HUMAN RESOURCE DEVELOPMENT:Market and Industry Information, Monitoring Developments

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SME Management (MGT-601)

Lesson 12

This lecture is a continuation of the lectures No 9&10 and 11 dealing with the short term, medium term

and long term issues. These issues are pre-requisites for forming a comprehensive SME policy.

HUMAN RESOURCE DEVELOPMENT

One of the major challenges that SME have to face is the emergence of the knowledge-based economy.

People must continue to innovate, change and upgrade. There is a need to nurture the entrepreneurial spirit

and skill development for adopting innovative technologies.

The low-literacy level of our population poses an immense challenge to our competitiveness. Yet, it is a fact

of life, which we will not overcome, in the short run. It is therefore imperative that we seek intelligent short

and medium-term solutions to bridge the literacy gap.

One aspect of the Government's strategy is to strengthen non-formal skills and entrepreneurship

development, to better prepare workers for employment and to improve population's general capacity of

self-employment. But are there other ways by which we can enhance the skills of our workforce in such a

way that we need not despair when facing external competition?

The government has established a number of institutions that impart training and skill development. These

institutions, Pakistan Institute of Management Science (PIMS), Provincial Vocational Training Councils

Authority, Technical Training and Vocational Authority (TEVTA) Government Universities and various

other support institutions have however remained rather passive regarding the shaping of human resource

development for SME.

A frequent complaint is the mismatch of the output of our human resource development institutions with

the demand of SME. There are also only limited options for the training of the middle management. Low

skills of workforce, inadequate vocational training facilities yet remain out of the scope of the reforms

agenda.

Are there any mechanisms by which we may achieve effective consultation between supply and demand

sides of our vocational training system so as to attain a maximum benefit for our economy?

Entrepreneurship does not breed in a vacuum. For a healthy, growing business environment, it is necessary

to foster entrepreneurial culture in Pakistan, which goes beyond the inclination to trade in goods.

Entrepreneurial skill development programs can boost this.

Technology Transfer and Up-Gradation

Developing SME based on local skills/resources has now been rightly recognized as a means of promoting

economic growth and a very effective tool for providing productive employment in a country. But up to

date technology also plays a vital role in the vertical integration of the firms, moving them up the ladder in

terms of firm productivity enhancement.

In our country, growth oriented export firms still have problems sourcing quality inputs due to the lack of a

network of reliable suppliers. This adds to their transaction costs. Likewise, the SME are not large enough

to furnish sufficient demand to be an incentive for a big high quality input supplier.

The government in its efforts to facilitate technology transfer for indigenous SME initiated a program with

the United Nations Development Program (UNDP) to promote Technical Cooperation between

Developing Countries (TCDC) 8. The scope of Phase 1 remained narrow and focused on capacity building

of various public sector organizations through training programs. The intended final beneficiary, SME, has

not yet been able to benefit from the program.

In its other efforts, the government used to offer cash grants9 for ISO certification to those enterprises that

choose to be growth oriented internationalized SME. The government also set up a National Productivity

Organization as a resource center and a research institute to enhance industrial and labor productivity in

Pakistan.

SME Management (MGT-601)

Similarly, other organizations like Pakistan Council for Scientific Industrial Research (PCSIR), Pakistan

Industrial Technical Assistance Center (PITAC), Ministry of Science and Technology (MOST) etc.

established to facilitate industrial growth still need to adopt an active approach to provide their services to

SME in an effective manner.

________________________________________________________________

A few countries (mainly China, Singapore, Indonesia, Sri Lanka) also shared their experiences and

expertise with Pakistan.

9 Discontinued since June 2003.

Major technology up-gradation obstacles include:

Inability to acquire sophisticated testing equipment and R&D facilities. (SME see it as a financial

problem).

Lack of skills/experience to operate high-tech machinery.

Insufficient information on technological cooperation opportunities.

Lack information on target market quality requirements and lack of knowledge on how to achieve

these quality levels.

Absence of appropriate metrology and testing equipment and related infrastructure as common

facility centers.

Market and Industry Information

Access to market and industry information is one of the keys to develop successful business strategies.

Frequently, business and trade associations are able to provide their members with such services. By

associating with like institutions in foreign countries, they are also able to establish links and obtain

information on foreign markets.

Over half of our SME belong to business and industry association. Their perceived role is limited to

lobbing and negotiation with the government. Yet very few SME (12%) perceive their associations to

be a source of information on new developments in their fields of business operation. How to increase

the service provisions by all types of stakeholders will become a fundamental issue when SME support

programs will be looking for deliver channels.

Monitoring Developments

Harmonizing Enterprise size Categories

Pakistan has no across the board legal definition of SME. This makes it extremely difficult to monitor

the development of our SME economy and to establish benchmarks against other countries in order to

devise areas of intervention and support.

Various government departments and public-sector agencies have adopted their own definitions. There

are, of course, various reasons for them to define SME, and there may even be discussion on just how a

strict and reasonable size standard could be defined.

A number of current definitions are based on capital standards since this influences the pattern of fund

raising in the formal and informal market by SME.

Many stakeholders consider enterprises with 100 or more employees as large, and enterprises with less

than 5 employees as micro. Yet our statistical system classifies enterprises with more than 10 employees

as large, and the State Bank of Pakistan considers those with more than 250 employees as large.

The reference to international practice also suggests differentiation among industrial, wholesale, and

retail10 and services related enterprises. This view also gets credence from various studies on the issue

for pakistan11. Again, this consideration is only visible in the SBP definition and missing in all others.

There are also rationales beyond the particular organizational motivations for defining specific size

classes, and it will therefore be useful for all stakeholders to review definitions on technical grounds.

For a national policy, it is extremely important to have a harmonized definition for, as it is also

important for the government to focus assistance as reasonably as possible for maximum efficiency. It

SME Management (MGT-601)

is also imperative to adopt a definition to foster the coherence of vision in the SME policy development

and for the better implementation of related support programs across institutions.

REFERNCES

1-SME Issues Paper by SMEDA (policy planning & strategy department)

2-World Bank survey (Gallop)

3-Financial issues &SMEs (paper read by Dr Ishrat Hussain)

4-Small Entrepreneurs in developing countries By Dr Asghar S. Nasir

Book Recommended

Small Entrepreneurs in developing countries By Dr Asghar S. Nasir

Key Terms

ISO certification (International Standards organization certification like ISO 9000 Quality certification)

R&D (Research and Development)

SBP (State Bank of Pakistan)

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