SMEDA and ILO Collaborate to Address Business Informality in Pakistan

The Small and Medium Enterprises Development Authority (SMEDA) and International Labour Organization (ILO) have jointly conducted a study to explore the challenges and opportunities associated with reducing informality among businesses in Pakistan. The study was presented at a workshop aimed at formulating a national strategy to formalize Small and Medium Enterprises (SMEs) in the country.

The report unveiled during the workshop highlighted the significant presence of the informal economy in Pakistan, estimated at around USD 457 billion. It was noted that a substantial portion of the non-agricultural workforce, approximately 72.5%, is engaged in the informal sector. Asad Islam Mahni, Federal Additional Secretary Industries and Production, emphasized the importance of formalizing SMEs to boost industrialization and integrate them into local and global value chains.

Socrat Aman Rana, CEO of SMEDA, stressed the pivotal role of SMEs in driving the economy, with over 5.24 million SMEs contributing significantly to exports and employment. He emphasized the necessity of overcoming barriers to formalization and developing a National Action Plan to facilitate SME formalization, citing its positive impact on economic development indicators.

Furthermore, Rana acknowledged the prevalence of undocumented economic activities in Pakistan, resulting in lower tax contributions. He praised SMEDA's initiatives in supporting SME growth and advocated for transitioning informal enterprises towards formality to enhance economic sustainability.

Ms. Judith Van Doorn from ILO highlighted the advantages of business formalization, including streamlined procedures, increased productivity, and overall SME development. She underscored the potential benefits that the formalization process could bring to businesses and workers in Pakistan.

The collaborative efforts of SMEDA and ILO to address informality among businesses in Pakistan signify a crucial step towards fostering economic growth and sustainability. By promoting SME formalization and enhancing the business environment, Pakistan aims to unlock the full potential of its entrepreneurial landscape, paving the way for inclusive economic development.