by
Dr. M. S. S. El-Namaki
Director, RVB Delft
(Research Institute for Management Science)
The Netherlands
The problem
There exists a common belief, supported by developing country case histories, that small industry could be a prime mode of economic growth if it overcomes some structural problems and assumes a proper industrial policy role. The World Bank, UNIDO, ILO and a multiple of research forums have explored some of these problems and come away with the conclusion that the sector suffers from a shortage of managerial skill and a scarcity of technological input. This lack of managerial skill as well as the fragile technological base have demonstrated themselves in a tangible enterprise mortality rate in invariably all developing countries encountered in the course of this and other research efforts.
The following paper addresses, therefore, four specific issues:
(a) Technological characteristics of small industry in a number of developing countries especially in Africa and Asia.(b) Commonly identified technology problems of the sector in these countries.
(c) Different approaches applied to the problem of technology development and transfer as well as managerial skill creation within the sector.
(d) An evaluation of the situation and an assessment of the needs for additional efforts in this regard.
The approach is observation oriented with the results of contemporary research on small industry in general and technology development and transfer in particular, being the major input. The author's own individual and institutional exposure to these problems have, obviously, supplemented this analyses.
A few limitations are, however, worth noting. Small industry is difficult to define precisely and there is always the danger of getting off focus. The paper therefore covered a relatively wide span starting with the limited, near informal sector units up to the well structured and relatively mature units.
Writings on management and technology within the sector are, on the otherhand, abundant but center around worn out themes i.e. bad management, weak entrepreneurial pulse, hostile environment, etc. and the treatment of the problems of technology in the sector is more implicit than explicit. This paper has therefore made an explicit attempt at separating the two issues and dealing with each as a recognizable problem within one broad frame.
The scarcity of data on forest based industries in general and those of developing countries in particular has added to the difficulty of providing a clear focus. So reference has been made to a broader set of small industries in general and to forest-based industries whenever the data was rich enough and reliable enough to be included.
Technological characteristics of small scale industry in developing countries
The technological characteristics of small scale industry in developing countries could, in the author's view, be measured in terms of six specific variables: (a) economies of scale; (b) the technological base; (c) technological disparity; (d) infrastructural base; (e) learning; (f) industry differentials; (g) labour intensity; and (h) linkage pattern. The list is by no means exhaustive but it provides as complete a view as can be, of the different factors at play in the determination of the technological characteristics of the sector. We now examine each of those variables closely.
Economies of scale
Small industrial units are, by assumption, limited scale manufacturing operations that do only selectively, demonstrate the typical impact of scale on productivity and output. They emerge and persist in industries where scale economies are either relatively unimportant or are associated with limited levels of employment and investment. They also decline whenever scale economies become significant. Breaking the size barrier is, in fact, a measure of success of the small industry entrepreneur.
The experience of Korea and Taiwan (Ho, 1980) could probably be of assistance in thowing some light on what could be considered, for various industries, the minimum efficient plant size and in what industries could small scale manufacturing units be considered efficient.
Korea and Taiwan have experienced a shift from small low technology content industries in the late fifties and early sixties to large high technology content industries in the seventies and eighties. Both countries had a strong small industry sector in the sixties that declined - in terms of total employment - gradually but measurably, over the last two decades. The share of Korean small enterprises (5-49 employees) declined from 54% in 1958 to 17% in 1975. The identical share of Taiwan small industrial units demonstrated a parallel decline from 45% 1954 to 26% in 1961 (Ibid).
A walking tractor hauling poles on a trailer
In Korea, in particular, an estimation of efficient plant size according to the “survivor technique” (calculating for two points in time the share of an industry's output by size of establishment and consider those sizes that experience increases in their shares as efficient sizes), suggests that the efficient plant size in most industries is above 100 workers (Ibid). It also suggests that the incidence of efficiency in the small industry is most observed in two industrial branches: food and textiles.
Summing up, not every small industry is, from a size-technology point of view, appropriate. Certain technologies and industrial branches, lend themselves to small scale application without jeopardizing productivity and efficiency. Those are most common in the wood, furniture, garment, leather and timber industries. The smaller the industry, moreover, the more difficult is the question of size-technology fit. Cottage industries and handicraft should find their justification not because of the level of productivity achieved but because of the level of employment generated.1/
1/In both Korea and Taiwan three industries accounted for three quarters of the net increase in factory employment in manufacturing, (a) textiles and apparels, (b) products of chemicals, petroleum, coal, rubber and plastic and (c) metal products, machinery and equipment. Within these three groups, strong growth was experienced by such industries as man-made fibres, fabrics, petrochemicals, chemical fertilizers and electrical machinery and apparatus, where the average size of establishment is quite large and where scale economies are known to be important (Ho, 1980). It may be interesting here to refer also to another survey that has been carried out in 1981 of the size of manufacturing plants within thirty three major industries in Britain, Germany and the United States over the period 1970-1973 (Paris, 1981) that supports the notion that certain industries are more likely candidates for small scale operations than others. From the thirty three industrial groups surveyed six; leather, clothing, furniture, timber, cement products and beverages, had a median plant size of 100 employees or less in Germany. Britain demonstrated a higher plant size for clothing, furniture and cement. The United States, on the other hand, demonstrated an even higher plant size that those of Germany and Britain. Other industries demonstrated a larger size of employment, across the board, and little significant country differentials. Median plant size in selected industrial groups 1970-1973 (number of workers):
|
|
Britain |
Germany |
USA |
Germany/Britain |
|
Leather etc |
90 |
70 |
160 |
.81 |
|
Clothing |
120 |
100 |
180 |
.78 |
|
Furniture |
130 |
70 |
200 |
.56 |
|
Cement etc |
140 |
70 |
80 |
.45 |
|
Timber |
60 |
20 |
110 |
.27 |
Technological base
Small industries are dependent for their equipment and process technology on a limited number of resources that start with (a) the entrepreneurs' own technical expertise probably gained during earlier stages of paid employment (Schmitz, 1982); (b) large firms that provide the technology as a component within a sub-contracting arrangement (Ibid); (c) government institutions desirous to support a measure of indigenous technology. And although the level of technology associated with any small industry initiative is a function of all three variables, there is sufficient evidence to suggest that the first is the prime source of technology in small industry in a significant number of developing countries.
Case studies from Brazil (Schmitz, 1980) indicate that thorough knowledge of the production process tends to be the small producers' strong point. “The most important source of skill and know how found was previous wage employment. The training and experience gained in this way varied with the job previously held, but generally it provided a sufficient basis to pick up the missing technical aspects through a process of learning by doing, which was an integral part of the small producers' struggle for survival or expansion”. Similar conclusions were reached in Eastern Africa (King, 1974, 1975, 1979). This fairly narrow base of technological input does result in a strong measure of technological “retardness” that expresses itself in, among other things, a comparatively low level of labour productivity in the respective plant or plants. “Many small scale operators are engaged in a process of production and technological development but their ability to develop cumulatively over extended periods is limited” (Bienefeld, 1975).
