Naveed Ahmad Khan
Islamabad – The Small and Medium Enterprises Development Authority has urged the government to introduce targeted budget measures for small and medium enterprises, warning that without immediate relief on port charges, energy costs, and compliance burden, Pakistan’s SME sector will continue to struggle with competitiveness and export growth.Mashood Khan, Director SMEDA, said SMEs form the backbone of Pakistan’s economy, contributing significantly to employment, industrial output, and exports. However, he stressed that structural challenges continue to undermine their growth potential. “SMEs are the engine of job creation and industrial development. The upcoming budget must address their core issues to enhance competitiveness, increase exports, and support sustainable economic growth,” he said.SMEDA has submitted a comprehensive set of budget proposals focusing on nine key areas: port charges, raw material pricing, export market access, auto parts certification, audit exemption, sales tax on small cars, auto financing limits, financing tenure, and energy costs.1. Rationalization of Wharfage and Port Charges
Mashood Khan highlighted that SMEs face an excessive financial burden due to unrealistic wharfage, terminal handling, and local shipping line charges on both imports and exports. He said these costs directly reduce the competitiveness of Pakistani products in international markets.“At present, the structure of wharfage and port handling charges varies significantly between Karachi Port Trust, Port Qasim Authority, and Gwadar Port. This creates confusion, delays, and cost inefficiencies,” he explained. SMEDA has proposed that the government introduce a uniform structure for wharfage and port handling charges across all three ports. A standardized, transparent tariff regime would reduce unpredictability for exporters and importers and bring Pakistan’s charges in line with regional competitors. The move, SMEDA argues, is critical for SMEs that operate on thin margins and cannot absorb arbitrary increases in logistics costs.2. Raw Material Pricing and Supply Chain Stability
The Director said many SMEs procure raw materials through local distributors and agents who often create artificial shortages and impose unjustified price increases. This practice substantially increases production costs and weakens export competitiveness.“Unregulated market practices by middlemen lead to price volatility. SMEs cannot plan production when raw material prices fluctuate weekly,” Khan noted. SMEDA has recommended that the government intervene to monitor market practices and ensure fair pricing and uninterrupted supply of industrial raw materials. It suggested strengthening the role of regulatory bodies and establishing a mechanism to check hoarding and artificial price hikes, especially for steel, chemicals, plastics, and packaging materials used by export-oriented SMEs.3. Market Access and Export Consolidation
Access to international markets remains one of the biggest hurdles for small exporters, according to SMEDA. The authority proposed that Pakistan’s Commercial Attachés posted in GCC countries, Europe, Australia, and other regions should actively facilitate business linkages for SMEs. Their role should extend beyond traditional diplomacy to include identifying reliable distributors and buyers for Pakistani products.To address high freight costs, SMEDA also proposed export consolidation programs. Under this model, multiple SME products such as kitchenware, washroom accessories, home décor items, engineering goods, and handicrafts can be shipped together in a single Full Container Load. “Many SMEs cannot fill a full container on their own. Consolidation will reduce per-unit logistics cost and make exports viable,” Khan said. He added that the government should subsidize or facilitate the establishment of consolidation hubs near major ports.4. Support for Auto Parts Export Certification
Pakistan’s auto parts sector has strong export potential but faces a major barrier in meeting international certification requirements. SMEDA pointed out that certifications such as IATF 16949 cost approximately Rs. 700,000 per company, while ISO 14001 Environmental Certification costs around Rs. 500,000 per company.“Without these certifications, Pakistani auto parts manufacturers cannot enter global supply chains of major car makers,” Mashood Khan said. SMEDA has proposed a dedicated budget allocation to subsidize certification costs for SMEs. A partial or full subsidy would enable more firms to qualify for export orders and integrate into international automotive value chains, boosting foreign exchange earnings.5. Audit Exemption for Small SMEs
Compliance burden was identified as another major challenge. SMEDA proposed that SMEs with annual turnover below Rs. 500 million should be exempted from routine audits by multiple government agencies, including Income Tax, Sales Tax, EOBI, SESSI, Labour, and Environmental departments.“Small entrepreneurs spend more time dealing with auditors than running their businesses. Multiple audits increase costs and discourage documentation,” Khan said. The proposal aims to reduce administrative burden and allow entrepreneurs to focus on expansion and employment generation. SMEDA suggested that instead of frequent audits, risk-based scrutiny should be applied only in cases of suspected non-compliance.6. Reduction in Sales Tax on Small Cars
To stimulate demand in the automotive sector and support localization, SMEDA proposed reducing sales tax on vehicles up to 800cc from 18% to 9%. “Small cars are the most affordable option for middle-class families. Lower taxes will increase demand, encourage investment in domestic manufacturing, and create jobs in the auto parts industry,” the Director explained. He argued that higher volumes due to lower prices would compensate for reduced tax rates and also help Pakistani manufacturers achieve economies of scale.7. Enhancement of Auto Financing Limits
SMEDA recommended that the State Bank of Pakistan increase the vehicle financing limit from Rs. 3 million to Rs. 8 million. The current cap, it said, restricts consumers from purchasing even mid-range vehicles and limits growth in the sector.“Increasing the financing limit will improve purchasing power and stimulate demand, which in turn supports industrial growth,” Khan said. The proposal is aligned with the government’s objective of expanding consumer financing and promoting a documented economy.8. Increase in Vehicle Financing Tenure
The authority also proposed extending the maximum vehicle financing tenure from the current limit to seven years. Longer repayment periods would reduce monthly installments and make vehicles more affordable.“Affordability is the key driver for auto sales. A seven-year tenure will bring monthly payments within reach of more families,” Mashood Khan noted. He added that this would also support leasing companies and banks by expanding their customer base.9. Reduction in Energy and Logistics Costs
SMEDA stressed that high electricity tariffs, gas prices, and logistics costs continue to erode the competitiveness of Pakistani SMEs. It proposed targeted relief measures for export-oriented SMEs, including subsidized energy tariffs and freight support.“Energy is the largest component of production cost for many SMEs. Without competitive energy prices, Pakistani products cannot compete with Bangladesh, Vietnam, or India,” Khan said.He suggested a differential tariff for export units and direct support to offset logistics expenses, especially for shipments to distant markets.Strategic Importance of SMEs
Concluding, Mashood Khan said the proposed measures would significantly improve the business environment for SMEs, enhance exports, create employment, increase industrial investment, and contribute to sustainable economic growth. “Supporting SMEs is not merely an economic necessity. It is a strategic investment in Pakistan’s future competitiveness and prosperity. A strong SME sector means more jobs for youth, higher exports, and a resilient industrial base,” he stated.Economists agree that SMEs account for over 90% of all business enterprises in Pakistan and employ nearly 80% of the non-agricultural labor force. However, their contribution to exports remains below potential due to the challenges outlined by SMEDA.Industry stakeholders are now looking to the upcoming federal budget to see how many of these proposals are adopted. If implemented, the measures could mark a shift toward a more SME-friendly policy framework.
