EDITORIAL: A recent Stakeholders’ Engagement Workshop organised at the Karachi Chamber of Commerce and Industry (KCCI) touched upon some important points about small and medium enterprises (SMEs), their importance, and ways of getting them to live up to their potential. The workshop was part of the EU-funded International Trade Centre’s (ITC’s) Growth for Rural Advancement and Sustainable Programme (GRASP), which is designed to strengthen SMEs associated with livestock, dairy and horticulture in Sindh and Balochistan by focusing on financing, HR, environment, quality and packaging, along with other things fundamental to the functioning of SMEs. ITC’s chief of sector and enterprise competitiveness, Robert Skidmore, very rightly pointed out that in order to ensure sustainable economic development it is essential to support and work closely with SMEs, since they cover about 70 percent of the global economy, create jobs and help solve many of the problems faced by governments.
There can be no denying, of course, that SMEs form a very crucial part of any thriving economy because they are the largest employer owing to their labour-intensive nature. Yet they face severe financing problems at times since they form an unorganised and undocumented sector, which rules out the possibility of bank credit. That is also understandable. Banks are often required to have an ironclad commitment to risk management because it is after all the depositors’ money that they loan out. The ITC chief explained that GRASP focuses on what markets, buyers and consumers want. It then helps equip producers and SMEs with skills, technology and services needed to take off and become effective. GRASP also provides producers with targeted services such as market information, credit and training. And since it does this all over the world and has come to KCCI to “listen to and understand the problems of SMEs so that we can help,” it must have realised by now that one of the biggest problems that prevents SMEs from becoming documented is the country’s labour laws; standing orders with regard to labour, EOBI, social security, etc.
To make any progress perhaps authorities need to redefine the thresholds in terms of the number of people employed for coming under the purview of these laws. And a good beginning in this regard can be made by exempting at least small enterprises - which the State Bank of Pakistan (SBP) defines as business entities which do not employ (including contract employees) more than 50 persons and whose annual sales turnover is up to Rs150 million - from all labour laws. That way at least the smallest business outlets can be regulated and have stronger legs to stand on.
There can be no denying that SMEs can be quite the game-changer for economies like Pakistan’s. They provide jobs to a very large number of people and can do wonders for our poverty and unemployment levels. And since the job market has always struggled to cater to the many millions of new workers that come to it every year, considering our out-of-control population growth rate, the government should be even more eager to do what it can to promote SMEs. They are easy to manage, a lot of them can be set up with very little support, and they can help keep money in circulation even in parts that are cut off from the mainstream. All that needs to be done is to do away with unnecessary labour laws and properly organise and document them so that they have easy access to bank credit - that special ingredient that lubricates sector growth better than anything else and provides the support that enterprises that aren’t too big cannot do without.
One of the tasks of GRASP is “to make small companies resilient so that they are ready to compete even during crises triggered either by pandemics like Covid-19 or any environmental change.” Hopefully, it will be able to identify the right steps needed to achieve just such things and then relevant authorities will make necessary changes promptly so SMEs can bolster household income and help boost the real economy.
Copyright Business Recorder, 2021
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