What do Pakistan’s SMEs want? Many things! From ease of credit to ease of doing business. But there is something that SMEs need, much more than they explicitly demand: training.
Recognising this, the Trade Development Authority of Pakistan is currently collaborating with the Institute of Business Administration (IBA) to develop training modules for existing and new SME exporters who have the capacity to produce an exportable product but lack knowledge about the processes and procedures due to which they are unable to bring dollars in their kitty.
Without an attempt to provide an exhaustive list of training needs assessment of the SMEs, here are some key areas that demand attention, based on BR Research’s interaction with a wide variety of SMEs and SME-related stakeholders over the last many years.
Arguably the most important training need for potential exporters relates to the form of formalization, and benefits of formalization. A host of SMEs in Pakistan, which can potentially export, lack proper formal structure, and/or clean books of accounts to be able to tap the credit market or enjoy a reputation with potential foreign buyers.
To this end, case studies of Pakistani SMEs that have formalized their structure should be developed, especially highlighting how it helped them tap export markets. Ideally these case studies should be presented by the management of the firms that are the subject of those studies. For SMEs that want to formalize, a training module ought to be developed on how various business structures suit their business needs: from partnerships to AoPs to SME listings, LLPs and single member private company.
Next step should be to train them on the legalities of exports – for example various types of business contracts – as well as banking, insurance, financial management. The former is important in the context of contract enforcement, both cross country and with domestically suppliers, especially in dealing with unforeseen circumstances.
The latter is needed to learn how to manage working capital, cash-flow mismatch, various forms of financing options (bank lending to modarba) etc. Many SMEs also learn the importance of insurance the hard way; a training module therefore should incorporate these aspects. On a related, some SMEs will also need training on futures contracts to secure the availability of raw material at stable prices.
Depending on which SME sectors the TDAP-IBA duo is initially targeting, the training module should also incorporate sector-specific standards and regulations, be it local or foreign. For instance, many exporting firms in Pakistan – some even large ones - are found unaware of China’s trade policy instruments (tariffs and non-tariffs) because of which they face challenges in meeting non-tariff measures such as product standards, labeling, certification and other procedural requirements.
Others don’t know where or how to get their products tested to meet importing countries requirements, and face problems in getting licenses, permits & certifications. While some of these licensing problems need to be fixed by the government, SMEs are also found to lack basic awareness in this regard. It is equally important that SMEs have the basic know-how of the WTO technical barriers to trade agreement, so they can better invest their energies, instead of walking into a cul-de-sac.
International marketing is another module that IBA should focus on. These may include a wide range of topics from targeting the right international trade exhibitions to pulse reading of the markets, and building long term business-to-business relationships with foreign buyers and local suppliers. Many SMEs also lack an understanding of how to utilise the various export incentives and endowments offered by the government.
Many others even lack the very information of those incentives and endowments. For example, as the World Bank’s recent Pakistan Development Update flagged, top 100 firms in Pakistan account for roughly three quarters of duty-exemptions offered by the government. This suggests that fixing the information asymmetry is an important part of the solution.
To resolve the issue of information asymmetry, the TDAP-IBA should develop a bilingual multi-medium information portal (Urdu & English) that is kept up to date with the latest export incentives/endowments offered by the government as well as various sector-specific exports related regulatory changes.
Considering that training modules cannot be as comprehensive as a graduate programme, the portal should gradually incorporate a vast set of FAQs on wide ranging topics (including the ones discussed above). These should be coupled with educational videos as well as discussion forums moderated by volunteers from a panel of sectoral/subject experts as well as dedicated representatives from various departments such as PSQCA, central bank, TDAP, customs and so forth.
Lastly, these exercises should not be construed as a one-time event, because that will not yield desired results. Instead, a gradual approach should be adopted, moving from one SME sector to another, from internal problems of exports to external problems, and from problems faced in ongoing exports to initiating exports. Each lens of looking at training assessment would provide different solutions!
Comments
Comments are closed.