industrial policy, its spatial aspects and cluster development in ...

• To protect the value added industry, the government should rationalize tariffs
according to the following escalating schedule: (1) raw material: 0 – 5%; (2)
intermediate goods: 5% – 10%; and (3) final goods: 15% to maximum bound
tariff.
• Given limited policy space in tariff based measures, the government should
effectively use non-tariff measures to its advantage in line with the WTO
agreement. In this regard, government should more effectively use border control
measures such as Sanitary and Phytosanitary (SPS) measures, quality standards
such as technical barriers to trade (TBT), quantity and quality measures such as
Pre-Shipment inspection (PSI), temporary measures to slow imports or to impose
import restrictions such as Safeguards (SG) and Balance of Payment Measures
(BOP) to protect local industry.
Facilitating SME Growth
Strengthening Institutional Support to SMEs
According to the most recent study conducted on SMEDA, Pakistan’s premier agency for
supporting small and medium sized enterprises: “Pakistan’s economy is dominated by
SMEs with more than 90% of enterprises belonging to this category. The SME sector is
suffering from many constraints including lack of access to finance4, limited access to
markets, lack of infrastructure, hostile business environment, corruption and red tape,
weak management and lack of access to skilled labour. Also, many of the government
policies are devised from the perspective of large firms and not SMEs. The
implementation of SME policies in Pakistan is fragmented and limited and needs to be
more effective in light of the SME sector’s importance and contribution”.
4 Small and Micro enterprises are often rationed out of the credit market due to information asymmetries such as
opaque knowledge of firms and sectors on the part of commercial banks. Information asymmetry results in relatively
high collateral requirements for SMEs which along with the degree of documentation required for loan application
deter them from resorting to the formal sector credit market – commercial banks. Lack of credit availability thus
severely impedes the growth potential of small scale and micro enterprises. Data suggests that over 90 percent of small
enterprises finance their business and working capital requirements through retained earnings.
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