Ed­i­tor’s Desk

Enterprise - - Contents -

SMEs are termed as an engine of eco­nomic growth in both de­vel­oped and de­vel­op­ing coun­tries. These en­ter­prises pro­vide low cost em­ploy­ment since their unit labour cost is lower than in large-sized units. SMEs as­sist in re­gional and lo­cal de­vel­op­ment and ac­cel­er­ate ru­ral in­dus­tri­al­iza­tion by cre­at­ing a link with the more or­ga­nized ur­ban sec­tor. Such units achieve fair and equitable dis­tri­bu­tion of wealth by re­gional dis­per­sion of eco­nomic ac­tiv­i­ties and con­trib­ute sig­nif­i­cantly to ex­port rev­enues. SMEs are known to have a pos­i­tive ef­fect on the trade bal­ance since they gen­er­ally use in­dige­nous raw ma­te­ri­als. Such en­ter­prises also as­sist in fos­ter­ing a self-help and en­tre­pre­neur­ial cul­ture by bring­ing to­gether skills and cap­i­tal through var­i­ous lend­ing and skill en­hance­ment schemes. They have the re­silience to with­stand eco­nomic up­heavals and main­tain a rea­son­able growth rate since be­ing in­dige­nous is the key to sus­tain­abil­ity and self-suf­fi­ciency.

The Pak­istani econ­omy has amaz­ing po­ten­tial for de­vel­op­ment but, un­for­tu­nately, it has not suc­ceeded in de­riv­ing ben­e­fits in this re­gard de­spite a se­ries of ef­forts launched by var­i­ous pol­icy-mak­ers at dif­fer­ent times. Many large in­dus­trial units have failed due to eco­nomic slumps, in­sti­tu­tional mal­prac­tices, po­lit­i­cal mo­tives and dam­ag­ing ac­tiv­i­ties of labour unions. This has also dis­cour­aged the for­mal lend­ing in­sti­tu­tions to sup­port these large units hav­ing sick port­fo­lios. The con­se­quent in­suf­fi­cient and low qual­ity pro­duc­tion has, there­fore failed to meet the de­mands of lo­cal and in­ter­na­tional mar­kets lead­ing to a deficit in bal­ance of pay­ments, fur­ther con­tribut­ing to the un­em­ploy­ment rate.

It is true that SMEs can­not match the out­put of larger man­u­fac­tur­ing units but this can be off­set through spe­cial­iza­tion achieved by the small and medium sized man­u­fac­tur­ing units. Coun­tries like Tai­wan, Ja­pan and Korea have pro­vided a suc­cess model through their small and medium man­u­fac­tur­ing en­ter­prises. Those who be­lieve that only large firms are re­spon­si­ble for eco­nomic growth need to bear in mind that it is the small ven­dors and sup­pli­ers who con­trib­ute heav­ily to the pro­duc­tion of large units. Pak­istan’s in­dige­nous au­to­mo­bile sec­tor is a good ex­am­ple. The progress and pros­per­ity that is driven by SMEs at the lower level ben­e­fits all tiers of in­dus­try

It was about 12 years back that the Gov­ern­ment of Pak­istan es­tab­lished the Small and Medium En­ter­prises De­vel­op­ment Author­ity (SMEDA) with a view to de­vel­op­ing in­dus­try at the lower level. As de­fined by the State Bank of Pak­istan, a small or medium en­ter­prise is an en­tity which does not em­ploy more than 250 per­sons (if it is a man­u­fac­tur­ing con­cern) and 50 (if it is a trad­ing/ser­vice con­cern). It is clear, how­ever, that de­spite all the ben­e­fits of­fered by SMEs, this im­por­tant sec­tor is be­ing ne­glected in Pak­istan, cre­at­ing a ma­jor gap in the econ­omy.

SMEDA has also had in place an In­dus­try Sup­port Pro­gramme since 2004 with the ob­jec­tive of trans­fer­ring tech­ni­cal ex­per­tise to in­dus­try through in­volve­ment of in­ter­na­tional ex­perts. Col­lab­o­ra­tions have been es­tab­lished with var­i­ous in­ter­na­tional or­ga­ni­za­tions like Ja­pan In­ter­na­tional Co­op­er­a­tion Agency (JICA), Ger­man In­ter­na­tional Co­op­er­a­tion (GIZ), United Nations In­dus­trial De­vel­op­ment Or­ga­ni­za­tion (UNIDO) and World Bank for its var­i­ous ini­tia­tives. But it is ob­vi­ous that the fruits of such fa­cil­i­ta­tion are not vis­i­ble. It is high time that, in the face of a weak­en­ing econ­omy, pol­i­cy­mak­ers for­mu­lated achiev­able strate­gies in this re­gard. This can be done by build­ing and de­vel­op­ing SMEs so that the man­u­fac­tur­ing base can be re­in­forced and more em­ploy­ment op­por­tu­ni­ties cre­ated.

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