The present government has, reactivated SMEDA as a
policy to focus on small and medium scale enterprises
Feb-04 - Feb-10, 2002
Small and Medium Enterprises (SMEs) represent the
most significant component of Pakistan's economy as it forms over 85
per cent of business in the country comprising heterogeneous
activities with prominent presence in services and manufacturing
sectors. These provide almost 80 per cent of industrial employment
contributing 30 per cent to GDP and above 25 per cent to country's
The SMEs have been getting immense recognition the
world over due to their pivotal role in economic development.
Frequently quoted as the backbone of an economy, these contribute
towards employment opportunities and revenue generation, promotion of
craftsmanship, equitable wealth distribution, resource mobilization
and development of an entrepreneurial culture. The SMEs are considered
hub of innovation and as the only hope for the survival of local
artisans who have been carrying unique skills over generations.
Despite its immense importance in the economy of
the country this sector has, unfortunately, not received due attention
of the economic planners and policy makers of the country in the past.
What has happened on this front is more because of the initiates of
the enterprising people of this country rather than the policy
support, encouragement or financial assistance of the government or
the financial institutions. The potential of this sector is
tremendous. Experts estimate that its contribution to country's GDP
and export earnings can easily be doubled by providing necessary
government support and financial assistance.
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 sectors.
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.
During the past few months the SMEDA has taken many
initiatives which are likely to have far reaching effects on the
industrial development of the country specially the small and medium
scale industry. 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 to
100 million have been classified as medium size business
Another major initiative taken by the SMEDA 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 taxation, labour management, credit policies, utilities,
registration provisions and maintenance of the premises will be
reviewed," a source in SMEDA disclosed. The idea of the exercise
is to remove the anomalies created by the uniformity of these laws and
regulations under which the government agencies treat big and small
business establishments, he added.