CLUSTERS, as described by the Small and Medium Enterprises Development Authority (Smeda) “are geographical concentrations of enterprises which produce and sell a range of related or complementary products and are faced with common challenges and opportunities”.

There are various export-oriented clusters in Pakistan, amongst which the success story of Sialkot’s surgical instruments cluster — the only surgical cluster in Pakistan — is worth noting. The cluster’s technological upgrade started with its collaboration with the surgical cluster at Tuttlingen, Germany, which transferred expertise and machinery to Sialkot.

On the marketing side, the cluster faced various challenges while exporting to its European Union, US and Middle East markets. During the late 1990s, Sialkot’s surgical exporters were caught unawares when the export markets needed them to be ISO-certified. No expertise existed in the cluster at the time and there was temporary loss of business; many firms went bust.

Taking the initiative, the cluster arranged trainers and auditors for quality assurance to maintain access to these markets. A material testing laboratory was set up with the help of USAID. The laboratory plays an important role in helping Sialkot instruments conform to international standard specifications. Self-initiative and foreign assistance have been important in increasing the quality and competitiveness of the Sialkot surgical cluster.

However, the cluster is mainly manufacturing non-reusable surgical instruments for low value-added markets. With time, the international markets are not only becoming cost competitive but competitors are increasingly entering the low value-added market segment.

This writer, while doing research on Sialkot’s surgical cluster, interviewed several leading surgical firms’ executives about the challenges facing them. They pointed out various steps which could be taken by the government and its various development agencies for improving the competitiveness of small and medium enterprises (SMEs) and thus indirectly of the surgical cluster.

First, the executives were not happy with the facilities, machinery and syllabus of local vocational training institutes and described them as outdated and no longer suitable to local industrial needs. Second, the executives complained about the capability level of teachers and trainers at these vocational institutes, who are not given regular training to upgrade their skills.

An executive remarked that these instructors should be sent to the local firms for training on the machinery being used by the local industry. This initiative would help to renew their skills and make them aware of the needs of the local industry.

Also, consistent production quality control is a major issue. Firms are taking various initiatives for quality control at various stages of manufacturing. However, again lack of a properly trained workforce is hampering their efforts.

One executive said that to streamline manufacturing operations of different products in his firm, he tried to explain what a ‘process’ is, what are its qualification requirements and where one process finishes and the next one starts. But he said he was not able to explain the concept of a ‘process’ and the issues of quality control related to each process to his workforce.

Thus, although there is a need to manufacture better value-added products for more revenues for sustained competitiveness in the long run, the necessary groundwork needs to be done before embarking upon that journey. Recently developed economies like Singapore, Hong Kong and South Korea first assimilated technology from abroad and then improved it incrementally.

But to be able to do so, they first invested in education to create a workforce with analytical skills, which could assimilate and then improve the transferred technology from abroad.

Therefore, taking a holistic approach to increase the competitiveness of the cluster, various initiatives could be taken for improvement of the cluster, a few of which are enumerated.

First, the capability level of the workforce in the cluster needs to be attuned to the requirements of the cluster industry through better training of the vocational institutes’ instructors and provision of latest machinery at these institutes.

Second, government development agencies such as the Technical Education and Vocational Training Authority, the Technology Upgradation and Skill Development Company and Smeda need to increase their contact with SME executives/entrepreneurs before formulating and launching an SME development policy. Third, government development agencies also need to facilitate international collaboration between the surgical cluster and customers.

However, a word of caution here. The government and its various development agencies need to be facilitators only; the type of collaboration, its scope and execution need to be left to the entrepreneurs of Sialkot’s surgical cluster to decide.

Finally, the development agencies should help SMEs in scanning the environment, especially over the horizon for any emerging threats and/or opportunities and help SMEs mould/develop capabilities accordingly.

The writer is a PhD candidate with diverse industrial experience.