Munich Personal RePEc Archive

The Role of Small and Medium Enterprises in Supplementing Large Industries in Pakistan with Particular Emphasis on Automobile Industry

Aslam, Muhammad (2005): The Role of Small and Medium Enterprises in Supplementing Large Industries in Pakistan with Particular Emphasis on Automobile Industry.

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Small and medium enterprises (SMEs) are a very heterogeneous group of businesses usually operating in the service, trade, agro- based, and manufacturing sectors. They include a wide variety of firms such as village handicraft makers, small machine shops, and computer software firms that possess a wide range of sophistication and skills. Some are dynamic, innovative, and growth-oriented while others are small and perhaps family owned. SMEs usually operate in the formal sector of the economy and are classified by the number of employees and/or by the value of their assets. The size classification varies within regions and across countries. SMEs provide products and services that the big competitors don't for multiple reasons. SMEs deliver what no one else seems to want to deliver, and in many cases, they do it very well. Without SMEs, many big companies would not be able to deliver what they promise to customers. Thus SMEs supplement large-scale industries. Pakistan's economy is an economy of SMEs. SMEs cover every sector and type of industry and auto industry as a driver industry; forms 13% of the world engineering trade which at the last count was 60% of the total trade. Therefore, this industry has been selected as case study for this paper and an attempt has been made to identify growth prospects, capabilities and impediments in the development of auto vendor industry in Pakistan. Auto industry provides direct and indirect employment. The total employments including OEMs & vendors are over 500,000 persons including technicians, engineers and management staff in Pakistan. Auto parts industry in Pakistan is contributing over Rs 8 billion annually to the national exchequer. Total contribution by auto industry in revenue is over Rs. 60 billion. It saves foreign exchange to the range of about US$ 3,304 million by import substitution. Pakistan auto industry has over a dozen manufacturers in cars, motorcycles, buses, trucks and tractors and has 1600 vendors in informal sector. About 500 vendors operate in formal sector. The contribution of this industry in our GDP is over Rs. 200 billion.

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