SMEDA PAKISTAN

(SMALL AND MEDIUM ENTERPRISE DEVELOPMENT AUTHORITY)

PRESENTED BY ABDULLAH & SIAL MUHAMMAD

PAKISTAN

Brief history of SMEDA

Government of Nawaz Sharif established Small and Medium Enterprises Development Authority in late 1998 with great fanfare and pledged to provide Rs. 250 billion for Small and Medium Enterprises (SMEs) in three years. But there had practically been no investment in the small and cottage industries since the establishment of SMEDA.

It is established to take on the challenge of developing Small & Medium Enterprises (SMEs) in Pakistan. SMEDA is relatively a new organization with a futuristic structure and focus on providing business development services to small and medium enterprises. SMEDA is not only an SME policy-advisory body for the government of Pakistan but also acts as a one-stop-shop for its SME clients

Evolutionary Phases of SMEDAPhase - 1

Dec ‘98-Dec ‘00

Textile Vision 2005Fisheries TransportDairyLight EngineeringInformation TechnologyLeather

SES Monitoring

HEXPO 2000 & beyond

Leather Outlook 2010

Cool Chain

Flatted Factories

Fisheries Implementation

Marble & Granite

Gems & Jewelry

Phase - 2Jan ‘00-Dec ‘00

Boat ModificationAuto VendorsCarpet WeavingPower Loom ClusterCeramic ClusterMarble & GraniteDates & ApplesWooden FurnitureLeather Garments

Trade Secrets

Phase - 3Jan ‘01- May ‘03

Help Desk LaunchedOTC ProductsBusiness Plan Develop-Training & DevelopmentWebsite LaunchedPublications

Sector Strategies and Implementation

Business Dev. Services

Cluster Development

Sector Strategy UpdatesStrategic Focus - WTO

Phase - 4Oct ’03 - onwards

SME Policy SME Info. ServicesSME Networking Group

Policy and Conducive Environment

Textiles Marble and Granite GinningCutlery Furniture Light Engineering Bangles ClusterDairy

Help Desk & RBCsTech. Up gradationTraining & DevelopmentMarketing ServicesFinancial ServicesEntrepreneurship

ILO Study World Bank ADB PPTA

Phase I (Dec 98 - Oct 99): SMEDA in the initial stage started working on a few priority sectors. The objective was to develop comprehensive strategies followed by implementation with the collaboration of the relevant Government departments. Case in point is the marine fisheries sector where a detailed strategy was developed and implemented through various regulatory authorities. However, the Business Development Services (BDS) during that phase were only limited to the monitoring of the Prime Minister’s Self-Employment Scheme.

Phase II (Jan 00 - Dec 00): During this period SMEDA worked on different sectoral studies including the Textile Vision 2005, Hexpo 2000 & beyond, etc. These assignments of long term strategy development were successfully completed and later on submitted to the Ministry of Commerce for implementation and follow-up.

Even during this phase limited resources were allocated towards the development of BDS.

Phase III (Jan 01 - Nov 01): SMEDA was restructured from being a sector driven organisation to a functional support body. Emphasis shifted from macro level strategy formulation towards provision of business development services to SMEs and physical intervention in SME clusters. During this period lending programmes tailored to meet the credit requirements of specific clusters were also formulated. A wide array of Over the Counter (OTC) products were produced to facilitate SMEs through Help-Desks. SMEDA also launched its B2B portal to provide market connect to the SME sector.

SMEDA VISION

Growth of globally competitive SME sector through a favorable and facilitating environment and support services as an engine of growth and sustainability to national economy.

MISSION OF SMEDA

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.

OBJECTIVES OF SMEDA

Formulate Policy  to encourage the growth of SMEs in the country and to advise the Government on fiscal and monetary issues related to SMEs.

Facilitation of Business Development Services to SMEs.

Facilitate the development and strengthening of SME representative bodies associations/chambers.

Set up and manage a service provider’s database including machinery and supplier for SMEs.

SMEDA objective continued..

