Role of SMEDA in developing SME's in Pakistan - Business - Entrepreneurship

Role of SMEDA in Developing SME's in Pakistan

Submitted to: Sir Imran AliSubmitted by: Ali Zahid MBE-SP08-003 Kashif Aslam MBE-SP08-028

COMSATS Institutes of Information Technology M.A.Jinnah Campus Lahore. Department of Management Sciences.Introduction Developing a group of diverse and competitive small and medium enterprises (SMEs) is a central theme towards achieving sustainable economic growth. SMEs are crucial to the economic growth process and play an important role in the country's overall production network. Some advanced economies have succeeded because SMEs form a fundamental part of the economy, comprising over 98% of total establishments and contributing to over 65% of employment as well as over 50% of the gross domestic product. Although the numbers might be lower in Pakistan, SMEs have the potential to contribute substantially to the economy and can provide a strong foundation for the growth of new industries as well as strengthening existing ones, for Pakistan's future development.Definition of SMEs1. SMEDA Definition Small & Medium Enterprises are defined as follows, as approved in SME Pol icy 2007.

Enterprise Category Employment Size (a) Paid Up Capital (b) Annual Sales (c)Small & Medium Enterprise (SME) Up to 250 Up to Rs. 25 Million Up to Rs. 250 Million2. State Bank of Pakistan According to State Bank of Pakistan, SMEs are organizations which Fulfills one of the following criteria:* A trade / services concern with total assets at cost excluding land and buildings up to Rs 50 million.* A manufacturing concern with total assets at cost excluding land and building up to Rs 100 million.* Any concern (trade, services or manufacturing) with net sales not exceeding Rs 300 million as per latest financial statements.

Importance of SMEs The ideology behind the promotion of SMEs comes from the perceived failure of large enterprises in creating adequate productive jobs to absorb a significant share of the rapidly growing labor force in many developing countries. This perception inspired emphasis on the development of small industries by stressing benefits such as income generation, dispersal of economic activities to small towns and rural areas, and mobilization of entrepreneurial talents. Following are some points which will reveal the importance of SMEs.* SMEs are more labor-intensive than large enterprises. * SMEs are as efficient as LEs or more efficient than large enterprises.* SMEs are more equitable in distributing the income they generate than large enterprises.* SMEs are more likely to play a higher role in rural development than large enterprises.* The significance of SMEs is associated primarily with their role in stimulating economic growth.* SMEs create employment opportuniti es as they are labor-intensive. * SMEs enhance regional development.* Create more equitable income distribution. * SMEs play a complementary role in relation to larger firms--as suppliers and distributors.* SMEs serve as a training ground for developing the skills of workers and entrepreneurs. * The presence of SMEs curbs the monopoly power of larger firms.* A country can reduce its vulnerability to financial crises by strengthening its SMEs.* SME's are the backbone of a national economy, particularly in developing countries.* SME provide the platform for small & medium entrepreneurs to work as an arm taking of economic and social indicators of a country.

Objectives of SMEs Following are some broad objectives of SMEs.* Economic Growth* Economic Development* Poverty Reduction* Employment* Social and economic sustainability

Characteristics of SMEs Following are some common characteristics of SMEs.* Owner is the manager & few employees* Owned & operated independently* Relatively small investment, production, sales, dealings etc.* Inadequate efficiency of business operations.* No relationship with other firms or parties for Investment, Management, finance, tax

Statistical facts regarding SMEs1. ACCORDING TO THE ECONOMIC CENSUS OF PAKISTAN

Sales below Rs.0.5M 84%Sales below Rs.1.0M 93%SMEs less than 5 Year old 19%Survive beyond 25 years 4%Business enterprises nation-wide 3.2MSMEs 2.96MHousehold Units 0.18M

2. Province wise Distribution of SMEs

Name of Area SME UnitsPakistan 2.96 MillionPunjab 65%Sindh 18%Khyber Pakhtunkhwa 14%Baluchistan 3%

3. Distribution of SMEs According to the No. of Employees

Total SMEs units 2.96 million (100%)SMEs employing 1-5 Persons 2.85 million (96.6%)SMEs employing 6-10 Persons 79,000 (2.67%)SMEs employing 11-50 Persons 26,000(0.87%)SMEs employing over 50 Persons 1617(0.054%)

4. Economic Contribution of SMEs

Employment 78%GDP 40%Value Addition 35%Exports 25%

5. SMEs Share in Sub-Sector

Sub-sectors Percentage Share of SMEsCotton Weaving 13%Other Textiles 6%Metal Products 7%Carpets 4%Art Silk 5%Grain Milling 16%Jewelry 4%Wood & Furniture 10%Others 35%

Barriers to SMEs Growth SMEs are facing various barriers in the way of their growth and development. Following are some main barriers SMEs are facing these days.* Govt. & SME Interaction* Taxation* Finance* Labor Legislation* Human Resource Development* Technology* Market & Industry Information* Lack of Infrastructure* Environmental issues & compliance* Social compliance issues* Intellectual Property Rights

