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Post-corona: Economic revival role of SMEs


SME are the key and pillars of economy in any country. In Japan by law all major companies are bound to procure 60-70 % components from SMEs. In China, it is SMEs which lifted 500 million people up from poverty. During Shaukat Aziz period some work was done in Electrinic components and gadgetry when assembly from CKD was allowed. But he also eased imports by lowering duties and cheaper US dollar generated a race for imports of luxury goods.
Later PPP and MNS governments continued with this trend. Result SMEs vanished and trade gap widened. There has been a race for cheap imports of not only consumer items, machinery components electric gears and fruit and vegetable. It became a fashion to buy imported eatables even milk, whereas Pakistan is one of the top milk producing country. It goes waste as packaging and preservation is not available. Same is the case with meat, fruit , and vegetables. There is no industry for these products.
PM has rightly addressed and announced to revive Construction Sector as post Corona economy revival strategy. It will support around forty industries. These industries barring steel and cement all fall in the categories of SME. Earlier free for all imports made these industries close down. Unscrupulous elements made hay through under invoicing on the entry of China in the suppliers market. Some of the finest small industries progressing up well simply got killed when consumer switched to Cheap goods from China. Chinese always clever businessmen , obliged Pakistani traders who went to China in droves in search of cheap goods . Although construction industry is opened at least in Punjab and KPK no clear cut policy has been dished out to revive SMEs. A policy , access to easy and cheap finance, ease of business, relax too many licensing and accompanied cost is required . Provincial governments after 18 amendment has taxed every thing under the sun . Result , increase in cost of production and hesitation on the part of SME entrepreneur . Further , save SMEs from official agencies hounds always looking for the pray .
SME can be categorised in three major fields.
First . Electronics, this is a very large area . It include hundreds of items required in a broad spectrum , from tiny cut outs to electric gadgetry. TVs to bulbs . Some Pakistani companies were making excellent light switches and hundred of allied electric components . They even started export. All vanished in the sea and flood of cheap but substandard imports. Chinese industry quickly judged Pakistani trader . They were willing to obliged them . Whereas components and goods going to USA and Europe are different in standard and pricing.
It is of utmost importance to revive SMEs , the range also is from household to auto parts, hardware to cosmetic , carpets to decoration , and so on .
This can only be achieved by categorising the industries in three categories. First , revive closed SMEs . This should be by giving easy finance up 10 -20 million through easy one window process. The present procedure in the banks is counter productive and cumbersome. Banks discourage SMEs . It could be by establishing Small loans Corporation, or directly by state through banking channels against the project and two personal guarantees . The import of machinery for such industries be tariff free , tax holiday for three years and thereafter 5% fixed tax for five years. Technical support be provided. Special incentive be given to establish industries in small towns.
Second, medium level industries be established with outlay from 30-100 million, in special industrial zones , again one window operation. Tariff and tax incentives be given to them as well .
Third . seek Chinese help to relocate industries from China and and regions where labour is costly in SEZs under CPEC.
In the small and medium sector , Agri implements is a major industry and technical field . All over of Pakistan hand made implements are manufactured in make shift workshops by hand . These implements are crude but cheap . Small farmers prefer these as their maintenance is easy and not costly. This sector be converted to organised sector by offering, technical assistance, import of designs of various gadgetry, import of machinery through easy finance, set up technical assistance centres at Tehsil and district level. Skill development centres can be set up as Private Govt endeavours . This is the area in which Chinese assistance will be very helpful . Such small industrial hubs can bring revolution . ADB can also extend long term assistance.
For all this , mindset of lower and higher bureaucracy needs to be Changed. Corruption like cancer has rotten this class. Best of policies are scuttled at the alter of corruption.
Hope this budget could address these issues.