Vol.

10, Issue 2
July - December 2020

ISSN: 2221-0946

From the Editor’s Desk

In Pakistan, there are an estimated 5.2 million small and medium enterprises (SMEs). Their contribution to GDP is estimated to be
40% while that to exports is estimated as 25%. The Government of Pakistan is cognizant of SME sector potential, and thus National
SME Policy Action Plan 2020 was recently approved by the Prime Minister of Pakistan, in one of the meetings of the National
Coordination Committee on SMEs Development constituted by the Prime Minister. While policy making process requires research
backing and credible information, SMEDA’s SME Observer is an attempt to highlight the areas that are crucial in development of this
sector. Simultaneously, it also serves as an information resource on SMEs and provides statistics that may be useful for stakeholders.

In this Issue of SME Observer, an article highlights the importance of Crowdfunding as cogent means for pitching ideas, projects and
ventures to the world for raising capital. With growing internet penetration in Pakistan – 180 million cell phone subscribers i.e. a tele-
density of 84.2 percent; 98 million broadband subscribers i.e. 45.6% percent internet penetration in the country, the opportunity
available to tap into funding resources for start-ups has increased manifold. The article concludes that harnessing the potential of start-
ups and small & medium enterprises through developing and providing alternate channels of finance, such as crowdfunding can
certainly bring dynamism and diversity to the SME financial market.

The Sector in Focus section aims to explore the role of medium to high-tech value-added Manufacturing Sector in stimulating economic
growth, which can be achieved through further localization of existing industry; making products competitive enough for export through
technology acquisition and by bringing international manufacturers of sophisticated products to Pakistan through joint ventures. The
article concludes that a shift to medium to high-tech value-added manufacturing requires major macro-economic policy reforms,
continuation of economic policies, institutional restructuring, development of conducive business environment, provision of level
playing field to local industry, improvement in infrastructure and business support services.

The section on Marketing underscores that the role of marketing in SMEs is often overlooked in Pakistan. However, it also suggests
that myriad of marketing options are available to SMEs in the present digital age that are both low-cost and effective.

In the section on ‘Impact of COVID-19,’ an attempt has been made to identify sectors that have suffered the most during COVID-19
pandemic. It includes various factors, which have been analyzed to identify areas that have been hit the hardest.

Lastly, Lahore on Rails section highlights the benefits of ‘Office Suite – Google Workspace’ which includes Google Docs, Slides,
Sheets, and a number of key business tools like email and cloud storage. Google Workspace (formerly G Suite) is the most
comprehensive cloud-based office toolkit on the internet.

We hope that our readers will find the articles of this publication useful. We welcome suggestions on making the SME Observer a
leading publication and information source on the SME sector.

Editor - in - Chief In this Issue

Hashim Raza
Money, Credit & Banking: Crowdfunding Platforms for Supporting Start-ups and SMEs... 2
CEO, SMEDA
Sector in Focus: Exploring the Role of Medium to High-Tech Value-Added
Manufacturing Sector in Stimulating Economic Growth…........ 6
Editor
Marketing: Importance of Marketing in the Life-cycle of SMEs……….…… 13
Nadia Jahangir Seth
GM, Policy & Planning Impact of COVID-19: An Attempt to Identify the Sectors Affected by COVID-19
Pandemic in Pakistan………………………………………….….… 17
Lahore on Rails: Office Suite – Google Workspace………………………….…....... 23

Turn Potential into Profit!

Small & Medium Enterprises Development Authority
Ministry of Industries & Production
Government of Pakistan
1
Money, Credit & Banking
Crowdfunding Platforms for Supporting Start-
ups & SMEs
Nadia J. Seth*

It has now become customary to keep hearing of thriving start-up ecosystems around the globe. Even in Pakistan,
ever so often one comes across a presser on how start-ups from Pakistan are raising capital / funds from
international investors and multiple stakeholders are providing much needed seed and growth capital. It is also
usual to see that Pakistan is far behind the game in terms of its local venture capital, angel investment as well
as crowdfunding activity. However, having said that, recent initiatives, mostly by the State Bank of Pakistan
through amendments in its Foreign Exchange Manual, as well as the Securities and Exchange Commission of
Pakistan’s endeavors to launch a regulatory sandbox to test innovative business models, seems to be setting
the pace for innovative disruption, not only in the tech sector, but also in traditional sectors of education and
health.

In the recent past crowdfunding platforms have emerged as cogent means for pitching ideas, projects and
ventures to the world for raising capital. The access available to campaign pitchers / project initiators is pretty
much the entire world, hence not limited to a particular territory or region, thanks to the internet. Typically, small
to even very generous sums of money are raised through such platforms that serve as intermediaries. So, while
start-ups may find it difficult to raise capital through debt instruments, usually commercial financial institutions
being wary of financing new ventures, crowdfunding platforms provide such start-ups the opportunity to sure up
capital from multiple individuals.

While crowdfunding predates the 19th century, it truly took off in the 2000s. More recently it has gained greater
traction with platforms such as kickstarter and gofundme unleashing the opportunity available for project initiators
to raise capital. There are different types of crowdfunding opportunities available, which include;

 Securities-based crowdfunding: investors are promised a stock, future shares or another security in the
company / venture invested in for their capital injected.

*Ms. Nadia J. Seth is currently working as General Manager in Policy & Planning Division, SMEDA

July – December 2020 2

  Donation Based crowdfunding: making a donation to a cause by an individual investor
 Reward Based crowdfunding: an investor receives a reward from the project supported. It could possibly
be a product produced by the project
 Peer-to-peer lending / Debt crowdfunding: a loan from private individuals with pay back without involving
traditional banks.
 Real-Estate Crowdfunding: To invest in real estate, without having to deal with brokers, real estate
agents etc.

With growing internet penetration in Pakistan – 180 million cell phone subscribers i.e. a tele density of 84.2
percent; 98 million broadband subscribers i.e. 45.6% percent internet penetration in the country, the opportunity
available to tap into funding resources for start-ups has increased manifold in recent times.

Technological infrastructure and technology itself cannot guarantee success and neither can merely setting up
a platform. In order for any crowdfunding platform to be successful, an entire eco-system, anchored in trust needs
to be developed. Confluence of academia, regulators, policy makers and innovators within the start-up eco-
system can yield benefits for most developing countries. From forward looking regulations, to investor protection,
and technology infrastructure, can we even think of leveraging upon the potential opportunity.

