Reviving SME Sector

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The Small and Medium Enterprises (SME) sector is passing through a worst time due to some measures taken by the government under the influence of IMF and called upon it to announce soon a new SME policy in order to create conducive environment for these businesses for their better promotion and growth. Due to tough business conditions, SMEs are compelled to take loans to meet the needs of working capital instead of expansion as their survival was in jeopardy.

According to State Bank of Pakistan, SMEs obtained loans of Rs.111 billion during the first eleven months of 2018-19 out of which Rs.94 billion was taken for working capital, which showed that they were undergoing very difficult times. During the last 11 months, the rupee has experienced over 30 percent depreciation while the prices of electricity, gas and POL products have been hiked many times in addition to increasing taxes in budget.

Therefore, the government must to finalize a long-term Policy Frame Work for Small and Medium Enterprises (SME). The rise in the interest rate and depreciation in Pak rupee along with higher inflation has increased the SMEs’ cost of operations. The economic growth rate slowed down last year to 3.3 per cent from 5.5pc and as World Bank report it is expected to grow at an even slower pace around 2.4pc in the current year. This means SMEs will have to struggle more to enhance their sales. Also, under CPEC mega project local SMEs will face tougher competition in the near future as Chinese SMEs equipped with better management skills and advanced technologies. Lots of Chinese SMEs are expected to compete with their Pakistani counterparts. Capacity enhancement of SMEs and innovation in business models along with support from banking sector for loan/funding required an immediate attention, so it is high time for the government to introduce the long-awaited SME policy.

The business community believes that the long term policy should be framed to enable our SMEs to compete with those of China, India and Bangladesh so that they can contribute more to our export growth. SMEs must adopt futuristic approach in catering to local markets keeping in view the changing dynamics of urbanisation, quest for quality and consumer choices.

The government must introduce preferential taxation policies and suggested that the new enterprises that engage with transportation, posts and telecommunications, consultation, information industry and technological industry should be exempted from one year of taxation. The government must revisit banking system for financing SMEs and the process must be made easy to help out the SME’s in the country.

 

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