The first ever small and medium enterprises (SME) policy is most likely to be announced officially some time next week, a highly placed official source told Business Recorder here on Friday. Prime Minister Shaukat Aziz has already approved the policy, compiled by the Small and Medium Enterprises Development Authority (Smeda).
The inordinate delay was due to other issues of national importance, which kept the announcement of the SME policy pending, the source said. The policy recognises Pakistan as an economy, comprising mainly of the SMEs. The significance of their role is indicated by various statistics. According to more recent estimates, there are approximately 3.2 million business enterprises in Pakistan.
Of these enterprises, employing up to 99 persons, constitute over 95 percent of all private enterprises in the industrial sector, employing nearly 78 percent of the non-agriculture labour force. They contribute over 30 percent to the gross domestic product (GDP), Rs 140 billion to exports, and account 25 percent of exports of manufactured goods, besides sharing 35 percent in manufacturing value added.
The SMEs continue to suffer from a number of weaknesses, which hamper their ability to take full advantage of the opening of economy and the increasingly accessible world markets. The areas of constraints are normally identified as labour, taxation, trade capacity, finance and credit availability.
A thriving SME sector has long been recognised as one of the key characteristics of any prosperous and growing economy. To move forward, the country needs to develop a common vision for the SMEs to be the real engine of growth.
Realising that implementing change required, the formulation of a policy for the SME development and assigning specific responsibilities for its implementation and continuous improvement, the SME Task Force was constituted by the government in January 2004.
As there were many cross-cutting issues to be addressed, the SME Task Force was composed of diverse sectors and levels of the government and included major stakeholders of the private sector, and the SME in particular. To enable the SME Task Force to work effectively, four working committees were set up to carry out technical analyses and deliberate the findings.
-- Working committee on business environment: creating a favourable business environment for SME in Pakistan's economy and eliminating unnecessary obstacles.
-- Working committee on access to finance: increasing SMEs' access to formal finance, including equity financing while addressing the question of "lacking documentation" and banks' technical capabilities and improving SMEs' capacity to become bankable.
-- Working committee on access to resources and services: Improving the delivery mechanisms for assistance and the access to resources for SME in Pakistan inter alia business development services, qualified human resources, and technology, so as to improve their productivity and capacity for employment generation.
-- Working committee on SME definition, feedback, monitoring and evaluation mechanism: Establishing appropriate and harmonised definitions for Pakistan of what are to be considered micro, small, medium, and large enterprises.
Furthermore, the establishment of a sound mechanism by which the development of the SME sector and the effectiveness of the assistance provided to the SME can be monitored. The working committee, after due deliberations, finalised their recommendations in each of these areas.
-- Across the board recognition for SMEs as a sector requiring separate policy and regulatory space, define SMEs that qualify for support, propose counter-balancing measures to eliminate disadvantage of size.
Further, remove unnecessary regulatory burden, institute SME support mechanism in both public and private sectors, improve support delivery mechanism and establish policy evaluation and review systems. To achieve the above, wide-scale consultations with the provinces were undertaken to elicit views of the ultimate beneficiaries, ie SMEs. The participation of stakeholders had been the cornerstone of the policy development process.