THE world is in transition and changing at a pace not seen before due to advancement in technology and communications. Business and the way we do business must be flexible towards new global developments, ongoing reforms of the existing institutional frameworks and introduction of new WTO regimes which will create opportunities and, in many ways, pose new challenges, especially for those living in the developing world.

Analyzing the positive outcome of these developments, it is noticed that the focus of global business is moving to our part of the world, countries with large markets such as China, India, Pakistan. These countries are witnessing high GDP growth rates and improving per capita income, leading to better consumer spending potential, presenting new opportunities.

Large businesses and corporations are re-thinking their strategy, products and services to match needs of these markets and clients in this region.

Let us take an example of financial services industry. The industry is focusing on client segments and developing products and services best suited to micro, small and medium enterprises. As a result of which, we have seen the expansion of the consumer finance business over the past two decades and more recently the emergence of SME and micro finance, which is being adopted by the formal financial services sector.

It is also true for other Industries such as telecom, advertising, automobile, technology and many more which are undergoing massive transformation in terms of Research and Development to capitalize on these emerging opportunities.

But there is an apprehension that developments like these may result in dislocation in certain sectors of the economy leading to un-employment.

In order to prepare for these new challenges and mitigate risks it is imperative that we develop infrastructure and support mechanisms that encourage the growth of small and medium sized enterprises as well as practices which are the principal generators of new jobs and activity in any country. Only definition, business models or the level of technology deployed may vary from country to country, but they are accorded high priority within all economic regions.

SME’s principally engage or involve those segments of the society that are living on relatively lower income thresholds within the economy. Therefore, public policy accords high priority to the development of the SME sector because of its potential for generating employment, increasing incomes and reducing poverty.

Exclusive policy and regulatory space, removing fiscal and non-fiscal barriers, definition of SME to qualify for support, measures to eliminate disadvantages of size, removing unnecessary regulatory burden, instituting SME support mechanism in both the public and private sector, improving support delivery mechanisms, policy evaluation have a significant impact in terms of generating employment and improving incomes of low income households.

In Pakistan, there are reportedly 3.2 million business entities and enterprises employing up to 99 persons constitute over 95 per cent of all private enterprises in the industrial sector and employ nearly 78 per cent of non-agricultural labour force. They contribute over 30 per cent to the GDP and account for 25 percent of export of manufacturing goods besides sharing 35 per cent in manufacturing value- added.

However, the potential for SME’s is largely under-utilized due to several factors that hamper rapid growth within the sector. The two principal factors are:

* A conducive business and regulatory environment

* The level of debt/equity financing available to such enterprises

Once these problems are tackled, its outcome will lead to a more robust SME sector, business integration within the economy and greater level of employment that eventually leads to poverty reduction.

(The writer is the president, Khushhali Bank ).