Technological disparity
The generic term small-scale industry conceals, in fact, three levels of technological sophistication each related to a specific type of activity: craft production, cottage industries and small manufacturing. Each of those three is, in fact, a distinct mode of production with different scale and level of technology parameters. The simplest and least problematic level of technology is that of crafts. Carpentry, furniture etc demand relatively limited technological input. Cottage industry demands a relatively higher level while small-scale industry could demand again comparatively, the highest level of technological input in the sector. The five levels of technological input identified in the case of a sample of seventy small scale carpenters in Dakar (Van Dijk, 1982) could provide an illustration.
These conclusions are also supported by an FAO study exploring the level of mechanization of a number of small forest based industries in Jamaica, Thailand, Honduras, Egypt, Sierra Leone and Bangladesh (FAO, 1985). The study revealed that a large number of small (up to 10 workers) forest based industries do not use any machines, whether powered or non powered (69% in Jamaica and Honduras and 93% and 99% in Egypt and Bangladesh).
An examination of the level and availability of equipment and process technology in yet another sample of 465 small enterprises in the Senegal (van Dijk, 1982) could provide an additional illustration. The study distinguishes between two levels of technology, simple and more sophisticated and measures the percentage of each in the respective ample.
Table 20: Technology level among a sample of carpenters in Dakar, 1977.
|
Technology |
Share |
|
|
Number |
% |
|
|
Simple tools, no machines. |
57 |
81 |
|
One machine, relatively simple (e.g. boring machine) |
5 |
8 |
|
One combination machine |
3 |
4 |
|
Several machines including a combination machine |
5 |
7 |
|
An appropriate technology (e.g. circular saw) |
0 |
0 |
|
Total |
70 |
100 |
Source: Van Dijk, 1982.
Table 21: Segmentation of technology by level among a sample of smaller industrial units in the Senegal, 1977
|
Activity |
Tool or machine required |
% using higher level technology (by No.) |
|
Blacksmiths |
Welding equipment |
40.3 |
|
Brickmakers |
A blockmaking machine |
0 |
|
Carpenters |
A measuring instrument |
21.9 |
|
Electrical repair |
A measuring instrument |
53.3 |
|
Furniture making |
A sawing machine |
88.0 |
|
Mechanical repair |
A measuring instrument |
51.1 |
|
Watch repair |
A measuring instrument |
11.4 |
|
Others |
A piece of equipment worth more than 10000 F CFA |
27.8 |
|
Total sample |
|
39.1 |
Source: Van Dijk, 1982.
Factors influencing the choice of a specific level of technology for this group were found to include investment level, scale, knowledge about and accessibility of specific types of technologies, human prejudice against or for a specific technology, cultural factors and the existence of a technology gap i.e. non-conformity of the available technology with the level desired by the entrepreneur or recommended by the feasibility makers.
Infrastructural base
Experience of a large number of countries in both Africa and Asia has shown that small industry usually needs a strong infrastructural base, although this need may vary according to the size and nature of industry. The smaller the unit and the less formal is its frame, the less the need for this infrastructure. The larger the unit and the more complex the product or the process, the greater the need for this infra structural base. Very small and artisanal establishments provide their own power (mechanical, hand or generator) and can adapt to different types of physical location and shelter (Page and Steel, 1984).
The larger small industries are very much dependent on the existence of the facilities usually contained within an industrial estate. Those could be technically oriented services as central repair workshops, facilities for the bulk purchase of raw material and warehousing facilities or common facilities as foundries, electroplating shops, tool and die shops, heat treatment shops, woodworking shops, a quality control laboratory and a special machine shops. Although industrial estates are usually the focus of all these facilities, a UNIDO exploration of the relevance and effectiveness of industrial estates for small industry development has revealed, however, that industrial estates had little success in attracting industry to rural areas (UNIDO, 1978).
Industry differentials
The term forest-based industries conceals, in fact, a number of different industries with different characteristics. They differ in terms of labour input, proximity to the raw material base (the forest), nature of raw materials used and their utilization pattern, sensitivity to scale, resort to technology, marketability of output etc.
The most important of those, in terms of employment in a number of surveyed countries are those based on wood such as carpentry, furniture, upholstery and wood carving but others as bamboo works, mat making, basket making, hat making, agricultural tools, canning, medical and aromatic herbs etc can also be locally important. Assuming that since all these industries are forest based they are equal in technological and managerial paramaters could be dangerous. The very difference between these industries could spell out their susceptibility to stimulation and lead to a direct differentiation in the applied methods and approaches.
Learning
Contemporary and not that distant research has revealed the existence of a measure of correlation between average total or partial cost of production of a product and the cumulative volume of production. Average total cost declines with increase in volume not only as a result of economies of scale but also as a response to four other factors that have proved instrumental in causing a cost decline. Technology is prime among these factors while dexterity, learning and quality of management follow by not too far a distance. This so called learning or experience impact was traced in large manufacturing operations producing a wide variety of products from integrated circuits to baby food.
The author strongly feels, although admittedly has yet to accumulate empirical evidence, that small industries in most developing countries are not susceptible to the learning or experience impact just described. The reasons for that are the following: first is the fact that many small scale industries, also in the forest sector, do not lend themselves to large scale operations. Second is the frequently observed low level of technological input and technological adaptation in many of those industries. Third is the long established high labour intensity and low labour dexterity, in many of those industries.
Fourth is the often cited constrained managerial performance of the great majority of these units. And fifth, and last, is the limited scope for learning given the environmental constraints of the industries. As said earlier, precious little empirical evidence is there to support the suggested relationship between learning and the small scale industry sector in developing countries. Suggestive evidence is, however, there.
Labour intensity
Aggregate data consistently show that increasing size is associated with decreasing numbers of workers relative to capital. This labour intensity of small industry is a favourite argument in favour of the industry and a frequently cited rationale for its stimulation. Several determinants could actually lead to this labour intensity. One of these could be the degree of “sophistication” of utilized technology. Differences in labour intensity may simply reflect the impact of differences in the wage/rental ratios facing small and large firms on their choice of both technique and industry. Another determinant may be the degree of informality of the enterprise, with informal sector enterprises more inclined towards substituting capital with labour and employing low-skill, minimum wage-tied labour.
And a third possible determinant of this labour intensity could he the economies of scale that we have mentioned earlier and the fact that certain industries and industrial branches require considerable capital outlay within a wider span of scale than that reachable by a small industry.
Linkage pattern
The probability is high that the forward linkage of small-scale forest based industries to large scale industries is lower than their backward linkage. This is due to the non-forest-based raw material purchase by SSI manufacturers. The extent of the linkage may depend on the level of subcontracting that exists between small and large scale manufacturers although links through the open market could also be important (FAO, 1985).
Simple powered tools are essential for higher productivity
Commonly identified management and technology problems within the Forest-based small industry sector
An ever elusive technology
Technology is a scarce commodity in small industry in most developing countries. Barriers, and there are many of them, restrain the flow and inhibit the access of the entrepreneur to this technology. There are source-related barriers, investment-related barriers, market-related barriers, development-related barriers and access-related barriers. A source related barrier is that resulting from a reluctance of the large industry to provide essential production technologies to the small firm out of a restrictive attitude towards technology dissemination or fear of outright competition or rivalry. Some of these source-related barriers are institutionalized and have deep roots in developed country technology export restriction regulations (Barton, 1984). Investment related barriers arise from the existence of a prohibitive price for the technological input, a price that is beyond the financial capabilities of the small enterprise.
