FPCCI Organizes Interactive Session on Draft National SME Policy

KARACHI – The Research and Policy Division of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) organized an Interactive Session on Draft National SME Policy at FPCCI Head Office Karachi and Capital Office Islamabad & Regional Office Lahore through Video conferencing. The session was presided by Engr. Daroo Khan Achakzai, President FPCCI and attended by Dr. Mirza Ikhtiar Baig, Sr. Vice President FPCCI, Vice Presidents FPCCI Arshad Jamal, Qurban Ali, Abdul Rauf Mukhtar, Shireen Arshad, Ijaz Abbasi, and Engr. M. A. Jabbar Convener FPCCI Standing Committee on R&D. The session was also attended by Rehmatullah Javed Convener FPCCI Standing Committee on SMEs, Arjumand Qazi Convener FPCCI Standing Committee on SMEs Financing,  Representatives of SMEDA, SME Bank, State Bank of Pakistan, Non-Banking Financial Institutions and Modarabas, Small Traders Association, and others stakeholders. 

While welcoming the participants, Engr. Daroo Khan Achakzai President FPCCI highlighted the issues of SMEs to include such as access to finance, high cost of doing business, low value addition, technological advancement, complicated tax system etc. He also shared the success experience of SMEs of Japan, Korea, Taiwan, China etc. He further suggested easy and favorable discounted rate access of finance to SMEs, establishment of SMEs zones and clusters etc. Engr M. A. Jabbar Convener FPCCI Standing Committee on R&D on the invitation of President FPCCI made detailed presentation on draft National SME Policy and also deliberated the circumstances surrounding the whole issue from the beginning of inception of SME policy and its support by public sector from way back 2007. He suggested that the draft policy on SME requires to be thoroughly analyzed as to its working implementation tools in view of present existing difficult coordination amongst Federal Ministries and even between federation and provinces. He said that the broad domain of support is available since 18^th amendment and now the advocacy and the implementation may involve dual supports from federation and provinces. He said that some of the issues relate to exclusivity of federal government, while some have been devolved. Therefore he said that there exists now strong base for advocacy to improve the business environment for SMEs to reduce some of the adverse impacts on the economy by increasing the share in the economy through increased participation supported by public sector.

During the session, the participants discussed in details the contents of draft National SMEs Policy and suggested the government to provide business conducive environment with simplification of registration process and favorable trade and tax policy. The participants also urged the government to have safeguards during the post privatization of SME bank in order to have the due role of the bank in affecting the progress of SMEs. The participants also showed their reservations on various definitions of SME being proposed and discussed. They suggested that a single definition requires to be notified and preferably with higher business turnovers in order to keep accommodating the SMEs in proportion to their business growth in terms of growing sales turnovers with passage of time. Moreover, the SBP should include all sectors in SMEs Financing instead of present restricted to 8-9 sectors and all the banks should consider financing on cash flow basis instead of collateral basis. The participants also put a thrust on preferring financing for local production units and SBP may give some guidelines to commercial bank for setting the targets for their regions and zones in respect of financing SMEs. The participants also indicated that the financing from Non-Bank Financial Institutions and Modarbas be also included in SBP Policy of SMEs Financing. The participants also suggested establishment of business centers in all cities and organization for capacity building program for SMEs entrepreneurships. The participants also urged the establishment of SMEs cluster in Pakistan as at present there are only 25 clusters in Pakistan while in Bangladesh, there are 200 clusters and 3000 more clusters exist in India.

The Participants also stated that SMEDA is the only organization that is working for SMEs and is over burdened to take care of many issues, the increase in capacity and capability of SMEDA can help in managing to propose a workable SME policy. The participants added that the SME Policy 2007 was neither implemented properly and nor the data of SMEs are available for further research and strategy analysis to further work upon. The participants suggested to formulate the policy according to the current economic environment for increasing the manufacturing GDP. The policy should also have practical approach of implementation with the linkage of the SME with Vendor industry for buy back arrangements. The participants indicated that in Pakistan the banks are generally reluctant to give loans to SMEs sector due to elevated risk. Most of the loans in major are given on collateral basis to SMEs and commercial banks lack due interest in developing of required effective credit models to finance SMEs. The participants further suggested the involvement of academia in SMEs promotion and establishment of incubation centers, holding of awareness sessions with the involvement of SBP and SME banks and market facilitation to SMEs for domestic manufacturing and exports.  The capacity and capability gaps in institutions addressing the issues confronted with in promoting the SMEs were also discussed in details and recommendations were made that the structural weaknesses in the institutions be removed in order to be close to professional approaches in developing a workable policy for SMEs to work with under continued audit of the performance of SME policy for invoking interventions where deem appropriate and necessary.