Impact of Institutional Reforms on the Development of Small and Medium Enterprise Sector versus the Large Scale Industry of Pakistan

Abstract

The Small and Medium Enterprise Sector can be termed as a revenue generation and employment creation in developing economies. The sector is highly cost effective as compared to large scale industries. After independence, Pakistan started with a very weak share of 34 industrial units. During the last six decades economic managers, realizing importance of the small and medium enterprises as a real source for the improvement of economy, formulated various policies for the development of the sector with basic emphasis on the optimal utilization of domestic raw material. In light of those policies, financial and technical institutions were established to provide advisory services and to assist in obtaining credit, training and basic facilities for the development of small and medium enterprises, however, the sectoral contribution of Small and Medium Enterprise Sector in the gross domestic product is not appreciable as against large scale industry, which reveal that the specific needs for the promotion of small and medium enterprises have not been answered in appropriate manner. Consequently, small and medium enterprises of Pakistan are unable to take part in the growing markets of the world. According to the Economic Survey of Pakistan, 2013 the sector constitutes over 90 percent of business in Pakistan and being highly labor intensive, provide employment up to 83 percent work force of the non agricultural labor, contributes 40 percent towards the country’s gross domestic product, accounts for 35 percent of the value added in the manufacturing industry and generates 25 percent of manufacturing sector export earnings. The purpose of this paper is to highlight role of the measures and programs in respect of financial, managerial and technical assistance were launched by the economic managers and planners of Pakistan for the improvement of Pakistan’s Small and Medium Enterprises.