Market structure barriers reflect a high measure of concentration that converts the small industrial unit into a marginal player with no virtual impact on technology transfer or development. Development related barriers arise from market information imperfections or ignorance. The small entrepreneurs' knowledge of new technologies is scarce and distant (Schmitz 1982; Choi, 1986). “For small enterprises the adoption of the latest technology means a discontinuous leap from their previous technology” (Bienefeld, 1975). New technology enters into the country, moreover, through foreign subsidiaries or is developed through local firms larger in size and potential than the small industrial unit.
Access-related barriers refer primarily to the efficiency of the institutional infra-structure created to support the process of technology development for the small industry owner. Although this point will be explored at length later, it is necessary to draw attention here to the still rather limited reach of much of the existing technological support institutions and existence of an invisible barrier between the small industrial units and these institutions.
Reliance on the infrastructural support
Small rural industries depend, sometimes to an excessive extent, on infrastructural support and their productivity and opportunities for survival do, as a result, display a dependence on the accessibility and validity of that support. Attitude towards that support is, however, not uniform. Some governments favour a self reliance approach to the whole issue. “In the Philippines ...while conditions are made congenial, the measures are largely to promote self help. The Philippines five year plan (1983-87) indicates “the promotion of individual self reliance and self esteem will be pursued in the context of broad community participation and involvement” (Rau, 1986).
Pool manufacturing practices and working conditions
Small plants, in a sizeable number of developing countries, do demonstrate stark deficiences related to basic production management techniques as plant layout, material flow, production planning, physical distribution, quality control, product and process design etc. The observation applies to small industrial plants observed in countries as varied as Kenya and the Philippines.
The same plants do also harbour adverse working conditions that undermine productivity and safety. Inferior technology, deficient raw material, incomplete infrastructure, irregular supply of energy, inappropriate equipment all contribute to these adverse conditions. Many entrepreneurs had their first exposure to manufacturing in similarly ill-fit environments and do not have a sound comparative base to guide them. Information on safety and the working environment rarely reaches the small enterprise. Knowledge of what may be considered proper working conditions is scarce, limited and little professional advice is sought in this regard. The result is high accident rate, poor work attitudes and, ultimately, lower productivity. (Louzine, 1982).
Limited technological skills
Technological skills available in small industries, especially the rural ones, is mostly limited to the owner and a very few, if any, individuals around him. The owner's skill is mostly earned at an earlier stage in his career and seldom developed to match the dynamic nature of most industries. The technological skills of the other individuals within the enterprise is mostly limited and seldom developed. Limited funds, operational pressures and poor basic education account for that.
The labour market, moreover, and in the majority of cases, seldom provides a direct and sufficient coverage of the technological skill gap that emerges from this situation. The result is a tangible level of technological stagnation reflected in poor to very poor product specifications, outmoded product designs, limited product range, inefficient manufacturing processes, loss in touch with the market etc. The most casual observation of small and cottage industry in countries as varied as Nepal and Sri Lanka would confirm this observation.
Empty pockets and limited resources for technological development
Finance, or rather lack of it is one of the most commonly cited small industry problems almost everywhere. The problem takes, however, a different shape depending on the source and the angle from which it is viewed. The small industry owner expresses it, more often than not, in terms of limited access to sources of funds and restrictive practices by these sources. Sources of funds view it in terms of deficient managerial skills and the inability of the entrepreneur to exercise control. The truth lies somewhere between the two extreme positions depending on the country in question and the situation at hand. What is certain is that the scarcity of financial resources does impact upon the technological capability of the enterprises as equipment become difficult to modernize, training programmes become difficult to pursue, basic applied product and process adjustment become difficult to allocate time to etc.
Private sector financial institutions in the Philippines, for example, make few loans and even fewer term loans to small enterprises. The government's programmes have shown that the risks and arrears of lending to SSE are far higher than commercial banks would normally accept. One of the most important reasons for this high risk element is the shortage of information on small enterprises and the absence of a formal record keeping system on credit worthiness which is, in many cases, due to the broad distribution of the qualities of the owner and the difficulty that he encounters into distinguishing between sound and unsound loan requests. (Anderson, 1981). Philippino cottage industry, where loans are granted on basis of collateral and a personal knowledge of the local enterprise, provide, however, a better record than that for larger small firms.
The experience of the Philippines is not that much different from that of many other developing countries. Government programmes do provide an increasing number of small enterprises with access to institutional credit. The volume of lending is mostly, however, small compared to demand. And with structural constraints preventing the private finance sector from filling the gap, technology assumes a remote and untangible role.
Scarce technological software
Small industry in a large number of observed developing countries demonstrate a multiple of specific and in many ways non-conventional managerial traits that one seldom encounters in medium or larger firms. First is the very small management team that brings along with it a lack of specialization, a predominance of multi-functional roles, a shortage of promotable manpower, a pronounced domination by a leader and a large measure of informal control. Second there is the limited control of the environment and the limited resources available to scan it, anticipate potential changes and adapt capacity accordingly. Third there is the informal pattern of operation, with conflicts resolved more easily and loyalties assuming a high magnitude. Fourth there is the general unawareness or indifference to the structured approach to the managerial function and the need for a longer term vision of the enterprise and its environment. (Gibb, 1983).
Chinese girl working in the family business
These and other related problems lead to the emergence of performance bottlenecks. Owners concentrate on tasks that they value rather than adopt a rational approach to task identification and pursual. Planning develops as response to events instead of a rational choice of a course of action that promises most returns. Manpower practices deviate from the structured and managerially acceptable and demonstrate a bias toward the social and paternalistic. This is reinforced by considerable use of family labour. Control becomes ad hoc and seldom based on proper information flows.
Many small industries start, moreover, with far too limited insight into the real market potential of their products and proper channel or channels to pursue. Some of their problems arise from their technical orientation, and their preoccupation with product specifications more than market requisites. Yet another cause of their problem is the little emphasis placed on the marketing function in their appraisal and feasibility plans. The problem could also have roots in the tense competition from other small enterprises or even medium industries sensing the entry of the small industry as a longer term threat or an unnecessary pressure on costs and margins. And last but not least is the very simple and sheer lack of skill on how to identify a market opportunity, choose channels of distribution and approach those channels and maintain a presence.
Initiative demonstrated by the small industry entrepreneur is also not always and undisputedly welcomed by his environment. In fact there is sufficient evidence that environmental forces ranging from purely cultural and social currents to ingrained government bureaucracy go quite a long way towards restraining the driving force behind small industry in many developing countries.
A case in point is China's emerging economic policy guidelines stimulating individual initiative and encouraging entrepreneurship. Yet an article in the China Daily (April 16,1985) entitled “losing out in the love business” demonstrates the extent of the cultural resistance to the principle and practice of free enterprise. This article started with the following statement “Shanghai's private entrepreneurs some of whom earn more than people employed by the state find difficulties in the love affairs”. It went on to underline the failure of the emerging class of Chinese entrepreneurs to find marriage partners because “people think that self employment is too risky, they still consider entrepreneurs of low social status and some self employed Chinese entrepreneurs seem to be poorly educated and rustic in their language and behaviour” (El-Namaki et al, 1985).
