towards national agenda of human resource development, employment
generation and economic growth. More than 22,000 SMEs have benefited
from this exercise so far. These programs are fee-based to attract the
quality participation and are conducted in collaboration with
chambers/ associations /institutes/private and public sector. The
objective of these training programs is to help SMEs in developing
trained Human Resource that can contribute towards improving quality
and productivity to achieve competitive edge in national and
Q: What are
the current sectors SMEDA is working on?
SK: We have
been closely working with the private sector for last six months in
collaboration with USAID to evolve development strategies for the
three potential sectors of SMEs; dairy, gem and jewelry and the marble
and granite. Prime Minster had recently approved the development
strategy for dairy sector.
"I am confident that the strategy would pave
the way for economic revolution curbing poverty in the rural areas of
Pakistan. I hope the action plan for marble and granite development
will be announced by July this year," said Khawaja.
In its efforts to achieve quantitatively verifiable
targets, SMEDA carries out comprehensive analyses of international
trends, national policies and 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.
Concurrently it interacts 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 at the level of chambers and associations to provide proactive
and responsive financial, technical, management and marketing services
to SMEs. For the provision of Business Development Services to SMEs,
SMEDA has set up Helpdesks in all four of its regional offices where
any SME in need of SMEDA's services can simply walk in and obtain over
the counter products such as project briefs, pre-feasibility studies,
regulatory procedures and advice on specific problems. End