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Surgical Goods Cluster in Sialkot, Pakistan

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Surgical Goods Cluster in Sialkot, Pakistan Punjab Small Industries Corporation (PSIC) Diagnostic study of industrial and handicrafts clusters in Punjab ACKNOWLEDGEMENTS This diagnostic study has been carried out for the Punjab Small Industries Corporation (PSIC) by GAT Consulting (Pvt) Ltd (GAT). We are especially thankful to the MD PSIC Mr. Bilal Butt and the PSIC Administrative and Technical staff from Lahore and Sialkot regions for their kind support and guidance during all stages of preparation of this diagnostic study. GAT is also thankful to the Sialkot Chamber of Commerce and Industry (SCCI) for their cooperation in the preparation of this study. Furthermore, we also extend our thanks to the Trade Associations and individuals from small, medium and large scale industry who participated in the surveys and focus group discussions regarding issues confronting this cluster and helping to identify possible solutions to these problems being faced by this industrial cluster in Sialkot. GAT CONSULTING (PVT) LTD 2 Punjab Small Industries Corporation (PSIC) Diagnostic study of industrial and handicrafts clusters in Punjab DISCLAIMER This research document has been prepared for PSIC regarding issues confronting the industrial clusters in the Sialkot region. This report contains correct information provided by the cluster actors; however, GAT and/or PSIC do not bear any legal responsibility for the correctness and usefulness of the information contents of this study at the individual or industry level. The information contents of this report may vary considerably at the small, medium and large-scale industry level and might not be suitable for further references as an authentic source. GAT CONSULTING (PVT) LTD 3 Punjab Small Industries Corporation (PSIC) Diagnostic study of industrial and handicrafts clusters in Punjab TABLE OF CONTENTS 1.1 Introduction ………………………………………………………………………………………………… 5 1.1.1 Background and Objectives of the Study …………………………………………………………… 5 1.1.2 Literature Review and Global Experiences…………………………………………………………… 5 1.2 Methodology…………………………………………………………………………………………………. 6 1.2.1 Methodology of the Study…………………………………………………………....………………… 6 1.3 Data Analysis………………………………………………………………………………………………… 8 1.3.1 Data Entry, Data Cleaning and Processing………………………………………………………… 8 1.4 Porter's Five Force Model………………………………………………………………………………. 8 1.5 Description of Cluster……………………………………………………………………………………… 9 1.5.1 History of the Cluster……………………………………………………………………………………… 9 1.5.2 Geographical location……………………………………………………………………………………. 11 1.5.3 Main Products of the cluster…………………………………………………………………………… 11 1.5.4 Core & other cluster Actors analysis………………………………………………………………… 13 1.5.5 Raw Materials and Intermediate Goods…………………………………………………………… 14 1.5.6 National, International Scenario of Cluster……………………………………………………… 16 1.5.7 Socio economic dynamics of cluster…………………………………………………………………. 21 1.6 Analysis of Business Operations ………………………………………………………………………. 21 1.6.1 Cluster Production Operations…………………………………………………………………………. 21 1.6.2 Markets and Marketing strategies…………………………………………………………………….. 22 1.6.3 Value chain analysis………………………………………………………………………………………. 24 1.6.4 Technology used and Output……………………………………………………………………………. 24 1.6.5 Human Resource and training issues………………………………………………………………….. 26 1.6.6 Credit constraint and related issues…………………………………………………………………… 27 1.6.7 Legal issues faced by cluster…………………………………………………………………………….. 27 1.7 Institutional framework for cluster development activity……………………………………….. 28 1.7.1 Government & Semi-government Organizations………………………………………………… 28 1.7.2 Local Bodies/Chambers/Association………………………………………………………………. 28 1.8 SWOT Analysis of Cluster……………………………………………………………………………….. 30 1.9 Porter's Five Factors……………………………………………………………………………………… 31 1.9.1 Suppliers Power…………………………………………………………………………………………… 32 1.9.2 Buyer Power…………………………………………………………………………………………………. 32 1.9.3 Competitive Rivalry…………………………………………………………………………………………. 32 1.9.4 Threat of Substitution……………………………………………………………………………………… 32 1.9.5 Threat of New Entry………………………………………………………………………………………… 32 1.10 Major Issues and Policy Recommendations……………………………………………………… 33 1.11 Future vision………………………………………………………………………………………………… 34 1.12 Action Plan…………………………………………………………………………………………………… 38 GAT CONSULTING (PVT) LTD 4 Punjab Small Industries Corporation (PSIC) Diagnostic study of industrial and handicrafts clusters in Punjab 1.1 INTRODUCTION 1.1.2 Background and Objectives of the Study Punjab Small Industries Corporation (PSIC) has been working for the development of small-scale industry and the handicrafts sector in various parts of the Punjab. PSIC intended to carry out a diagnostic study of Industrial and Handicrafts Clusters in