Small industry in Peru provides another example. An investigation has revealed that it takes a starting entrepreneur 289 days in order to get a permission to establish a small clothing factory. And that a licence to start a business in a more politically sensitive industry takes three to eight years (The Economist, July 19, 1986).
Technological skill, know-how development, and their promotion in developing countries
Technology, for the small entrepreneur, is simply knowledge essential for the conduct of a productive function. It includes: (a) Industry specific knowledge; (b) Product-system-related knowledge; (c) Firm-specific knowledge; and, finally, (d) On-going problem-solving capability or skill essential for solving management problems.
Technology viewed within this context has a “soft” as well as a “hard” component. The soft component relates to the human capability generation process linked to the absorbtion and management of the technology. The hard components focuses on the essential technological processes and equipment utilized in the manufacturing process. Both components are of equal significance. They could be either transferred or generated domestically. Transfer has provided the answer for decades. Development and generation receive contemporary attention. The following discussion treats technological skill as a function of both the transfer as well as the domestic development process.
The transfer of technological know how and skill
Some experience exists in transfer of technology. However, small industries, despite their prevelance and omni-presence, are rather difficult to track and account for when it comes to the transfer of technology. A few surveys quoted in a UNIDO study confirm the contention that small industrial units in both Germany and France have been quite active in the transfer of technology to business partners elsewhere. The survey conducted in the Republic of Germany indicates that nearly one fourth of the 415 enterprises studied had taken part in technology transfers by 1973. The various studies available on France are perhaps more relevant. One survey shows that nearly half of the 100 or so small sized enterprises studied had taken part in technology transfers by 1976 and that the other half had been unable or had not wished to do so. There is also a statistic given in yet another UNIDO study that suggests that small sized enterprises account for 15 to 30% of the total number of subsidiaries of parent companies of European origin operating in Brazil, Mexico, Peru and Venezuela, as well as of the total number of licensing agreements concluded by European firms in these countries (UNIDO, 1982).
It is worth noting here that technological skill development has only recently become an explicit element of the transfer process. This does not mean, however, that it is given its due attention today. Transfer programmes as the sister industry programme of Sweden and the pilot plant programme of the Netherlands have demonstrated strong bias towards equipment transfer at the expense of human skill transfer.
One can also add that reasons vary for the interest of small industry in Western Europe in the process of transfer of technology. Continued access to markets threatened by tariff or non tariff barriers is one reason. Extention of traditional export relationship is yet another. Some of them also see it as a part of a policy of gradual “sharing” of specific manufacturing processes with developing countries as a dimension of an overall international policy of redistribution of labour.
With regard to the transfer process itself, a few approaches exist, of which prime examples include “sister industries”, “transfer agents”, “South-South cooperation” and use of “pilot plants”. These methods are reviewed below.
(a) The sister industry relationship, a Swedish approachThe essense of the sister industry relationship is a long term technology transfer relationship between two small industries one in a developed country and the other in a developing country.
The senior sister is not necessarily a manufacturer of production equipment, nor a consultant, but rather a company that is using the technology itself. The junior sister is typically a newly established small enterprise within a national small industry creation scheme. And the basic assumption is that assistance is rendered and most needed in the short term and that the longer term should bring about a measure of self reliance. The relationship could entail one or all of the following components:
On the senior sister's side: (i) preliminary project proposal; (ii) detailed specification and costing of the entire project; (iii) purchase of necessary machinery, equipment and starting material; (iv) technological training of selected entrepreneur; (v) supporting expertise for the installation and running of the machinery and equipment; (vi) supportive advisory service (vii) continued purchase and delivery of spares, materials etc. On the junior sister's side: (i) providing an equity input; (ii) managerial and technical responsibility for the operations of the firm; (iii) desire and readiness to continue the development of the product, the market and the firm.The framework of cooperation is set out in an agreement between the Swedish organization and a home country counterpart. The senior sister and the supervisory counterpart agree on the type of technology to transferred, the products to be manufactured, the capacity of the plant, the extent of training required and scope of the support in installation and running of the plant.The local supervisory agency enters, in its turn, into a hire purchase agreement with the junior sister specifying the extent of financial input from the entrepreneur and the supervisory agency.
The local supervisory counterpart harbours a responsibility to: (i) identify products and technologies with high priority; (ii) identify and select the entrepreneurs; (iii) carry out feasibility studies; (iv) provide plant infrastructure (buildings etc.); (v) provide the common facilities required within the industrial estate. SIDA (the Swedish aid agency) is, on the other hand, held responsible for the identification and selection of the senior sister, financing and monitoring of the programme.
(b) The transfer agent, an Asian approach
“Technonet Asia” is a typical example for another approach to technology transfer, and adaptation. National member organizations have a strong small and medium scale industry function and a national industrial policy role. They cooperate in the transfer of indigenous technology through:
- Making available to one another industrial and technical information on products and processes developed and available in their respective countries.Technonet has been fulfilling a significant function as technological broker and an agent for South-South cooperation. The limited geographical coverage of the organization and the limited scale of the operations may be considered its most significant drawback.- Identifying technology seeds and technology needs for eventual facilitation of transfer or sharing of results.
- Developing effective coordination and liaison with local institutions concerned with the development of small and medium sized industries as well as with local sources of technical information and expertise.
(c) South-South cooperation, an Indian approach
Cooperation among governments and organizations from developing countries in the transfer of technology is a commonly advocated channel. Several government agencies and corporations in India, for example, have been playing a pioneering role in this respect. The government owned Central Machine Tools has helped to set up a metal-working research institute in Iran. The National Industrial Development Corporation has been setting up industrial estates in Guyana and equipping a technical training institute in Malaysia. Hindustan Machine Tools has been establishing an advanced training centre in Iraq etc.
The Indian government's small industry programme in Tanzania is possibly, a typical example for a South-South technological approach with all it opportunities and problems. A credit line was established, in 1977, in order to be utilized for import of machinery and training of Tanzanians in India. Fourty-eight small independent industrial projects were selected and 31 quasi-independent district development corporations were also, until 1985, identified for a transfer of technology, a credit arrangement or both. The implementation of the programme was faced with serious problems both at the despatching and the receiving end. Some shipments were not containerized, some cases of machinery were incomplete, some factory buildings were behind schedule and some contemplated training has never taken place. All in all however the attempt provides what could be considered positive results worth imitating elsewhere.
(d) The Pilot Plant, a Dutch approach
Transfer of technology through Multinational Corporations is a familiar and controversial issue. It is laden with the by now common and familiar arguments against multi nationals in general and their involvement in the industrialization process in developing countries in particular. The case of the pilot plant initiated in the Netherlands by a multinational is worth referring to because it represents the potential role of a multi national in the transfer and adaptation of technology to the small industry in developing countries.
The origin of the plant is without any doubt the self interest of the multinational itself. The corporation was faced with the problem of creating assembly and manufacturing units in countries with less than optimum industrial infrastructure. The decision was therefore taken in the fifties to simulate the process by building in the Netherlands a limited scale plant that could embody the difficulties and constraints encountered in developing countries. The experience meant compromising on a number of variables including the equipment, which had to be largely local, comparatively simple and adapted to the environmental conditions in the host country as well as the scale which had to be adjusted to the limited batch production.
