MGT601

SME MANAGEMENT
Lesson 10

Issues and Policy

Development for SME – II
Chapter Learning Objectives
 This lecture deals with the policy-
making issues on short and medium
term basis.
 Issues where we feel we may achieve
strong impacts in the short and
medium-term, i.e. until 2011. They
should therefore become major topics
of our deliberation and shape the
formulation of our SME policy.
 Issues in Policy
Development (Short and
Medium-Term Issues)
Business Environment
• Consultation with affected
SME before launching a new
policy
• To allow them to participate
in government procurements
Continued……

• To allow them a grace

period for adjustment
• The policy of UK “think
small first”
• Minimizing the bureaucratic
discretion
Relationships between Government
and SME

 The relation ship is

fundamentally flawed
 Centralized control on the
basis of misled facts by profit
seeking semi literate
entrepreneur
Continued……

 The attitude problems

between SME and
bureaucratic system
 The language barrier
Continued…….

 All laws, regulations and

support material is available
in English only
 We should increase the
usage of Urdu in
documentation. Specially in
policy papers
Continued…….
 The Government sector
procurement is very small. It is
fewer than 4%. The small
number is due to tough
bargaining price 36% and
supplies on credit 34% due to
absence of rules for purchase.
Taxation issues

 High rates of taxation

 Expensive accountants and
legal advisors
 High cost of bookkeeping for
small firms
Continued…..
 Time consumption by tax payer
to handle tax issues
 Physiological cost (in terms of
anxiety, stress and phobias by
possible mistakes and reaction
of tax authorities)
Continued……
 67% of the enterprises termed
tax regulations as most
problematic
 56% of businesses report a
crunch of taxes
 28% of businesses felt taxes are
very high
Continued……
 The SMEs are harassed by the tax
authorities
 69% of the firms having less than 1
million assets have given tax as
number one problem due to cost of
bookkeeping and hiring
professionals.
Continued…..
 During last few years tax based
expansion is very slow
 Two sectors; Retailers and small
medium Manufacturers have
already offered the idea of fixed
taxation.
Continued……..

 The tax reforms are only

done in tax administration
and management by
authorities
 No incentive for SME enter
the formal economy
Conclusion

The result of such policies is that

(unfortunate) surprises to small
firms are less frequent. It is made
sure that businesses potentially
affected are consulted and informed
of any forthcoming policy shifts so
as to avoid negative impacts.
Conclusion…..

Special attention is paid to

minimizing the room for bureaucratic
discretion while developing policy
rules or procedures. All such
mechanisms are missing in present
policy or legal environment in
Pakistan. The absence of a
specialized, uniform legal framework
for the development of SME hampers
SME operations.
 Thanks you
Happy Learning,
Keep Learning