VI.

STRENGTHENING TECHNOLOGY INCUBATION SYSTEM FOR CREATING HIGH TECHNOLOGY-BASED ENTERPRISES IN PAKISTAN

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I. INTRODUCTION A. Pakistan a wonderful country to visit

Pakistan is the land for the lovers of adventure and culture and its appeal is universal. It is an inexpensive country especially for visitors from the developed world. It is the home for many great civilizations over a long period of history. The Indus valley civilization flourished here 5,000, years ago. The ruins of Moenjodaro in Sindh (one of the four provinces of Pakistan) and of Hrappa in the Punjab (province) tell the tales of highly cultured people dwelling in these areas around 3,000 to 5,000 BC. Then there is Taxila, a beautifully hilly area partly in Punjab and partly in NWFP (provinces). Taxila holds layers of various Gandhara kingdoms unsurpassed as a treasure house of the Greco-Buddhist sculpture and artefacts. This civilization flourished around 300 BC. Pakistan also homes Mughal (1500 AD to 1857 AD) monuments which are strewn all over the country. Pakistan has a varied landscape ranging from high mountains to low coastal planes. It is blessed with lush green mountains, planes, deserts and magnificent rivers. During all four seasons of the year the country always offers some place where one can have a pleasant holiday.

B. Brief review of economy

Pakistan, like many other developing countries, has been deficient in domestic resources to finance the investment necessary to sustain rising per capita income and, thus, relied heavily on external economic assistance to bridge resource gap since the early 1950s. There has been a positive and significant contribution of foreign economic assistance in sustaining higher growth rate in Pakistan. It also helped in providing an established infrastructural base for growth. Power communications, education and healthcare sectors are reasonably developed. Agriculture forms the largest sector of economy contributing more than 24 per cent of the GNP. The country is facing severe balance of payment problems, which are caused by a narrow export base. The economy is heavily dependent on the agriculture sector. The conventional industrial base revolved mainly around textiles, cement, and sugar. Agriculture still has huge prospects for improvement. The country is fully capable of producing self-sufficient quantities of edible oil and tea, which presently form a considerable percentage of imports. This area, however, needs acquisition of and development of new methods for selection of crops, sowing practices and processing techniques. The manufacturing sector is passing through a turbulent and disruptive period, it is due to the shocks inflicted by economic sanctions, which weakened recovery in this sector since 1997-1998. During 1997-1998, large-scale manufacturing grew by 2.7 per cent as compared to 6.7 per cent growth in the previous year. The growth in small-scale manufacturing remained at 8.4 per cent. The government intensified its efforts to improve the investment environment in the country through various policy initiatives. These initiatives include creation of a better environment to provide access to capital market for SMEs and to improve and mobilize the country present research and development infrastructure in service of SMEs.

C. Relevance of incubation concept for Pakistan

In modern times, rapid and unprecedented changes are taking place which determine productivity success of a business. Therefore, establishing a new competitive business is not only a matter of business skills. It has now become more like a science where an initial educational time can guarantee the success of the enterprise. This period is spent in specialized incubation centres where common infrastructure facilities are available on rent. It also saves a lot of expenditure on capital investments during the development phase and makes it less risky to start developing new ideas into marketable products. Incubators provide a conducive atmosphere to young firms helping them to survive and grow during the start-up period when they are most vulnerable. Incubators provide hands on management assistance, access to financing and orchestrated exposure to critical business or technical support service. They also offer entrepreneurial firms shared office services, access to equipment, flexible leases and expandable space all under one roof. According to studies on the impact of incubated investments (1997) carried by National Incubation Association (NBIA) about 87 per cent (Entrepreneurial Center, Birmingham, Alabama, <http://www.entrepreneurialctr.com/index.htm>) of incubated businesses were rated as success.

