Smeda, ILO unveil joint study on reducing informality in enterprises

Lahore   -   The Small and Medium Enterprises Development Authority (SMEDA) and International Labour Organization (ILO) have unveiled a joint study on “Mapping of Barriers and Opportunities to Reduce the Informality of Enterprises in Pakistan”. The report was launched at a consultative workshop held to lay down the national action plan for formalization of SMEs. The workshop was also addressed by Asad Islam Mahni, Federal Additional Secretary Industries and Production, Socrat Aman Rana, CEO SMEDA, and Ms Judith Van Doorn, Enterprise Specialist of ILO. Asad Islam Mahni, in his address, said that according to a conservative estimate the total size of the informal economy in Pakistan is around USD 457 billion, whereas around 72.5% of the labour force, outside agriculture, is employed by the informal sector, also covering market share of over 40% in the GDP. The Ministry of Industries & Production, he said, is in the process of developing the National Industrial Policy.

The Policy will provide a comprehensive roadmap of re-industrialization in Pakistan, considering the regulatory & taxation regimes, as well as incentivizing investments in key sectors of the economy. Our focus is also on integrating SMEs into local, regional, and global value chains, he added. Further, he appreciated the role of ILO and SMEDA in highlighting SME challenges and advocating SME development through evidence-based policy proposals.

CEO SMEDA Socrat Aman Rana, in his address, highlighted the significance of SMEs. He said there are an estimated 5.24 million SMEs driving our economic engine. Exports of the sector are estimated at 30%. In terms of employment, 70% of the non-agriculture labour force is associated with the sector. The majority of SMEs, around 53%, operate in wholesale and retail trade, hotels, and restaurants, followed by community, social, and personal services at 22%, and manufacturing at 20%, he said, adding that the study on barriers to formalization of enterprises and consultative workshop to develop National Action Plan for SME Formalization, is a crucial first step towards recognizing that informality exists in our economy and that supporting SME formalization can have a significant impact on our key development indicators. He informed that despite being the 43rd largest economy globally in terms of GDP, a significant portion of Pakistan’s economy remains undocumented, resulting in a low tax contribution, with the tax to GDP ratio never exceeding 13%, clocking in at 10.2%, only better than Lao PDR, according to a recent OECD commissioned study on the Asia & Pacific Region.

Socrat Aman Rana further said that SMEDA, over the years has been tirelessly engaged in supporting growth of SMEs in Pakistan. Its services, ranging from over-the-counter business tools and resources, such as pre-feasibility studies, business guides, templates, its physical footprint through common facility centers established in key SME clusters and research and advocacy with policy makers continues to gather strength, he said and termed this study as a call to action, as it provides a basis to design a comprehensive programme for supporting the transition of informal enterprises towards formality. SMEDA is committed to strengthening collaboration with our int’l development partners, public sector organizations, SMEs, and other stakeholders, in order to build an atmosphere that supports the growth of enterprises, makes a significant economic contribution, encourages innovation and entrepreneurship, and contributes towards achieving the Sustainable Development Goals (SDGs), CEO SMEDA said and expressed dee gratitude to the ILO for spearheading this ground-breaking initiative and look forward to continuing our collaboration to forge a prosperous future for our SMEs.

Ms. Judith Van Doorn, Enterprise Specialist of ILO, in her address highlighted multi-pronged approach of ILO business formalization, emphasizing how it can be made easier, more attractive and beneficial for both business and workers. She also pointed out that formalization process, in Pakistan, would promote simplification of business procedures, productivity and development of SMEs.

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