Prime Minister Shehbaz Sharif has ordered the constitution of the Small and Medium Enterprises Development Authority, observing on his meeting on SMEDA in Islamabad on Friday that small and medium enterprises were the backbone of an economy. He was right in that, but he should have also realised that SMEDA had been founded in 1998, and seen if had gone beyond collecting some basic figures. Mr Sharif’s commitment to the sector became apparent when he decided that a special steering committee would be set up, and that he would personally head it. Perhaps he needs to find out what SMEDA has failed to do right since its establishment. Then too, it was widely touted that small and medium enterprises provided a large proportion of the GDP, with 5.2 million enterprises producing 40 percent of the GDP and contributing 31 percent of the country’s exports.
SMEs are also primary sources of employment, with 42 percent of jobs already coming from them. They avail Rs 491 billion of bank credit. This is something that Mr Sharif latched onto, and ha gave a target of increasing that credit of Rs 800 billion. This is one of the prime areas where the government can intervene, but there is the danger of using this need for credit as a means of doling out favours. Mr Sharif’s government has to go the extra mile not just because his party derives much of its support from the businessmen who run SMEs, but because this government has committed itself to expanding the tax net. This is even though the PML(N) has so far been successful in keeping SMEs untaxed. SMEs should be a mainstay of the taxman; unfortunately, a situation has developed where they wish to remain under the radar; a wish which results in the strangling of growth in the sector.
Growth does not mean a proliferation of SMEs, but a graduation into the next stage: small enterprises grow so large that they qualify as medium. A small enterprise is defined as one with an annual turnover of less than Rs 150 million. Once it crosses that, it will be considered a medium enterprise. If it crosses a turnover of Rs 800 million, it will be considered a large enterprise. SMEDA gives out ideas for various small enterprises, but there is much more to done. Done it must be for the country to move forward, for no economy has grown without the help of its SMEs.
