September 04, 2006	Monday	Sha'aban 10, 1427

The government is considering a set of proposals to create special “industrial cities, clusters and zones” to attract investment, particularly for establishing small and medium enterprises (SMEs).

Concerned officials have also been asked by the higher authorities to work out possible fresh fiscal and non-fiscal incentives to be offered to the SMEs located in these specified areas.

A group of officials and independent economists and experts including those of Pakistan Institutes of Development Economists (PIDE) and Higher Education Commission/COMSTECH has recommended setting up of an Authority for improving the facilities in the existing industrial clusters and creating more clusters, by acquiring full knowledge of problems being faced by specific industries and creating facilities required to improve the quality of products with higher productivity.

The industrial clusters, export processing zones, industrial zones and cities for various manufacturing activities have been set up in various countries with a view to ensure that producers have an access to the infrastructure and they do not face bureaucratic hurdles. These have played an important role in various countries, particularly in the Far East.

However, officials concede that so far the export processing zones have met with limited success. The industrial zones were established in 1990s but after the withdrawal of incentives they became irrelevant. But the proposed Gwadar Industrial Zones and textile city may make a difference.

The new clusters, cities and zones may be located in the areas along motorways. Lahore-Islamabad motorway could form such a cluster and Chakri could be a cluster for software industries and Pindi Bhattian of textiles.

Clusters are important for SMEs because they provide cost-effective opportunities to deliver targeted technical assistance for upgrading technology, management and marketing. The clustering leads to greater efficiency and flexibility not attainable by individual firms operating in isolation.

Clusters of industries connected through vertical and horizontal relationships need to be developed. These clusters have critical mass that helps in sharing knowledge and resources and creativity, innovation and entrepreneurship. Sustained competitive advantage can be produced by mutual support.

Common facility centres have to be set up to help introduce new technology, production of better goods and higher productivity levels. It will enable industry to compete in terms of price and quality in the local market and exports. They are rather useful for the micro, small and medium enterprises.

Since such units neither have the knowledge nor the resources to acquire new technology, the government must set up such centres initially but eventually to be transferred to the private sector. These centres would help in the selection of proper technology and documentation to protect the SMEs rights.

These centres will provide testing facilities and extend advisory services for higher productivity with standardisation to the sub-contractors.

They will help in gaining greater competitive efficiencies; providing common services to improve forward and backward linkages with markets with supplies inputs; cooperation between the firms in upgrading technology; organising consultative meetings and to disseminate information; developing of sub-sector business associations to provide leadership and coordination; provision of essential machining facilities, needed to forge links between enterprises and the research and technology development being undertaken in institutions of higher learning and public financed research centres.

The government has been advised to introduce new strict certification laws for ensuring quality products as their quality is basic to increasing value-added and until the brand name is accepted, certification is key to get the benefits of quality improvements.

In this behalf, the ministry of science and technology has set up an accreditation agency. But it was not considered sufficient.

What matters is the confidence of customer in the accreditation agency. Since new Pakistani accreditation agency will be acceptable only when they earn good reputation, it is essential that there are counter certification. If accreditation agencies are joint ventures of the reputed accreditation of the world, it would help in not only increasing total exports but also their unit values. Besides some domestic consumers will no longer be opting for the imported stuff.

Whereas certification is important for almost all the industries, it is of crucial significance for the food industries, chemicals, electric and non-electric machinery and automobile industry.

Unless food products are properly certified, it may be hazardous to use domestically and almost impossible to export. Other industries which are to be accorded priority also need certification because most of the components have specification and quality that fits in the assembled products.

Necessary support to incubators in the form of low or no rent and operating subsidy, until rents and fees from the tenants match operating expenses. Thus the business incubator itself runs as a business, with the prospects of becoming self- supporting when operations are fully established.

The incubators should be technology based to ensure proper commercialization of their research products and linked to universities and research institutions or they should be industrial incubators for developing small businesses as vendor for components and services.

Single business incubators should focus on special sub-sectors, such as biotechnology, informatics. light engineering, handicrafts etc.