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The concept of incubation when seen in the perspective of Pakistan seems viable and practicable. This concept can help to achieve the desired goals of development in manufacturing and services sectors. In Pakistan, there is a pronounced gap in the interests of our educational and research sector and the activities and actual practices of manufacturing and services sectors which are shy to accept new concepts and ideas. It is necessary to break the monotony of conventional practices and introduce new concepts and technologies, broadening the scope of Pakistans economy. This requires the development of a strong partnership between the research community and a visibly more productive sectors of the national economy including manufacturing and service sectors. Having scarce resources, Pakistan needs to pool its resources in a more economical way and at a reduced risk factor. Incubation concept, therefore, suits Pakistan for a gradual conversion from conventional to a more dynamic and developing business society and to broaden the base of her economy. As a policy, the Pakistan Government, has decided to encourage small and medium scale manufacturing and to select areas where employment to investment ratio is higher. These include assembly and manufacturing of electronics products and systems. Software development and improvement of some conventional industries. The country has embarked upon the development of an information society in a short time. To achieve this, a comprehensive information technology policy and action plan has been designed and is being implemented. It is expected that this action plan will put pressure on the present communications infrastructure and may need manyfold expansion in the near future. Therefore, this will create a lot of opportunities in the business of software, electronics systems electronics components and materials and other related goods. In order to generate useful employment within the country, the government plans to increase these opportunities and to encourage the private sector to participate actively in these areas. In order to facilitate investors to grow against the odds of large risks in non-conventional high-tech areas of electronics and software industry, the following incubation centres have already been either approved or established.

II. TECHNOLOGY PARKS AND INCUBATION CENTRES A. Software Technology Park, Islamabad
The Software Technology Park of Islamabad is now well established. A covered area of about 40,000 sq ft, with all infrastructural requirements is available on nominal rent. The Software Technology Parks provide conducive conditions for software stop shops. It provides a large band width communication with reliable power supplies, high flexibility buildings, minimized regulatory overheads and maximum flexibility in the choice and use of space. The Park management is developing similar Parks at Lahore and Karachi, the two largest cities of the country.

B. High-technology township (techtown)

High-tech township was approved by the government in 1996 at a total cost of Pakistan Rupees (PRs) 1,396 million (US$ 24 million). The implementation of this scheme had been delayed due to financial constraints. Recently, the government has constituted a committee to consider early execution of the township. The scheme envisages the development of a whole town into a closely associated industrial community. The town will provide space to investors for setting up high tech industries based on electronic technologies. The township will provide centralized infrastructure facilities and also an incubation centre for new entrepreneurs. The capital development authority of Islamabad has been given the responsibility of handling this project. The authority is well versed with the development work of similar nature. The town plans to create 247 plots for SMEs and about 64 multistoried buildings for stop-shops type enterprises. It also includes 14 Blocks for incubation centres and electronics goods and component shops.

C. Electronics industries promotion centre

The National Institute of Electronics (NIE) situated in Islamabad is involved in research and development of electronics systems and components. It has established an incubation centre for the development of its own lab prototypes into pilot production lines. The centre is supported by the research and development groups of the Institute and has the following main objectives:

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(i) (ii) (iii) (iv) (v) (vi)

Set up Pilot production lines for electronic and high technology products developed by NIE or any other interested entrepreneurs; Provide labs for the development of production techniques/processes, methodologies, materials and equipment suited for the local electronics manufacturing industry; Provide labs for development of materials/devices and boards, etc. for the training of manpower to enhance productivity; Prepare marketing strategies for local products; Adaptive redesign, maintenance and manufacturing of electronics instruments; Provide consultancy in setting up electronics related industries.

D. Indus information technology park

The Government of Sindh has recently started the establishment of an Information Technology Park at Karachi, the largest industrial city of the Country. The development work for the park is in progress, the park envisages the establishment of software houses, Incubation Centres, hardware manufacturing and setting up of other related facilities. The park would be declared an export free zone to encourage foreign investments and export of software. This would be the first complete IT Park in Pakistan providing all necessary facilities to the start up companies and entrepreneurs of IT business.

III. POLICY FRAMEWORK

Pakistan has adopted a well-defined science and technology policy guided by a high level National Commission for Science and Technology. The government is committed to increase investment in science and technology from a meager 0.07 per cent to a 0.5 per cent of the GNP in three years. In the fiscal year 1999-2000 PRs 15.7 billion (US$ 270 million) are committed for science and technology. The Present Minister for Science and Technology is deeply interested in the promotion of research for economic development and is steering research to uplift the present state of industry, in particular, and the economy, in general. A detailed programme is under preparation to upgrade and revitalize educational and research institutions. The following science and technology policies are in practice.