Across Europe “Crowd-Fund-Port Central European Crowdfunding” supports SMEs across the EU to gain access
to alternative sources of finance. A mapping exercise across various partner regions in the EU was conducted
to identify key success factors in raising capital through crowdfunding platforms. Information obtained included
type of project, sector/industry, size of firm, ownership structure, funding required and raised, platform used and
identification of success factors to provide lessons for project initiators. Through its campaign “Rapid invesTOR”
Austria was able to raise a total of Euros 3 million with over 1,500 investors, contributing to building Allianz
Stadium of the football club.” A key selling point for investors being “immortalized” with their names at the
stadium. Within the gaming world, “Galaxy of trian” were able to raise over 669% of their goal, a tile-based sci-fi
board game developed by four gaming designers in Poland. Similarly, FreezyBoy, a compost bin for kitchen
received an overwhelming 300,000 Euros. There are other countless examples where funds have been raised,
adopting any one of the equity, debt or even reward based system. While a lot of innovators and start-ups start
out to raise funds through such crowdfunding platforms, all are not successful. A lot rides on the pitch of idea
and the interest it is able to generate.

In order to be able to make a pitch, it is important that the following key points be kept in mind:

1. It is not any easy road to tread. Significant human and financial resources are required to make a pitch and
to sustain a pitch. The opportunity cost for raising funding through such platforms may be quite high
2. Choice of the platform has an important role to play vis-à-vis the project.
3. Payment systems available in the country are an important determinant of success of the project and for
raising funds. In most countries, the payment system is not robust enough or may not exist to support raising
capital. Restrictions by leading platforms on who can make a contribution also restricts access to high net
worth investors.
4. Network of contributors and outreach play a significant role in promoting the project.
5. Tapping into complementary avenues, such as mentors networks, incubators and accelerators can provide
much needed support to firms to be able to make a good project pitch.
6. Non-monetary benefits can outweigh, the success or failure of a project.

There has been increasing interest to use such crowdfunding platforms to achieve the Sustainable Development
Goals (SDGs). “Access to full and productive employment” one of the goals of SDGs helps us zero in on the
SME sector, that is acknowledged as a key sector for creating maximum jobs. However, the SME sector growth
itself is constrained due to limited access to credit. A potential of raising over $96 billion from the developing

3
world through crowdfunding can go a long way in achieving the SDGs. The current funding gap of $2.5 trillion for
the SDGs can be bridged through crowdfunding offers. Whether done using equity or lending based crowdfunding
or donation based crowdfunding, the efficacy of such platforms cannot be denied.

On the regulatory side, in 2015 the Securities & Exchange Commission of the USA voted to enact Title III of the
JOBS Act that opened equity crowdfunding to unaccredited investors, inspiring much confidence in others around
the world to legislate equity crowdfunding across their countries. Malaysia was the first ASEAN country to enact
crowdfunding regulations. The regulations cap the amount raised to RM5 million ($1.15 million) or RM3 million
($690,000), depending on the size of the firm. Investors are able to invest no more than RM5,000 ($1,150) in a
company, and no more than RM50,000 ($11,500) total, via crowdfunding. Under the framework, RM 3 million
can be raised within a 12 month period. Issuers are able to tap on investments from retail to more sophisticated
angel investments according to set guidelines. According to the Securities Commission report, the Equity
Crowdfunding (ECF) and Peer to Peer (P2P) financing market provided close to RM350 million (approx. $84
million) alternate financing for nearly 900 MSMEs. Malaysia, moving forward even more progressively notified
new property crowdfunding framework for first time home buyers through amendments to its guidelines on
Recognized Markets. Accordingly new obligations for a property crowdfunding platform have been set which
include minimum shareholders’ funds, an obligation to provide fair, clear and timely information to investors and
buyers prior to participating in property crowdfunding campaign and an exit certainty within an agreed time period.

Key Features of Malaysian ECF Framework

More recently, the Securities and Exchange Commission of Pakistan (SECP) granted approval for the first
technology-based crowdfunding platform for commencement of live testing under its first cohort of Regulatory
Sandbox. The Pakistan National Investor Portal (www.pnip.com.pk) has also been recently set-up. The portal
serves as a link between start-ups and investors as a complete digital eco-system. The success of such initiatives
remains yet to be seen. However, globally there is substantial evidence of raising billions through crowdfunding
platforms.

SECP has set the ball rolling. What is required is swift action towards capitalizing upon the opportunity that exists
within the country. With an SME financing gap of $ 5 trillion globally, and Pakistan’s uptake at merely PKR 470
billion with 170,000 SME clients across Pakistan does not bode well. Harnessing the potential of start-ups and
small & medium enterprises through developing and providing alternate channels of finance can certainly bring
dynamism and diversity to the SME financial market; an area worth exploring.

July – December 2020 4

References:

1. Crowdfunding’s Potential for the Developing World. 2013. infoDev, Finance and Private Sector Development
Department. Washington, DC: World Bank.
2. Existing Legal Issues for Crowd funding Regulation in European Union Member States- International Journal
of Business, Humanities and Technology Vol. 7, No. 3, September 2017
3. Developing World Crowdfunding; Prosperity through Crowdfunding – AlliedCrowds Annual Report January
2016
4. “Crowdfunding in Emerging Markets: Lessons from East African Startups.” 2015. Washington, DC: The
World Bank Group.
5. https://www.sc.com.my/analytics/ecfp2p
6. https://pnip.com.pk
7. https://secp.gov.pk

5
Sector in Focus
Exploring role of Medium to High-Tech Value-Added
Manufacturing Sector in stimulating Economic Growth
Maryam Anas Ganaie*

Introduction:
The process of modern economic growth is accompanied by structural changes in the economy that refers to
shift from predominant agrarian structure to a fast-growing industrial development and service-oriented economy.
Structural transformation refers to moving from low productivity sectors such as agriculture and agri-based
industries including textile to high-productivity and value-added sectors. In this regard, manufacturing sector
plays an important role as it stimulates production activities from resource-based industry to high value-added
products through technological development and innovation. Nations which are now grouped among the
developed countries, such as Korea and China show a systematic shift in the production structure from low- to
medium and high- value added activities in manufacturing sector. Within manufacturing sector, transformation is
recorded in both, a movement from low-value added sectors to medium to high-tech activities and, within
particular industries, vertical integration into knowledge-intensive services sector. Therefore, manufacturing
sector progress is not only instrumental in increasing productivity of firms but also supports services sector
development in terms of R&D activities. This paper aims to explore avenues of shifting from low value-added
sectors to medium to high tech manufacturing sectors of Pakistan in order to stimulate economic growth through
promoting productivity and exports.

