SME SECTOR THE BACKBONE OF PAKISTAN’S ECONOMEY

Abstract

This is the Final Research Thesis Report into the development and issues regarding Small and Medium Enterprises and their contribution towards Pakistan’s Economy. It outlines the main purpose of research, the activities undertaken and the responses proposed. The development of a strong and vibrant SME sector is proposed in this report as a significant means through which quality employment opportunities can be created, along with additional incomes. Such development will, in turn, contribute to improved social and economic well-being, as well as to the alleviation of poverty. This project reviewed policies and programs affecting SMEs in urban areas. It identifies the main areas of constraint, opportunity and concern for the SME sector and endeavored to find ways to support government, non-government, civil society organizations and the private sector, in their efforts to promote SMEs. This Report will support the Government in its examination of the current situation and in the design of strategies that address the growing concerns of employment and poverty alleviation. In doing this, the Report has attempted to demonstrate the importance of the hundreds of thousands of medium and small enterprises that can be found throughout Pakistan. These enterprises perform a number of essential functions. They create millions of jobs, generate additional incomes that are of significance to many poor and disadvantaged families, and they generate a high proportion of the country’s wealth. They also have important trading linkages with larger enterprises and are a natural steppingstone for business growth - where medium and small businesses become bigger ones. Despite its size and contributions to the economy, little attention has been paid to the SME sector. As a consequence, a potent resource for change and development is being overlooked. Our SME suffer from a variety of weaknesses, which have constrained their ability to adjust to the economic liberalization measures introduced and to take full advantage of rapidly expanding markets of the world. But SME importance and contribution in the economic activity suggests that there is a significant potential to enhance their growth through appropriate regulations and promotion. While SME are being mentioned in some of our socio-economic strategies and policy documents, measures are not sufficiently specified and prioritized for us to be able to speak of any coherent SME policy or approach. The SME Sector Development Program Abstract Page 8 of 119 seeks to improve this situation by inviting all concerned stakeholders to draft Pakistan's future SME policy. SME promotion is an important issue for many government departments and central offices. However, there is an existing lack of coordination and regular information exchange mechanism among institutions, which constrains their collective ability to deliver in the SME development process. The responsibility for facilitating SME policy development lies with SMEDA, attached to the Ministry of Industry and Production. One of the major reasons for the lack of coordination is that SMEDA has not been provided with a mechanism to initiate, coordinate, monitor, and evaluate initiatives of SME development outside of its own scope of activities. Therefore, cross-departmental and stakeholder consultations, resulting in the preparation of our national SME policy are our key to success. The issues highlighted in this paper give a retrospective view of things while giving a current picture of the SME business environment in Pakistan. There are issues we may only solve in the long term and which therefore are beyond our current scope. And there are issues we may solve in the short to medium term. These issues should become the focus of our SME policy. Many practical recommendations have been provided in this Thesis Report for ways in which The Government of Pakistan can begin to boost the potential of the SME sector. These recommendations cover policy issues, as well as concerning programs that promote SME development.