The Lessons on the recovery of micro, small and medium enterprises (MSMEs) from the unprecedented COVID-19 challenge should be replicated and modified to strengthen response and recovery from the large-scale loss incurred during current floods, Joint Executive Director, Sustainable Development Policy Institute (SDPI), Dr Vaqar Ahmed has said.

He was speaking at the launch of a study titled: “Micro, Small and Medium Enterprises Amid Disaster: Lessons from Pakistan’s Experience,” jointly conducted by SDPI and the International Development Research Centre (IDRC).

It is based on 750 firms across the country with a special focus on women-owned and women-led firms. Among other factors, the study highlights the impacts of supply chain and transmission disruption, resilience to bounce back, and efficacy of government interventions.

Dr Vaqar said that the study revealed that at the initial stages of the crisis, there was a decrease in import-export, production and short-term consumption patterns along with a liquidity squeeze and decline in capital and investment, which has left MSMEs struggling for survival.

He said that tax reforms and subsidies did not have much positive impact and the majority of SMEs could not avail public financial facilities due to lack of awareness, doubts, cumbersome transaction costs and processes whereas informal borrowings remained highly preferred.

He suggested that communication channels must be improved exponentially to improve the response to the crisis. He also recommended that transaction costs and time for registration of SMEs should be streamlined, and government should support the resilience and recovery of SMEs through specific quotas.

Dr Arjan De. Haan, Senior Program Specialist, Sustainable Inclusive Economies, International Development Research Centre (IDRC) stressed the need to realize that governments and other stakeholders need well-researched data and policy recommendations to recover and develop resilience to COVID-19.

He said that the researchers analyzed the impact of COVID-19 on MSMEs and utilized gender perspective to further understand the impact on different stakeholders and women-led firms.

Faheem Sardar, Senior Policy Specialist, Prime Minister’s Office said that it was crucial to identify hidden disasters and crises and solutions to these issues. He informed the participants that the processing and clearance time in cross-border trade had been reduced to 24 hours after the one-window operation was introduced.

He said that MSMEs must abide by “evolve or die” when it comes to e-commerce, which had simplified and sped up interaction between seller and buyer. While there was tremendous growth in e-commerce, it was crucial to remember that it created space for cyber crimes, which were more than worth US$3 trillion per annum.

General Manager, Policy and Planning Division, SMEDA, Nadia J. Seth said that 70% of SMEs were informal and unregistered which hindered their access to government facilities. Till March 2021, the State Bank of Pakistan had provided Rs 435 billion to the SMEs through various COVID-19 relief and recovery initiatives, she said.

Such initiatives were based on learnings from post-2010 flood initiatives. So far, nearly half of the SMEs were still unaware of those initiatives mainly due to poor communication strategy, and weak linkages between SMEs and the government due to low registration and formalization, she added.

Private Sector Development Specialist, the World Bank, Kiran Afzal said that tourism and heritage sites across the country had been extensively damaged. In Khyber Pakhtunkhwa alone, an estimated $80,000 to $90,000 were required for post-flood conservation and restoration.

She suggested that the private sector needs to increase financial and technical capacity, and emergency response services to support SMEs to recover from major shocks. She stressed the need for climate resilient infrastructure development in the long-term plan with emphasis on environmental impact assessment and implementation of construction by-laws.

Assistant Professor of Economics, Institute of Business Administration, Dr Aadil Nakhuda, and co-author of the study briefed the audience that the survey targeted SMEs across Pakistan; younger than 10 years as they lacked the experience to manoeuvre through major shocks like COVID-19 and climate disasters.

He said that the study identified that nearly 50% of SMEs were informal and not registered mainly due to procedural difficulties and high costs. He further highlighted various other factors which left SMEs vulnerable and how these impacts varied across the country, based on size and gender.

Principal of Credit, Karandaaz Capitals, Izzah Shahbaz said that private financial markets were highly collateralized and the necessary condition of guarantee hinders SMEs from accessing financial assistance.

She further said that research conducted by Karandaaz revealed that stringent corporate governance discouraged SMEs from entering the formal sector and registration, which also disables them from accessing formal public financing initiatives leaving them vulnerable to external shocks.

Credit: Independent News Pakistan-WealthPk