MGT601 SME Management GDB Solution Spring 2013

Pakistan is an under developed country and SME’s are playing an important role in uplifting its economy. There are approximately 3.4 million business enterprises in Pakistan. SMEs contribute over 30% to the GDP. Establishing and Promoting of SME’s is the prime concern of Government policy for economic revival, poverty alleviation and employment generation. But alarming point is that it could not grow like Malaysia, Twain, South Korea and other countries. Still, in Pakistan SME’s and entrepreneurs are known as imitating entrepreneurs, heavily depend upon innovative entrepreneurs from developed countries Japan, Germany, China etc. So, for an entrepreneur to start business must have sufficient cash in hand and most importantly business guts and skills.

Point of Discussion

In your opinion, what sort of actions to be taken by the government to promote SME’s in country and what contribution can be added by the private sector to promote the trend of entrepreneurship in country?

Solution: Small and Medium Enterprises (SMEs) will be promoted through a coordinated and tailored mechanism, as these have a key role to play in the economic turnaround, said the newly appointed Punjab Industries Department Secretary Irfan Ali. While talking to the business community at Lahore Chamber of Commerce and Industry (LCCI) on Saturday, he said the development of local brands and human resource would be the prime areas for strengthening the SME sector that had been facing multiple challenges for the last five years. “I will hold monthly meetings with LCCI to improve liaison as well as listen to the business community’s problems,” he said, adding that government was alive to the private sector’s issues and doing the needful. Though energy shortage and law and order kept the economy hostage during the last five years, the Punjab chief minister had a clear vision on the economic issues, which would help resolve their problems at the earliest, he said. The secretary, however, urged the business community to prepare recommendations to boost economic activities in the province saying the government would implement all their practical proposals without any delay. LCCI President Farooq Iftikhar said, “Business community understands that the Punjab government is moving in the right direction and its seriousness on business issues will yield positive results.” He, however, urged the industries secretary that all stakeholders be taken on board while preparing industry-related policies, and asserted that industrial estates be exempted from load shedding of gas and electricity to meet the local market and export targets. He also expressed concerns over undue interference of Social Security Department, EOBI and Labor Departments and said tax refund claims were unduly delayed. Calling for establishment of more technical institutions, he said existing technical institutions were not competing with the fast growing population of the province.

Governments to promote entrepreneurship:

Shaping fertile ecosystems:

  • Build strong local bases anchored in regional development initiatives, encouraging entrepreneurs, local authorities, large companies, public and private education systems, to devise and implement synergetic strategies that build on a common ambition, sense of purpose and talent pool.
  • Leverage a relevant talent pool through a better alignment between the skills requirement of the local economic fabric and the education offering (primary and secondary education, vocational training, higher education, lifelong training).
  • Foster collaboration among key actors through appropriate incentives by entrusting universities with the mission of applied industrial research, promoting the exchange of talents among academia, research and business or encouraging cooperation between established and entrepreneurial companies.
  • Provide enabling infrastructures, especially by fostering public/private schemes to develop common local infrastructures (R&D centers, transportation, voice and data communication, etc.).
  • Ensure a stable, simple and conducive regulatory environment at a regional / supranational level to give undistorted access to larger markets while providing the opportunity to achieve critical size quickly.
  • Offer targeted tax incentives to promote business creation and development as well as innovation.

Financing entrepreneurship from inception to critical size:

  • Ensure the availability of financing for each stage of enterprise development and support the development of domestic or regional equity markets dedicated to high-potential SMEs, in order to support the growth of entrepreneurial ventures and break the ‘glass ceiling’ that hinders their development.
  • Develop specific solutions for high risk / low qualified entrepreneur profiles to help fight poverty, long-term unemployment and social divides in both emerging and mature economies.