The Role of Cottage and small Industry In Economic Development

The role of handicrafts and small scale industries in the changing pattern of economic
and social life is a subject of considerable importance especially to the countries that
are still in the early phases of industrial development. The Asian Regional Conference
of the International Labor Organization held in New Delhi in 1947 adopted a special
resolution on the subject and suggested, inter Alia, the desirability of establishing, where
feasible, branches of industrial production on the basis of small domestic and
handicrafts industries and emphasized the need for organizing these industries. Cottage
or household industries occupy an important position especially in rural set-up as
traditionally in those areas women are not encouraged to work outside their homes.
Therefore, a significant number of women in Pakistan is engaged in handicraft and
tailoring activities. For example, up to 30 to 40 percent women in NWFP are involved in
the cottage and handicraft industries. Small scale industries like carpet weaving, candle
making and handicrafts can be established in houses with women gain- fully employed
therein. This not only increases the active labor force but also empowers the women.
However, as female artisans typically work at home they have no access to credit with
which to buy new materials or to increase their production. Similarly, they also face
difficulties in marketing their products.
Most workshops and firms active in the field of handicrafts are economic units that are
administered with a small capital. More than 94% of people in the handicrafts industry of
Europe work in small economic units with staff strength of 1 to 8. Statistics are almost
the same in other countries. According to some observers, this also increases their
vulnerability as they find it difficult to compete with larger firms which enjoy economies
of scale as well as better facilities of credit and marketing. But a proper management
with an expert planning can help in removing obstacles and solve problems in the
handicrafts industry.
The benefits of establishing and promoting cottage and handicraft industries are many.
They not only provide additional employment and raise the standard of living for both
rural and urban populations but also prevent migration from rural areas to the cities. At
present, efforts are being made to promote handicraft and cottage industries by
establishing new industrial estates and cottage industry villages for bringing together the
cottage industry at one place.
Realizing the potential of the sector and its role in alleviation of poverty as well as
empowering rural women, the Commonwealth (CW) in collaboration with Sindh Small
Industries Corporation (SSIC) launched a survey in Sindh to help revive centuries old

handicrafts industry in the province. The Commonwealth came to the help of handicrafts
artisans following the reports that the traditional handicrafts making skill was dying due
to lack of financial resources. They assured the SSIC officials that on the basis of
survey the CW would provide technical and financial support to save the centuries old
professions from extinction. At that time SSIC itself did not provide any financing to
cottage and handicraft industries due to paucity of funds. However, it submitted Rs. 500
million financing scheme in this respect. It also offered plots in new small industrial
estate of 100 acres established at Northern B pass in Karachi on 10% payment with the
remaining 90% being charged in easy installments over a period of four years. Out of
this, about 30 acres in the estate have been reserved for women to set up cottage
industry units.
Pakistan has enormous potential in handicrafts and could earn precious foreign
exchange through the export of handicrafts products. Good quality of handicrafts is
produced in all the four provinces that have recognition in the world market. There are
good demands for rugs, carpets, brassware, handicraft and embroidered work in the
international market. According to an estimate, these goods at one time provided about
30% of export receipts of manufacturing sector.
According to the Trade Development Authority of Pakistan (TDAP), efforts are being
made to increase this share to one billion dollars but this does not seem to materialize
so soon because it has been observed that instead of increasing, Pakistani handicrafts
are losing their foothold in the international markets. Pakistan could export only $ 5
million worth of handicrafts in 2008-09 and instead of increasing this amount it is
declining continuously. In 2009-10 the country received only $0.9 million from these
exports which further reduced to $ 0.4 million in 2010-11 and to $ 0.15 million in 201112. In the first quarter of 2012-13, Pakistan received only a meager amount of $ 0.054
million from the exports of these commodities. This is in contrast to the performance of
other developing countries which may be seen from the fact that Indias handicrafts
export totaled one billion dollars and Vietnam earned $ 800 million through the export of
these items last year. The share of Pakistan in the world trade of handicrafts, estimated
to be around $ 250 billion, is quite negligible.
There are many reasons for this dismal performance. It has been observed that with
the passage of time the quality of craftsmanship has been diminishing. The value has
been infringed and the traditional sense of handicrafts has almost disappeared. Thus
this sector is in dire need of development and promotion in order to revive the culture
and art of Pakistani heritage. The biggest problem cited by the artisans in this respect is
the access to credit to be able to expand and compete in the international markets.

