Entrepreneurship in Pakistan

Factually, Entrepreneurship in Pakistan has remained limited by its recent definition . The small-scale industrial sector development is measured through the industry’s rate of entering its industrial sector. Suppose this measurement is taken to rank the activity of entrepreneurship in Pakistan.

In that case, the annual industry’s average rate entering the industrial sector is lower than in most countries worldwide. However, there is a noticeable caution that the new small industry entering the country’s industrial sector remains unregistered, refer to the informal business section.

Introduction

The small and medium enterprise development authority (SMEDA) department Pakistan estimates that 90% of the registered private industries (3.5 million) are small and medium enterprises with 10 to 100 employees. Moreover, 80% of the non-agriculture labor works in these small and medium firms, contributing to the annual GDP being about 40.9%.

These firms are mostly owned by the proprietors and shifted to the next generation as a family business and have no culture to register in public (IPOs).

The available data of the last six decades of the Pakistani development authorities shows that the economic development executives never focused on entrepreneurship. All the government efforts for the said decade openly express that government showed biases towards large-scale firms compared to small ones.

 In the Pakistani context, the evidence found in history points out that most people think about large plants and large-scale industries having machines operated by many workers when someone discusses industrialization. It surprises the People when they know that the small-scale and informal sectors govern the Pakistani industrial landscape but continuously ignore economic policies.

However, last few years,  as economic policymakers have realized that innovation and entrepreneurship are the engines for the economy’s growth, they have reviewed Pakistani policies and emphasized entrepreneurship growth.

As discussed above, the small-scale sector development usually reveals entrepreneurship features, though this area is primarily developed as an informal section. In urban zones, the informal sector of the small-scale industry has controlled job opportunities in the following industries, wholesale, construction, trading, retail, transport, hotels, storage, and communication.

Read about types of entrepreneurship, click on the below link.

https://businessdream.pk/types-of-entrepreneurship/

Issues For Entrepreneurship

 Some issues reported by the SME industries in Pakistan’s industrial zones are divided into two sections.

Section-1

• The government of Pakistan has placed a complicated tax, administrative and legal environment, and small firms must face these obligations to register their business. However, due to complexity, they avoid the registration of their companies.
• Generally, entrepreneurs are unwilling to do R&D because they think that R&D has a high cost and fewer margins. The high cost of R&D mainly depends on the minimum labor wages set by the Pakistani government and utility prices. The industry’s nature in terms of skill-based or knowledge-based also contributes to restricting the organizations to avoid R&D. However, government organizations sent entrepreneurs to explore new markets to enhance trade.
• Primarily, small businesses seek subsidies and incentives from the government rather than paying attention to their Research’s innovation. This culture has deep roots in the business environment.
• Most businesses are run as owner-operated, which always resists developing professional management because traditionally, business expansion depends on favor policy compared to professional management. Furthermore, there was a lack of expertise to practically provide advice for major areas, e.g., brand establishment, business operations, marketing, and project feasibility. Without giving the market depth, there was a lack of input from the universities, research institutions, and other specialized knowledge departments, so knowledge spillover stayed imitative and narrow.

Section-2

• There was a shortage of skillful labor, which was believed to be a key constraint for entrepreneurship development. Typically, SMEs lack skilled human resources compared to large firms with qualified human resources, creating unbalanced competition. There is a phenomenon called interfirm skilled labor transferred, which is influenced by relative wage levels. In this scenario, the SMEs remained far behind the large firms.   Unfortunately, employers do not reward technical skills sufficiently. Society never respects even people having jobs of blue-collared.
• All of the above, the business community does not trust each other, which is a significant hurdle for its growth. On the other hand, entrepreneurs have impeded cooperation, leading to failure to develop the existing markets and stop exploring new markets.   Entrepreneurs always try to hide information related to business; thus, they maintain bank addresses and mailing addresses in other cities. Another grim complaint recorded that one employer invests his time and money in training labor, but in the end, trained labor set up his own business or moved to a new employer. That’s why the owner-operated company does not have faith in professional employees.
• Small business people had fewer options for financing from the banks. They always think that the banks only gave loans to the big business people due to political and noncommercial reasons. Pakistan’s state bank is the biggest tentative block because it put prudential documentation and regulations requirements, which most SMEs could not fulfill. The reseasons behind the failure of the SMEs industry in Pakistan are found as competition of cutthroat, cooperation culture shortage, willingness for going to a solo flight, less attitude toward the delegations, having no proper knowledge or homework, and having no relevant experience or expertise for the development of the business.

Opportunities for entrepreneurship

We discussed issue for entrepreneurship in Pakistan and now we will discuss the opportunities for entrepreneurship in Pakistan.

Regardless of all these challenges, there are two major opportunity areas where entrepreneurship can contribute significantly: firstly, more than the 2/3rd population of Pakistan is richer in youth aged between 20 to 30, which indicates that Pakistan can produce active labor for the next few decades.

For the next two decades, most young laborers entering the market will have no education and skills or limited education and skills that will cater to the market’s demand. Also, there is little resilience left in the economy and bearing capacity for the growing young labor due to the following reasons, non-stop surprises to the economy such as fluctuation in the international goods price, energy, and 2010/11 flash floods.

It is required to think again about the necessary resources for Pakistan’s growth, and entrepreneurship is the best option to counter these challenges.

Secondly, many researchers explored the need for indigenous cooperation between the industry and university for technology transfer. Estimates from 1999 to 2007 reveal that R&D had gained attention as an investment for the Research & Development has increased by 600% in Pakistan, which was standing at 1.176 billion US dollars or .7% of the GDP. During the same period, it was recorded that Pakistan encouraged Research as the number of researchers increased from 187 per billion to 310.

Even though Pakistan has suffered significantly in the economy for the last few decades. However, there are significant R&D capabilities in the national institutions and universities, particularly in the technology and science-focused programs. This explored capability can be a new opportunity for entrepreneurship, wealth creation, and economic growth by establishing its link with trained and skilled youth entrepreneurs.

Final words 

Finally, Pakistan is struggling to facilitate entrepreneurs by launching a program named Pakistan Nojawan Program. The Government of Pakistan awards new startup finance by submitting an attractive idea. Moreover, the Government of Pakistan also providing loans for new startups.

For more information about the Pakistan Nojawan program, open the following link.

https://pmyp.gov.pk