An Overview of Sectoral Contribution to GDP:

Structural transformation can be gauged by shift in sectoral contribution to GDP. In Pakistan, contribution of
agriculture sector to GDP was 27.08% in 1999-2000 which has decreased to 19.31% in 2019-20 while share of
services sector to GDP was 53.61% in 1999-2000 that increased to 61.4% in 2019-20. Contribution of industrial
sector to GDP decreased slightly from 19.31% in 1999-2000 to 19.29% in 2019-20. (PBS, 2019-20)1

1
Source: Pakistan Bureau of Statistics, https://www.pbs.gov.pk/sites/default/files//tables/national-
accounts/Table-7.pdf

*Ms. Maryam Anas Ganaie is associated with Policy & Planning Division, SMEDA

July – December 2020 6

Contribution of manufacturing sector to GDP was 10.38% in 1999-2000 which increased to 12.48% in 2019-20.
The manufacturing sector showed some improvement from 2004- 05 to 2007- 08 as its contribution to GDP
increased from 13.32 % to 14.42% respectively, however, steady decline was witnessed since 2007-08 from
14.42% to 12.48% in 2019-20. Within the manufacturing sector, contribution of large-scale industry increased
from 8.34% in 1999-2000 to 9.05% in 2019-20 while small scale manufacturing industries share doubled from
1.01% in 1999-200 to 2.04% in 2019-20 (PBS, 2019-20).

Comparison of Pakistan’s sectoral contribution to GDP with Korea, China, Malaysia and India suggests high
reliance on services sector of all economies when compared with agriculture and industry. For example, Korea
and Pakistan have almost same share of services sector in GDP that is around 61.5%, while services sector of
both economies is at different levels of development.
Graph:1 Sectoral Contribution to GDP 2019-20 (% Share)
70
60.9 61.4
60 54.5 52.96
49.88
50
37.2 37.8 38.3
40

30 24.88
19.29
19.31
20 15.6
7.7 7.54
10
1.9
0
Korea China Malaysia India Pakistan

Agriculture Industry Services

Sources: Economic Survey of Pakistan (2019-20)

OECD Economic Survey-Korea (2020)
https://www.statista.com

Increasing share of services in GDP does not place manufacturing at secondary level to stimulate economic
development process. However, services sector is linked with manufacturing sector as high-value services like
finance, consulting, IT, engineering, etc. sell their services to the manufacturing sector. Industrialized economies
of Korea and Malaysia developed strategies and policy framework to drove institutional change and evolved their
technological capabilities to raise productivity of their national firms that led to enhance competitiveness of their
services sector.

In case of Pakistan, within the services sector, only wholesale & retail sector alone contributed 18.1% to GDP
that is higher than manufacturing sector share in economic value addition. This suggests that Pakistan’s
economy is increasingly becoming consumer economy where wholesale and retail sector contributes higher than
manufacturing sector. This is mainly due to the fact that, Pakistan’s manufacturing sector consists of resource
base low value-added including light engineering, textile, chemical, agro-based industry that are unable to meet
increasing demand sophisticated high quality consumer and capital goods. Lack of technological transformation,
innovation, research and development within manufacturing sector constrains its productivity and
competitiveness. So naturally, firms are involved in selling goods instead of producing as they lack product

7
sophistication critical to achieve economies of scale. Instead of leaving it to market actors to promote technical
change, Pakistan may also adopt a proactive industrial policy to stimulate industrialization and structural change
from low- to high-value added activities. The subsequent section presents an overview of contribution of medium
to high tech manufacturing sector in GDP and exports.

Contribution of Medium and High-Tech Manufacturing Sector in GDP and Exports:

Historical trend of Pakistan’s economic development suggests uneven economic growth experience. However,
slow growth in GDP and productivity is mainly due to (i) lack of a strong foundation in manufacturing with little
diffusion of new technologies, and (ii) firms’ inability to access international best practices (Rasiah and Nazir,
2015). This resulted into less contribution of manufacturing value addition to GDP in Pakistan (12.7%) relative to
the successful industrialized countries including China (28.9%), Korea (27.5%), and Malaysia (22.7%). As
depicted in graph 2, share of medium- and high-tech manufacturing value added in total manufacturing value
added is even lower in Pakistan (24.5%) as compared with Korea (63.8%), China (41.5%), Malaysia (44%), and
India (41.5%). The main reason of uneven structural transformation for low level value addition to medium to
high-tech value-added industry are mainly, pre-mature deindustrialization, trade openness, inconsistent policies
of the Government and lack of resource allocation for invention, innovation and technology transfer. In Pakistan
deindustrialization occurred prematurely before achieving specialization in high-value added activities.
Innovation in Pakistani firms are low by the standards of competing countries. The incidence of such innovation
is below 5 percent in Pakistan, which is low even for countries at a similar level of GDP per capita. (World Bank
Enterprise Survey, 2017)

Graph:2 Share of Manufacturing value Added in GDP and Medium- and High-tech Manufacturing Value
Added share in total manufacturing value added

Manufacturing Value Added Share

in GDP

Medium- and High-tech

Manufacturing Value
Added share in total
manufacturing value
added

Source: Competitive Industrial Performance (CIP) Index 2020 Dataset, UNIDO

According to Competitive Industrial Performance (CIP) Index 2020, UNIDO, Pakistan ranks 82nd out of 148
economies while China ranks (1), Korea (3), Malaysia (23) and India (42). Similarly, share of medium-or-high
technology goods in overall value-added exports in 2018 is much lower in Pakistan, around 10.3%, compared

July – December 2020 8

with around 66.1% for Malaysia, and 34.8% for India. Statistics given in graph 3, suggest that Pakistan relies
heavily on exporting low-technology products, which constitute the biggest share of its total exports, followed by
medium-technology and high-technology products, respectively. These low-tech products have simple skill
requirements and compete mainly on price, making labor cost an element of cost competitiveness. Therefore,
with a nominal fluctuation in exchange rate, exports become uncompetitive in international market.

