The Small and Medium Enterprises Authority (SMEDA) is
planning to take two major initiatives which will have far reaching effect on
the industrial development in the country specially the small and medium scale
The SMEDA has asked the government to carry out a census of
small and medium size business establishments in the country through the Federal
Bureau of Statistics. According to the criterion worked out by SMEDA, all those
business enterprises having 10 to 40 employees and having productive assets
(excluding land and building) worth Rs 2 to Rs 20 million are small business
establishments. Those having more than 40 employees upto 99 with productive
assets worth over Rs 40 million have been classified as medium size business
Another major initiative being taken by the SMEDA next month
is to launch a regulatory mapping exercise in coordination with two experts from
the International Labour Organization (ILO) to review the entire set of laws,
rules, regulations and SROs at the federal, provincial and local levels that
govern business operations. According to a source "these laws and
regulations, may be in hundreds or even more, may date back more than 60 and 70
years, and these either need to be updated or scrapped altogether". Many of
these laws and rules are unrealistic, outdated and obsolete, but under these
laws and rules, the government agencies functioning at various levels enjoy
immense powers and small and medium business enterprises are literally hostage
in the hands of government functionaries.
One reason why the small and medium business establishments
prefer to operate in the informal sector is their unending harassment at the
hands of the government functionaries, such as labour inspectors, excise
officials, municipal functionaries and a host of others.
"All laws, regulations and rules that govern fiscal and
taxations, labour management, credit policies, utilities, registration
provisions and maintenance of the premises will be reviewed", he disclosed.
The idea of the exercise is to remove the anomalies created by the uniformity of
these laws and regulation under which the government agencies treat big and
small business establishments.
Small industries remained totally neglected during the last
decade despite official acknowledgment of the importance of this sector in the
economic growth of the country. Although the provincial small industries
corporations remained starved of resources, the deposed government of Nawaz
Sharif established Small and Medium Enterprises Development Authority in late
1998 with great fanfare and pledged to provide Rs. 250 billion for Small and
Medium Enterprises (SMEs) in three years. But there had practically been no
investment in the small and cottage industries since the establishment of SMEDA.
In the medium enterprise sector, the authority did chalk out an excellent scheme
for the fisheries sector only. Its national transport scheme fizzled out and it
failed to present viable schemes for the dairy, gems and jewellery and marble
The present government has, however, reactivated SMEDA as a
policy to focus on small and medium scale enterprises in the private sector. The
authority is making a two pronged approach to achieve its objectives. It is
acting as a lobbyist for the hitherto neglected small and medium size business
and also helping the government by trying to bring these establishments within
the documented economy sector.
The present government's emphasis on development of small and
medium scale enterprises in the private sector is being duly appreciated by the
donor countries. Japan, European Union, Italian government and Asian Development
Bank have shown keen interest in the various projects identified by Small and
Medium Enterprises Development Authority (SMEDA) of Pakistan.
The Minister for industries and production Abdul Razzak
Dawood told newsmen in Islamabad recently that the government in cooperation
with the Asian Development Bank (ADB) has initiated two new credit facility and
guarantee schemes worth around $250 million for the promotion of exports and
small and medium enterprises (SMEs) in the country.
The two new schemes namely Export Credit Facility Scheme
worth $150 million and Export Credit Guarantee Scheme worth 80 to 100 million
will be operational by March 2001, he said. Giving details of the scheme, the
minister said the export credit guarantee scheme will help resolve the problems
of SMEs in securing credits from banks by providing collateral to the banks
concerned on nominal charges. He said the SMEs which are often unable to secure
credits from banks due to collateral or security problems will now be able to
get credit from banks through the credit guarantee scheme.
Active interest of the developed countries and international
financial institutions in the promotion of small and medium size industrial
enterprises, is a welcome development. It may be pointed out here that the
prospects of a significant spurt in fixed capital investment in large scale
industries in Pakistan appear to have dimmed. One reason for it is the sharp
rise in rupee cost of such projects due to the fact that the exchange rate of
Pak rupee at its present level has fallen to an extent that local capital
mobilisation would be an uphill task for the sponsors to accomplish. Large scale
projects under these circumstances can be promoted only through foreign private
investment. It may be recalled that almost the entire existing base of large
scale industries in Pakistan was created and established between 1960s and 1980s
when the exchange rate of Pak rupee ranged from Rs 5 to about Rs 20 a dollar.
The cost of imported plant and machinery at this juncture when the exchange rate
is Rs 60 to a dollar will be enormous burden for sponsors to bear.
According to available official statistics, while large scale
industry has a share of only 20 per cent in the total employment scenario of the
country, the small scale industries are providing employment to 80 per cent of
the existing workforce. On the export front the contribution of small scale
industry, particularly in the textile sector, is as high as 60 per cent (the
entire power loom sector and textile ancillary industries such as hosiery,
towels, bed-wear, ready made garments etc, are categorised as small and medium
manufacturing enterprises.) The growth in value addition in small and medium
industries has been well maintained at 8 per cent over the last several years
but the growth in large scale industry had fallen off to about 3 per cent and
was even showing a negative growth in recent years. Thus the development
potential in small and medium scale industries continues to be perceptibly high,
which deserves suitable policy stimulus from the government.