February 05, 2007	Monday	Muharram 16, 1428

Official claims expressing ‘unwavering’ commitment to the development of small and medium enterprises (SMEs) notwithstanding, it has taken the government almost one and a half year to ‘examine’ and approve Pakistan’s first ever SME policy.

It was some time in the 3rd quarter of 2005 when a task force (set up in January 2004) finalised the SME policy and sent its draft to the federal government to seek the ‘input’ of different ministries on the recommendations, actions, and initiatives proposed in it for improving the lot of small sector, but was considered and approved by the federal cabinet only about a few weeks back.

Though the policy has been developed with a view to supporting the smaller and medium enterprises in the manufacturing, services, and trade sectors by ‘removing all irritants and snags holding back their growth’ into a vibrant and globally competitive sector of the economy, it has failed to generate the expected interest and enthusiasm among small entrepreneurs who are supposed to gain the most from its implementation.

In fact, a vast majority of entrepreneurs remain unaware of the existence of such a policy at all in spite of the fact that it promises to brighten up their future. Some exporters from Sialkot told this writer that they didn’t even know if the government had undertaken any such exercise to identify and address at the policy level the issues and problems they had to confront right from the setting up of a business to the marketing of their goods and products, at home or abroad.

“What policy?” “Sorry I haven’t seen it yet.” “Where can I find it by the way? You got a copy?” These were the standard responses one got from several entrepreneurs contacted in Gujranwala and Sialkot, two major SME clusters in Punjab, for their comment. To many it came as a surprise that no one in the government, which rarely lets any opportunity to show off its commitment to the small and medium sector slip through its hands, has displayed eagerness to actually ‘own’ the policy.

“The official silence over the SME policy can be explained variously,” says a surgical instruments exporter from Sialkot who wished not to be identified. “But I guess that it is as nobody is actually prepared to own the policy for the time being because everybody – from the prime minister to the industries minister, seems to have his plate full with other more pressing and important issues. We just don’t know what the policy proposes for helping the small and medium industries, whose exports are dipping because of higher production cost and intense competition in the world markets, in my city.”

Smeda consultant, who was engaged in the development of the policy, concurs with that viewpoint. “With the next general elections just round the corner, the government wants to and is actually busy, devising policies and schemes that can really attract votes, and help the ruling party win the polls. Just look at the way the much-publicised President’s Rozgar Scheme was conceived and devised. Everything was done on a fast-track and a hefty amount of Rs10 billion set aside for the scheme in a matter of only a few days or weeks. It was because the president himself had put his weight behind the project,” he says.

“Besides, the scheme is perceived from the president down to the lowest tier of the government as something that will help the ruling political coalition win votes in the election. On the other hand, the SME policy, even if it actually gets implemented in letter and spirit, will begin to pay the dividends in the shape of economic benefits and consequent political support from the public and business in the medium- to long-term over the next several years. Hence, it (the SME policy) is not seen as something to have any direct or indirect bearing on the outcome of the forthcoming election. Besides, its implementation involves a lot of hard work and demands total attention and time. That is why the policy and the objectives for which it has been devised have already been pushed down to the bottom of the government’s priority list,” the consultant says.

The task to develop the first SME policy was undertaken to recommend interventions and actions for improving the business and regulatory environment in which SMEs are forced to function, providing them easy access to bank credit at reasonable interest rates, and making resources for technology and related services available to them.

Though no separate data or statistics have ever been tabulated in order to evaluate the contribution of the SMEs to the national economy, it is estimated that SMEs constitute around 90 per cent of 3.2 million private enterprises in the industrial, services and trade sectors, and employ around 78 per cent of non-agriculture labour force. The SMEs, census shows, also contribute over 30 per cent to the GDP and 25 per cent to the country’s total export earnings. Their share in the manufacturing value addition is estimated to be at 35 per cent.

The need for an SME-specific policy was being felt for a very long time because the existing industrial, fiscal and other policies did not prioritise the small sector or respond to its specific requirements. The absence of an SME-specific regulatory and fiscal regime, as well as unfriendly business environment was identified a long time back as the main obstacle in the development of the small and medium sector considered as a bulk employer around the globe and a major contributor to poverty reduction efforts.

The policy has for the first time attempted to define uniformly, small and medium sectors in manufacturing, trade and services sectors for all the stake holders and gives a broad framework for promotion of the SMEs by improving regulatory, fiscal and business environment. It is the first document that proposes SME-specific interventions and initiatives for increasing their contribution to the economy. Officials say that the policy document gives a broad framework for promoting and developing small and medium sector through institutionalisation of the support structure and outlines a strategy for SME-led private sector growth for poverty reduction and job creation.

The new SME policy specifies the role of each stakeholder right from federal and provincial ministries and departments to banks and private sector and proposes a mechanism for its implementation and monitoring for the benefit of the targeted sectors, says a senior official of Smeda (Small & Medium Enterprise Development Authority), the agency which coordinated the efforts to devise the policy on behalf of the federal industries and production ministry. But the question remains: will the policy ever get implemented?

Smeda officials are optimistic that the policy will get implemented, but the entrepreneurs, who are the real stakeholders, remain sceptic. “We have had too many promises and documents listing our issues and their solutions in the last one decade or more. Every two years or so the government invites us to a seminar or meeting to give our input on the situation facing the SMEs, but nothing practical is ever been done. Frankly, I’m not interested in the said policy. If there is anything the government wants to do for us, it should take practical steps,” says a garments producer from Lahore.

“The implementation of the policy requires political support from the highest level. Unless the president or the prime minister is prepared to own it, the policy will remain yet another well-drafted document. I don’t see the required political will at any tier of the government, at least not for the time being,” adds the consultant.