ISLAMABAD, Jan 25: The Asian Development Bank (ADB) has urged the government to simplify taxation and labour laws to develop Small and Medium Enterprises (SMEs).
“The ADB has diagnosed the main barriers to development and if these barriers are removed, it will greatly help to develop SMEs in Pakistan,” said a senior visiting ADB official Rainer Hartel.
Speaking at a one-day workshop: “developing a conducive environment for SMEs in Pakistan”, organized jointly by ADB and the Small and Medium Enterprise Development Authority (Smeda), he said here on Saturday that there was an urgent need to reduce and simplify rules and regulations particularly pertaining to labour and taxation laws.
He said his bank has conducted an in-depth study as a precursor to a significant loan programme to Pakistan. The main concern of the study, he said, was labour legislation and the discretionary powers of the labour inspectors. Lack of clear guidelines and definitions of the power of the inspectors are a breeding-ground for collusion between a labour inspector and enterprise management. Minor concerns of the study, Mr. Hartel said, were the lack of inadequate training for labour inspectors and their unrealistic salary and travel expenses.
The institutions implementing the various labour laws were most fragmented and most of the services provided were of a low standards, not providing any incentive for enterprises to register with them. The government, he said, should look into possibilities to merge some or all of the institutions implementing labour legislations to improve services and reduce administrative costs.
The participants of the workshop were told that income taxation was the second important area of legislation affecting SMEs. Until recently, the main concern with income tax legislation for SMEs was delay in tax refund. The Income Tax Ordinance 2001 has introduced a system of spot checks rather than full assessment of every return as the previous system did.
Another area of concern was the registration process for the sales tax. Most SMEs perceive this process as too cumbersome. Limiting the physical verifications and expediting the registration process could simplify it. Furthermore, a definite list of documents, which were needed at the time of registration, should be provided to SMEs to remove any ambiguity of registration process.
Bruce Harris, international expert on business development services for SMEs, Klaus Altemeier, project team leader from GFA — German Consulting Agency — and Peter Bisseger, international consultant on matching grants for SMEs, also addressed the workshop.
Generally, they stressed the need for supporting SMEs in Pakistan by removing various irritants and hurdles.
Iqbal Mustafa, Chief Executive Officer (CEO) of Smeda, said that his organization had been working with the support of the ADB to lay down concrete plan for making the environment for SMEs conducive in Pakistan. The series of stakeholders workshops in Karachi, Lahore and Islamabad had been held to discuss the issue.
However, he assured that views expressed by stakeholders during these workshops would be given a lot of consideration for the development of the SMEs.
He also said that Smeda would shortly be submitting a report to the government on the development of SMEs. As soon as the report is transformed into a policy, ADB will start its $100-$200 million development programme for SMEs in Pakistan, he added.