SME’s employ nearly 80% of Pakistan’s non-agricultural work force; prosperity within this sector has huge upstream and downstream benefits. Since most of the large corporate giants and their upper management/owners have better access to corridors of power and hence policy influence, the on-ground voice of SME’s is lost and seldom heard. Over the years, there has been a lack of focused attention from government leadership including a lack of vision and objectives, which define structural improvement in SME policy.
Research, analysis, policy making and implementation must be driven from the very top of government. It is also discouraging to see that there is practically no representation or platform for high performing SME’s to partake in the discourse on economic policy in Pakistan. This disconnect is evident in resultant economic performance indicators. The hard-hitting target of increasing industrial productivity must be approached from multiple directions by resolving a variety of issues in parallel.
An increase in industrial productivity will result injob creation, rising incomes and higher spending/local demand oriented economic activity. This will catalyze more efficient businesses that will naturally form competitive and comparative advantages through the free market and will become the bedrock of our export orientation and economic sustainability in volatile global environments.Tariffs and protection will only work to increase local manufacturing productivity if it is coupled with improvement in manufacturing efficiency and skill development of workforce.
Otherwise, in the long run, tariffs and protectionism only harms local industries in any country because it reduces motivation for businesses to improve, as they know they will always have a safety net and will be protected with tariffs to make imported goods more expensive. It is important to understand that this comfort zone actually harms the country and their own ability to be competitive. This lack of competitiveness will be evident in lack of exports or loss of local business if foreign companies decide to set up operations in Pakistan. While protectionist policies have some short to medium term advantages, they must be part of a 360-degree approach to improving domestic productivity.
Development strategies should also not focus simply on monetary and fiscal measures. They should focus on thought and mentality within SME’s, which will unlock and catapult a mindset of growth and entrepreneurship. Every large enterprise was once an SME at some point in its history and this will always be the same cycle, an economy should focus on its roots and the outcome will always be strong.
Sometimes it is too easy for people to invest in non-business ventures and park their money in relatively safe investments. The government should make a conscious effort at encouraging people to start businesses and develop their thinking along the lines of need based business ideas and technology based businesses. As mentioned above, the need for skills development to enhance the productivity by mentality change of employees is essential. These programs should mainly be government run as private initiatives will never be able to roll them out at a scale that is needed, nor have cross industrial buy-in that government machinery can achieve.
It may also not be a lucrative return on investment for a private initiative. The above is in addition to the dire need of basic vocational training for the various industries in operation in Pakistan such as textile, plastics molding, sheet metal, casting, food processing, pharmaceuticals, sports foods, surgical goods, cloth weaving, furniture, etc. the list is endless. It is also important that this should be rolled out in the form of a short and basic curriculum in the public schooling system of Pakistan before FSC.
This will in turn become a feeder for vocational training institutes for interested students. It is essential that students be given awareness and an opportunity of vocational skills at a young age to see the benefit of it out of their own interest rather than be forced to take it up later due to lack of other opportunities. If the vocational skills training sector of Pakistan improves, the follow on affect of this is so huge, many people do not realize the benefits. There are whole industries currently formed out of uncertified skills such as electricians, plumbers, mechanics, etc.that exist in the market will not only become organized and skilled, they will be able to charge better prices for quality certified services. Steadily this will elevate the vast majority of our population in terms of education, skill and income and will create a wave of new micro business owners.
Pakistan is at the precipice of huge economic growth via our SME’s. All potential for local productivity and technology improvements to reduce reliance on imports and export-oriented growth will come from businesses that are right now SME’s, 40% of our GDP comes from SME’s alone. There are multiple methods and strategies through which a comprehensive SME development plan can be devised with SMART (Specific-Measureable-Actionable-Relevant-Time bound)objectives and result oriented KPI’s. It is important to understand that SME businesses do not have tall and multilayered management hierarchies, there is a constant and direct connection between owners, employees, production challenges, quality issues, technology constraints, purchase and sale supply chains as well as daily administrative and government office interaction. An SME owner is at the true forefront of observing policy in action and challenges faced by the average Pakistani.
Exclusive written by
Ahmad Usman
Director operations Plastech Autosafe