Graph: 3 Medium- and high-tech Manufactured exports share in Total Manufactured exports 2018

97.3% 96.4%
100.0% 85.5% 87.2%
79.5%
74.2%
80.0% 66.1%
60.5%
% share

60.0%
34.8%
40.0%

20.0% 10.3%

0.0%
Korea China Malaysia India Pakistan
Manufactured exports share in total exports (percent)
Medium- and high-tech manufactured exports share in total manufactured exports (percent)

Source: Competitive Industrial Performance (CIP) Index 2020 Dataset, UNIDO

The standard of manufacturing in Pakistan is not at par with the international standards, and there is a dire need
of mechanisms, which lead to the use of knowledge and technology to improve competitiveness of traditional
manufacturing industries. Pakistan's output through innovation is also negligible, as it relies on technology
transfer to improve its manufacturing techniques. In manufacturing, diversification of products and growth in
productivity are also dependent on R&D expenditures, in particular, the machinery sector, which is lacking in the
case of Pakistan.

In view of foregoing it is evident that the absence of technological capabilities hinders and discourages
businesses from exploiting benefits of new technologies, including lack of knowledge, resources and training.
Pakistan needs to develop new products and processes for improvements in productivity and growth. In this
regard, opportunities may be explored in existing structure of manufacturing sector where with some
technological changes and productivity improvement of workers, medium to high value-added production process
can be initiated. The subsequent section highlights key sectors for investment for promoting medium to high tech
manufacturing sectors.

Key Medium to High-Tech Value-added Sectors for Investment:

An ideal entry point for Pakistan to promote medium to high-tech value-added manufacturing sector would be
through further localization of its existing industry; making products competitive enough for export through
technology acquisition and by bringing international manufacturers of sophisticated products to Pakistan through
joint ventures. In this regard, following are some potential high-tech sectors for investment:

1. Automobile and Auto-part Sector:

The automobile sector is a leading industry which is self-sufficient in its capacity and capability of producing parts
and components locally. It has localized to an extent that some of its upstream vendors are starting to mature.
Considering the potential of the sector, there is a need to promote further localization that could involve
indigenizing the powertrain of vehicles (such as engines), along with other components. To have a competitive

9
advantage in the sector, Pakistan needs to indigenize the production of these component with high degree of
sophistication. Through increased scale of production and right policy mix, the ability to manufacture the
powertrain and components of auto-vehicle will be possible.
Auto-Development Policy (2016-21) has encouraged new-entrant to start production in Pakistan which is
expected to increase competition as well as scale of operations for firms. To further exploit the full potential of
the sector, Government needs to take initiatives to provide specialized trainings in new technologies in addition
to establishing auto-motive research and development centers for innovation.

2. Electric Vehicles:
Adoption of green technology across the world has given rise to manufacturing of electric vehicles. Like
developed economies, many developing countries are signing up for electrification of their transport sector.
Recently, Pakistan has also announced its first Electric Vehicle Policy (2021-2025), which primarily focuses on
buses, trucks and other 2-3 wheelers. In the advent of electrification of global transport industry, there will be a
huge demand of electric vehicle parts. It reflects that the country needs to establish local manufacturing industry
for electric vehicle assembly, spare parts and related products. If we do not carry out necessary reforms aimed
at technological advancement of the sector, it will greatly hamper our ability to enter the global market of electric
vehicle parts and related components. Conversely, the increase in the electric vehicle demand will also give rise
to energy sector because of their reliance on power grids. Electric vehicles require charging stations which will
be installed at side of grid. This will require development and maintenance of high voltage grids to fulfill the power
requirement of the vehicle. This reflects that there is a potential demand for equipment and maintenance of the
grids globally.

3. Electronics Sector:
Although Pakistan is a producer of number of white goods such as washing machines, microwaves, refrigerators,
air conditioners, but it has not yet achieved a modest level of diversification in manufacturing of electronic
products. The electronics sector does not only require establishment of assembly units for electronic equipment,
but also manufacturing of related components. We need to provide support to attract global electronic
manufacturers to work in alliance with local industry. Many international manufacturing companies are aiming to
establish their production and assembly units in Pakistan. With policy support and infrastructural reforms,
Pakistan can attract many international manufacturers including Samsung, Siemens, Huawei among many
others which will give opportunity to Pakistan to enter into the segment of electronic manufacturing.

4. Mobile and Computers:

The demand for electronics among other white goods is anticipated to grow in the future. This requires Pakistan
to develop its strength by facilitating localization of these products. Pakistan has a huge demand for electronic
products including mobile phones and computers. Recently, quite a lot of local firms have initiated assembling of
these products which is a first step towards localization. To further escalate the development in the sector,
international manufacturers need to be encouraged to establish their manufacturing units in collaboration with
local manufacturers.

5. Surgical Instrument Industry:

The technological advancement has enormously improved and simplified complex medical and surgical
procedures. The use of optic fiber and optical aid during surgery have become a common practice. This
advancement has also led to the increased demand of technological advancement and innovation in the
manufacturing of surgical instruments. Currently, Pakistan’s surgical appliances’ industry is following
manufacturing and supply of conventional surgical gadgets. Though Pakistan has maintained the export of
surgical appliances in the international market, but it won’t be sustainable if it is not upgraded to the anticipated
level of advancements. For example, the area of high value surgical and orthopedic implants and electro-medical
instruments has been completely ignored which has a high global market value than that of conventional surgical
instruments. Pakistan needs to exploit this huge market by increasing the technological adaptation in the local

July – December 2020 10

market through development and production of instruments using latest material and also to explore areas of
elector-medical and diagnostic instruments.

6. Textile Value Added Sector:

Consider the textiles and clothing sector, which still constitutes about 60 percent of total manufacturing exports.
While there are some large, technologically advanced firms in this sector, the average firm in the textile industry
is still using 30-year-old technology (PIDE, 2018). The industry is dominated by yarn and cloth producers, which
are low-end products with low margins. Efforts must be made to stimulate upgrading in the industry and to spawn
medium- and high-technology industries. For an integrated high-value added textiles and clothing industry to
emerge, the country must stimulate (i) upgrading vertically so as to raise the value added within the textiles and
clothing industries, and (ii) functional upgrading to include designing, logistics, and the manufacture of
complementary support materials and machinery, such as resins, air-jet looms, auto-fabric scanners, computer-
aided design and computer-aided manufacturing machinery.

