Booming exports via SMEs

By: Prof. Abdul Shakoor Shah

Small and medium ventures can be categorized from their workforce. According to SMEDA (small and medium enterprises development authority), “An organization having up to 250 employees, paid up to Rs.25 million and annual sales up to 250 million is referred as small and medium sized enterprise. According to SME bank of Pakistan, “An enterprise having total assets of Rs. 20 million is a small enterprise and with Rs. 100 million is classified as medium one. The assessment is made in Pakistani currency. The vitality of small and medium sized industries were neglected in the past preferring the large ones as giants achievers for national economy. But developing Asian countries, Taiwan, Japan and Korea turn the tables by growing their small and medium industries. The economists turned their heads to it and brought out that the economy must be boomed from grass root level. Export is inevitable for world economic uplift.

Export business is one of the oldest forms of trades. SME has manifested its significance in the world wide but over here it is handled varyingly. We are too rigid to adopt new techniques in any field that is why by neglecting SME we are pushed far behind then the rest of regional countries. According to SMEDA, SMEs consisting of around 90% of all the industries in Pakistan; employ 80% of the non-agricultural workforce; and their part in the annual GDP is 40%. As per the Asian development bank report, SMEs in Pakistan are sharing in terms of value added 30% and 80% employment in industrial zones. Negligence to SMEs resulted in decline of SMEs and national economy. With the exception of a few positive initiatives the rest are in dire need to be reviewed. Wise initiatives for the betterment of SMEs will enliven the economic skeleton. The export hurdles are pacing down its growth, dreaming of an export boom without tracing out its hurdles is like a wild goose chase. We not only have to find them out but we also have to find a remedy for them. It is one of less discussed and written topics in our country. The researchers have pointed out the problems and hurdles of SMEs, they vary from researcher to researcher, but they can be classified into two major types: external and internal obstacles.

These hurdles affect export in one way or the other. Handling internal ones is easier than external ones. Internal barriers are concerning local industry, manufacturing. External are related to idiosyncratic overseas customers’ preferences, complicated trade measures and practices, tariff saddles and regulatory import control by foreign govt. fierce contest, exchange rate vacillation and scarcity of hard currency for international trade are worth mentioning. These fall in the domain of industry export market and macro environment issues. The existing gulf of variation between low and medium income economy level, the paramount role of SMEs is essential. In Pakistan, low level income industry must be triggered to at least medium level through SMEs. Internal export barriers have halted the export boom of the country. It includes functional, marketing, energy and environmental barriers. Energy barrier has caused production shortage and price hike. The augmenting short fall, high charge and overbilling of electricity, gas and other constituents have worsened the situation.

In such a sorry state of affairs, the export industry fails to execute orders. High energy tariff has dispatched the production cost to Mount Caucasus. Environmental barriers include Socio-economical, political and technical problems for exports. Dwindling economy, unpredictable currency exchange perils have caused much damage to our exports. Due to fund shortage, the exporters are unwilling to invest in SMEs as they can predict certain doom. Hard and fast exporting rules, high tariff and certain other obstacles have shattered the confidence of the exporters. The exporters seem reluctant to sign a contract. Socio-cultural aspects are also distressing our exports. Local business tactics, linguistic barriers, cultural dissimilarities between the host and export country put a full stop to export process. Product related issues, price, distribution and promotion, manufacturing new products for oversea consumers, adaption of newly designed and style, meeting the international criterion is like opening a Pandora’s Box. The quality of exported goods, packaging, labeling offering technical and sale services, if all these are not up to the mark of targeted customers, the export will surely doom. It will not only jolt the export but also cause severe decline for future export. Outlandish prices, lack of granting credit amenities to overseas are notable barriers in dooming exports. The intensive gung ho setting will purge the exporter from the competition. Unavailability of ordered goods timely, shortage of warehouses, untrustworthiness of oversea presentation and limited access to supply mediums results in export decline and negative impression of the customers. Lack of adjusting export promotion may push the investors to withdraw their shares from the export industry. SMEs related hurdles must be catered with immediate measures eradicating capacity insufficiency, working capital, manufacturing capacity, improper workers, managerial time deal, untrained workforce and financial setback will hit on the back bone of export.

Export prices should be competitive because other country exporters try to minimize the price to dominate the market for future monopoly. But most of the time these problems are observed in price and quality. Along with other factors halting exports, we must concentrate on the fact of procedural barriers of exports. Procedural barriers include, slow, late or partial recoveries of payment from abroad, miscommunication with oversea customers and unfamiliar with documentations create barriers in smooth flow of exports. Complex documental procedure, complicated exporting process has pulled our exports down to the present regrettable stage. If we generate patriotism, honesty, faithfulness, truthfulness and other international trade ethics along with proper support, training and directions we can boost our export from doom. One man show cannot stop the declining exports, we must join hands collectively as one nation by engaging all the relevant departments to pull Pakistan out of export downfall. Govt. must step forward to promote SMEs.  

The writer is a freelance columnist and can be reached at [email protected]