Muhammad Almas Khan Khattak Deputy Chief

Industries & Commerce Section Ministry of Planning, Development & Reform

May 25, 2016 1

INTRODUCTION

Small and Medium Enterprise Sector is one of the key Sector of our National Economy. It plays a pivotal role in reshaping the national economy as well as raising the socio-economic standard of population at large in terms of providing employment opportunities and GDP Growth. It also brings innovation in the economy and contributing in value chain promotion.

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SMEs Definition Current Definition as per SME Policy 2007 approved by the Federal Cabinet:

Revised Definition of State Bank of Pakistan (SBP)

*Business entity that meets both parameters. Other organizations have also developed their own SME definitions as per requirement. Source: SMEDA

Enterprise Category

Employment Size (a)

Paid Up capital (b)

Annual Sales ©

Small & Medium Enterprise (SME)

Up to 250 Up to Rs. 25 million

Up to Rs. 250 million

Enterprises Number of Employees* Annual Sales Turnover

Small Enterprise (SE)* Up to 20 Up to Rs. 75.00 million Medium Enterprise (ME) *

21-250 (Manu. & Service MEs) 21-50 (Trading MEs)

Above Rs. 75 million and up to Rs. 400 million

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New proposed definition by SMEDA and agreed by all stakeholders.

Note: This definition is under the process of approval.

Enterprise Category Employment Size (a) Annual Sales Turnover

Cottage Industry Family Unit Up to 5 million

Micro Enterprise 1 - 10 0 – 10 million

Small Enterprise 11 - 50 11 – 150 million

Medium Enterprise 51 - 250 151 – 1000 million

Large Enterprise 251 – and above Above 1000 million

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SALIENT FEATURES OF SME SECTOR IN PAKISTAN

� Total SEMs in Pakistan 3.2 million � Percentage of SMEs in Pakistan 99% �  SMEs Sale in Pakistan 85% < 0.5 million & 93% < 1 million � Share in GDP 40% � Share in Exports 46% � Share in employment Generation 80% (14.9 million jobs) Source:: SMEDA & Pakistan Economic Survey 2011-12

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POTENTIAL SME SUB-SECTORS IN PAKISTAN

�  LOGISTICS- Contributing US $ 650 million annually �  ICT AND ALLIED SERVICES – E - Commerce potential in USA

is US $ 20 Trillion. In Pakistan E - Commerce potential is available due to access of 29 million people to internet in 2012

� GEMS & JEWELLERY – National Market volume is US $ 12.5 billion and exports more than US $ 1.2 billion

� HORTICULTURE – A potential sector earning its foreign exchange component worth US $ 3.78 billion

� CONSTRUCTION – Providing jobs to 3.8 million construction workers including 2.6 million un-skilled workers and 1.2 million skilled workers in addition to provision of shelter to population at large.

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�  FISHERIES - Export worth US $ 379 million � DAIRY & LIVESTOCK – Contributing 55.9% of Agriculture GDP

and 11.8% of National GDP. �  ENGINEERING – Light Engineering export is worth US $ 242

million. � MINERALS – Export worth US $ 1.17 billion �  LEATHER - Export worth US $ 814 million �  TOURISM – A potential sector contributing to GDP growth �  TEXTILE MADE UPS & APPAREL - Export worth US $ 7 billion

and providing jobs to 2.5 million persons. Source: Pakistan Economic Survey 2013-14

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ISSUES / CHALLENGES IN SME SECTOR OF PAKISTAN

�  HARDSHIPS IN ACCESS TO FINANCE �  OBSOLETE TECHNOLOGY �  MARKETING �  HUMAN RESOURCE AND SKILLS �  REGULATIONS �  LOW VALUE ADDITION �  LAW AND ORDER SITUATION �  SHORTAGE OF ENERGY & HIGHER PRICES �  COMPLEX TAXATION SYSTEM �  POOR INFRASTRUCTURE �  DIFFICULTIES IN DOING BUSINESS

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INTERVENTIONS OF PLANNING COMMISSION FOR PROMOTION OF SME SECTOR

�  VISION 2025 (PILLARS -V & VI) LAYS SPECIAL EMPHASIS ON PRIVATE SECTOR AND ENTREPRENEURSHIP LED GROWTH AND AIMING AT SUSTAINED ENGAGEMENT OF THE PRIVATE SECTOR, ENABLING EFFICIENT DEPLOYMENT OF PRIVATE RESOURCES AND SKILLS TO ACHIEVE THE VISUALIZED OBJECTIVES.