Reforms in Services Sector:

It must be noted that adoption of technology and deployment of intellectual human resource in services sector
will be instrumental in increasing meaningful growth and productivity of the sector. The combination of technology
and talent definitely suggests focus on services sector. There are over 200 multinational companies working in
Pakistan with close to 80 billion dollars in fixed capital investment, so there is reasonable domestic market, as
well as a major opportunity for export of services from Pakistan. Technological advancements in services sector
is very important for example, use of Information Technology (IT) in wholesale and retail, banking and finance,
and transportation and telecommunications bring positive changes in Pakistan service sectors that have
traditionally struggled with slow productivity growth (APO 2020). Furthermore, Artificial Intelligence (AI), Robotics,
Animation, Gaming, Finance, Accounting, Legal Services, Health Care Services, Engineering and Research &
Development are among many areas where investment can be made. Training, financial assistance and
provision of critical infrastructure will be instrumental for stimulating services sector growth.

Conclusion and Way forward:

Structural transformation refers to the economic shift from agriculture to industry and services sector and industry
to services sector. In comparison to agriculture and industry sector, Pakistan’s economy is more inclined towards
services sector. Despite contributing more than 60% to the GDP, services sector remained marginal compared
to Industrial sector. However, in contrast to other industrial sub-sectors including construction, mining etc. the
importance of manufacturing sector is significantly higher. Currently, the manufacturing sector consists of
resource-based low-added products that hampers Pakistan’s export share in the global market. In this advent,
there is a need to shift manufacturing sector’s focus towards medium to high tech value-added manufacturing
industry.

This require major macro-economic reforms, continuing of economic policies, institutional restructuring,
development of conducive business environment, provision of level playing field to local industry, improvement
in infrastructure and business support services. In long run, Pakistan cannot achieve its trade targets without
shifting its export strategy from resource base products to the high-tech exportable products. The following
measures may be considered to promote local high-tech industry in the country:
 Government may provide incentives to foreign investors to encourage Foreign Direct Investment (FDI) in
medium to high tech industries.
 Support may be provided to export oriented production units to encourage use of state-of-art technology and
advance manufacturing process development.
 Industrial parks, special economic zones and science parks may be developed for export purpose only, to
facilitate production of high-tech engineering products.
 Facilitation may be given to local firms to develop linkages with international companies for technology
transfer and to get involved in regional or global value chain.

11
 SMEs may be encouraged to establish relations with large national and multinational corporations to ensure
acquisition, diffusion and transfer of technology. Effective linkages may also be developed to facilitate
production processes and market access.
 Testing facilities, post-harvest and cool-chain facilities, agricultural marketing and packaging support may
be provided to support agriculture sector productivity.
 Creating linkages between the industry, technology companies and specialized research centers.

References:

Asian Productivity Organization (2020), Productivity Data Book, https://www.apo-

tokyo.org/publications/ebooks/2020-apo-productivity-databook/
Rasiah and Nazir (2015), “The State of Manufacturing in Pakistan”, The Lahore Journal of Economics 20: SE
(September 2015): pp. 205–224
Sharma (2019), “Pakistan@100 Structural Transformation”, World Bank
https://openknowledge.worldbank.org/handle/10986/31410

July – December 2020 12

Marketing
Importance of Marketing in the Life-cycle of
SMEs
Alishba Waseem*

Marketing is one of the key functions of an enterprise, whether big or small. However, conventional discussion
about marketing, its essence, role and impact is centered on large organizations with a well-formed organizational
structure and adequate availability of funds. There still exists a gap in understanding how marketing concepts
that are usually discussed in terms of activities of larger firms, translate into the context of SMEs.2
Given the apparent difference between capital and human resource availability of SMEs and larger firms, it may
be inferred that marketing strategies will differ between these enterprises, commensurate with the size and scale
of each enterprise. Due to resource constraints, entrepreneurial marketing is common in SMEs which involves
use of unconventional and creative methods of marketing, aiming to maximize utilization of resources at hand.3
Use of low-cost and rudimentary marketing techniques such as networking and word-of-mouth might be more
prevalent in SMEs than use of traditional large-scale communication employed by large organizations. Similarly,
marketing information inputs for decision-making may be acquired through other ways such as personal
experiences, individual judgments and outsourcing rather than a systematic internal consolidation of marketing
insights.
Role of Marketing in SMEs
Marketing in SMEs has been defined as a “set of strategies that make a business idea intelligible, accessible
and shareable”.4 The true essence of modern marketing transcends marketing communication. Instead, its all-
encompassing role entails creating value by means of various activities including market development, product
*Ms. Alishba Waseem is currently working as an intern in External Relations Directorate, SMEDA
2 Simpson, M., Padmore, J., Taylor, N., & Frecknall‐Hughes, J. (2006). Marketing in small and medium sized
enterprises. International Journal of Entrepreneurial Behavior & Research.
3
Bettiol, M., Di Maria, E., & Finotto, V. (2012). Marketing in SMEs: The role of entrepreneurial sensemaking. International
Entrepreneurship and Management Journal, 8(2), 223-248.
4 Bettiol, M., Di Maria, E., & Finotto, V. (2012). Marketing in SMEs: The role of entrepreneurial sensemaking. International

Entrepreneurship and Management Journal, 8(2), 223-248.

