Numerous problems and issues plague Pakistan's small industry, retarding its growth into a vibrant, economically viable and internationally competitive sector.

The difficulties confronted by the small sector range from their lack of access to reasonably priced formal banking credit to finance their operations and upgrade technology to unfriendly tax and inspection regime.

Last, but not the least, their inability to afford costly testing and inspection services and processes owing to their small size and limited production capacities further complicates the situation for them and blocks their growth and expansion.

No matter how enterprising a small entrepreneur is, the absence of common pool of services and processes in both the public and private sectors prevents him from adding value to its products. So most small entrepreneurs find it more convenient to be content with whatever they have achieved instead of trying to grow and expand.

This "gap" was pointed out by a study conducted by the Asian Development Bank (ADB) on the country's small and medium sector a couple of years ago. On the basis of that study, ADB approved in February 2004 a $170 million SME Sector Development Programme.

A small component of this sector programme - $200,000 - is to be spent on the formulation of the country's first-ever SME policy and another $12 million on the establishment of Common Facility Centres (CFCs) in the cities and towns where SME clusters are to be found through the Small & Medium Enterprise Development Authority (Smeda).

Among other countries, our next-door neighbour and competitor - India - already has such common facilities for such sectors as textile finishing, leather garments and products, toys, and forestry.

The project for the setting up of the CFCs was to be launched during the current fiscal year. However, as is usually the case, bureaucratic snags have delayed it until next financial year. Besides, the federal industries and production ministry is yet to consider and approve the concept paper on the CFCs and their utility prepared by Smeda.

Smeda officials are hopeful of establishing some 50 or more CFCs over a period of five years. These centres will provide a common pool of machinery, testing and inspection services and processes, and technology related services for collective improvement of small industry clusters located all over the country.

These centres will offer processes, services, machinery and equipment that no single small entrepreneur can afford to have. Those involved in the project believe that the small entrepreneurs would be able to share these high cost specialized common facilities and use them for improving their quality and adding value to their products and services, and even training manpower. This in turn will help them access foreign markets and improve productivity levels.

So far, Smeda proposes to set up CFCs for such sectors as engineering, furniture, marble and granite, agro process, sports goods, fisheries, gems & jewellery, textile garments, etc, which are to be found in "clusters" from Karachi to Peshawar. The decision to establish a CFC at a particular place would be taken only after ascertaining the needs of the industry and market.

The concept of CFCs is not new to Smeda, which has already launched one centre each for the leather garments units in Sialkot and light engineering industry Gujranwala. The Computerized Pattern Making Centre, established at a cost of Rs3 million or more for the leather garments producers has been working for about two years.

The facilities offered by the centre have so far been used by 218 SMEs for a nominal price. The centre has also been used to train 87 people in computerized pattern making. Many of them have or are in the process of setting up their own businesses.

The Light Engineering Service Centre, which would cater to the needs of probably the largest cluster of light engineering in Punjab, has just begun to provide services to the local industry. It has cost Smeda Rs2.5 million.

Smeda has however yet to make up its mind whether to operate the CFCs on a "no profit, no loss" basis or on a commercial basis, and left the final decision to the association of the industry concerned. "If the stakeholders - the industry - feels that they wouldn't need the facility after a few years, they may operate the centre on the no profit, no loss basis.

However, if they feel that they would need that facility for a longer term, they can charge nominal profit that could be used to replace the machinery once the life of the existing equipment expires," say Smeda officials. The decision would be taken on a project-to-project basis. But it is clear that all the CFCs to be established would be managed by the stakeholders themselves through an independent board of directors to give them a "sense of ownership".

One of the major factors as to why the small sector in the country has failed to overcome the difficulties in its way, and perform and grow according to its potential is the government's indifference towards it.

In the last few years, the country's leadership seems to have recognized the importance of small and medium sectors in poverty alleviation and economic growth of the country; hence, a lot of emphasis on the need to support the SMEs. One hopes that the government actions match official rhetoric for once.