The transfer of technology process was seen by the multi-national as the ultimate product of three components. The first is the so called general industrial know how. This is more operations management-related type of information that could be transferred through training and on the job exercise. The second is product related technology (product specifications, product operation, product quality standards). And the third is process-related technology (tooling, line planning and balancing, production flow etc).
An evaluation of the different approaches to technology transfer
It is necessary to ask whether the various approaches to technology transfer just reviewed are appropriate and efficient.
(a) Could the South really teach the other South? South-South transfer of technology is very attractive and sounds very valid within the ideological and political commitments of developing countries. Experience has however shown us that there are many problems involved in the process:- Is the technology transferable? Some specific cases of technology transferred from Asian to African environments disclosed a non-compatibility almost equal to that of that imported from the North.(b) Is it a sister or a mother relationship? Experience has taught those involved in the creation of sister-industry relationships between small industries in developing and developed countries that the process, contrary to the appealing impression it gives, is complex and cumbersome. The Tanzanian experience has revealed many points of weakness and the following are just a few of them:- Does the recipient have the capability to absorb the transferred technology? The gap between some developing countries could be just as wide as that between developed and developing countries.
- Is there enough skill at transferring technology? Experience indicates that skill is needed in the management of the transfer process. Elementary errors related to the process of transfer itself create dramatic consequences.
- Greater emphasis on the technological transfer process than the economic viability of the project.Taken together one can state that the essence of the concept is sound once managerial and economic constraints are given due attention and the transferred technology is sufficiently adapted to domestic and typically local conditions.- Technological bias has lead to a near total omission of the managerial training and skill creation dimension.
- Identifying “elder” sister in the developed country seemed difficult and guiding them throughout the process seemed even more difficult.
- Specific environmental constraints common to developing countries as shortage of foreign exchange or lack of local raw material could cause unsurmountable obstacles to the desired technology transfer process.
(c) Who protects us against the self interest of the multinationals? Multinationals' self-denial might not last as long and be as durable as to provide a genuine support to small industry. The following specific problems have emerged in a number of observed cases:
- Tied technology. Tied to the equipment and processes provided by the multi-national are usually specific raw material and component inputs that vary from those locally available and can only be supplied by the multi-national itself.- Tied outlets. Multinationals impose, in many cases, specific marketing conditions to their technology transfer. Those amount to the a near confinement of all marketing efforts, especially in export markets, to that very multinational.
- Limited opportunities for skill transfer. Technological skill transfer is a second priority in multinational operations, as evidenced almost everywhere. Their cooperation with rural small industries almost excludes this transfer altogether.
The development of indigenous technological skill and know-how
Developing technological competence has long been identified as one of the most complicated issues facing developing countries today2. Global R&D is seriously biased towards developed countries. Secondary and higher education in developing countries, the main bastion of technological infrastructure, on the other hand, demonstrate considerable insufficiency. Student composition within developing country universities and technical institutions demonstrate, generally, a strong bias towards law, social science and other arts subjects. Some of the indicators of technological competence as the percentage of expenditure on research and development as a percentage of GDP, the number of technicians per 10000 inhabitants and the number of scientists and engineers also per 10000 reflect alarming disparity between the developed and the developing countries (See Table 22).
2/Just six countries, (the USA, Britain, France, Japan, USSR and West Germany) accounted in 1979 for nearly 85% of all R&D spending and 70% of R&D manpower resources (The Economist, August 25, 1979), some of the research in pioneering areas as microelectronics and biotechnology for example is almost exclusively concentrated in industrialized countries.
New roads - a step towards the development of both small and large-scale industries
Table 22: Some indicators of technological competence in developed and developing countries.
|
Indicator |
Japan |
Argentina |
Bangladesh |
Egypt |
|
Spending on R&D as % of GDP |
2.0 |
1.8 |
0.2 |
0.8 |
|
Technicians (per 10000 population) |
8.0 |
4.3 |
0.1 |
- |
|
Scientists and engineers (per 10000 population) |
35.4 |
3.1 |
0.2 |
3.0 |
Source: The Economist, August 25, 1979.
Having said this, it should be stressed, however, that the experience of a significant number of developing countries indicate that the development and diffusion of domestic or improved technologies within the small scale industry sector offers a lot in terms of enterprise productivity, employment generation and import substitution. It is, moreover, usually associated with a tempering in rural-urban migration, and a boosting in the use of local raw material, local tools and equipment and local intermediate inputs. Many government programmes have been developed, therefore, with the objective of developing adjusted or adapted technologies especially in rural areas and encouraging the use of those.
Manufacturing technologies of interest to rural producers have been developed for a large number of consumer and small capital goods, including processed food, agricultural tools and implements and wood products. Several approaches are also being tried to improve the dissemination of technological information among rural producers, including the establishment of specialized technological institutions and extension agencies (ILO, 1986).
Approaches to indigenous technology development
It must be obvious, however, that domestic technology development in developing countries is a difficult process especially when we are dealing with a small industry. What is going on right now is the result of multiple efforts. Some of the initiative emerges from individuals, some from enterprises and some from specialized institutions created for this specific purpose.
(a) The individual approach. Individual initiative of an entrepreneur with some technical ability and the business insight to identify a product or a process and tie that to a market opportunity, is still the most common pattern in many developing countries. Many of the small and rural industries one comes across in countries as varied as India and Nigeria have been created in this way. And many of them do demonstrate the technological limitations of this individual Initiative too.(b) The enterprise approach. Technological innovation here is the product of a goal that has been set by the enterprise as a result of a market signal or simply technical bias of the entrepreneur himself. Though not very common among small and rural industry, it does frequently emerge as an extension of the private initiative referred to above.
(c) The institutional approach. The Institutional approach is fairly novel to many developing countries but seems to be the favourite solution of the majority. The frame in itself assumes different dimensions and diverse forms and maintains a wide variety of linkages and roots.
One could in fact distinguish between four varieties of these technological development institutions as outlined below. Case profiles of technology development institutions in various countries are given in the “boxes” - the first giving examples from Asia, the second from Africa.
- The extension-cum-technical development institution: This is an institution that has been created in order to develop small industry in the broadest sense and technology enhancement is seen as part and parcel of the function. The technology development function is either conducted within the broad frame of the organization or delegated to a specialized institution created within that frame. A typical example for this are the small industry organizations of Tanzania, Zambia and more recently Zimbabwe. In all three cases, technology is seen as part of a broader formula that includes entrepreneurial development, consultancy and technical support.(d) The training approach. As the reader must have observed by now, training plays a central role in the process of development of basic technical skill, product related technology and process related technology. Almost each of the organizations referred to in the case profiles (see “boxes”) has its own programme for either conceptual preparation or skill generation.- The product, process and equipment design institution: This is an institution created with the prime objective of designing new products, adjusting the specifications of existing ones, creating or reformulating processes and developing new equipments and tools. The target group could be primarily small industry, like Thailand's Industrial Service Institutions. A few institutions, however, cater for the needs of both small and medium scale industry as Egypt's Engineering and Industrial Design Development Centre.
