Economic plight of MSMEs ignored

Deteriorating law and order situation, fuel hikes raise cost of doing business

Usman Hanif September 24, 2022
Donor organisations trying to help Pakistan face difficulties as they cannot better plan their support in the absence of timely and credible data on SMEs. PHOTO: FILE


The law-and-order situation coupled with rising fuel prices and creeping levels of inflation are threatening the survival of micro, small and medium enterprises (MSMEs) in the country as prominent trade bodies remain silent on the issue.

Speaking to the Express Tribune, Zulfikar Thaver, President of the Union of Small and Medium Enterprises (UNISAME) said, “The breakdown of law and order in urban areas, especially Karachi, and worsening economic conditions have made it difficult for MSMEs to remain functional. Trade bodies are not raising the plight of MSMEs with the competent authorities.”

Thaver urged the chambers of commerce and industry and trade associations to “earnestly facilitate their members in arbitration, complaints, promotion of trade and industry, modernisation and advocating the cause of MSMEs at the provincial and federal level.”

“Trade and industry representative bodies need to work hard to resolve these issues and take up matters effectively and diligently with the relevant authorities. Recently, the crime rate has surged as robberies and thefts have increased,” he added.

Thaver noted that “gangsters are snatching mobiles and wallets at gunpoint, without any fear of reprisal. What makes matters worse for MSMES is that the government has increased fuel prices and utilities companies are also increasing their rates every month and there is nobody to stop them. The depreciation of the rupee is also hurting all segments of society, particularly the business community.”

“It is true that the cost of doing business has gone up enormously, while demand and growth opportunities have shrunk at the same time,” stated Khurram Schehzad, CEO at Alpha Beta Core (ABCore). “This will negatively impact the viability of small and medium businesses,” he added. “Retailers are taking undue advantage and have increased prices disproportionately when compared with rupee depreciation and the increase in dollar rate,” explained Thaver.

“All of this needs to be examined and it is the duty of trade representative bodies to advocate and highlight these issues before the competent authorities,” he emphasised. “The worst affected are MSMEs as their cost of production has increased due to price hikes, which has also simultaneously dampened demand by reducing the purchasing power of customers,” Thaver maintained.

Taurus Securities’ Head of Research Mustafa Mustansir said, “Business is very slow and MSMEs represent one of the largest employment generating segments within the economy.”

“Most of these MSMEs operate on very thin margins and depend heavily on their turnover. MSMEs and small businesses are also suffering from a lack of credit, especially informal forms of credit for procurement of inventory,” he added.

“The rich and affluent are not as affected as the micro to medium sector. It is pertinent to note that most of the members of trade associations and chambers of commerce are MSMEs and it is incumbent upon the trade bodies to speak on their behalf,” Thaver said.

“The economic conditions are tough given higher commodity prices along with fiscal adjustments made by the government including the electricity tariff hike, budgetary measures and the rolling out of petroleum subsidies,” said Tahir Abbas, Head of Research at Arif Habib Limited (AHL).

“Moreover, the law-and-order situation is deteriorating especially after the floods. At this point, the government should use an iron fist to keep the situation under control,” Abbas added.

“Most of the associations are busy with photo sessions and dinner parties; they are only active at the time of elections, making promises which are soon forgotten. Most of these associations are politicised and controlled by the big boys who have their tactics to secure votes; no one outside their circle can even think of contesting against them,” lamented Thaver.

Published in The Express Tribune, September 24th, 2022.

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