This is the second article selected for the
Inter-University Articles Contest by PAGE.
Pakistan has emerged as the second rapidly growing
economy in Asia after China in 2004-05, as claimed by the government
and well accepted by international raters and financial institutions.
According to Economic Survey 2004-05 this increase in real GDP is the
courtesy of robust performance of large-scale manufacturing and the
services sector. Even though the large-scale manufacturing registered
15.4% growth but the Small and Medium Enterprises (SMEs) is the core
issue in the country's progress and specially the prosperity of masses
that are surviving with low scale income due to which Pakistan ranks
135th out of 174 countries on Human Development Index.
When we think about SMEs, we consider these as one
person manufacturing enterprise but according to SMEDA, Small
Enterprises should possess ten to thirty five employees with two to
twenty million rupees capital intact in equity. Medium Enterprises
should possess thirty six to ninety nine employees with twenty to
forty million capital intact in equity. Here we have to see the role
SMEs in the progress and well being of masses in Pakistan.
The assessment of the role of SMEs in Pakistan is
of vital importance. Some times we have shinny figures and data
regarding economy like GDP growth or per-capita income, but these are
misleading because the earners of these massive growths are not the
masses but the capitalists in the country. SMEs produce income for
masses located in countryside and the capitalist associated with this
activity is generally small or medium as the name suggests.
In Pakistan SME sector is not only the minor sharer
till yet, reality is that Pakistan's whole economy is highly
dependable on the pace and productivity of SMEs. Out of Pakistan's 3.2
million enterprises 95% are those who possess 99 employees in private
industrial sector and employ about 78% of non-agriculture labor force.
SMEs contribute 25% export of manufacturing goods and 30% of GDP is
the out come of business efforts of SMEs.
The vital question is not "What SMEs have
produced?" But, what they are capable to produce? The simple
answer is if they produce on their full potential Pakistan would be a
way ahead on economic racetrack of the world. They can produce
billions of dollars worth items, that is why SMEDA is quite right in
stating its mission as "Turning Potential into Profits".
Turning potential into profits gives us a more true
and fair picture of the role of SMEs in Pakistan. Now we will see what
potential we have and the threats associated with it and how we turn
potential into profit by overcoming existing threats.
Firstly talked about is what the main potential we
have to boost the progress and efficiency of SMEs. The real potential
for SME growth in the country is the deprived people of the country
who are quite keen to raise their standard of living. It simply means
the future of SMEs is associated with the temptations of highly
talented but deprived masses of Pakistan and their will to turn their
dark days into glittering ones. But the real problem associated with
their will & dreams is the finance and technical assistance. The
financing concern have two issues: first is the availability of
finance and second is the rate plus terms on which the finance is
Financing SMEs in heavy liquidity period for banks
is not a burden but an opportunity because banks can utilize their
liquidity by advancing finances to the SMEs. By advancing to SMEs they
can earn two advantages. First, when they advance to many small and
medium enterprises as compared to the large ones, their amount will be
distributed to a number of clients that will increase the probability
of recovery. Secondly, the contribution in national economic growth
via utilizing their liquidity that is in excess due to great activity
in economy in period after 1999 that will further expand the activity
in banking sector.
Exploring a specific niche product is another way
to boost SMEs sector. Niche is a unique product that we can produce at
low cost with an absolute advantage. In Pakistan we are producing
Niche from Wazirabad by producing surgical instruments and Sialkoat is
there for sports good. SMEDA and other concerns like EPB have to come
up to explore some more niche that is for sure available in this
country of highly skillful workforce. In this capacity Prime Minister
Program of One Village One Product is of high importance. Even we
could not achieve economy of scale through this niche but the
available glittering demand in international market can off set the
cost burden and causes the inflow of foreign exchange.
The movement of masses from rural to urban areas is
another hot slot of the time. While developing a well integrated SME
sector in the country, it is a clear cut advantage that we can stop
this mobilization that certainly hinder the urban problem and cut the
urban development overheads and cost of maintaining masses of the big
cities like Karachi. Even it will be a factual probability that
through SMEs we can convert our villages into new towns and sources of
revenues and progress.
Stock markets in the country are in deprivation of
less numbers of listed companies; I think it is for the sake of well
being of stock markets and SMEs that SMEs should be authorized to get
listed in the shape of ventures of 3 to 5 SMEs on stocks on relatively
smaller amount of capital that is how the SMEs could muster the very
capital and while becoming a part of corporate culture can acquire the
expertise of good management. In early stages the board of SME
companies (as they would not be able to pay handsome amount to
experts) should consists of experts of Federal, Provincial governments
and specialized financial institutions and the small and medium
entrepreneurs. Small and medium entrepreneurs should possess the
majority share and the share of these other stakeholders restrict to
support and nominal profitability that can be enhanced through more
profitability of these concerns.
SMEs will be the main source of poverty reduction
in Pakistan that will create the value and innovation for country in
the days to come. The thing that really needs serious attention is to
remove the unnecessary bureaucratic procedures. It is essential to
make it possible that the opportunities for small entrepreneurs should
not be wasted through excess processing of finance applications or
other official terms. Assistance for SMEs is not enough; the
government and specialized financial and technical institutions should
stand as the partners of the small and medium entrepreneurs, this is
the only way the financial institutions can recover their funds with
yield, government could achieve its goal of poverty reduction and
economic progress and above all the value creation process will
continuously be tracked for poor masses of Pakistan so that they will
not be poor any more.