BY

Volatility and inefficiency were the hallmarks of these policies. This retarded industrial progress and resulted in increased instability and uncertainty in the industrial sector. These policies also hampered the proliferation of micro, small, and medium industries which could have led to a massive upsurge in industrialization and could have got the country out of the economic malaise.

The recent efforts of the Bhutto government to invite foreign investment on a gigantic scale and the tremendous response of the foreign investors, which is evident from the US$ 20 billion worth of MoUs signed in the past months, has overshadowed the crucial need to spread a web of small scale industries all over the country.

The case for this grid is highly imperative now if the country desires to achieve the illusion of becoming an Asian Tiger in the very near future. These small scale industries are essential for they have a very vital role to play in accelerating the economic and social policies and achieving the required impetus towards industrialization. The picture of a small scale industry that emerges today points out to the following :

(1) Helps to generate employment.

The small scale enterprise is comparatively easy to set up and can provide more opportunities for employment at a relatively lower employee / capital cost. The enterprise could be a micro or cottage type which is a home-based one where most of the personnel involved are family members or in case of a unit which is the place of work for a craftsman, then there would be his assistants who also learn the trade. The employees are generally between 5 and 10. Or it could be a small industry where the workers are more than 10 but less than 20. Unlike urban-based large industries, these units are able to tap a pool of underworked and unemployed rural workers. They are also in a position to pay lower wages and ignore most of the facilities and benefits due to the workers under the prevailing labor legislation. This gives them another advantage over the larger organized sector as they have a cheaper roster of workers.

(2) Provides skilled manpower and on-job-training.

The small scale enterprise is able to turn out a better skilled force, albeit one trained mostly in rudimentary approaches. The lack of modern machinery and the use of out-dated technology is widespread and is a major drawback in churning out a world-class product. However, this does allow the worker to attain the necessary skills. Furthermore, since the employer is more concerned with having a economical but reliable worker, there is more opportunities for the workers to get on-job-training. In this way, the workers do learn the skills which are hereditary and which are passed on thru the age-old system of Ustad-Shagird (master / pupil). Thus the unskilled youth of the area where the unit is based is well-placed to learn new skills.

(3) Low-cost products.

The advantage of a small scale industry is its ability to manufacture the product at a more economical rate than an industry which has more overheads and other heavy expenses. This enterprise is primarily dependent on the entrepreneur or on two or three persons. Normally the owner performs multifarious functions relating to the purchase of raw materials, hiring and training of personnel, overseeing of the production processes, marketing of the finished products, etc. This enables him to keep his grip on all the aspects of the company and at the same time, keep the cost of production reasonably lower. The enterprise can then sell the products at an affordable price directly to the consumer or thru the market mechanism available for that product.

(1) Lack of entrepreneurial ability.

The owner of the enterprise is excessively tied up in attending to the tasks undertaken by him. This works at some disadvantage for him and the company because these tasks preclude him from imbibing the latest technological knowledge and makes him too busy to be aware of the contemporary processes of marketing and management. This generally results in a situation where the efficient and state-of-the-art methods are unknown to him and where the gap between his scope of knowledge and what the world has to offer is widened.

(2) Financial constraints.

A major deterrent in the progress of a small enterprise is the unavailability of finance or in many cases the owner’s ignorance or inability to tap the funds allocated to the small manufacturer. This prevents him from increasing or modernizing his manufacturing facilities or buying raw material in bulk at a better price. This may also deter him from hiring more expensive labor and also from providing more credit to the buyer or user.

(3) Crude production processes.

It is a general conception that the small enterprise normally uses rudimentary methods of production and has a larger percentage of wastage of raw material. There is more reliance on unscientific procedures such as non-usage of weighing devices, use of ad-hoc measures to determine quality, less productivity of workers due to an informal atmosphere, and non-existence of a proper accountability system.

(4) Undue control / interference by government.

A prime reason why many small enterprises are either off-the-records or are situated in rural or backward areas is the discriminatory and authoritarian approach of government officers. The owner has to prepare all kinds of forms and is harassed by the factory inspectors who are more concerned with applying the statutory provisions of the various laws relating to industries. The aversion to maintaining records and registers is one reason why these owners are sitting ducks for the officers. Another reason of discontent is that the government’s policies for small industries is not progressive-oriented, since there is seldom a pertinent effort towards providing facilities such as infra structure, providing tax holidays, providing liberal loans, and providing ready markets to these industries.