A. IT Policy and action plan

The vision of the policy is to harness the potential of information technology as a key contributor in development. The policy envisages participation of all stakeholders to achieve a sustainable information society in Pakistan. The policy strategies have been proposed under several focus areas. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Establishment of technology parks and incubation centres Human resource development Infrastructure development Software industry development Hardware industry development Internet services development Provision of incentives Promotion of awareness for efficient use of IT Development of legislative and regulatory systems

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B. National Technology Policy and Action Plan

The National Technology Policy envisages measures like, legislative and regulatory procedures, provision of incentives and development of R&D structures to facilitate exploitation of technology by all sectors of the national economy under market driven forces. Under the technology policy, the following strategies are being followed: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Provide incubation opportunities for small and medium industries; Promote viable MSTQ Systems within the country; Development of efficient R&D structure responsible to industrial needs; Dissemination of techno-commercial information; Promotion of foreign investments for technology transfer; Technical Manpower development; Dialogue between the private and public sector, where public sector participates as a catalyst to promote private sectors initiatives; Promote modern technologies in materials development biotechnologies, information and renewable energies.

C. Science and technology infrastructure

1. Research institute
Pakistan has developed a broad-based infrastructure for research and development. There are 164 research institutes working in many fields of basic and applied research. The ministry of Science and Technology administers twelve of these institutes. These institute cover a vide range of modern disciplines and are mostly involved in basic research work. Until now there had been very little effort on their part to actually market their research. Some of these institutes tried to develop marketing sections and organized their programmes in accordance with market needs. Unfortunately, their efforts failed due to uneven development of administrative, marketing and research sections. All these institutes have the potential to contribute effectively in creating variety in the development of the national economy. These institutes can be used as problems-solving centres for new experiments and assist the end users in initiating new technologies. It would be great help for these institutions if they are fed with problems of industrial processes target-oriented development jobs, testing and standardization assignments, etc. Established incubation centre can utilize these institutes as a source for technology development by feeding them tasks on payment which will, in turn, strengthen their financial position and broaden the scope of their activities. A Combination of incubation centres and the research institute can work to create much needed diversity in the manufacturing sector.

2. Education
With a literacy rate of 45 per cent and about 1.68 million students attending senior secondary level schooling, Pakistan has 26 universities, which provide access to higher knowledge for 3 per cent of its young citizens. There is an extended network of professional training college for engineering medical and other disciplines working under these universities. Enrolment in the secondary vocational institutions was 85,000 in 1999, in Arts and Sciences colleges 760,000, in professional colleges 135,680 and in universities 93,608. The overall participation rate at primary stage (Class I-V) is estimated at 77 per cent. At the middle stage (Class VI-VIII) it is estimated at 51 per cent and at higher secondary level (IX-X) it is 36 per cent.

Vocational training
Presently Pakistan has training capacity of 46,452 persons per year in more conventional trades. A skill development council has been set-up recently which has a broad mandate. It will assess overall training needs of the country and will reorganize present training programme adding modern technology concepts wherever needed.

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D. Financing of Projects
In addition to above-stated schemes, which have technical orientation, the government has instituted following facilities, which cater for the access of an average entrepreneur to capital.

1. Small Business Finance Corporation

The SBFC is a development financial institution established by the Government of Pakistan. It provides financial assistance on soft term loans to small business enterprises. The main objective of the project is to encourage development and promotion of small business enterprises in manufacturing as well as services areas. The SBFC has sanctioned loans of PRs 2,208.7 million (US$ 370) million against 11,435 cases upto March 1999.

2. PMs Self-employment Scheme

Under this scheme all the state owned banks and SBFS provide facility of loans ranging from PRs 500,000 to 54,000,000 for small industrial enterprises. They have disbursed PRs 3,820.8 million up to March 1999.

