THE federal budget 2014-15 did not propose any concrete measures for the growth of the SME sector, which is recognised as a key contributor to the national economy.

Ironically, the government, despite realising lack of financial resources and capacity of small and medium enterprises, gave it a ‘level-playing field’. But the sector currently remains virtually financially excluded.

Incentives were announced for the capital market, direct foreign investment and joint ventures, but SMEs would be unable to avail them, as there is no policy or institutional support for the sector.

The marble sector — comprising marble, granite and onyx — though severely under-developed, is an important component of SMEs. An emerging industry — marble has tremendous growth potential — has been ignored by successive federal and provincial governments.

The only concession the 2014-15 budget provides is the retention of exemption on custom duty and sales tax on import of machinery, equipment and materials for marble sector. But a 5pc sales tax has been imposed on a wide range of goods, including on import of machinery for other sectors.

But despite the many constraints and problems faced by the industry, its exports have been increasing sharply — from $23 million in 2003-04 to $61 million in 2011-12. The industry exported marble valued at $70 million from July 2013 to April 2014.

China is a major market for Pakistani marble, with a share of 60pc of total exports. But it only imports raw products — slabs and blocks —at zero-rated duty under the free trade agreement. Italy is another major buyer of Pakistani marble. China and Italy process raw or semi-finished products and re-export value-added items like mosaic work, inlay designs, tiles etc, across the world, including to Pakistan.

Other markets, such as Saudi Arabia, Russia, US and other Middle Eastern and European countries demand finished marble products, and thus constitute less than 10pc of our exports.

The international construction industry is projected to grow at 6.6pc, from $940 billion in 2013 to $990 billion this year. Saudi Arabia alone imports marble products worth $1,500 million.

Pakistan has carved out a niche for itself. Among all dimensional or natural building stones, marble is the most preferred stone the world over. There are over 100 types of colours and varieties of marbles with exotic appearances and of great decorative and functional value, which offers us comparative advantage over many other countries.

Nonetheless, Pakistani marble is highly degraded due to a variety of factors, like poor blasting practices, inefficient mining and outdated processing technologies, inconsistency of product quality and shortage of skilled manpower.

Globally, Pakistan is the sixth largest extractor of marble, but its share in total world exports of $60-70 billion (which is growing at 8pc annually) is insignificant. Extraction and production of marble has registered a gradual rise year-on-year, from 0.63 million tonnes in 1999-2000 to about five million tonnes currently.

Nonetheless, there are just 30 units with appropriate machinery and equipment for cutting, sawing, grinding, polishing and sizing, which mostly produce raw and semi-finished products. Wastage is recorded at about 80pc, against the global benchmark of 45pc. And while the domestic market is well developed, marble product users are relying more on imported products. In 2012, Pakistan imported 53,000 tonnes of marble and granite.

Marble is the sixth largest mineral extracted, with some 1,400 quarries and 3,000 processing units — all in the small-scale sector — employing about 30,000 workers. There are large deposits of marble, onyx and granite, classified as medium to high grade, and estimated to be over 350 million tonnes, according to the Geological Survey of Pakistan.

Unfortunately, these reserves have not been specifically measured yet. There have been no recent discoveries either, but other geological surveys infer three billion tonnes of marble deposits in Khyber Pakhtunkhwa/Fata, which accounts for over 70pc of national marble production. Balochistan has about two million tonnes of reserves.

Given the persistent loadshedding, poor law and order situation and lack of infrastructure, particularly in areas where quarries and processing units are concentrated in like KP/Fata and Balochistan, it is not likely that production and exports would increase dramatically, unless the government takes special steps, associating mine owners, business entrepreneurs and other stakeholders.

Recently, the All Pakistan Marble Mining Process Industry and Exporters Association had threatened to close the marble processing industry, as it faced six-hour announced and 6-10 hours unannounced loadshedding in Karachi — the largest marble industrial hub — besides extortion and strikes.

The first and only National Mineral Policy 1995 failed in exploiting the full potential of the marble sector and in attracting foreign investment and joint ventures, introducing modern technologies for mining and processing and promoting marketing expertise.

Various measures announced almost 10 years ago have not been implemented yet, including the upgrading of 14 selected quarries, developing 18 marble cities to house 2,000 state-of-the-art marble factories and setting up of marble training institutes of international standards across the country.

The revised National Mineral Policy was announced in February/March 2013, but it has not been owned, and thus not implemented, by the present government. However, that the KP government took initiative to announce its mineral policy — the first-ever mineral policy of any province after the passage of the 18th amendment. This is expected to allow many fiscal and non-fiscal concessions to the sector.

The USAID has also helped streamline and modernise the business. Through its five-year USAID Firms Programme of $5 million, which focused on 10 most economically promising private sector SMEs, it has supported capacity building, developing a strategy to improve quality, improving market linkages, and achieving value-addition in the marble sector.

The writer is a former chairman of the State Engineering Corporation, Ministry of Industries and Production

Published in Dawn, Economic & Business, June 16th, 2014