�  INTRODUCING REGULATORY FRAMEWORK CONDUCIVE FOR PRIVATE SECTOR GROWTH, WITH WELL DEFINED INDUSTRIAL AND COMPETITION POLICIES WHICH ARE INVESTMENT AND BUSINESS FRIENDLY

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�  REMOVING INFRASTRUCTURE BOTTLENECKS BY LAUNCHING DEVELOPMENT PROJECTS

� DEVELOPING A COMPETITIVE KNOWLEDGE ECONOMY BY STRENGTHENING INDUSTRY – ACADEMIA & RESEARCH INSTITUTIONS LINKAGES AND PROMOTING VALUE ADDITION.

�  IMPROVING PRESENT RANKING OF PAKISTAN FROM 133RD OUT OF 148 COUNTRIES AS PER GCI COMPETITIVENESS RANKING.

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�  ENCOURAGING INVESTMENT THROUGH COORDINATION AND SYNCHRONIZATION BETWEEN FISCAL, MONITORY, INVESTMENT, COMMERCIAL AND INDUSTRIAL POLICIES AND PLANS.

�  VISION 2025 SEEKS TO PROVIDE SMEs A LEVEL PLAYING FIELD AND FAIR COMPETITIVE ENVIRONMENT.

�  THE FEDERAL GOVERNMENT WOULD WORK WITH PROVINCIAL GOVERNMENT AS WELL AS DOMESTIC AND INTERNATIONAL DEVELOPMENT INSTITUTIONS TO AMELIORATE THE PROBLEMS FACED BY SMEs AND HELP THEM IN ACCESSING CAPITAL THROUGH SMALL BUSINESS LOANS.

�  MICRO BUSINESS WILL BE ENCOURAGED, THUS PROMOTING ENTREPRENEURSHIP AND INNOVATION.

�  THE RURAL NON-FARM SECTOR WILL ALSO BE REVITALIZED BY FORMULATING JOB SCHEMES OR BUSINESS SUPPORT LOANS TO MITIGATE PRESSURE ON THE URBAN AREAS. PRIME MINISTER’S YOUTH LOAN SCHEME IS THE IDEAL MODEL OF SMEs DEVELOPMENT.

�  VILLAGE COMMUNITY CENTRES WILL BE ESTABLISHED TO HARNESS POTENTIAL OF COMMUNITY MOBILIZATION AND PROMOTING IDEAS.

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DEVELOPMENT SCHEMES/PROJECTS LAUNCHED FOR PROMOTION OF SME SECTOR:

�  DEVELOPMENT PROJECTS OF PAKISTAN GEMS & JEWELLERY FOR SKILL DEVELOPMENT AND TECHNOLOGY UP-GRADATION (COSTING RS. 1459.92 MILLION)

�  ESTABLISHMENT OF COMMON FACILITY CENTRE FOR SILK CLUSTER AT MINGORA, SWAT (COSTING RS. 57.53 MILLION).

�  ESTABLISHMENT OF FOUNDRY SERVICE CENTER LAHORE (COSTING RS. 206.31 MILLION).

�  HYDERABAD ENGINEERING SUPPORT CENTRE (HESC COSTING RS. 295.55 MILLION).

�  LIGHT ENGINEERING UP-GRADATION CENTRE FOR SMEs IN BALOCHISTAN (LEUC) HUB, LASBELA (COSTING RS. 304.911 MILLION).

�  PESHAWAR LIGHT ENGINEERING CENTRE (PLEC), PESHAWAR (COSTING RS. 288.156 MILLION).

