Friendly environment

This refers to the letter ‘No credit for MSMEs’ (Aug 1) by Sheikh M Riaz. The writer has rightly pointed out that the most current IMF bailout programme and all those before it were stop-gap, short-term solutions to a larger problem that needs fixing. The long-term answer must be to encourage small enterprise manufacturing and exports in the country, which in addition to increasing employment and economic activity in the country, will also help in the current trade imbalance. Banks are reluctant to provide any credit to this sector, happy with government loans and bonds. The MSMES are presently working at low profitability and without any finance, or government help, this has to change.

However, in order to achieve exports in non-conventional and value-added sectors, the government must first encourage local ‘import substitution’ and provide a favourable environment for MSMES, which is presently lacking. For example, the government has to reduce the foreign exchange gap limit on imports through letter of credit. Foreign suppliers normally refuse letters of credits for values of less than ten thousand dollars, thus hitting the small enterprises which import a small amount of material that is not available locally and is essential for import substitution which is a steppingstone for future exports. Therefore, it is imperative that the government facilitate small enterprises by avoiding unnecessary restrictions, allowing them discounted loans.

Sikander Khan

Lahore