13
or service development, value addition through product or service augmentation, employing marketing data in
decision-making and communication of offerings to the consumer. These compendium of activities are part of
the marketing mix which includes decisions pertaining to product, price, place or distribution and promotion.
Employing the right marketing
strategies in the context of internal
capacity is a key challenge for SMEs.
In efforts to determine the right
approach, correct identification of the
characteristics of the business and its
offerings is required. For this purpose,
businesses are often differentiated
based on stages in the life-cycle of the
products and services offered. The life-
cycle approach thus, serves as a
systematic method to determine the
right strategy as the business
Source: https://studiousguy.com/product-life-cycle/
progresses.
Life-Cycle Concept
The Product Life cycle concept pertains to analyzing product and service characteristics in terms of its demand
in the market.5 All products and service have a predictable pattern of progression commonly divided into four
basic stages; Introduction, Growth, Maturity and Decline.6 While, all products or services must undergo this cycle,
the duration of each stage differs considerably contingent on the product or service type. The following graph
shows a typical product life-cycle.
The concept of product life-cycle is of particular importance because the stage of each product or service has
considerable implications on the strategy of the firm. Consequently, a specific marketing strategy that worked
effectively for an SME when the product was first introduced may prove unfruitful years after its existence which
signifies readjustment of activities in light of life-cycle development.
Analysis of existing practices suggests that, overall, marketing activities of SMEs change as the business
develops. Younger companies tend to be more marketing-oriented that older companies. 7 Marketing-orientation
bodes especially well for SMEs in initial stages of their life-cycle when the company’s offerings lack awareness
in the market and thus need marketing to expedite sales. In addition, greater attention to marketing may allow
SMEs to engage in effective practices pertinent to the needs of the business rather than engaging in activities
that do not add value to the enterprise.
Introduction
Introduction Stage of the life-cycle involves the launch of a product or service in the market when there is no
existing demand. Main characteristics of this stage involve a high risk of failure, negative profit, need for
continuous improvement and high marketing expenses. In addition, SMEs are particularly susceptible to failure

5 Marmullaku, B. (2014). Marketing strategies of SMEs based on product life cycle; a study among SMEs in Kosovo (Doctoral
dissertation).
6
Cao, H., & Folan, P. (2012). Product life cycle: the evolution of a paradigm and literature review from 1950–
2009. Production Planning & Control, 23(8), 641-662.
7 Simpson, M., Padmore, J., Taylor, N., & Frecknall‐Hughes, J. (2006). Marketing in small and medium sized

enterprises. International Journal of Entrepreneurial Behavior & Research.

July – December 2020 14

at this stage due to myriad of factors, including inadequate utilization of the marketing mix in product
development.8
Product planning and marketing strategy formation can therefore play a paramount role in the survival of the
business. Mismatch between market opportunity and the company’s offerings is a common reason for business
failure. In these early stages, market research and analysis may be used to match internal capability with
consumer demand to ensure economic viability of the enterprise. Adequate planning and identification of correct
market and target audience may increase likelihood of entrepreneurial success.
Characteristically, the cost of promotion and communication is high during this stage to facilitate business
development by informing audience of the company’s offerings. Since SMEs may initially lack financial resources,
personal sales and networking is often suitable means of promotion.9
Growth
Subsequent to a favorable introduction in the market, there is a rise in sales as the market expands in the growth
stage. Increasing awareness and growing sales also stimulate competition. In comparison with the introduction
stage, the growth stage offers better opportunities for the strategy development process.10
Strategy consideration at this stage are thus focused on increasing sales, finalizing the target audience and
enhancing products or services in light of the response of the customer. Primary marketing activities for SMEs
may involve, revisiting and improving the marketing mix with emphasis on the pricing strategy, increasing
promotion and expanding the sales network. In addition, communication through various means such as
advertising provides favorable prospects as the complete potential of the market has not yet been utilized.
Consequently, effective communication activities can greatly impact the rate of growth for SMEs at this stage.
Maturity
Maturity phase of a life-cycle features complete utilization of the market opportunity and intense competition
concomitant to a highly saturated market environment. Marketing at this stage is an entirely different gambit
compared to previous stages. Focus is shifted towards reaching higher efficiency and optimal utilization of
internal operations rather than business development activities.11
Due to high competition, marketing strategies assist in fighting the competition through promotional activities,
appropriate pricing policies and value addition through product and service differentiation. In addition, retention
of consumer preferences is imperative to the business with attention on integrated marketing communication.12
Decline
The last stage of the life-cycle features declining demand and a steady decrease in sales leading towards an
eventual cessation of the product or service. Marketing only holds a secondary role if the goal of the business is
to salvage whatever is left of the enterprise. However, various marketing strategies can be used for business
development if the company intends to redesign the products or services and discover new markets by means

8 Marmullaku, B. (2014). Marketing strategies of SMEs based on product life cycle; a study among SMEs in Kosovo (Doctoral
dissertation).
9 Marmullaku, B. (2014). Marketing strategies of SMEs based on product life cycle; a study among SMEs in Kosovo (Doctoral

dissertation).
10 Marmullaku, B. (2014). Marketing strategies of SMEs based on product life cycle; a study among SMEs in Kosovo (Doctoral

dissertation).
11
Marmullaku, B. (2014). Marketing strategies of SMEs based on product life cycle; a study among SMEs in Kosovo (Doctoral
dissertation).
12 Cao, H., & Folan, P. (2012). Product life cycle: the evolution of a paradigm and literature review from 1950–

2009. Production Planning & Control, 23(8), 641-662.

15
of market research.13 This direction would employ strategies similar to the introduction stage as new and
unexplored markets are searched and exploited. However, divestment is a more commonly sought option during
this stage due to lack of profits.14
Implications for Business Development for the SMEs of Pakistan
The role of marketing in SMEs is often overlooked in Pakistan. This may be due to the absence of a palpable
relation between the primary operations of a business and marketing along with the belief that SMEs can survive
without this additional burden. It may be possible to carry out the main economic operation of buying and selling
a product or service with profit without recognizing marketing as an essential activity. However, in believing so,
additional benefit that may come from actualization of the true potential of the business is let go. There is
generally a positive relationship between marketing activity and financial performance and growth of
companies.15 Growth-orientation in companies often prompts marketing-orientation. Consequently, such
entrepreneurial mindset hinders the progress of SMEs.
Ill-suited marketing effort can be as ineffective as the absence of marketing activity. Each stage of the product
and service life cycle requires a unique marketing mix. Proactive and successful marketing initiatives will identify
the stage of the product or service life-cycle and plan and implement strategies accordingly. Lack of planning
prior to marketing initiatives may lead to an unfavorable response and wastage of company resources, negatively
impacting business development.
Major problems that the SME sector faces in Pakistan consists of lack of marketing information, low value-added
products and lack of strategic planning.16 In addition, Pakistani SMEs operate in limited markets; usually the
domestic private sector with regional operation. Operating in limited markets along with lack of access to
communication channels inhibits growth and value chain enhancement in SMEs.17 Marketing apposite to the
development cycle of a business can thus, establish the groundwork for elevating some of these issues.
Consequently, marketing activities can also facilitate internationalization of domestic SMEs.
SMEs may lack resources to identify opportunities or create new business plans for growth. Thus, there exists
an alternative of outsourcing these specialized tasks to marketing and consultation companies.18 In addition, the
proliferation of information and communication technologies provides new avenues of marketing opportunities.
Myriad of options for marketing are available to SMEs in the present digital age that are both low-cost and
effective. Prudent marketing planning and implementation in the context of the product and service life-cycle is
requisite for the successful application of the available options.