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�  SIALKOT BUSINESS AND COMMERCE CENTRE (COSTING RS. 484.61 MILLION).

�  WOMEN BUSINESS DEVELOPMENT CENTRE (WBDC – MINGORA), SWAT (COSTING RS. 35.01 MILLION).

�  SME SUB-CONTRACTING EXCHANGE (SMX) (COSTING RS. 26.04 MILLION).

�  WOMEN BUSINESS DEVELOPMENT CENTRE (WBDC), PESHAWAR (COSTING RS. 28.41 MILLION).

�  LEATHER CRAFT DEVELOPMENT COMPANY (LCDC), MULTAN (COSTING RS. 214.01 MILLION).

�  DEVELOPMENT OF MARBLE & GRANITE SECTOR (COSTING RS. 2276.880 MILLION).

�  REVIVAL OF FOUNDRY SHOP IN PITAC LAHORE (COSTING RS. 32.490 MILLION).

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�  NATIONAL BUSINESS DEVELOPMENT FOR SMEs, ALL PAKISTAN (COSTING RS. 1500 MILLION, NEW UN-APPROVED).

�  SMEDA, SMEs FACILITATION CENTRE AT PITAC, LAHORE (COSTING RS. 57.20 MILLION).

�  TECHNOLOGY UP-GRADATION OF CUTLERY INDUSTRY (COSTING RS. 165.26 MILLION, NEW UN-APPROVED).

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RESEARCH STUDIES RECENTLY APPROVED BY PLANNING COMMISSION FOR CLUSTER DEVELOPMENT �  FEASIBILITY STUDY “CLUSTER DEVELOPMENT BASED

INDUSTRIAL TRANSFORMATION PLAN V-2025” (COSTING RS. 71.74 MILLION)

�  FEASIBILITY STUDY “CLUSTER DEVELOPMENT BASED MINERALS TRANSFORMATION PLAN V-2025” (COSTING RS. 62.21 MILLION)

�  FEASIBILITY STUDY “CLUSTER DEVELOPMENT BASED A G R I C U L T U R A L T R A N S F O R M A T I O N P L A N V-2025” (COSTING RS. 96.30 MILLION)

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WAY FORWARD �  CONTINUOUSLY UP-GRADING THE SME SECTOR THROUGH

POLICIES AND REGULATORY REFORMS �  APPROVAL OF A COMPREHENSIVE MUTUALLY AGREED

DEFINITION OF SMEs BY ALL STAKEHOLDERS. �  PROMOTING ACCESS TO FINANCE BY CREATING A SPECIAL

SMEs FUND UNDER THE DIRECT CONTROL OF SMEDA. �  STRENGTHENING LINKAGES WITH DONOR AGENCIES TO

PERSUADE THEM TO EXTEND FINANCIAL ASSISTANCE TO SMEs IN PAKISTAN.

�  UP-GRADATION OF TECHNOLOGY TO BRING THE SECTOR AT PAR WITH THE DEVELOPED NATIONS OF THE WORLD.

�  HUMAN RESOURCE DEVELOPMENT AS PER ACTUAL NEED OF SME SECTOR.

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�  PROMOTING ACCESS TO MARKET THROUGH E-COMMERCE AND OTHER ICT ARRANGEMENTS.

�  PROMOTING INCLUSIVE GROWTH OF SME SECTOR. �  IMPROVING COORDINATION AMONG ALL STAKEHOLDERS

THROUGH CONTINUOUS ACTIVITIES TO BE ORGANIZED BY THE SMEDA ON QUARTERLY BASIS.

�  SPECIAL EMPHASIS BE LAID ON SME SECTOR IN THE PROPOSED INDUSTRIAL PARKS / SPECIAL ECONOMIC ZONES ALONG SIDE CPEC ROUTES THROUGHOUT THE COUNTRY.

�  IN THE SHORT TERM AND LONG TERM PLANS OF CPEC AGREEMENT, THE PROPOSALS SUBMITTED BY SMEDA MAY BE GIVEN TOP PRIORITY.

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THANKS

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