Gujranwala, Gujrat, Mandi Bahauddin and Sialkot districts of the Gujranwala Division to prepare cluster profiles, diagnosing cluster issues and making policy recommendations for cluster based development with special focus on export oriented clusters. The objective of the consultancy is to prepare a roadmap and policy guidelines for future interventions in the area to facilitate growth through cluster based industrial development. The major objectives of the study are: Profiling and Mapping of Clusters in Punjab Identification of Issues Confronting these Clusters Policy Planning of Interventions for Uplift of the Clusters Consequently, GAT has been hired by PSIC through a competitive bidding process to carry out a Diagnostic Study of Industrial & Handicrafts Clusters in Sialkot district in the Punjab. During the inception phase, we maintained active liaison with the PSIC team to develop a shared understanding of the task requirements. We visited PSIC offices a number of times in order to hold meetings to clarify certain observations and collect relevant information/data and documents and reports. 1.1.3 Literature Review and Global Experiences Over the past three decades, development research has focused on the importance of industrial clusters in the development process. In the United States (US), many states have designed and implemented cluster based development strategies. In 1999 the National Association of State Development Agencies and State Science and Technology Institute held a one-day workshop to analyze cluster based development strategies in the US. Enright (1996, 1998) and Feser (1998) noted that concept of cluster based survey is widely accepted by the development planners because it has the benefit of contributing towards understanding regional economy. There are also questions about the abilities of the policy makers to exploit the strengths of the clusters to make them a driving force for the economy and turn them into successful industry. Rabellotti (1995) explained that cluster is a group of firms located in the same geographical area, where there are a significant number of firms specializing in the production of inputs and for manufacturing the same type of goods. In an industrial cluster there are numbers of firms that are engaged in the production process of a commodity. Textile sector is an example of this manufacturing model. The research goes on to cite the Sinos Valley cluster in Brazil, Agra in India and Guadalajara and Leon in Mexico for the production of footwear and further mentions the surgical goods cluster in Sialkot, Pakistan. The current era of trade liberalization has highlighted the dire need of joint and synchronized action among the cluster members to address new commercial pressures as the Indian and Mexican clusters have faced problems in the past decade. Furthermore, Pakistani and Indian clusters have faced issues related to quality and environmental standards as a result of trade liberalization. Trade liberalization often leads to increased global competition and loss of traditional markets. In the light of current threats to the domestic industrial clusters there is a need for joint action to maximize market share. GAT CONSULTING (PVT) LTD 5 Punjab Small Industries Corporation (PSIC) Diagnostic study of industrial and handicrafts clusters in Punjab In the surgical industrial cluster of Sialkot, Pakistan, there are around 220 producers with around 1,500 subcontractors who are producing goods valuing around $124 million for the US and Western European markets since 2000-2001. This sector came under pressure in the first decade of 21st century when issue of sterilization of the surgical instruments was raised. Subsequently, there was a major shift in the US policy to import surgical instruments from Pakistan. They removed third party purchasing and direct selling to the hospitals evolved. After the collapse of the Soviet Union, the woollen knitwear cluster in Ludhiana, Tewari lost their traditional market. However, exploring alternative markets in Europe led to a swift revival. The firms in the woollen knitwear cluster upgraded their brands to a higher quality for their domestic as well as foreign buyers. This experience highlighted the importance of the domestic market in the process of innovation and learning opportunities for any cluster. Rabellotti (1995, 1999) studied shoe-producing clusters in Mexico and Italy and the initial study conducted in 1995 compared the Guadalajara and Leon shoe clusters from Mexico and Italy. The study found that initially the relationship between suppliers and manufacturers was stronger in Italy as compared to Mexico while shoe clusters in both Italy and Mexico, exhibited weak forward linkages, i.e., marketing and commercialization. This study highlighted the importance of informal relationships that was greater in
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