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MGT601 - SME Management - Lecture Handout 11

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We are dealing with the short and medium term issues for SME policy formulation. In fact this whole issue is inter-related in lessons No 10,11,12,13 and14.

Labor Issues

Likewise, the intensity of the regulations is the second most important reason for firms to drift into the informal economy all over the world. Labour Laws and regulations in Pakistan14 are considered to be one of the most complicated areas with which any business enterprise deals. The present set of the labor laws was the result of checkered initiative of various governments to create a healthy business environment for the labor. Consequently, enterprises have to deal with fifty six (56) labor laws with some of them being industry specific. The existing plethora of labor laws has made compliance impossible for the enterprises due to their inherent inconsistencies. Numerous labor inspections under these laws are yet another impediment that retards the growth of SME.

The labor market dynamics have changed considerably over the years, a higher degree of adaptability and flexibility along with Labor market security, including protection against arbitrary loss of employment, reductions in income and healthy work practices are essential requirements of new environment. Besides, the condition for compliance for international labor standards under the global economic system is another issue.

Taking into account the need of labor market and employers, the Ministry of Labor and Manpower introduced an employment security regime. The new labor policy initiatives is aimed at creating a favorable environment for facilitating industrial promotion and revival along with legislative and structural changes to bring in an environment to devoid of restrictive labor practices, but protecting the rights and interest of the workers.

It was proposed that existing labor legislation be simplified and rationalized into six basic laws. In addition, for promoting bilateralism among government employer and employees, government established a forum Workers Employers Bilateral Council of Pakistan (WEBCOP). The government is also working in the development of Labor Inspection Policy under the SME Sector Development Program to reduce the interface of government officials with businesses without compromising on the unhealthy work practices. The only issue highlighted thus far through direct interaction with SME is that of co-ordination. The business and labor community at large has been supporting the reforms.

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MGT601 - SME Management - Lecture Handout 09

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This lecture is concerned with the different issue and other obstacles faced by the policy makers while forming an SME policy for Pakistan. This includes both long term and short term issues.

Issues and Policy Development

Pakistan’s economy is an economy of SME. Policies in the past have given a general perspective, direction and defining broad parameters of activity within the macro environment framework, but efforts have focused on large enterprises, neglecting SME, which are at the heart of our economy. Our SME suffers from variety of weaknesses, which have constrained their ability to adjust to the economic liberalization measures introduced and to take full advantage of the rapidly expanding markets of the world. But SME importance and contribution in the economic activity suggests that there is a significant potential to enhance their growth through appropriate regulations and promotion.

While SME are mentioned in some of our socio-economic strategies and policy documents, measures are not specified and prioritized for us to be able to speak of any coherent SME policy or approach. The SME Sector Development Program seeks to improve the situation by inviting all concerned stakeholders to draft Pakistan’s future SME policy.

SME promotion is an important issue for many government departments and central offices. However, there is an existing lack of coordination and regular information exchange mechanism among institutions which constraints their ability to deliver in the SME development process. The responsibility for facilitating the SME policy development lies with SMEDA, attached to the Ministry of Industry and Production. One of the major reasons for the lack of coordination is that SMEDA has not been provided with a mechanism to initiate, coordinate, monitor and evaluate initiatives of SME development outside of its own scope of activities. Therefore, cross departmental and stakeholder consultations, resulting in the preparation of our national SME policy are our key to success. A network of institutions stimulating the growth of SME is also being proposed. The issues highlighted in this lecture give a retrospective view of things while giving a current picture of the SME business environment in Pakistan. There are issues we may only solve in the long term and which therefore are beyond our current scope. And there are issues we may solve in the short to medium term. These issues should become the focus of our SME policy. Short to medium term issues revolve around three major topics:

Read more: MGT601 - SME Management - Lecture Handout 09