KARACHI, April 24: Country representative of the Asian Development Bank in Pakistan Marshuk Ali Shah has lashed out at the Pakistan bureaucracy and called it “monstrous”. He held the bureaucracy responsible for obstructing development and growth in the country.
In his key note address on the second day of the two-day conference on “SMEs — the Future of Pakistan” here on Thursday, organized by the Small and Medium Enterprise Development Authority (Smeda) and a private company of chartered accountants, Mr Shah shared with the participants ADB’s perspective on the SME sector growth and development in Pakistan.
Deviating from his prepared text draft, the ADB representative set the tone of the proceedings at the very outset when he came down heavily on Pakistan’s bureaucracy. He informed the participants that the ADB at present was involved in 53 projects in Pakistan involving an outlay of $4.5 billion with the federal and provincial governments.
His outburst against the bureaucracy stemmed from the numerous meetings he had held with the officials at the federal and provincial levels to discuss the ADB projects. Mr Marshuk was introduced by the organizers of the conference as an ADB executive, who has 13 years of experience in dealing with Pakistan’s affairs.
He disclosed that the ADB was currently preparing the SME Development Programme (SDP) to facilitate the creation of an enabling environment for SMEs and increase their potential as catalysts for pro-poor growth and employment. “The SDP is part of the ADB’s 2003 lending assistance package to Pakistan for $100 million. The ADB offered $800,000 technical assistance in February last year to help the Pakistan government prepare this SDP.
He said SMEs in Pakistan contributed about 30 per cent to the GDP and 99 per cent to the total 2.3 million enterprises, which were very small, and absorbed 60 to 70 per cent of labour force in manufacturing, services and trade sectors. An additional 20 per cent is absorbed by the units employing between 10 and 99 workers.
“Because of an unfavourable business environment, coupled with low investments and rent seeking behaviour, the SMEs growth potential for employment, income generation and poverty reduction has largely remained untapped,” the ADB representative observed.
He made a specific mention of Pakistan’s complex labour, tax and industry laws and their implementation procedures, which according to him, was a common source “for the reported abuse of power by the officials”. He spoke of the highhandedness of the tax inspectors and officials of labour and industry departments which added to the cost of doing business and created a negative attitude in the enterprises towards all such laws.
He said the SDP had identified a host of issues in Pakistan’s SME sector, which could be addressed through appropriate interventions.
Identifying the issues confronting the growth of SMEs, he pointed out that the ADB planned to engage itself actively with the government and autonomous institutions in drafting simple laws and tax regulations. The ADB, he said, would support the State Bank’s initiative in preparing the SME neutral prudential regulations.
He also disclosed the restructuring and expected privatization of the SME Bank that needed to focus on commercial banking to the SMEs. He lauded the recovery operations of the SME Bank in last three years, but said there was a need for the bank to concentrate on new business.
The SME SDP, he said, found lack of SME-friendly tax regulations. He said Pakistan’s tax regulations imposed high barriers for entry into the documented economy.