Conducting sector studies and analysis for sector development strategies. Facilitation of SMEs in securing financing. Strengthening of SMEs by conducting and

facilitating seminars, workshops and training programs.

Donor assistances for SME development of SMEs through programs and projects.

Assist SMEs in getting international certifications (such as UL, CE, DIN, JIS, ASME, KS, etc.) for their products and processes.

Identification of service opportunities on the basis of supply/demand gap.

BACKGROUND Army Rule in Pakistan A market economy and encouraged trade liberalization

Investment both local and foreign hindered by

political instability distrust between public and private sector and a non conducive (favorable) legal and economic policy

environment

Over 95% of businesses fall in SME category which have not developed due

obsolete labour laws and skills, wrong taxation system, idle trade capacity, lack of finance and credit availability and market access. The Small and Medium Enterprises Development Authority

(SMEDA) was established in 1998 under the Ministry of Industries and Production in order to foster the development of SMEs in the economy.

Emergence of SMEDA

Small and Medium Enterprises Development Authority (SMEDA) Premier institution of the Government of Pakistan under the Federal Ministry of Industries and Production, SMEDA was established in October 1998 to take on the challenge of developing (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.

SME Sector in Pakistan

3.2 million business units in Pakistan

Over 99% business units employ less than 99

persons.

Generate 78% of non-agri sector employment

Direct Contribution to GDP over 30%

Generate 25% of Manufacturing Export Earnings

Contribute 35% in Manufacturing Value addition

Functions of SMEDA

SMEDA has a country wide out reach with four main regional offices each headed by a Provincial Chief for each of the four provinces of Pakistan i.e. Punjab, Sindh, Balochistan and North West Frontier Province these are further extended to 23 major cities of the country with a one-man office housed in prominent Chambers of Commerce & Industry which are called Regional Business Coordinators. The Outreach Division also includes Industry Support Cell and Training Services Department which is responsible for providing training services to SMEs. Business & Sector Development Service

Organization structure of SMEDA

CHALLENGES TO SEMDA AND LESSONS LEARNED

Public and private sector roles need to be defined very clearly to reduce power struggle.

The roles should contain a balance of power and performance as otherwise dialogue turns into a monologue.

Constitution of such structures should try to make them safe from political changes in leadership.

A balanced system of incentives both for public and private stakeholders encouraging cooperation needs to be designed to create motivation for results.

Issues in SME Financing

Sources of Working Capital for SMEs

Retained Earnings

68%

other8%

Informal1% Equity

12%

Banks/ FIs7%

Trade Credit4%

Financial Sector Contributing 7% Working Capital

Source: Gallup Survey of 1000 Industries in 2009 covering 12 cities & 8 sectors

Sources of Investment for SMEs

Trade Credit2%

Banks/ FIs8%

Equity17%

Informal2%other

12%Retained Earnings

59%

Financial Sector Contributing 8% Investment

Source: Gallup Survey of 1000 Industries in 2009 covering 12 cities & 8 sectors

WHAT does these pie charts say about the Situation

Most SMEs operate through Self-Financing or Retained Earnings

SMEs do not make use of Trade Finance for Expansion

Fear of regulations discourage them to come in the formal fold

Access to formal credit is strongly correlated to firm size & age of the firm

The size of SME credit market is estimated to be 250 to 400 billion

Legal Structure of Business Unitsin Pakistan

Corporates & Others

8%

Proprietorships &

Partnership85%

Public Sector7%

Source: ILO SMEDA Study 2009

International Linkages & Collaboration

SMEDA also aggressively works to develop international linkages with other countries & international donor agencies. SMEDA strives to develop SME Development ties on bilateral and multilateral basis with countries around the globe. SMEDA has working relations with over 50 countries which includes share of information and experiences, business match making for investment and joint venture opportunities, support & encouragement of trade fairs Out of these over 50 countries, SMEDA has signed Memorandum of Understanding with 9 countries with its counterpart agencies, these include China, Poland, Turkey, Morocco, Tunisia, Algeria, Mauritius, Kuwait, and Uzbekistan

SMEDA oversees efforts

SMEDA has also developed strong working ties with a number of international donor agencies who are involved in the economic development of Pakistan. This collaboration generally includes financial and technical assistance to the SME sector of Pakistan. These agencies include JICA, UNIDO, UNDP, World Bank, Asian Development Bank, USAID, SES, GTZ etc.

