This report explores the impediments faced by the Small and Medium Enterprise (SME)
sector in Pakistan. SMEs in Pakistan constitute 90 per cent of the economic establishments,
contributing 30 per cent to GDP and 25 per cent to export earnings. The sector also employs
78 per cent of Pakistan’s non-agricultural labour force. Improvements in the SME sector
therefore have important repercussions for growth and employment, which makes this sector
a focal point for industrial policy.
Pakistan’s growth in general and that of the manufacturing sector specifically has remained
fairly stagnant in the recent past. During a period spanning the past six decades (1960 – 2012)
Pakistan could only achieve an annual average GDP growth of 4.47 per cent with
manufacturing sector performance of around 6.3 per cent (Figure 1-1). However, over the
same period many regional economies grew much more rapidly, with China leading with
phenomenal GDP growth of 9.1 per cent during the period 1970-2009. The manufacturing
sector in China grew by over 15 per cent annually in the last twelve years (CIA World Fact
Book).