ISLAMABAD    -   Lessons on the recovery of Micro, Small and Medium Enterprises (MSMEs) from the unprecedented challenge of COVID-19 should be replicated and modified to strengthen response and recovery from large-scale losses incurred during current floods. 

This was stated by Dr Vaqar Ahmed, Joint Executive Director, Sustainable De­velopment Policy Institute (SDPI). He was speaking at the launch of a study ti­tled: “Micro, Small and Medium Enterpris­es amid Disaster: Lessons from Pakistan’s Experience”. The research conducted jointly by SDPI and International Develop­ment Research Centre (IDRC) is based on 750 firms across the country with special focus on women-owned and women-led firms. Among other factors, the study highlighted the impacts of supply chain and transmission disruption, resilience to bounce back, and efficacy of government interventions. 

Dr Vaqar said that the study revealed that at the initial stages of crisis, there was a de­crease in import-export, production and short-term consumption patterns along with liquidity squeeze and decline in cap­ital and investment, which has left MSMEs struggling for survival. He said that tax re­forms and subsidies did not have much positive impact and majority SMEs could not avail public financial facilities due to lack of awareness, doubts, cumbersome transaction costs and process whereas in­formal borrowings remained highly pre­ferred. He suggested that communication channels must be improved exponential­ly to improve the response to the crisis. He also recommended that transaction costs and time for registration of SMEs should be streamlined, and government should support resilience and recovery of SMEs through specific quotas.

Dr Arjan De Haan, Senior Programme Specialist, Sustainable Inclusive Econo­mies, International Development Research Centre (IDRC) stressed the need to realise that governments and other stakeholders need well-researched data and policy rec­ommendations to recover and develop re­silience to COVID-19. He said that the re­search analysed the impact of COVID-19 on MSMEs and utilizes gender perspective to further understand the impact on different stakeholders and women-led firms.

Faheem Sardar, Senior Policy Specialist, Prime Minister’s Office said that it is crucial to identify hidden disasters and crisis and solution to these issues. He informed the participants that the processing and clear­ance time in cross-border trade has been brought down to 24 hours after one-win­dow operation was introduced. He further said that MSMEs must abide by “evolve or die” when it comes to e-commerce which has simplified and sped up interaction be­tween seller and buyer. While there is tre­mendous growth in e-commerce, it is cru­cial to remember that it creates space for cyber-crimes, which is more than worth US$3 trillion per annum.

Ms Nadia J Seth, General Manager, Poli­cy and Planning Division, SMEDA said that 70% of SMEs are informal and unregistered which hinders their access to government facilities. Till March 2021, the State Bank of Pakistan has provided Rs435 billion to SMEs through various COVID-19 relief and recovery initiatives, she said, adding that such initiatives are based on learning from post-2010 flood initiatives. So far, nearly half of the SMEs are still unaware of these initiatives mainly due to poor communica­tion strategy, weak linkages between SMEs and government due to low registration and formalisation.

Ms Kiran Afzal, Private Sector Develop­ment Specialist, World Bank, said that tour­ism and heritage sites across the country have been extensively damaged. In Khyber Pakhtunkhwa alone, an estimated $80,000-90,000 are required for post-flood conser­vation and restoration. She suggested that private sector needs to increase financial and technical capacity, and emergency re­sponse services to support SMEs to recov­er from major shocks. She stressed the need for climate resilient infrastructure develop­ment in the long-term plan with emphasis on environment impact assessment and im­plementation of construction by-laws.

Dr Aadil Nakhuda, Assistant Professor of Economics, Institute of Business Adminis­tration and co-author of the study briefed the audience that the survey targeted SMEs across Pakistan; younger than 10 years as they lack the experience to manoeuvre through major shocks like COVID-19 and climate disasters. He said that the study identified that nearly 50% of SMEs were informal and not registered mainly due to procedural difficulties and high cost. He further highlighted various other factors which left SMEs vulnerable and how these impacts varied across the country, based on size and gender. 

Ms Izzah Shahbaz, Principal of Credit, Karandaaz Capitals, said that private finan­cial markets are highly collateralised and the necessary condition of guarantee hin­ders SMEs from accessing financial assis­tance. She said that research conducted by Karandaaz revealed that stringent corpo­rate governance discourages SMEs from en­tering formal sector and registration, which also disables them from accessing formal public financing initiatives leaving them vulnerable to external shocks