MEDIUM SECTOR UNHAPPY WITH DOWNGRADING DEFINITION

THE FINANCIAL DAILY 17/10/2020

The Union of Small and Medium Enterprises (UNISAME) expressed deep concern at the definition proposed by US AID Small Medium Enterprise Activity (SMEA) and today informed the State Bank of Pakistan (SBP) officials that this definition will not be beneficial to the sector and SBP needs to consider the disadvantages of such a proposal made by SMEA.

President UNISAME Zulfikar Thaver said the existing definition indicates that the medium category is those having a turnover of Rs 800 million. Now these learned personnel have proposed turnover upto Rs 650 Million meaning they have reduced it by not only Rs 150 Million but by the 58% depreciation or so, of the Rupee as the upto Rs 800 million turnover was decided for the medium category in 2016. The USD parity rate then was Rs 104 to a Dollar and today it is Rs 162. Accordingly they need to set the turnover for medium sector upto Rs 1200 million fairly. SMEA also did not take into account the 30 % inflation since 2016 to date. Indeed very surprising how they overlooked all this and proposed the turnover limit of Rs 650 million reducing it by Rs 150 million

The point of UNISAME is that it is unwise to exclude the upper medium entrepreneurs in this manner as then , they will be deprived of financing under SME schemes. They will be dislodged.
Presently the small sector is in deep trouble due to the Covid 19 and the large sector is shy they are not putting up new industries. The only vibrant sector at this time is the upper medium sector and removing them from the SME definition is unwise.
UNISAME earnestly requested the SBP to comprehend the matter and impress upon SMEA not to propose this definition.
In all countries of the world the definition is liberal and does not curtail growth and especially SBP in our country has played remarkable role in promoting not only SMEs but the large as well. This was evident during the pandemic.

Secondly earlier the parameters were Assets, Employment size and Turnover , now they have adopted the single parameter of turnover and in this connection their attention was invited that as far as exports are concerned , it is possible but in cases of imports there is under invoicing to save duties and then local sales are without invoices so again it is not correct to measure only with turnover.

Thirdly they are proposing that SMEs must be registered, well the union favours registration but it should be done gradually and the SMEs should not be forced to register, they need a friendly approach to tell them the status they will get and the benefits of being registered. The approach must be friendly and not scarry.

It is pertinent to note that SBP is a sovereign body and independent, it will not be influenced and will carry out its own study and propose to the policy makers how best it can resolve the SME definition in the best interest of the sector and the economy.

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