- The research institution: Emphasis here is placed on applied research in the first place and the technological diffusion of the results of this research in the second. A few of this type of institutions exist in South Korea and Taiwan. They maintain, in many cases, strong link with universities and technical institutions and identify themselves, more frequently than not, with the academic and educational systems.
- The training institution: Many of the small industry promotion and technological training institutions one comes across in the Philippines, India, Thailand, Sri Lanka, Tanzania, Kenya etc fall under this category. Their prime objective is the training of cadres for the cottage and small industries in the country. They differ considerably in approach and level. Some conduct what is tantamount to vocational training while others approximate the polytechnic approach.
One can in fact talk of three types of training; training aiming at the technical skills and industry or branch knowledge of the entrepreneur (ISC training in Thailand for example); training directed at the managerial skills of the entrepreneur (SIDO's extension training in Tanzania for example); and training provided in order to keep the entrepreneur informed of recent mainly technological developments within his field (training provided by the SMIPC of Korea for example).
Training conducted by the Small Industry Extension Training Institute of India, for example, covers a wide range of topics that range from entrepreneurial development in the classic sense to specific aspects of technology. Training conducted by Small Industry Consultancy and Training Institute of Tanzania (SICATA) includes basic consultancy skills (for extension officers), functional management (for the existing entrepreneur), entrepreneurial development (for the emerging entrepreneur), small industry development policy (for the policy formulating and support agencies) and, last but not least technical drawing, technical maintenance and metal working (for practicing entrepreneurs) (See Figure 3).
Figure 3: The consultancy-cum-training model
Some of this training is organized on a national basis while a considerable segment is carried out in collaboration with other developing or developed countries. SIDO Tanzania's SSI training programmes for example, are carried out in collaboration with a Dutch counterpart. There are training centres that are created as a by-product of some form of technological collaboration e.g. the collaboration between India and the governments of Guyana, Iraq and Malaysia.
(e) The programme approach. Technology development could follow a programme approach i.e. a cluster of efforts developed by the government or the private sector in order to stimulate technical education or skill development among a specific group of individuals. These programmes are usually confined to a specific target group, run along non conventional lines and have a variable life cycle. They are also financed, in a large number of cases, out of special allocations beyond the traditional budget outlays of the respective agency. Some examples, which refer to India, Kenya, and Egypt are given in the boxes”.
|
PROFILES OF LOCAL TECHNOLOGY DEVELOPMENT INSTITUTIONS: ASIAN EXAMPLES CASE ONE: The industrial service institutions of Thailand. There are several of industrial service institutions in Thailand and they have all been created with the objective of providing technical information, extension, advice as well as training within the light engineering branch. Services available cover industrial engineering, industrial design, packaging, furniture and woodworking, heat treatment, electroplating, machine shop practice, tool and die design and making, foundry technology and low cost automation. The institutions develop, also, appropriate machinery and equipment as low cost import-substitutes. The institutions also undertake techno-economic surveys to appraise the availability of technical and economic resources within certain branches of industry. CASE TWO: The Indian Council for Advancement of Rural Technology The Council has been established by the government of India in order to fulfill several functions centering around the collection of information, the conduct of technology oriented training programmes and the acting as a focal point for rural technology related issues. The most important objective from our point of view is probably that of acting as “a catalyst for development of technology appropriate for the rural areas by identifying the crucial problems encountered by the rural people and funding research and development efforts by different organizations”. This function is supplemented by that of disseminating knowledge on rural technology to manufacturers of machinery, tools, equipment and spare parts and of sponsoring training programmes, supporting research and strengthening existing research and development institutions. CASE THREE: The Small and Medium Industry Promotion Corporation of the Republic of Korea (SMIPC). SMIPC is a fairly recent creation of the Korean government in
order to support the technological and managerial development of SSIs in the
country. The resource base is strong and the function includes extension
services of technological, managerial and promotional nature. Specific
handicrafts manufacturers with the market or capability for export of quality
products are given generous assistance. Applied technology and management
training programmes are provided at regular pace and with the minimum of cost.
Specific diagnostic services are also extended to the enterprises and they are
also helped in the process of adjustment and response. |
|
PROFILES OF LOCAL TECHNOLOGY DEVELOPMENT INSTITUTIONS: EXAMPLES FROM AFRICA CASE ONE: The Small Industries Development Organization (SIDO) of Tanzania. SIDO was established in the early seventies in order to promote and coordinate small-scale industry development in the country. Small industry included, according to the Parliamentary Act, craft production, cottage industries and small-scale manufacturing. Activities cover a wide span and include extension, credit, technology transfer, technology development, industrial estate creation and training. In the process, SIDO has undertaken a number of programmes with outspoken vision and policy behind them as the sister industry programme (in cooperation with the Swedish industry) and the Indo-Tanzanian programme (in cooperation with the Indian industry) and the Small Industry Consultancy and Training Programme (SICATA) (in cooperation with the Netherlands government - see Figure 3). CASE TWO: The Egyptian Engineering and Industrial Design Centre. The Engineering and Industrial Design Centre of Egypt (EIDC) was established in the late sixties with the specific purpose of developing a design capability for industrial products in the country and enhance the technological development of the industrial sector of Egypt. The tasks included: industrial product design and development, capital goods equipment design, production technology and tool design, process design, and prototype and tool manufacturing. The institution has been quite active along a broad front. In
the agricultural sector, mobile threshers with electric and diesel drives, small
trailers, irrigation pumps and sprayers were locally designed or redesigned in
order to suit local conditions and transferred to industry for manufacturing.
Among the agricultural implements a small woodworking lathe was also developed
in order to be manufactured in small shops and sold to woodworking and small
furniture industry. |
|
TECHNOLOGY DEVELOPMENT IN A GENERAL SSI ASSISTANCE PROGRAMME CONTEXT EXAMPLES FROM INDIA AND KENYA CASE ONE: The Birla Institute of Technology. - India Selected engineering students are invited in the last year of their degree course to carry out a research project to develop a practical solution to a technical problem which can form the basis of a small-scale engineering enterprise. Their answer to the problem is presented in writing (and in laboratory prototypes where applicable), as part of their material for the final examination. Many of them proceed with the developed product or process and create their own small industry. CASE TWO: The village polytechnic programme in Kenya. The programme provides unemployed primary school leavers with
six month training in one or several simple skills for which there is a market
in the villages. They also receive some basic management training. It is made
clear from the beginning that the objective is to enable the trainees to create
their own jobs by operating independently within their own community. Their
technological skills are developed under very constrained conditions as they
have to work with the minimum of equipment, and they therefore develop the
ability to improvise and make the best use of limited resources (Harper,
1984). |
|
INTEGRATED ASSISTANCE TO FOREST-BASED ENTERPRISES THE CASE OF THE EGYPTIAN FURNITURE INDUSTRY Egyptian industry has a prominent artisanal sector which produces mostly a wide range of household goods for local markets. The top four enterprise types in terms of employment and number of establishments can be ranked as: ready made garments, woodworking and furniture, food processing, and engineering and metallurgy. Major problems adversely affecting productivity, quality and, by extension, constraining the growth of small scale industry are: obsolete machinery; deficiencies in production and management (in product design and development, production planning and work methods, material selection, quality control, preventive maintenance etc.); poor working conditions and housekeeping (Ikram, 1980). Comparative advantage has led to concentration of the woodworking and furniture industry in Damietta province. Serious problems facing the industry are primarily technological such as poor finishing, workmanship, bad product designs, scarce machinery. Egypt is tackling these problems of technological retardness as follows: Product design. The creation of a provincial centre for product design and prototype production. Compelling units with more than fourty workers to create their own design centre. Encouraging the manufacturing of standardized semi-finished goods for assembly at urban centres. Encourage a measure of substitution between wood and synthetic substitutes. Training. Creating a department for interior design in Damietta as an extension of the Faculty of Creative Arts (Cairo). Introducing the following specializations within the curriculum of vocational training at secondary school level in the country: upholstery, carving, shaping etc. Confining the practical training of those attending vocational training classes to specified factories selected carefully by a group of specialists in the field. Organizing practical and focussed training programmes for construction workers involved in wood installation. Marketing. Improving the availability and quality of inputs. Excluding furniture exports from all fiscal levies and duties and introducing a tax rebate system. Developing a marketing-oriented brochure reviewing the potential of the industry in Egypt. Including furniture in trade agreements. Cooperative effort. Reviewing the definition of small
industry and craftsman, from a credit and finance point of view. Reviewing the
potential for a cross-country furniture cooperative marketing organization.
