Serious impact on enterprises in Pakistan due to COVID-19 emphasized in SMEDA survey report

• The number of enterprises to be adversely affected by the lockdown according to estimates is as high as 5.2 million.
• 95% of the SMEs reported a reduction in operations due to the lockdown.
• Public sector intervention needed to catalyze SMEs during the ongoing crisis

The Small and Medium Enterprises Development Authority (SMEDA), the premier institution of the Government of Pakistan under Ministry of Industries & Production which focuses on providing an enabling environment and business development services to small and medium enterprises, released a survey report on the impact of COVID-19 on businesses in Pakistan.

The 'Need' for the survey report

The number of enterprises to be adversely affected by the lockdown according to estimates is as high as 5.2 million.

Their most recent report comes at a time when Pakistan has been adversely affected due to the lockdown implemented to curb the spread of the Coronavirus. The survey was launched online and gathered a sample size of 920 businesses from all over Pakistan which collectively account for PKR 29 billion in Revenue and 19,641 employees, over 45% of which were daily wagers.

The need for the survey arose due to daunting initial estimates about the economy which illustrated sluggish growth in services, manufacturing and agriculture sectors, increase in unemployment, decrease in government revenue, decline in exports and disruption in supply chains. The number of enterprises to be adversely affected by the lockdown according to estimates is as high as 5.2 million.

The real impact of COVID-19 on SMEs in Pakistan

The survey report highlights the chief areas of concerns for the SME's due to the lockdowns amongst them reduction in operations, reduction in export orders, laying off employees and disruptions in supply chain.

95% of the SME's reported a reduction in operations due to the lockdown.

Similarly, 92% of them reported different levels of disruption in supply chain.

23% of the enterprises reported 100% losses in export orders because of the COVID-19 impact.

This has a domino effect with the unemployment rate as 46% of these enterprises have laid off a significant portion of their labour force and only 26% plans to rehire them in the subsequent months.

A massive 60% have reported to have problems in selling their product/service during the ongoing crisis. This can largely explain why 89% of the enterprises reported significant financial troubles, forcing them to cut losses where they can.

Government needed to catalyze SMEs during the ongoing crisis

The survey report makes a strong case for public sector support to mitigate the impact of COVID-19 and sustain their businesses. With the given sample, the report identifies key areas of support that could help sustain enterprises during the crisis. These SME-specific measures would work to assist enterprises in bearing loss, preventing laying off of labour force and sustain operations in the long-run. These measures include financial packages, tax relief, guarantees and grants, relaxation in payments of utility bills, support in paying salaries and easing conditions for loan repayments.

The report highlights the need of the government to step in monetarily and as well in facilitating SMEs during the lockdown. With reference to facilitation, 31% of businesses requested that the government allow all businesses to operate during the lockdown and 33% of them wanted to reduce the lockdown duration. Similarly, 24% of SMEs demanded the government introduce awareness programs in the wake of the pandemic.

Whilst respondents demand aid in the form of tax relief, utility bills relaxation and wage support, 63.92% of SMEs demanded financing schemes to cope with the current challenges, including loans on low interest rates, grants and relaxation of loan payments.

The respondents also demanded the government set up a 24 hour portal for SME problems and suggestions as well as trainings for businesses and their employees.

Implementation is key

Some of these sound measures, if implemented promptly would help stave off further unemployment as well as rejuvenate small and medium sized enterprises to operate at capacity once more. It must be noted that these measures are largely in-line with policies the State Bank of Pakistan has introduced and is in progress of implementing in the wake of the pandemic to facilitate the economy as World Bank predicted that Pakistan's economy could contract by as much as 1.3% in FY2020.