13 Marmullaku, B. (2014). Marketing strategies of SMEs based on product life cycle; a study among SMEs in Kosovo (Doctoral
dissertation).
14 Marmullaku, B. (2014). Marketing strategies of SMEs based on product life cycle; a study among SMEs in Kosovo (Doctoral

dissertation).
15 Simpson, M., Padmore, J., Taylor, N., & Frecknall‐Hughes, J. (2006). Marketing in small and medium sized

enterprises. International Journal of Entrepreneurial Behavior & Research.

16 Dar, M. S., Ahmed, S., & Raziq, A. (2017). Small and medium-size enterprises in Pakistan: Definition and critical

issues. Pakistan Business Review, 19(1), 46-70.

17 Shah, D. S., & Syed, A. (2018). Framework for SME Sector Development in Pakistan. Islamabad: Planning Commission of

Pakistan, 21-23.
18 Hemilä, J., & Oinas, M. (2009). How marketing affects an SME firm's profitability, growth and success. In 20th Annual

conference of the Production and Operations Management Society, POMS 2009. Production & Operations Management
Society.

July – December 2020 16

Impact of COVID-19
An Attempt to Identify Sectors Affected by
COVID-19 Pandemic in Pakistan
Farhan Zafar*

The COVID-19 pandemic has impacted economies across the globe. Worldwide lockdowns have brought social
and economic life to a standstill, culminating in a huge impact on most of the business sectors worldwide. The
situation is comparatively better in Pakistan. Nonetheless, there are certain areas/ sectors which are being
perceived as badly hit by COVID-19, such as; hospitality, travel and tourism, retail, hotels, real estate, education,
etc. Some sectors may even take years to recover and get back to their pre-pandemic level. Therefore, multiple
strategies would be necessary to tackle the impact of COVID-19 on various sectors. Quantitative analysis is the
key to identify sectors that require rapid action and support. In addition, change in exports, during the pandemic,
can be used as a signal to check the impact at country and sectoral level.
Impact on Exports during COVID-19 pandemic
Exports of many countries have declined due to the decrease in overall trade across the world. Pakistan’s case
is no different as exports have decreased from US$ 24.8 billion in CY 2019 to US$ 21.9 billion in CY 2020. The
major impact on exports in Pakistan can also be attributed to an overall decrease in world trade due to COVID-
19 pandemic.
The following graph shows that Pakistan’s exports during January to March 2020 did not suffer as much as April
to June 2020, in comparison to the same quarter in 2019, since April-June 2020 was the time when COVID-19
pandemic really started to have a greater impact on Pakistan’s economy. Lockdown and strict government SOPs
to control COVID-19 in the country led to a decrease in overall activity as highlighted in a survey report 19 on
Impact of COVID-19 on SMEs. Exports situation improved considerably from October to December 2020, with

*Mr. Farhan Zafar is associated with Policy & Planning Division, SMEDA

19
Survey conducted by Small and Medium Enterprises Development Authority (SMEDA) in April 2020

17
exports recording an increase in comparison to the same quarter in 2019. Overall, April to June 2020 quarter’s
performance contributed to a major decrease in exports in CY 2020, as compared to CY 2019.

Pakistan's Export Performance in 2020 vs. 2019 - Quarterly, Bi-

annual and Annual (Billion US$)

24.8
21.9

12.4 12.4 11.8

10.1
6.2 5.9 6.2 6.0 5.4 6.4 6.5
4.2

Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Jun (Bi- Jul-Dec (Bi- Jan-Dec

(Quarter) (Quarter) (Quarter) (Quarter) annual) annual) (Annual)

2019 2020

Sectoral analysis of some of the SME sectors shows that some export sectors were affected more than others.
Identification of Sectors affected by COVID-19
This assessment study is an attempt to identify sectors that have been affected by COVID-19 in Pakistan. Thus,
it includes various factors, which have been analysed to identify areas that have been hit by the pandemic. The
methodology to measure impact involves an assessment of export data of some sectors, followed by an analysis
of data from two surveys (using several factors to assess the impact during COVID-19). Factors that have been
taken into account for analysis are change in exports, impact on work activity/orders, disruption in supply chain,
change in annual sales turnover, and change in permanent employment. Export data at sectoral level has been
taken from State Bank of Pakistan (SBP) while other factors have been analysed by utilizing SMEDA’s surveys’
data (conducted in April 2020 and October 2020).
Surveys to Identify the Impact of COVID-19 on SMEs
In order to assess the impact of COVID-19 on small and medium enterprises (SMEs), SMEDA has been
conducting surveys since the start of the pandemic. The first survey was conducted in April 2020, followed by
two surveys in September – October 2020, in collaboration with Asian Development Bank Institute (ADBI), Asian
Productivity Organization (APO) and Lahore University of Management Sciences (LUMS). All surveys collected
data at sectoral level, and were an attempt to measure the impact on SMEs.
Since this study is an attempt to assess how COVID-19 pandemic has impacted SMEs at sectoral level, data of
two of the most relevant surveys has been analysed.
In the first survey conducted by SMEDA in April 2020, 920 businesses participated from more than 44 different
sectors. Following three factors have been taken into account for analysing impact on sectors from start of the
pandemic till April 2020.
1. Participation of at least 5 SMEs is necessary to represent a sector
2. Impact of COVID-19 on Work activity / orders / contracts

July – December 2020 18

 3. Supply chain disruption
In the second survey, SMEDA collaborated with ADBI and APO to conduct a survey of 236 enterprises across
Pakistan. Respondents from at least 24 different sectors participated in the survey. The following factors have
been taken into account to analyse the impact on the surveyed sectors;
1. Participation of at least 5 SMEs is necessary to represent a sector
2. Change in Total Sales Revenue in the first half of 2020, compared with that of the same period in 2019
3. Change in Employment (in October 2020) as compared to end of 2019
After thorough analysis of export and surveys data, the following tables illustrate the sectors that have suffered
from a high, medium-high, medium, medium-low or low impact during COVID-19.
In Table 1 and Table 2 a ‘High’ impact on change in exports means a greater decrease in exports relative to
‘Medium-High’ impact. Similarly ‘Medium-High’ impact shows a relatively greater decrease in exports in
comparison to ‘Medium’ impact and so on. In terms of change in Total Sales Turnover and change in Permanent
Employment, ‘High’ impact shows a greater (negative) impact relative to ‘Medium-High impact.’ Similarly a
‘Medium-High’ impact show a relatively greater (negative) impact in comparison to ‘Medium’ impact and so on.

