Prime Minister, Shri
Atal Bihari Vajpayee addressed the Global Summit on Small and
Medium Enterprises here today. Union Minster of state (Independent
Charge) of the Ministry of Small Scale Industries, Smt. Vasundhra
Raje was also present on the occasion.
The following is
the text of the speech of the Prime Minister
"At the outset let
me wish all of you Merry Christmas. Also, my greetings to you
for the New Year.
I do hope that the
foreign delegates will have a pleasant and comfortable stay in
India.
Small and medium
enterprises have always been the engine of growth for every country,
in developing as well as in transition economies. Their role in
building a solid industrial base can be gauged from the fact that
they represent over 80 percent of industrial enterprises of most
developing countries. They, along with micro enterprises, have
been identified as high potential sector for employment generation
and source of livelihood to millions of people in Asian, African,
and Latin American countries.
There is a popular
misconception that Small and Medium Enterprises do not count for
much in developed countries. Facts, however, reveal that they
are almost as dominant in the economies of the most developed
countries as in the least developed countries.
Many developed economies
owe their industrialization to Small and Medium Enterprises. Around
99 percent of seven million units in Japan -- one of the most
industrially advanced nations of the world -- are Small and Medium
Enterprises. They account for about 80 percent of total employment
of around 55 million persons. Around 52 percent of the Japanese
total exports emerge from this sector.
Similarly, Small
and Medium Enterprises constitute around 99 percent of all businesses,
employ over half of the workforce and generate 54 percent of the
sales revenues in USA.
The same is more
or less true about other developed economies.
Therefore, it is
a bit of a misnomer when we call them small-scale industries or
enterprises. The size of the individual industry or service enterprise
may be small, but together contribution is truly big. Hence, the
attention that governments and financial institutions ought to
pay to them has also to be great.
While achievements
in this sector are many, these, however, are dwarfed by the task
that is ahead of us. This sector today is at a crossroads in our
country and the world over. True, it has the flexibility to adapt
to the changes much better than its larger counterparts. But it
is also true that the process of globalisation has impacted Small
and Medium Enterprises much more than larger business enterprises.
The opening up of
national economies, the coming down of trade barriers, the constant
arrival of new range of products, and the introduction of ever
new processes of production and service provision, have transformed
the business operations of Small and Medium Enterprises. The unprecedented
strides in information and communication technologies have also
necessitated readjustments.
It is not that this
process has only created problems for Small and Medium Enterprises.
No. It has also opened up boundless new opportunities to innovative
enterprises. It has practically reduced the entire world to a
boundary-less single large market. The challenge before Small
and Medium Enterprises is how to capture these opportunities and,
at the same time, to reduce the chances of failure.
Today, margins across
industries are rather thin and a slight change in costs abroad,
or even within a nation, can undercut one's competitiveness. Small
and Medium Enterprises are particularly vulnerable to such volatile
developments because of their low resource base. Frequently, this
causes sickness in the sector and sometimes leads to closure of
units.
The turbulence is
both in terms of new start-ups and closures. Globally, it has
been estimated that up to 50 percent of SME start-ups in most
economies do not survive the first 5 years of operation. India
is no exception and we too have our share of sick industries.
Friends, you will
agree that mere numbers and economic terminologies cannot adequately
capture the underlying meaning of this phenomenon. Like all economic
phenomena, it leaves behind a profound social and psychological
impact. When enterprises close, or when the specter of unemployment
looms over workers, it affects the livelihood and the quality
of life of their families.
This is a global
phenomenon, although its severity may be felt less in some places
and more in others. Hence, there is a need for serious global
thinking on how to ensure greater stability of Small and Medium
Enterprises, how to provide greater social security for those
working in this sector, and, at the same time, how to retain the
dynamic force that drives this sector.
I am sure that your
conference will address many aspects of this challenge. In doing
so, I would urge you to especially consider the problems before
Small and Medium Enterprises in developing and least developed
countries.
The huge resources
available with the transnational financial institutions controlled
by the developed economies are not adequately serving the needs
of the SME sector. Even national financial institutions are not
sufficiently responsive to the needs of this sector.
For example, in India
Small and Medium Enterprises today pay the highest rates of interest
on the moneys that they borrow, and which only the banks can give
them. It is somewhat ironical that individuals who want to borrow
to buy a house today pay around 10 per cent interest; many big
companies can get money from the market directly at less than
10 percent; but a small business has to pay 13 percent or more.
How is it that an
individual borrower can get his expensive housing loan refinanced
by another bank at a lower rate, but a Small and Medium Enterprise
that borrowed two years ago at 15 or more, cannot?
Of course, it will
be said that there is greater risk involved in lending to Small
and Medium Enterprises. No doubt, there is much truth in it. Yet,
the challenge before all of us is how to reduce that risk, and
how to increase stability, sustainability and the success rate
of this sector.
Many people in
this gathering know that India has consciously promoted the development
of the Small Scale Industry. We introduced a new comprehensive
policy package for small-scale industry and the tiny sector in
August 2000. These include support on fiscal, credit and infrastructure
aspects, technology and quality improvement, marketing assistance
and streamlining rules and regulations.
At the same time,
governmental and semi-governmental agencies need to do much more
to act as facilitators, so as to make our Small and Medium Enterprises
more competitive. While eleven years of liberalization have given
big businesses much more freedom to operate, the Inspector Raj
still stifles small businesses. While the big can still afford
to deal with a myriad of rules and rulings, those whose whole
business often comprises only a dozen people (or less) cannot
afford to have even one of them tied down in filling forms and
"managing" the governmental system.
Therefore, I would
like to reiterate what I have often said before. All enterprises
– but especially Small and Medium Enterprises – must be speedily
liberated from the heavy burden of untenable constraints and hurdles
they face.
This should be done
by making necessary changes in the legal and administrative framework.
Wherever necessary, rules, regulations, procedures and guidelines
should be amended and simplified after taking Small and Medium
Enterprises into confidence.
This global summit
is an appropriate forum to address these and other relevant issues
and chart out a workable action plan for the development of Small
and Medium Enterprises. I extend my best wishes for the success
of this conference.
Thank you"