SMEDA in collaboration with JICA (Japan International Cooperation Agency) has initiated an Industry Support Program in Pakistan.

The present government's emphasis on development of small and medium scale enterprises in the private sector is being duly appreciated by the donor countries. Japan, European Union, Italian government and Asian Development Bank have shown keen interest in the various projects identified by Small and Medium Enterprises Development Authority (SMEDA) of Pakistan

strategies of smeda

The Small and Medium Enterprises Authority (SMEDA) is planning to take two major initiatives which will have far reaching effect on the industrial development in the country specially the small and medium scale industry.

The SMEDA has asked the government to carry out a the information that how much small and medium size business working in pakiatan through the Federal Bureau of Statistics.

It also launch a regulatory mapping exercise in coordination with two experts from the International Labour Organization (ILO) to review the entire set of laws, rules and regulations at the federal, provincial and local levels that govern business operations.

SMEDA Achievements

SMEDA today

Shahid Rashid, Chief Executive Officer of the Small and Medium Enterprises Development Authority (Smeda) is going to launch the first SME Subcontracting Exchange (SMEX) of the country today (Wednesday), January 27, 2010 at 3:00pm at Gujranwala Business Centre (GBC). The launching ceremony, besides the CEO, will also be addressed by Khalid Mehmood Chadha, President, Gujranwala Chamber of Commerce and Industry.

Topics we have covered in this presentation

What is meant by smeda? According to the criterion worked out

by SMEDA, all those business enterprises having 10 to 40 employees and having productive assets (excluding land and building) worth Rs 2 to Rs 20 million are small business establishments. Those having more than 40 employees upto 99 with productive assets worth over Rs 40 million have been classified as medium size business establishments.

One reason why the small and medium business establishments prefer to operate in the informal sector is their unending harassment at the hands of the government functionaries, such as labour inspectors, excise officials, municipal functionaries and a host of others.

Our Findings

. Recently, in Pakistan hundreds of businesses have been closed due to shortage of Electricity, water, Sui gas (natural gas), or due to law and order situation (like assassination of Ex-Prime Minister of Pakistan Benazir Bhutto in Rawalpindi).

every day million of assets are being transferred to Gulf countries by existing business community, in such a scenario no SME can prevail and grow with reasonable level of certainty.

recommendation

Moreover, economically, this policy is viable but not focused for some excellence sectors in future, like a widely acclaimed adopted one village, one product model for microfinance and SMEs, this policy shall be focused on some specific businesses and product lines, instead of forming a mass of unplanned and less cost-effective SMEs, in today world of globalization and specialization

Any queries regarding SMEDA …

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International Best Practices -Countries Studied

Developed CountriesGermany Japan

Neighboring CountriesChina India

Developing CountriesThailand Turkey

Priority Sectors

Gems & Jewelry

Marble & Granite

Dairy

Sports Goods

Furniture

Fisheries

Light Engineering

SMEDA Performance

80Pre-feasibilities under Process

9,379SMEs facilitated through Library

97Pre-feasibilities on Web site

120Business Plans

159Total Hits (25,669,736) from countries

1,433,527

Business Guide Series Downloaded

25,533 Number of SMEs trained (482 programs in +50 cities )

14,500Number of SMEs facilitated through helpdesks

SME Development – Policy Statement

“The Government of Pakistan is committed to develop the

SME sector for achieving higher economic growth leading

to creation of jobs and poverty alleviation. SME

development will be achieved by providing conducive

business environment, greater access to formal financing

and through provision of support in technical up gradation,

human resource development, marketing and innovation.

The Government will facilitate establishment of new

businesses by developing policies that help in unleashing

the entrepreneurial potential of the people of Pakistan”

Thank You