Opportunities for SMEs amid the pandemic
The writer is Assistant Manager in Policy & Planning Division of SMEDA. She can be accessed at maryam@smeda.org.pk
The Covid-induced economic slowdown has affected businesses, especially SMEs, worldwide. Sealed borders, trade interdependencies, export restrictions for maintaining stock of critical products to deal with the pandemic have changed global trade practices. About 94 countries adopted export restriction measures and 104 adopted import liberalisation strategy to survive amid the pandemic. As a result, global trade decreased by 4.5% in the third quarters of 2020 year on year. Overall exports from Pakistan declined by 7.2% between July 2019 and June 2020 and remained at $21.29 billion as compared to $22.95 billion during the corresponding period last year. However, Pakistan’s exports have shown some positive sign of recovery during July-November 2020, rising by 2.2% in year on year comparison.
The reigning pandemic has opened new avenues of investment, change in business operations, product transformation and adoption of new business models to address the changing demands of consumer market. A country like Pakistan rich in natural and human resources should exploit these opportunities and become self-reliant. Naturally, SMEs have an important role to play in this regard. Currently, there is a huge demand for medical and related products so countries around the world are assessing the possibility to shift towards producing certain health-related goods in close proximity of their own market competencies. The strategic importance given to the medical supplies sector is likely to persist in the near future. Pakistan needs to increase exports in the health and safety products like personal protective equipment (PPE), including protective masks, gloves, sanitisers, clothing, helmets, goggles, etc,
The WHO has published a list of critical products for exports to support their flow to deal with the pandemic. Of these products, 57 tariff lines at 6-digit HS are close to Pakistan’s competency. These products mainly include anti-epidemic goods (disinfectants, toilet papers, cleaning products etc); raw material for masks (fabric, aluminum and steel rods); medical equipment (instruments, appliances, machines, articles for conveyance or packaging of goods, of plastics, excluding boxes, cases, crates etc); medical supplies (protective kits, suits, masks, hats and other headgear, surgical gloves, of vulcanised rubber, wadding, gauze, bandages , other garments); and food products (meat, rice, flour, nuts, fruits and vegetables etc). Currently, Pakistan’s export of identified 57 tariff lines stands at $4 billion. Our exporters must exploit the opportunities emerging from the crisis by targeting a range of products that are close to their production line.
Furthermore, almost half of Pakistan’s exports are directed to the countries most affected by Covid-19. Approximately 40% of exports from Pakistan are destined for the stricken western countries like the US, the UK, France, Italy, Spain and Germany. As these countries have opened their borders for face masks, protective kits, sanitisers and other products, Pakistan can exploit the opportunity and compensate for low exports of traditional products to these destinations. In this regard, the government should support local SMEs through favourable business environment, fiscal support, provision of raw material, etc. Support may also be provided to meet quality and standardisation requirements, and steps may be taken to enhance export of food products to traditional and non-traditional markets. Now, the economies of the western countries, which are important destination for finished textile and leather products, are in the revival phase. Their economic revival offers greater market opportunities for local manufacturers and traders. The government should, therefore, adopt sector-specific strategy to facilitate potential sectors for export promotion. Pakistan may also need to adopt long-term industrial and trade strategy to provide essential economic support to businesses in post-Covid period. There is also the need to focus on strengthening local industry to cater to consumer market demand, capturing new markets and creating job opportunities for those who lost their jobs amid the pandemic. The ‘Made in Pakistan’ approach should be promoted by adopting import substitution strategy.
Published in The Express Tribune, March 28th, 2021.
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