19
 Table 1: Impact on Sectors during COVID-19 Pandemic

Impact on Work Activity/

Supply Chain Disruption

2020 vs. End of 2019)

Orders (till April 2020)

Change in Permancent
employment size (Oct
Change in Exports (CY

Change in total sales

revenue (First half of
2019 and 2020)

(till April 2020)

2020 vs. 2019

Sector

Agriculture
Auto Parts
Carpets,Rugs & Mats
Construction
Consumer Goods Manufacturing
Cutlery
Dairy
E-commerce
Education
Electric Fans
Engineering Goods
Fish & Fish Preparations
Food Items
Footwear
Fruits
Furniture
Gems
General Manufacturing
Handicrafts
Healthcare
Hospitality (including hotels)
Jewellery
Leather Manufactures
Leather Tanned
Logistics
Marble
Marketing
Meat and Meat Preparations
Other Business Services
Other Chemicals
Other Services
Pharmacautical Product
Plastic Materials
Printing and Publishing
Real Estate
Restaurants
Retail and Wholesale
Sports Goods
Surgical Goods & Medical Instr.
ICT and Telecommunications
Textile Group
Transport
Travel
Vegetables

July – December 2020 20

 Table 2: Impact on Sectors during COVID-19 Pandemic
Low or increase
Category High Medium-High Medium Medium-Low (only in case of
exports)
 Construction  Auto Parts  Electric Fans  Furniture  Cutlery
 Engineering  Carpets, Rugs &  Fruits  Other Chemicals  Gems
Goods Mats  Textile  Surgical &  Handicrafts
 Fish and Fish  Food Items Medical  Jewellery
Change in Preparations  Footwear Instruments  Leather
Exports (CY  Leather  Other Business  Vegetables  Manufactures
2020 vs. tanned Services  Meat and
2019)  Plastic  Sports Goods Meat
Materials  Transport Preparations
 Travel  Pharmaceutic
al Products
 ICT
 Auto Parts  Consumer  Footwear  E-commerce  Agriculture
 Education Goods  General  Engineering  Dairy
 Hospitality Manufacturing Manufacturing Goods  Pharmaceutic
Impact on (including  Food Items  Handicrafts  Logistics al Product
Work  Other Services
Hotels)  Healthcare  Marketing
Activity (till
 Jewellery  Real Estate  Other Business  Other Chemicals
April 2020)
 Marble  ICT Services
 Restaurants  Textile  Retail and Wholesale
 Travel  Transport
 Travel  Education  Auto Parts  Consumer  Agriculture
 Hospitality  Engineering  Food Items  Goods  Dairy
(including Goods  General Manufacturing  Other
Supply hotels)  Jewellery Manufacturing  E-commerce Business
Chain  Marble  Handicrafts  Footwear Services
Disruption  Restaurants  Other Services  Healthcare  Pharmaceutic
(till April  Real Estate  Logistics al
2020)  ICT  Marketing
 Textile  Chemicals
 Transport  Retail and
Wholesale
Change in  Travel  Construction  Agriculture  Education  Real Estate
Total Sales  Retail and  Furniture  Engineering Goods  Food Items  ICT
Revenue Wholesale  Other  Plastic Materials  Other Business
(First half of Chemicals  Textile Services
2020 vs.  Transport  Printing and
2019) Publishing
 Construction  Furniture  Engineering Goods  Agriculture  Plastic
Change in  Education  Food Items  Other Business Materials
Permanent  ICT  Printing and Services  Retails and
Employees  Other Chemicals Wholesale
 Travel  Publishing
(Oct 2020
vs. End of  Real Estate
2019)  Textile Group
 Travel

21
As per the availability of data (and after consideration of available factor), overall analysis suggests that there
has been a relatively greater impact on the following twelve (12) sectors. However, as the data for each and
every sector is not available, the list is not exhaustive.
1. Construction
2. Engineering Goods
3. Auto Parts
4. Education
5. Hospitality (including Hotels)
6. Jewellery
7. Marble
8. Restaurants
9. Travel
10. ICT
11. Textile
12. Transport

July – December 2020 22

Lahore on Rails
This segment ‘Lahore on Rails’ is basically inspired from ‘Madrid on Rails’ adapted from a famous open source web application framework,
‘Ruby on Rails’; a project initiated by the City Council of Madrid to motivate SMEs to use open source technologies

Office Suite – Google Workspace

Irfan Raza Naqvi*
At the heart of every business toolkit is an office suite. Documents, Spreadsheets, Presentations, Emails,
Calendar, Forms, etc. are everyday necessities, so you’d better make sure you have the right tools to handle
this in your business.

Google Docs, Slides, Sheets, and a number of key business tools like email and cloud storage, Google
Workspace (formerly G Suite) is the most comprehensive cloud-based office toolkit on the internet.

Why Google Workspace?

Nothing beats it on features, and the suite’s success has spawned a huge amount of add-ons and support
documentation. Google have a variety of plans that are designed to meet unique business needs. Discover
which plan best fits your business needs. Businesses with fewer than 300 employees can sign up online.

* Mr. Irfan Raza Naqvi is currently working as Assistant Manager in the E-BDS Department of SMEDA

For Feedback and Comments

Farhan Zafar
Small & Medium Enterprises Development Authority
4th Floor, Building No. 3, Aiwan e Iqbal Complex, Egerton Road, Lahore
Phone: 92 42 111 111 456 E-mail: farhan.zafar@smeda.org.pk

23
We are on the web: www.smeda.org.pk