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August 4, 2002
REVIEW: Setting up a small business
THE book under review is most timely. Today there are hundreds of graduates in business administration and engineering who are desperately looking for gainful employment but without any success. The author, Dr S M Naqi, has vast experience of managing public and private sector organizations and also as a successful entrepreneur. The students of business administration must have read similar books by foreign authors but this book has been written in the local context and fully describes the modus operandi of starting small and medium size enterprises in Pakistan. It is based on the premise that the activity is not confined to people who are born as entrepreneurs but it can be taught and learnt or perhaps relearnt.
The book begins with defining Pakistan’s position in relation to other countries. With widespread poverty, overpopulation, and weak economic structures, Pakistan is a third world country which needs to alleviate these problems. For this it is necessary to create a culture in which people, especially the younger generation, find investing in small or medium scale businesses more rewarding than making futile efforts to find jobs.
On the other hand, the employment potential of small-scale units, particularly those in the manufacturing sector, is much higher than that of large-scale manufacturing units. While the former account for only 28 per cent of the manufactured output, their share in employment is 81 per cent. At the same time job creation in large-scale manufacturing costs about 80 times more than that in the small-scale sector.
Based on the fact that the small and medium size enterprises generate employment and are mostly associated with the agro industries in an agrarian economy, the governments have always been encouraging the establishment of such industries. Various institutions set up by the government have been fostering the growth and development of small industries thereby stimulating industrial progress in the rural and less developed regions of the country.
Institutions such as the Industrial Development Bank of Pakistan and Small Industries Corporations of Punjab and Sindh have been effectively discharging their responsibility of providing financial assistance and loans to the small businessmen. Now the government has also realized the importance of imparting training and education to the entrepreneurs in managing and developing their respective businesses.
The Small and Medium Enterprise Development Authority (SMEDA) has been constituted in 1998, with these objectives in view. Besides providing financial support, the key responsibilities of SMEDA include provision of business development services at the micro level and human resource development.
The chapter on “Small business in Pakistan” contains success stories of a few businessmen in Lahore, which can provide valuable guidance to new entrants in the small business. Another interesting survey carried out by the author himself has been quoted in the book, whereby 151 successful entrepreneurs were identified and interviewed.
In the course of the interviews, they were specifically asked to identify the factors and characteristics, which in their estimation accounted for their success in business and industry. The top five in order of ranking were stated as hard work, honesty, communication skill, human relationship and determination. The lowest five were emotionalism, maturity, firmness with staff, business background and insight.
The book discusses at length the history of family business in Pakistan, its role in the economy and the community. It provides guidance on how to survive and also grow.
The tunnel vision that made an entrepreneur a success in the first place turns against him and stands in the way of professionalism necessary for survival. The entrepreneur never thinks that he will ever die and is constantly expanding, without planning for succession. His business must have a successor generation so that he can move into history. He can pass on to the next generation a philosophy that binds the family together and creates a rich tradition.
The government gives priority to the small and medium enterprises not only because of their importance in meeting social objectives, but also for industrial development. Generally, small firms are less affected by economic fluctuations as they have greater flexibility in relation to production schedules and labour employment. Similarly, small investors are less vulnerable and sensitive to political changes.
Moreover these enterprises generate a good portion of their capital needs from the informal capital markets and require less infrastructural support than larger firms.
These factors help explain why small-scale industries continued to grow during the difficult years of the 1970’s, while the production of larger firms declined, under the socialization programme.
Under the prevailing circumstances, when the local entrepreneurs are reluctant to pour their money into big business and foreign companies are no longer interested in investment, for obvious reasons, there is a silver lining on the dark cloud of economic stagnancy. There is enormous scope and potential in the country for investment in small and medium scale industries. If the talent and energy of Pakistan’s educated youth are utilized for business and its mindset changes from job hunting to entrepreneurship, the resultant acceleration in economic activity may lead to an industrial revolution in the country. Dr S M Naqi’s book must be read objectively by all those who are either students of or involved in business management and engineering.
Entrepreneurship: a recipe for economic development
By Dr S.M. Naqi
Naqi Hyder and Associate Available at 51-Aibek Block, New Garden Town, Lahore
404pp. Rs240
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