Not to question the country’s financial managers’ competence, but it is troubling to note official neglect of the SME sector, to say the least. At a time when the country is lagging far behind regional counterparts in terms of economic growth, and official policies have been unable to stimulate growth, the high inflation environment is deterring consumer spending, fitting the text-book vicious circle scenario.
In such circumstances, of all the indicators, employment ought to take central stage with policy makers. Whereas employment traditionally follows growth increases, it has become clear that our present situation does not warrant much growth at least in the foreseeable future. Investment too, both foreign and local, is severely compromised. The former because of the country’s security situation, and the latter owing to excessive government borrowing and high interest rates that crowd out private enterprise.
Therefore, we must rely on ‘manufacturing’ job opportunities aimed at providing second-round stimulus to consumer growth and eventually adopting a higher growth trajectory. As things stand, manufacturing and industry are not growing in a manner that will increase productivity and employment. Therefore, the most beneficial, and convenient, solution is to improvise and support SMEs. It is with good reason that SMEs make for more than 90 per cent of productive activity in the country.
However, it is simply beyond comprehension why the sector has yet to receive official patronage to the degree it deserves. By focusing on small and medium setups, we not only stand to gain in terms of productivity, economic activity and employment, but also in terms of specialsied exports. Official circles are mistaken if they let last year’s good export numbers hide a dip coming soon. We continue to bank on cotton and related products to comprise the bulk of our export basket. The commodity did will, riding on increased prices in the financial markets, but it has already fallen, compromising future earnings.
As a start, the government must take ownership of the SME sector’s problems. It should mandate specialised committees with fine tuning its financial and marketing activities, aimed at utilising and augmenting the existing setup. This simple approach will not only supplement traditional industry but also provide increased competition and ultimately help increase the purchasing power of a significant part of the working population.
It bears noting that Pakistan’s particular dilemma requires moving beyond traditional avenues of raising revenue and employment. As referred to earlier, we will need to proactively create jobs where infrastructure exists in ways that official sponsorship will not put unbearable burden on the government when it is already fiscally constrained.
It is also important to incorporate special policies for sectors and industries that can lead the way in providing jobs to the huge army of educated and skilled youth. Only then will we be able to influence growth and snap out of the uncomfortable stagflationary cycle. Presently, power and energy problems have crippled production and overall industry. When targeting sectors like SMEs, it will be of paramount importance to cater to specific production needs and timelines. It is no rocket science that production requires energy. And even within our energy mix, it is possible to allocate energy to productive uses by allocating it judiciously.
In conclusion, despite ominous signs, we have the necessary infrastructure as well as human resource base to achieve much higher growth than the present situation. All that is wanting is for relevant authorities and concerned quarters to concentrate on achieving the most basic of all economic imperatives, optimal utilisation of limited resources.
The writer is Chief Manager, SME Bank