Small and Medium enterprise development Authority (SMEDA) Premier institution of the Govt. of Pakistan under Ministry of Industries and Production, SMEDA was established in October 1998 to take on the challenge of developing Small & Medium Enterprises (SMEs) in Pakistan. With a futuristic approach and professional management structure it has focus on providing an enabling environment and business development services to small and medium enterprises. SMEDA is not only an SME policy-advisory body for the government of Pakistan but also facilitates other stakeholders in addressing their SME development agendas.SMEDA Vision Growth of globally competitive SME sector through a conducive and facilitating environment and support services as an engine of growth and sustainability to national economy.Mission Statement To function as the promoter & facilitator of SME sector in Pakistan by creating a conducive and facilitating environment as well as providing and facilitating service delivery to SMEs for enhancing their capacities and competitiveness.SMEDA Objectives1. Formulate Policy to encourage the growth of SMEs in the country and to advise the Government on fiscal and monetary issues related to SMEs.2. Facilitation of Business Development Services to SMEs.3. Facilitate the development and strengthening of SME representative body's associations/chambers.4. Set up and manage a service provider's database including machinery and supplier for SMEs.5. Conducting sector studies and analysis for sector development strategies.6. Facilitation of SMEs in securing financing.7. Strengthening of SMEs by conducting and facilitating seminars, workshops and training programs.8. Donor assistances for SME development of SMEs through programs and projects.9. Assist SMEs in getting international certifications (such as UL, CE, DIN, JIS, ASME, KS, etc.) for their products and processes.10. Identification of service opportunities on the basis of supply/demand gap.SMEDA Services SMEDA is currently offering following services to promote regulate and enhance SMEs in Pakistan.* Consultant Services* Training Services* Business Plan Division* Financial Services * Information Resource Centre (IRC)* Intellectual Property for Business Success* Legal Services* Policy and planning1. Training services SMEDA organizes training programs, seminars, workshops and conferences of short duration in major cities across the country for raising awareness and capacity building of SMEs. These need based training programs are affordable, appropriate and innovative. These programs are aimed at improving knowledge, skills and competencies in the technical, marketing, financial, compliance, policy, regulatory, legal, and commercial and other important functions. These programs help to improve major performance indicators such as productivity, quality, competitiveness and sustainability etc. The results include improvement in export potential, investment promotion, b usiness transparency, human resource development, managerial capacity building etc. These programs help decreasing the level of SME mortality and increasing efficiency.2. Business Plan Division Business Plan development services is one of the key services provided to enable existing as well as potential investors to make well researched and informed investment decisions.3. Financial services Financial Services Group (FSG) is one of the support units of SMEDA. As the name suggests, FSG is responsible for all financial consulting and advisory services that SMEs may require. As for all the support functions, FSG caters to both internal sector teams as well as any external walk-in SMEs. In addition to such consulting services, FSG also acts as coordinator of government schemes, which involve financial institutions.4. Information Resource Centre (IRC) SMEDA Information Resource Centre (IRC) has been established to cater to the information needs of SMEs and stakeholders from both the public and private sectors. IRC maintains a collection of more than 3400 books and CD-ROMs/DVDs besides subscribing leading newspapers and more than 20 journals of international repute on diverse business sections and related fields. A number of full text online journals are also available for SMEs and researchers on different fields of knowledge. IRC collection consists of databases, directories, reports, yearbooks, annual reports, and loose-leaf material that are available for easy retrieval through latest library management tools. Hard format of training programs conducted by SMEDA are also available in IRC. SMEDA IRC collection is increasing by an aggregate 10 % every year.5. Policy and planning Policy & Planning Division of SMEDA has dual focus internal & external. It plays a key role in devising and coordinating policies, action plans and strategies for SMEDA operations. On the other hand it has a mandate to carry out research, communicate with stakeholders and ad vocate policies with different tiers of the government with an ultimate objective of creating a conductive business environment for SMEs in Pakistan. P&P is the hub of policy and regulatory research that provides SME specific policy input to all tiers of government, government agencies and institutions, SME associations, industrial clusters and individual entrepreneurs.6. Intellectual Property for Business Success Intellectual Properties (IPs) are intellectual assets that are intangible such as knowledge, creativity and inventiveness. Intellectual property in its essence is that information which has economic value when put into use in the marketplace. The rationale of protection also rests on the premise that both forms of assets (tangible & intangible) have potential of wealth creation. IPs generally falls into two categories; industrial property and copyrights. The rights of inventions, industrial designs, trademarks, integrated circuits and geographical indication are pr otected under industrial property while the copyrights include literary work such as novels, poems, plays, films and also artistic works etc.7. Legal services We add value to the business of Small and Medium Entrepreneurs (SMEs) through facilitation in: * Resolving legal problems through service providers.* Creating awareness of legal rights & responsibilities by disseminating information on existing regulatory/contractual requirements through sample contract templates, business guides and seminars.* Enhancing capacities for improved compliance of laws, rules and regulations through training programs.* Legal opinions to your business queries, and * Interaction with regulatory authorities and service providers for removing legal impediments.8. Consultant services SMEDA also provide various consultancy services.