NationalVOLUME 16 ISSUE # 01

SMEs Rehabilitation

According to a survey carried out by the International Trade Centre (ITC), almost all agricultural micro, small and medium-sized enterprises (MSMEs) in Sindh and Balochistan have been severely affected by the coronavirus pandemic and need government help for their survival.

Projections indicate that agricultural production will be severely affected by the economic impact of the pandemic. In Baluchistan, 90pc of those employed in the sector are vulnerable to being laid off. For Sindh, more than four million people are predicted to lose their jobs, while it is expected that 84.6pc of those employed in the province’s SME sector are vulnerable to redundancy.

The Geneva-based ITC, a joint agency of the UN and World Trade Organisation (WTO), is implementing a six-year “Growth for Rural Advancement and Sustainable Project (GRASP)” designed to reduce poverty in Pakistan by strengthening small-scale agribusinesses in Sindh and Balochistan. The project, which started in 2019, with the funding of European Union, will complete in 2024. In Balochistan, the survey identified that 29pc of agribusinesses, and 34pc of farmers want the government to provide temporary wage subsidy to help them bear payroll expenses during the crisis. Similarly, 23pc of the former and 28pc of the latter called on their government to create standards for safe and hygienic transport channels to bring back workers while 14pc and 18pc respectively highlighted the need to provide a security net to protect the food sector against falling commodity prices.

Another important finding is that around 70pc of agribusinesses and farmers found it difficult to access information and benefit from policy measures taken to aid them whereas 29pc and 23pc respectively stated that temporary wage subsidy from the government would be most beneficial. A majority of the respondents said they urgently needed help to form strategies to foster the survival of their enterprises. They also stated some other immediate needs, including increasing input availability, market information dissemination, and support in accessing finance. Training in business and production management was also highlighted to improve their competitiveness.

The ITC survey identified that 28pc of agribusinesses and 29pc of farmers want the government to provide credit guarantee schemes to help them cope with the crisis. Half of rural MSMEs in Sindh want the provincial administration to defer payments for inputs, such as seeds, fertilisers, and feed. Nearly one out of five farmers, and 18pc of agribusinesses want the government to build emergency food reserves or food banks, thus providing a cushion of support on production levels of activity. A quarter of respondents wanted a security net in the form of protection against falling commodity prices.

Almost all MSMEs in Sindh and Balochistan stated that their business operations had been affected by the pandemic, with a majority of them being badly affected. They also reported lower domestic sales, and difficulty in accessing inputs locally. A majority of the surveyed MSMEs said they had temporarily shut down in addition to temporarily reducing employment, using their own savings, and, to a lesser extent, increased their marketing efforts to combat the pandemic challenges.

However, more than half of the SMEs interviewed reported that they do not envisage the closure of their businesses. Of those that do, agribusinesses were more likely to see it happening within one month or less, whilst farmers estimated 3-6 months or more. Almost all agribusinesses and farmers said they had adopted at least one action to counter the pandemic challenges. With respect to employment, most MSMEs acted by temporarily reducing employment. In terms of finance, the majority retreated by using up their own savings or borrowing from informal sources. Some MSMEs also attempted to recover production by moving to new suppliers, and made an effort to retain or improve sales by increasing their marketing efforts and developing online sales.

In the context, the Sustainable Development Policy Institute (SDPI) organised a consultative dialogue on policy measures needed for SMEs to recover from the impact of the Covid-19 pandemic. Punjab Board of Investment and Trade Director (Projects and Policy) Sohail Qadri informed the participants that his institution was aiming to create a platform for providing capacity building services to the SMEs and to help them explore global markets. He suggested that institutions, such as the Small and Medium Enterprises Development Authority (SMEDA) and Punjab Small Industries Corporation (PSIC), collaborate and help SMEs mitigate Covid-19-related difficulties.

SDPI Joint Executive Director Vaqar Ahmed suggested the Securities and Exchange Commission of Pakistan (SECP) ease laws for the SMEs and start-ups across the country. He pointed out that current laws were preventing idle liquidity in the economy from moving to innovative firms from real estate. People, willing to invest in Pakistan, also complain about the lack of a credible venture capital and crowdsourcing framework. Therefore, the SECP needs to evaluate the existing facilitation and regulatory framework, he added.

It is a common experience that small businesses find it difficult to access the refinance facility and collateral-free loan facility announced by the State Bank of Pakistan (SBP). Likewise, commercial banks do not understand the problems faced by the SMEs. In this situation, it is important that the government should immediately come out with a special relief package to help the small business enterprises in distress.