CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

It is a matter of fact that there are a lot of things in which large companies are experts while the small firms can better do some things also. If both, small and large firms do their business in which they get advantage, the welfare of the economy can be maximized and the state of specialization can be attained. When we focus on the impact of small as well as medium firms on the whole economy, it is difficult rather impossible for us to segregate their impacts from the impact of large corporations.

This issue remained a hot topic for centuries. Economists were of the view that it is a large firm, which participates actively in the economy and also shares a large amount of foreign exchange earnings. But their point of view changes when the countries like Taiwan, Japan and Korea developed on their small and medium based business. It is the crystal clear that these economies developed through the grass root level as small and medium enterprises belong to grass root. Those who believe that the large firms are only responsible for economic growth should keep in mind that the small vendors and small suppliers contribute heavily in the production of large firms. The reality on ground is that small firms are held responsible for making large firms to attain their targets.

The progress and prosperity, which take place from the lower level, benefit all the classes of the society. The spill over impacts of SMEs proves to be ever lasting on the world’s economy.

The situation differs in Pakistan. It is not more that 10 years that Govt. of Pakistan has established an institution named small and Medium Enterprise Authority (SMEDA) which is considered responsible to promote small and medium enterprises. SME sector is being neglected in Pakistan and so as the impacts of small and medium firms of Pakistan’s economy. Pakistan is very potential market for SMEs and if undertaken in systematic way can prosper economy within no time. Pakistan has a considerable advantage in some areas which needs to be explained quickly to reap the benefits of exports. Such benefits can increase foreign exchange rates very positively to develop a favorable framework in all areas of progress.

The awareness like fishing, education, fruit, crops, garments, cotton, sugar cane, dates ginning, wood, auto and many other areas are the basic startups for many people. This research explains the potentialities of some areas and knowledge of how these areas can contribute towards Pakistan’s economy by increasing the foreign exchange rates with reference to Sindh province. The high authorities and ministry of development and product should formulate some strategies to design practical policies with the cooperation of stakeholders, such policies will be flexible in enhancing the SMEDA plans and flourish SMEs activities at the larger scale. This will give a big boost to startup ideas and create cordial atmosphere of businesses. This will aid a lot more in understanding the export of Pakistan specially Sindh sector and improve our foreign exchange earnings.

The role of Small and Medium-Scale Enterprise (SMEs) in the national economy cannot be underestimated. These enterprises are being given increasing policy attention in recent years, particularly in third world countries partly because of growing disappointment with results of development strategies focusing on large scale capital intensive and high import dependent industrial plants. The impact of SMEs is felt in the following ways: Greater utilization of local raw materials, employment generation, encouragement of rural development, development of entrepreneurship, mobilisation of local savings, linkages with bigger industries, provision of regional balance by spreading investments more evenly, provision of avenue for self-employment and provision of opportunity for training managers and semi-skilled workers. The vast majority of developed and developing countries rely on dynamism, resourcefulness and risk tasking of small and medium enterprises to trigger and sustain process of economic growth. In overall economic development, a critically important role is played by the small and medium enterprises. Small and medium enterprises advocates, firstly, it endurance competition and entrepreneurship and hence have external benefits on economy wide efficient, and productivity growth. At this level, perspectives are directed towards government support and involvement in exploiting countries social benefits from greater completion and entrepreneurship.

Secondly, proponents of SME support frequent claim that SMEs are generally more productive than large firms but financial market and other institutional improvements, direct government financial support to SMEs can boost economic growth and development.

Some argued that SMEs expansion boosts employment more than large firm growth because SMEs are more labour intensive thereby subsidizing SMEs may represent a poverty alleviation tools, by promoting SMEs and individual countries and the international community at large can make progress towards the main goal of halving poverty level by year 2020 i.e to reduce poverty by half and becoming among 20 largest World Economies (Nigeria Vision 20:2020). Entrepreneurial development is therefore important in the Nigeria economy which is characterized by the following heavy dependence on oil, low agricultural production, high unemployment, low utilization of industrial capacity, high inflation rate, and lack of industrial infrastructural base. These constraints limit the rate of growth of entrepreneurial activities in Nigeria. Hence, this paper seeks to investigate Small and Medium Enterprises as a veritable tool in Economic Growth and Development. This paper seeks to investigate Small and Medium Enterprises as a veritable tool in Economic Growth and Development in Nigeria.