Creating a small industry/craft cooperative finance institution. |
The applied effectiveness of the institutional structure
Appraisal of the effectiveness of the institutional structures with regards to the issue of technology development is complex and could carry strong subjective elements into it. The observations which follow are the results of evaluations that have been done by some international organizations which we shall have to put our faith in. There is a general feeling that the institutional approach does suffer from a number of weaknesses, as follows:
- A widely spread effort. Many of the organizations created for the development of the small industry sector are given multiple functions and wide scope of activities. The result is a variable degree of attention given to technology development with, on occasions, a strong diversion of efforts away from technological development and into administrative and regulatory issues.- Non-selectivity of crafts and industrial branches. Undiscriminate attention is given to a wide variety of crafts and industrial branches without giving due regard to the relative significance and comparative advantage of some of those to specific rural communities or to the country as a whole.
- Low level of technological training. Technology provided in many of the technology-cum-extension or basic technology institutions is outmoded and, at times, outright outdated. Equipment associated with this type of training is often cumbersome and inefficient.
- Industrial estate focus. The concentration of efforts on industrial estate entrepreneurs, which is commonly observed, does limit the ability of other non-industrial estate dwellers to develop their products and processes technologically.
- The factory vs non-factory segmentation. The preference given in some cases, to factory type small industry could lead, on the longer term, to a stagnation of specific traditional crafts and appropriate technologies that might provide a perfect alternative to imported or transferred technologies.
- Training bias. Many of the training programmes offered within some institutions demonstrate a bias towards the upper levels of technical education. The consequence is a heavier concentration of training on already “developed” individuals and a disregard of the lower levels of the production skills.
The relevance and effectiveness of the training function
There are variable degrees of success of the training approach as a whole and many serious problems encountered there. First, is the ability of the entrepreneur to follow the training and absorb the contents. In Tanzania, a significant number of the entrants or existing entrepreneurs, especially in the village industry programmes, have basic reading and comprehension difficulties. The classic approach to training have failed there almost dramatically. Second, the high measure of differentiation required for technology training to be effective. Put differently, training has to focus on the specific problem areas of the rural industry. Much training does not fulfil this criterion. Third, is the lack of appropriate training material that relates to the entrepreneurs' realities and touches upon his day to day problems. Much if not the majority of the material is developed elsewhere and the relevance leaves, sometimes, a lot to be desired. Language of training could become an unsurmountable barrier (Oude Vrielink, 1983). Fourth, is the scarcity of equipped and motivated individuals that could perform the training cum extension function. This is a special problem in some countries of Eastern and Western Africa and the Pacific.
The problem of commercialization of indigenous technology
The development of indigenous technology is by no means a guarantee that this technology is going to be integrated in main stream of industry and business in the respective developing country. Experience of a number of developing countries from India to Korea reflect a variable degree of utilization of results of national research and development (R&D) efforts within the business sector in general and within small industry in particular.
Factors identified as crucial in the process of commercialization of indigenous technology include the R&D capabilities and the management of the R&D function, how multi disciplinary is the approach, the strength of the link between R&D efforts and applied industry problems, the expertise of the R&D personnel, the orientation of the R&D function towards the educational system and needs of the country concerned etc. Some less encouraging factors could, however, restrain the process considerably. Consider for example the commonly observed absence of demand for technological innovation, the preoccupation with technical excellence at the cost of commercial reality, conflict between the interest of industry and that of R&D institutions, technological gaps between R&D institutions and industry, the observed time lag in technology transfer, and lack of substantial follow up.
A note on micro enterprises in the FB sector
The analysis so far although addressing “small-scale industries” has covered approaches or insights which are more relevant to the larger small enterprises. As we said earlier, FB-SSIs demonstrate a strong bias towards particular smallness. Put differently, a large number of these enterprises display the typical characteristics of “micro” enterprises i.e. limited number of employees, small investment and strong dependence on one or two individuals for their very existence. The technological problems that an enterprise of this size and magnitude faces are, obviously, of a different magnitude from those confronted by larger and more structured small industries. Their technological needs are simple and mundane (mostly limited to basic manual or power assisted tools and the most elementary of management processes). Their perception of technology is very basic and tangible. Their investment in technology is limited. And their accessibility to technology is constrained. Table 23 summarises some prime indicators of FB-SSI smallness.
The problem of technological enhancement here is more that of making basic and essential tools available to the small entrepreneur, assisting him in adopting low cost automation techniques, encouraging him to use more power assisted tools and equipment, and, finally, stimulating him to adopt a managed approach to operations within the micro unit. The ultimate objective is, obviously, reaching greater productivity and, possibly, lower cost of production.
Several approaches could contribute to this enhancement process. First is encouraging village level associations of manufacturers. These could cooperate in machinery and equipment acquisition and utilization, exchange technical advice and complement each others' processes. Second is the provision of mobile technical support units i.e. technically-oriented and equipped extension officers who visit the villages with the purpose of assisting in specific technical problems i.e. machine maintenance, efficient raw material utilization, substitution of scarce inputs etc. Third are the village industry “common facilities”, where specific production equipment for industrial processes are accessible to the small entrepreneur. Fourth is the stimulation of specific village level extension with emphasis on low cost automation and basic power assisted production processes.
Summing up, a degree of decentralization of support services and facilities to rural areas is essential for an improved access of “micro” FB-SSIs to basic technology an increase in the and effectiveness of these services.
Table 23: A few characteristics of forest-based enterprises.
|
Characteristic |
Jamaica |
Thailand |
Honduras |
Egypt |
Sierra Leone |
Bangladesh |
|
Have 5 or fewer workers (%) |
96 |
79 |
96 |
97 |
- |
96 |
|
Firms with no machines(%) |
69 |
- |
69 |
93 |
- |
99 |
|
% of Employment in rural areas |
79 |
- |
100 |
65 |
96 |
- |
Source: FAO, 1985.
