950827

Small enterprises

loosely integrated in

national economy

KHALID ABBAS SAIF

FAISALABAD: The present situation of the small and micro enterprises is one of a rather loose integration within the mainstream of the national economy. This was pointed out in a study report of Pakistan Institute of Development Economics which is published by International Donor's Coordination Group with the assistance of Friedrich Ebert Stiftung Islamabad.

It was observed in the report that the small and micro enterprises associations were quite weak at present and not focused enough to become a key partner to shoulder the responsibilities and exert any pressure to get their share of the market. It was also pointed out that the rules of business could be defined better and enforced through a joint endeavour by the public and the private sectors.

Promotion of small scale enterprises, including micro enterprises, is one of the central concerns for employment generation and poverty alleviation under the Eight Five-year Plan document, appropriately notes that, in the face of massive growth in population, accompanied by very restricted labour absorptive capacity of agriculture and formal manfuacturing sectors, the small scale sector has to be mainly relied on for employment generation and poverty alleviation. Income generation by supporting small scale enterprises is also one of the central strategies of the UNDP inter-country programme on poverty allevation. The bilateral and multilateral donor community has subscribed to the above priorities, with the objectives of finding structural approaches in the fight against poverty, encouragement of the productive use of labour as the most important asset that poor people possess and enhancement of the labour absorptive capacity of the economy. A common element in the strategies followed by donors has been to support the process of sustained value-added creation in, and thus the growth of small scale enterprises in the private industrial sector, said the study report. Accoridng to report, the sustained growth of the small scale sector is to a large extent determined by the overall industrial and economic development. Potential and conditions for sustained small scale enterprises growth are incorporated in the overall industrial policy, on the basis of an integrated growth model for different segments of enterprises, defined on the basis of size and trade. Experience, however, shows that policy measures of the government have laid more emphasis on the overall growth with large sector in mind, giving a lower priority so far on fine-tuning these measures to the specific requirements of the small scale sector.

A series of measures are intended under the Eight Five-year Plan to stimulate the growth of small scale enterprises, focusing on improving their productivity and enhancing product quality and standards through training in vocational and technical skills and up-gradation of technology and modernisation. These stipulated measures are essential to promote small scale sector.

The study group mentioned that programme aiming to provide material assistance for the sector's growth are bound to be restricted, given a very wide geographical spread of the sector and a very large number of enterprises involved. Such interventions need to be carefully planned, in order to ensure their sustainability in the long run. A more substantive and comprehensive approach would require a policy commitment and intervention to create an overall climate of growth for the entire sector, the study group observed.

The study group pointed out that a major area of concern regarding small scale enterprises growth has been the infavourable policy environment, which disproportionately favours large sector enterprises. The large sector, being organised, has been the main focus of government's attention whenever promotional or regulatory policies are formulated and implemented. The small scale enterprises sector, which is largely informal, has existed and grown by default without any policy support from the government. The aim of most government policies is to stimulate investment in and to promote the growth of large sector, primarily by offering a series of incentives and concessions. It is seldom recognised, however, that these policies have an un-desired impact of discriminating against the small scale sector, putting it at a gross disadvantage in relation to the large sector.

The desired policy intervention, therefore, should aim at creating an overall atmosphere for competition between the two sectors on equitable terms, mainly by adopting an evenhanded approach towards the availability of capital and services and rationalising the regulatory framework, the study report on "promotion of small scale enterprises in Pakistan", proposes.