The Small and Medium Enterprises Development Authority (SMEDA), according to a report in this newspaper the other day, has established a Legal Services Wing with a view to extending assistance to small and medium enterprises (SMEs) throughout the country to cope with their problems relating to fulfillment of legal formalities.
The issues confronting an enterprise, whether big or small, not only at the initial stages of establishment but also during the course of operation, are undoubtedly of a wide range. The small enterprises are generally unable to face the rigours of numerous formalities, specially those relating to labour laws, social security, income tax, sales tax, district government's rules, etc. The overwhelming pressure that these requirements exert in terms of time and resources quite often discourages, a small enterprise to the extent of forcing it to abandon the project or operate in the informal sector.
The legal formalities are thus quite detrimental to the process of investment in the small and medium sector that are critical to employment generation.
SMEDA's initiative to create an institutionalised facility under its wings to help the sponsors of small and medium enterprises in dealing with the issues arising from a number of legal formalities, cannot but be welcomed, therefore, as an imaginative move.
The Authority plans to retain a panel of lawyers, income tax practitioners and firms of chartered accountants whose services would be recommended to the SMEs facing problems in any of these spheres. The fees to be paid to these professional experts, would be subsidised by SMEDA. As to what extent the proposed subsidy would be allowed to SMEs on professional services is not yet clear.
However, the officials from SMEDA would closely monitor the services of these professionals in order to ensure that the problem faced by a particular SME was satisfactorily resolved. The Legal Services Cell was reportedly established in June last at SMEDA's head office in Lahore while branch offices have been set up in Peshawar, Karachi and Quetta. In response to SMEDA's advertisement, about 80 professionals, comprising lawyers, income tax practitioners and chartered accountants are said to have offered their services so far, and the number is likely to increase gradually.
There will be no two opinions that since small and medium enterprises can be established with a relatively smaller capital base, they can be promoted fairly rapidly with necessary assistance to sponsors having experience and knowledge in specific fields of small scale manufacturing. Of course, the process has an immense potential to contribute to self-employment of skilled persons and creation of new employment opportunities for both skilled and unskilled workforce. Additionally, the production facilities to be developed by SMEs would not only cater for the local demand for a wide range of products but also add to the country's export earnings.
A drive in this direction may thus prove to be a highly rewarding course to step up investment activity in rural as well as urban areas.
The initial hurdle in the establishment of a small enterprise is undoubtedly the difficult exercise of completing all the legal formalities as are required by various government departments. This hurdle appears to have been correctly identified by SMEDA as is evident from its offer professional services to intending sponsors for coping with certain essential legal formalities at the earlier stages and also during the course of their operation.
It may be suggested here that the social security laws also need to be changed so as to make them applicable only to enterprises employing over 200 workers instead of 10 workers as at present. At the same time, the multiplicity in the number of social security offices/agencies should also be reduced to a minimum, thereby protecting the industrial establishments, including SMEs, from harassment in the shape of frequent visits by the officials of these agencies to industrial units for verifying compliance with social security laws.
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