EDITORIAL: Prime Minister Shehbaz Sharif only stated the obvious at the D-8 summit in Cairo when he termed the youth and SMEs (small and medium enterprises) “key drivers of economic development in any society”.
Indeed, as he went on to say that “by investing in both we can build inclusive and robust economies that are ready for the global challenges of today and tomorrow”.
Yet perhaps he went a step too far in boasting that “for Pakistan, investing in youth and supporting SMEs is crucial for our socioeconomic development and progress”. Because, while there would be nothing better for the economy in a country where 60 percent of the population is under the age of 30, the truth is that Pakistan’s SME sector faces several unnecessary challenges the biggest of which is limited government support.
And that, in turn, is the reason for their restricted access to credit lines as banks aren’t too eager to lend to them due to perceived risk, lack of collateral and often informal operations. That explains why the little credit they do get is often at prohibitive rates.
SMEs also face the twin deterrents of excessive bureaucracy – lengthy procedures for registration, compliance, licensing, etc. – and a very complex tax structure that is further complicated by frequent changes in official regulations. Then there are issues related to infrastructure. Frequent power outages and high energy costs regularly disrupt operations while inefficient supply chains and inadequate logistic networks increase costs and reduce competitiveness.
Little surprise then that SMEs continue to struggle even as the prime minister points to them as engines of growth. Yet now that he has put the spotlight on them once again – as have previous heads of government – the SME sector and the media should pressure the government to go a step further and provide policy support. Surely, the government understands that one key reason for their low productivity is shortage of skilled labour due to insufficient training opportunities. This gap is easily filled by setting up polytechnic institutes that offer certificate, diploma and degree programmes in different technical and vocational fields.
Such initiatives need more will than resources. It’s not that the government does not have solutions for this sector’s many problems; it’s just that policymakers only mention it when it’s politically correct and convenient. But now, when the economy needs all the push it can get, and the SME sector is a very large potential employer, it makes perfect sense to divert a measure of official time and resources towards it.
The first thing to do is ensure access to credit through SME-friendly banking policies. The next is to simplify regulatory frameworks and improve tax incentives for the sector. Then comes the part where encouraging skill development through targeted training programmes will be the key difference maker. And, in the modern age, the government must complement the initiative by promoting digital transformation and adoption of e-commerce.
It’s a shame that this sector has had to wait for official support for so long. And it would be unacceptable and unforgivable if the government continues to ignore it even when it can go such a long way in helping the workforce and the real economy.
Copyright Business Recorder, 2024
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