A few recommendations
It is obvious that the problem of developing a technological capability for forest-based small industry in developing countries is complex and involved. To pretend that a few recommendations will provide all the answers is misleading. The following therefore, are a few thoughts that may help directing attention towards some of the most urgent problems. The measures suggested hereafter can best be grouped as either policy level recommendations or enterprise level recommendations.
Policy level recommendations
(a) A regional approach to South-South technological cooperation.In order for the South-South technology transfer to materialize clear and approachable regional channels should be created. “Technonet Asia”, though with a few significant adjustments could serve as a model. Its span of activities should actually be as broad as to include the following:
- the identification and formulation of the need for a specific technology type within a country, a group of countries or a region.(b) Better integration of technological skill generation in the transfer process.- The identification of alternative suppliers or supply sources of that technology within the country, the area or the region.
- Have an insight into the alternative techniques available within a branch or industry.
- Preliminary evaluation and selection of the most appropriate technology for a small industry.
- Provision of assistance in the acquisition, assimilation, adaptation and adoption of the transferred technology.
There is plenty of room for the improvement of the transfer of technology process as we know it now. The sister industry programme could be adjusted and made more penetrative by linking it to existing technology development and technology training resources within the developing country itself. This would convert it into a continuous system instead of an ad-hoc one. Yet another approach is that of the “micro-centre” linkage between developed and developing countries.
Microcentres are a network of small industries operating within a specific industrial sector in a developed country. The purpose of the networking is essentially solving technical and managerial problems that do hamper the development of the units and providing an expanded opportunity for each member.
For example, in the Netherlands, micro centres are currently providing a linkage relationship with a similar setup that was created in Indonesia with essentially identical purposes. The element of interest here is that the Indonesian unit will be able to benefit from the Netherlands base and have free access to its resources. Specific training efforts are provided as part of the resource transfer package.
(c) Reconsidering vocational training. One of the important gaps in technical and technological knowledge is that of the middle line in production and manufacturing organizations. Many of the existing systems of development of middle level technicians suffer from their weak linkage with industry, on one hand, and their limited response to the actual national technological needs, on the other. An improvement of the system is urgently needed and some borrowing from a foreign system might not be that unusual.
The system one has in mind here is the German system of vocational training. It has three distinctive features. The first is the clustering effect it has on small scale industry in the country. Every small industry plant is required by law to belong to a handicraft guild, that regulates their behaviour and, more importantly, organizes the technical training of the following generation. This type of vocational training in Germany is treated as the natural sequel to schooling. It is legally obligatory for three years for all 15 to 18 years olds not otherwise in full time education. They must be released from work one day a week to attend an approved course at a vocational training school. Secondly, youngsters in that age group may be employed only by firms having approved training facilities. And finally, the school course must be complementary with the youngster's employment.
A system of this nature once adapted to the realities of small and rural industries in developing countries, would compensate for the deficient supply of basic technological know how to the sector. The training could, for example, take place at industrial estate factories, the technology cum-training centers etc.
(d) Encouraging the commercialization of indigenous technology. There exists a feeling that the commercialization of indigenous technology within the small industry sector could be greatly facilitated if:
- Development banks assume an active role in the allocation of funds to projects aiming at the exploitation of novel approaches to identified technological problems. This active role could take many forms ranging from preferential interest rates to extended grace periods and longer repayment schedules.- Investment guarantee agencies for R&D are created in order to cater for the limited-resource entrepreneur with the business potential but not the resource base.- Commercial banks extending their credit services in order to include technical and managerial support to the small enterprise.- Venture capital is stimulated and encouraged to enter the small industry investment market and deal specifically with the problems of product and process development there.- Governments should also encourage the flow of technology-related information (industry structure, new product development, new process development, competitive initiative, international market opportunities etc.) and boost a free flow of that information within the respective relevant sectors.Enterprise level recommendations(e) Stimulating technologically oriented cooperation among SSI entrepreneurs
It is the author's contention that the self interest of the small entrepreneur should provide the driving force behind the problem of technological development within the SSI sector. This cooperation could aim at identification of areas of common technological insufficiency, the collaboration in identifying sources of external assistance (if needed), the mobilization of funds for concentrated research and the dissemination of the results of the technological effort.
One of the good examples for this collaboration are the “branch cooperatives” known within the Korean system. Branch-related small industry there is organized, within the framework of the Korean Federation of Small Business, in cooperatives that perform, jointly, many functions. It is a broader and innovative application of cooperative principles. This cooperative pattern could prove crucial in solving as tricky problems as process related technological development or product related adaptation and adjustment.
The bottleneck within an approach of this nature is naturally the encouragement of branch-based cooperation and how to keep any coordinatory organ lean and effective. The Korean model provides a simple straight forward structure where the entrepreneur is the prime focus and driving force and the Small Industry Federation is merely the coordinator.
(f) Focussed technological exposure
Bringing technology to the small rural entrepreneur requires pragmatic action. Venues have to be created that combine practicality and accessibility. A typical example is the technology shop. This is a display of practical approaches to the manufacturing of specific products, of improved tools and equipment, of substitutes to outmoded products and of possible sources of information on new developments. They could be static, located in a rural capital or dynamic, moving from one manufacturing location to the other.
(g) Continuous consultancy first and training second
Technological training should relate in the most direct of ways to the SSI technological problems and should provide, in the same direct way an answer to these problems. The only way to achieve that is to add to training two other significant elements, diagnosis and continuous consultancy.
A period of diagnosis or exploration of the specific problems of an enterprise should preceed any attempt at technical training. This period should allow an examination of the technical and product-related issues of the enterprise, and supplement that with a view of the managerial dimension. The results of this diagnosis should lead to a clustering of the small industries according to their problem focus and, more importantly, an adaptation of the training message to these problems.
Specific, problem-based training programmes could then be developed, implemented and followed up. The participating entrepreneurs have a lot in common and are inclined to share experiences and, probably collaborate even after the training is over.
Continuous consultancy is tantamount to the creation of a permanent relationship with the entrepreneur, a relationship that extends beyond the training programme. It, in fact, starts with the diagnosis phase and goes through the training and extends in the future as much as enterprise needs dictate.
(h) Encouraging village level technical extension services
One of the prime issues constraining the development of technological skills among small entrepreneurs is their accessibility. This problem could be solved by using existing channels as agricultural or forestry extention officers, to provide the technological support function as part of their total support package. They have the access and the intimate knowledge of the clientele that would allow an effective service. They maintain, also, the added advantage that their advice could be directly related to forest-based industries and the very specific problems that those face.
(i) Introducing a village level industrial estate programmes
Mini industrial estates containing basic common facilities and a skeleton of extention services and located at convenient locations within the rural areas would go a long way towards covering the immediate technological needs of forest-based village industries. These estates should avoid the common errors of those larger ones which have been created in or around urban areas and whose state of technology sophistication proved to be out of reach of the micro entrepreneurs. They should contain very basic tools and equipment, charge little or nothing for their services, provide relevant advice on low cost automation, support the limited scale manufacturing of production tools and supply relevant managerial and technological advice.
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