Skilled craftsmanship is the principal feature of handicraft. However, for the greater part
trade in handicrafts is in the hands of middlemen many of whom have been associated
with handicraft production for generations. As a rule these middlemen work on small
scale and work to orders.
The economic downturn due to the load shedding, law and order, political uncertainty
and recession in the international market has not only affected the big business and
industry but has also badly affected the small business and industry which does not only
consist of more than 99% of the total business establishments in the country but being
labor intensive also provides employment to millions of people. In a capital starved
country like Pakistan, it is considered as an answer to both scarcity of capital as well as
generating employment. The capital to labor ratio in SME sector is around one-fourth as
compared to Large Scale Manufacturing (LSM) industries.
According to Punjab labor department sources, due to the crisis approximately 800,000
laborers have been dispelled from their jobs while 400,000 to 800,000 are receiving
fewer wages. Apart from this, owners have also withdrawn the overtime facility due to
load shedding which has further increased the hardships of the poor. Moreover, the
cottage industry which provides employment to millions of workers has been mostly
closed with around half a million self-employed owners out of job.
The President of Lahore Chamber of Commerce and Industry (LCCI) has recently
stated that about 70% of the industry had already been closed down and remaining was
on the verge of collapse. He said that industry has no money to pay salaries and utility
bills. More than 350 small industrial units, most of them surgical forging units in Sialkot,
Uggoki, Sambrial, Daska, and surrounding areas, have been closed down. About 6000
small and big sized units have been affected in Sialkot. Similarly, there are about 6500
SMEs and 25000 cottage industry units of diverse nature in Gujranwala which have
been badly hit especially due to energy crisis.
According to one estimate, there are about 10,000 factories in Lahore, among them 30
to 40 percent have been closed down because of load shedding as most of these
industries were using electricity and gas in huge amount. In these factories plastic
moulding, rubber articles, leather garments, cotton, iron-made goods and many other
things were being produced. According to Chairman, Pakistan Hosiery Manufacturers
Association (PHMA), the industry is suffering colossal losses due to power outages and
gas load shedding. The deterioration is across the board and almost all industries are
victims of declining trend. They are losing large export orders and laying off workers due
to closure of units. He further said that running units on self generation is costly and has
wiped out liquidity of many units.

Chairman of SITE Association of Industry in Karachi had estimated that about 10 to 20

percent of industries in SITE area are on the verge of closure mainly due to the crisis of
utilities whereas the President, Karachi Chamber of Commerce and Industry (KCCI)
stated that about 25 percent businessmen of the city have been forced to shut their
businesses due to load shedding and shopkeepers at major markets are suffering
colossal damages.
These economic crises have given rise to the social and political problems. On the one
hand the workers who lost their jobs due to closure of industries because of power
outages are protesting while on the other hand riots have broken out in Karachi and
other cities of the country which has given a new dimension to the problem of law and
order and compelled the business community to approach the government for seeking
quick and short-cut solution of the problem. Vice President, FPCCI asserted that it is a
vicious circle and we must come out of it at the earliest as long hours of load shedding
was causing social unrest and heavy production losses to the industry leaving negative
impact on investment climate. The business and industry are faced with a typical
situation and fear that it would be difficult for them to meet the quality and timely
delivery schedule given by their buyers. Chairman, Korangi Industrial Area said that
there was a rapid growth in the energy demand and in the near future it would be one
of the biggest issues if appropriate measures are not taken to resolve the same.
It is interesting to note that the energy crisis has not only affected adversely all sectors
of the economy, it has also given rise to a new form of cottage industry which is
producing scores of goods to counter the power outages. Small manufacturers, who are
actually exploiting load shedding, are getting handsome amount by making emergency
lights, candles, generators, UPS and many other items.
The load shedding crisis has given rise to the price-hike of electrical equipments helping
the manufacturers earn abnormal profits. Thus a sort of cottage industry has come into
being which is creating jobs opportunities for the manual labor force. Many producers
are making Ultra Power Supply (UPS) of 500-1000w and selling them at prices ranging
from Rs 6000 to Rs 12000. According to a generator dealer, an ordinary generator,
depending on different brands, sizes and quality, recorded a price hike of Rs 2000 to Rs
5000. Replica articles have also captured market due to low price, although there was a
serious concern about their quality. Most of the shopkeepers were selling artificial light
gadgets because, according to them, the common people forced them to bring these
goods to the market. But being of sub-standard quality they posed a serious risk that
they might explode.

Considering its importance, the industry calls for urgent attention for solution of the
problems retarding its performance and progress. The sooner it is done the better it
would be for the countrys economy and well being of the people attached to it.