The presence of the negative points have normally outweighed the advantages that the small scale industries help accelerate economic development. To effectively counter these negatives, the government has to embark upon a program to deal with these so that there is a plethora of small industries all over the nation. At present there are not more than half a million micro, cottage, and small industries and the figure has to zoom up if the objectives of industrialization are to be attained.

The entrepreneurial skills of the small industry owners need to be upgraded. This is possible if the Employer’s organizations, in association with government organizations such as Export Promotion Bureau and / or in association with foreign organizations including ILO, develop programs in simple and easy way for them, especially in the language of that particular area. Up till now the Employers’ Associations etc were neglecting these owners because they were either not their members because they could not afford the dues of these organizations or that the Associations were more involved in protecting the rights of their membership from the organized sector.

It is also essential that the suppliers of raw material and manufacturers of machinery also make efforts to provide latest information to the small industries. This also is applicable to the EPB to provide information regarding accessibility to the international market. A major program by the Bureau could be the invitation to foreign buying firms to meet the small scale owner so that they may be attracted to products at a reasonable rate and at the same time provide guidelines and advise to the producer to make his products on an enhanced quality scale. This internationalization of small industries can be achieved by also organizing exhibitions for their products, exploiting promising markets, taking measures to improve the product image of these units, providing product information to foreign buyer thru free advertising subsidized by EPB, providing samples of foreign produced goods to the small scale owner, and rendering expert advise on achieving international standards of quality.

The government should also radically change the strategy of industrial promotion agencies to attune it more towards providing the required impetus to prop up small scale industries. One way for the government to play a positive role would be earmarking purchase quotas from small industries for all government and semi-government organizations. For example 15 % of all government purchases should be from the small scale units. A price preference could also be provided to induce the establishment of more industries in the small sector.

There is a need to provide a friendly system of finances for these industries. There is a need to set up financial institutions that should only cater to the small enterprises and should specifically concentrate more on industries that are exporting or have a potential to enter the export market. The leasing companies and DFIs should enter into this field too, and thru the protection of the Small Industry Credit Guarantee Fund which should be set up by the Government provide liberal loans to these industries. The provincial governments can set up small sheds with all infra-structure facilities in designated areas on easy installment basis for these industries.

There is the need to improve the production facilities of these small units. One way to improve them is to link up with a major producer thru sub-contracting. This will enable the smaller units to produce goods on a defined guideline and specification and at the same time they could also avail the established quality control standards of the contracting organization. The utilization of the expertise available with the various technical institutes could also improve the manufacturing processes.

It is the duty of the government to initiate steps that would induce the small industry to come into the fold of the organized sector. This can be done thru simple documentation and by providing various tax incentives to them. The Factory Inspector can play a pivotal role in improving the working of the units. Instead of concentrating on the enforcement of mandatory provisions thru inspection visits which would lead to unnecessary harassment and legal entanglements, the emphasis should be on counseling, advisory services, and a positive, informal approach by the Inspector. This will eventually result in mutual trust and confidence, leading to a constructive approach towards making the workplace more efficient and conducive. An added advantage would be increase in worker productivity and may persuade the entrepreneur to positively increase the facilities and benefits to his workforce.

The industrialization of Pakistan should now not be a victim of experiments and oscillating policies. Sustainable growth requires dedication and action. Small enterprise development is of great significance to Pakistan. The prerequisites to achieve these are:

(A) The vision of the government to adopt and declare a comprehensive policy in support of small enterprise development.

(B) Coordinated efforts of the Employers’ Organizations, the Government, and the technocrats to diagnose the present policy and suggest proposals to remove bottlenecks and difficulties.

(C) Promulgation of practical measures at both the political and legislative level and inducement of budgetary support to bring forth the desired change.

(D) Overhaul of the administrative system and removal of all procedures such as red-tape, bureaucratic inertia, and unwarranted governmental impediments.

(E) In-depth study of the industrialization process of the existing Asian Tigers with special reference to the growth of small enterprises in these countries.

These steps are all the more essential if the network of a large number of industrial units is established all over the country and especially in the rural and least developed areas of Pakistan. This will lead the nation towards realizing the dream of being the next Asian Tiger.