How Sector Development Approach helps for Improving BE for SMEs

Transcription

1 How Sector Development Approach helps for Improving BE for SMEs A Case Study Pakistan The Role of Business Development Agencies in Developing Economies for Improving the Business Environment for SMEs Bangkok Conference on BE November 29, 2006 Shahab KHWAJA and Sajjad MOGHAL SMALL & MEDIUM ENTERPRISE DEVLOPMENT AUTHORITY MINISTRY INDUSTRIES PRODUCTION & SPECIAL INITIATIVES

2 Improving SME Business Environment Implications in Developing Countries Socio- Economic Conditions Focus on Competitiv- eness SME Development Agency Need for Physical and Business Infrastructure Emphasis on private sector dev. Political Environment: Poverty vs. Export Liberalizati on: Policy & Reforms

3 Sector Development as an Approach SME Sector large complete coverage impossible Sector Development Approach SME prominence Complete Value Chain Analysis Process led by private sector Strategy Working Groups (SWOG) SWOG identifies issues and priority SMEDA provides needed resources - fostering model of public private partnership. Focus is kept action oriented Exercise culminates into sector development plan Solutions to improve the business environment through policy interventions Actions to improve productivity and competitiveness at enterprise level

4 Sector Strategy Template Integrated Approach Value Chain Analysis Global Market Analysis Industry Analysis Regulations & Institutional Support Strategy Formulation Implementation & Monitoring Analyzing Demand & Supply Side Gaps Markets Access to Buss. Resources Regulatory Framework Technology Skills of Human Resource Typical Constituents of Sectors BE RAW MATERIAL BASIC PROCESS INT-MED PROCESS FINAL PROCESS CUSTOMER

5 Value Chain Analysis Not Enough Even well researched efforts fail to bring change in: policy or regulatory environment BDS market or the business infrastructure for SMEs Failure is attributed to: Little focus at Meso Level to give necessary institutional response Regulatory and institutional reforms are very slow taka long time to realize Importance of micro level interventions are emphasized especially with reference to various BDS and provision of sector specific infrastructure Reviewing its approach: Institutional arrangement for leading the sector development Mobilization initial investment to fund pilots.

6 Sector Development Targeting Competitiveness Pakistan Initiative for Strategic Development And Competitiveness (PISDAC) Govt. Avoids paternalism Ready to yield resources & Institutional Responses Factors Donors Role: Avoiding reliance on basic factors of advantage Policy Debate, Support for reforms, initial endowment, and capacity Building Firm Strategy, Industry Structure & Int l Trade Knowing relative competitive position When and where not to forward integrate Cross Linkages: Industrial Networks Improve inter-firm cooperation Foster Interdependence Demand Improve understanding of Stakeholders Opportunities for Pvt. Sector Investment

7 An Approach that was successful Process Formalize sector development through a single platform and provide resources Complete Value Chain Analysis & Strategy Develop Linkages within value chain and with local and int l organizations Targets Policy reforms by Government Endowments from Government/ Donors Investment by Private Sector Institutional Response: Collaborative Enterprises in Public-Private Partnership

8 Operational Strategy Based on Sector Development & Competitiveness Improvement Approach High SME affordability to buy services Low Business Competitiveness Technology Competitiveness Reducing Reg. Burden Access to Finance Infrastructure Large-Small Firm Linking Flow of Information Quality Competitiveness Public Sectors Role in Service Provision Focus of Initiatives Higher Edu. & S&T Promote IT & Telecomm. Technology Incubation & Venture Capital Cost Competitiveness Support/ Funds for Qty Imp Sector Specific CFC HR Training - Technology High

9 Results Marble & Granite Pakistan Stone Development Company (PASDEC) for the M&G sector, USD 5 million as endowment Government funds USD 34 million for Dev. Projects Dairy Sector Pakistan Dairy Development Company; GoP provides USD8 million in grant and USD32 million from banks Government development plan of USD 83 million Gems and Jewelry Sector Industry repositioning Export Sales orders of USD13 million Critical linkages with international training institutes USD 2.5 million endowment for the Gems and Jewelry Sector Development Company and USD 25 million for Dev. Projects

10 Conclusion Sector studies suggested that firm level conditions greatly vary from sector to sector Regulatory and policy environment cites to custom made solutions In all cases urgency points to reforms at intermediary meso-level inst. and access to BDS The priority of reforms: public private dialogue and governance, BDS market, product market competition, and regulatory environment The formalization of the process and providing it institutional outfit is a precondition for success Donor support for Success: providing initial resource endowment Capacity Building: articulation of microeconomic issues and explaining their relationship to macro policy issues Developing organizational capacities, resource mobilization and creating political pressures