CPEC offers opportunities of growth for SMEs
CPEC offers enormous opportunities to small and medium enterprises (SMEs) to flourish. The SME sector contributes significantly towards the economic growth of Pakistan by providing employment, assisting large industries and developing technological innovation. They also reduce the poverty level by providing employment to millions of workers.
However, the SME sector is facing acute challenges and without addressing them, we cannot expect it to flourish. Cost of doing business has increased due to the abundance of taxes and regulatory burdens. Pakistan ranked 141 out of 190 countries in terms of starting a business in the World Bank’s Doing Business ranking of 2016. This demonstrates that the regulatory process needs to be simplified so that new businesses can enter the market. There also exist structural weaknesses, use of outdated technology and a lack of access to credit which makes SMEs of Pakistan uncompetitive at the international level.
According to International Trade Centre, Pakistan’s export growth to China is less than the imports’ growth of China from the rest of the world. This means that there is room for Pakistan to tap the markets. Services like transport, telecommunications, travel and financial are among top service exports of Pakistan. By paying attention to the SME sector, Pakistan can earn export revenue in these sectors which will also address the balance-of-payments crisis of the country.
Entrepreneurship has helped in flourishing the SME sector and several new initiatives are visible in the country, such as the Higher Education Commission’s initiated policy to establish incubation centres in public universities. However, the effort must be backed with updated curriculum and resources for the centres. Universities can play an important role by providing feasible environment to students through mentorship and effective curriculum. More organisations like P@SHA are required, which gives guidelines to youth regarding entrepreneurship in technology sector.
Pakistan can learn from the experiences of Japan where large corporations like Toyota and Honda started as small factories. With effective government policies, these companies turned into giant corporations. The SMEs support centres, local policy on SMEs, credit guarantees and SMEs universities are some of the factors that play essential role in the development of the sector. Policies on providing internships to new graduates and assisting SMEs in finding new workers can also be fruitful. Pakistan should also focus on sectors, such as, technology and sports which have enormous growth potential.
Joint ventures with Chinese companies can also play a significant role in developing SMEs through provision of technology. Supply chain management, agriculture and livestock, minerals, food processing, surgical instruments, construction, ICT, are some of the key businesses where joint ventures are highly supportive for local SMEs in the backdrop of CPEC. Linking the SME sector with academia for research can also provide key insights into the sector. Technical training for workers is necessary to boost skills, increase productivity and make them compatible with the emerging opportunities from CPEC. The government needs to address the regulatory and infrastructure issues so that the SME sector can thrive at a swift rate.
The SME policy was formulated 10 years ago. Many developments have taken place since then which needs to be catered in the policy. The government is now in the process of making a new SME policy which is a positive step. However, it is required that all the existing developments must be incorporated into the policy along with keeping in mind the future needs and requirements that are developing in the context of CPEC. The SME sector is imperative to provide employment to millions of workers and by developing it further, it can help in resolving the unemployment crisis. Not only can the youth get job opportunities, the problem of inequality can also be resolved once economic prospects are available to the majority of the population.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.