Pakistan has around 150,000 small businesses and more than three million microenterprises, which together compose more than 90 percent of the country's total businesses and access to finance and improved technology and average standards of quality and product uniformity are especially very low.
An official survey report revealed that many of the micro and small enterprises (MSEs) were in rural areas and depended heavily on agricultural raw materials and poorly skilled non-farm labour.
As a result, rural businesses faced difficulty in accessing a range of essential financial and business development services (BDS), it said.
"More importantly, challenges are posed by the generally low level of literacy, particularly among women, poor business management practices, and reluctance or limited capacity to adopt more modern technology and practices, and to take on new commercial risks," said the report.
It further said that entrenched linguistic and ethnic differences provided further obstacles to investment in non-farm activities that crossed the provincial or tribal boundaries.
"The MSE business environment is influenced by a few influential, lack of infrastructure, social relationships, energy costs and reliability, and increasing competition from modern urban businesses and imports, which pose tough challenges in niche and mass markets.
"These factors translate into under-developed rural non-farm enterprises and cottage industries and loss of opportunities for employment growth and added market value," said the report.
According to the report, an expert of the Asian Development Bank (ADB) stated in his report that in South Asia as a whole, the non-farm economy accounted for roughly 25 percent of rural employment and 29 percent of rural incomes.
"Seasonal trading, agro-processing, manufacturing and service activities enhance rural livelihoods, support a growing agriculture, and supply consumer goods and services. Non-farm activity offers important economic opportunities for the rural poor in areas where landlessness is high," the ADB expert opined.
He mentioned that Pakistan's population was 68 percent rural and agriculture accounted for almost 45 percent of the total employment, and added that outside the agriculture sector, 46 percent of the rural poor (and 22 percent of the rural population) were non-farm households that did not share directly in incomes derived from agricultural crop production.
He said despite declining rural poverty in the 1970s and 1980s, poverty remained high in the 1990s, and pointed out that real growth in agriculture declined to an average annual rate of 2.4 percent with sharp year-to-year fluctuations from 1990 to 2002 compared with the overall rate of 3.5 percent achieved from 1960 onward.
He said that the yields of the major crops had largely stagnated in the past decade. The percentage of the rural poor living below the poverty line was essentially unchanged between 1990 (36.9 percent) and 1999 (35.9 percent), and even rose to 38.9 percent in 2002, a drought year, he added.
"If Pakistan is to meet its goal of reducing poverty by half by 2015, rural economic opportunities must expand in agriculture and the non-farm sector. In the absence of a change in the structure of rural incomes and employment, growth in traditional crop agriculture and associated growth linkages may not be adequate to substantially raise the incomes of the rural non-farm poor households, he suggested.
He pointed out that the strategies to promote rural non-farm income opportunities were, therefore, necessary to make an impact on rural poverty in Pakistan. In many areas of rural development, Pakistan lagged behind its Asian neighbours with fewer natural resources. Drought and the poor performance of crops and livestock often forced rural people to migrate at least temporarily to the cities.
He said: "This situation is exacerbated by the system of landholding, which is characterised by a high degree of land concentration by ownership and by a high incidence of sharecropping tenure in the two most populous provinces of Sindh and Punjab.
"Cities like Karachi with a population of around 14 million are increasingly ill-equipped to handle the concomitant problems of overcrowding and pressure on the urban infrastructure and environment.
"The urban population grew from 24 million in 1981 to 53 million in 2005, hence, there is a pressing need (also found in other Asian countries) to seek non-traditional work opportunities in rural areas. Efforts must, therefore, be made to diversify the rural economy in non-farm sectors such as services, small-scale manufacturing, and value-added agricultural processing," he added.
He said the ADB proposed loan target of rural and pre-urban enterprises that had potential for labour-intensive growth if provided with synergistic support by a range of private sector, non-government and public sector partners.
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