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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 export earnings.

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 establishments.

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.