3. Small and Medium Enterprises Development Authority (SMEDA)

A Small and Medium Enterprises Development Authority has also been set up for growth and development of SMEs in Pakistan SMEDA has started functioning recently and its programme includes, designing training programmes for fresh entrepreneurs, organizing workshops and seminars dissemination of knowledge in critical areas and development of project proposals in new areas such as fisheries. These areas include business skills development, product development, and the development of management skills for the utilization of technical advances in industries.

4. Scientific and Technological Development Centre

STEDEC has been established to facilitate R&D Organization in commercialization of the R&D results. The STEDEC provides finances for matured projects by the R&D organizations for commercialization of their outcomes as soft loans with a comfortably long period of recovery. Another such scheme has been launched by the Ministry Science and Technology (MOST) under the name Contractual Research. Under this scheme, MOST funds private entrepreneurs for practicable ideas or initiate, schemes involving high priority commercial projects. The concept is to involve R&D infrastructure in the development of such commercially valued products which have definite sponsors.

5. Metrology, Standard, Testing and Quality Assurance System (MSTQ)

Under the science and technology policy, Pakistan has initiated a comprehensive programme for strengthening of MSTQ infrastructure. The following measures are taken to make manufacturers more quality conscious and to build infrastructure for an effective quality assurance system: (i) (ii) (iii) (iv) Ministry of Science and Technology (MOST) and sister organizations conducts countrywide training programmes for Auditors and Consultants in ISO-9000 and ISO-14000-quality system. Industries and institutions are given special incentives to go for ISO certification. A national accreditation body is in the final stage of operationalization. This body will initially work under the ministry of science and technology. An existing National Physical Standard laboratory is being upgraded for a National Metrology Centre. There are many other labs already working in various areas which can effectively provides in calibration testing services.

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IV. RECOMMENDATIONS
Pakistan has reasonably developed the basic infrastructure to embark upon a meaningful strategy for the promotion of high tech based small and medium scale industry. The present government had already launched a Technology Development programme in various sectors such as electronics engineering, textile, biotechnologies, etc. With a view to diversify economic base, the government has committed a hundred fold increase in the budget allocation for science and technology, in three years National Commission, for science and technology, a high level commission will be set up to implement government priorities. The commission has full powers to reorganize, update, redirect and utilize all present R&D infrastructure. Incubation centres for high-tech projects is one of the governments priorities. However, a plan is still to be prepared with details. It would be highly desirable if a coordinated programme utilizing the existing research and development infrastructure is chalked out considering inputs from all other stakeholders.

(a)

Stress Areas
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) Electronics (hardware development, automation) Information technology (software development) Medicines Upgrading of conventional industries Agro bases industries Energy Biotechnology Textiles New materials Engineering Ocean Resources Defence

(b)

Objectives

The programme should deal with the high risk factors involved in the implementation of innovative technological ideas by providing incubation centres for specific industries. It should provide: (i) (ii) (iii) (iv) (v) Technical help through all R&D resources available in that field throughout the country with Internet speed. Provide access to capital market as soft loans during incubation period and also provide access to loans after successful graduation of the project for its commercial implementation. It should provide special skills required for marketing of the product. It should provide space flexible enough for making changes and should be equipped with common infrastructure on a rental bases. For electronics, the incubation centre should have following facilities available on a rental basis:

Small scale PCB fabrication unit capable of economically producing PCBs in small numbers Small scale stuffing and soldiering stations on rent Test equipment and other instruments available for hiring Access to injection moulding and other plastic and metal casing fabrication on rent Electronic component shop within the facility premises.

A similar requirement is worked out for other stress areas.

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V. CONCLUSIONS
Pakistan has a reasonably developed R&D infrastructure. Despite of financial constraint the country is ready to increase investments in science and technology. Presently emphasis is being given to human resources development through training and to upgrading the existing R&D infrastructure. The programme of incubation of technical ideas into commercial products is carried out; by involving most of the R&D institutes in productive research. They can initially provide consultancies and even reorient their research programmes according to the requirements of industries. It will help the country to achieve its already-defined priorities and, also, make it more self-supporting.

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