LAHORE – Asad Islam Mahni, Federal Additional Secretary Industries and Production has said that the total size of the informal economy in Pakistan is around $457 billion.
Speaking at unveiling of a study on “Mapping of Barriers and Opportunities to Reduce the Informality of Enterprises in Pakistan”, he said that around 72.5 per cent of the labour force, outside agriculture, is employed by the informal sector, also covering market share of over 40pc in the GDP.
The Small and Medium Enterprises Development Authority (SMEDA) and the International Labour Organization (ILO) has carried out the study and the report was launched at a consultative workshop held to lay down the national action plan for formalization of SMEs.
Asad Islam Mahni said that the Ministry of Industries & Production is in the process of developing the National Industrial Policy. “The Policy will provide a comprehensive roadmap of re-industrialization in Pakistan, considering the regulatory & taxation regimes, as well as incentivizing investments in key sectors of the economy. Our focus is also on integrating SMEs into local, regional, and global value chains,” he added.
Judith Van Doorn, Enterprise Specialist of ILO, highlighted multi-pronged approach of ILO business formalization, emphasizing how it can be made easier, more attractive and beneficial for both business and workers. She also pointed out that formalization process in Pakistan would promote simplification of business procedures, productivity and development of SMEs.
CEO SMEDA Socrat Aman Rana said that around 5.24 million SMEs are driving economic engine. Exports of the sector are estimated at 30pc. In terms of employment, 70pc of the non-agriculture labour force is associated with the sector. The majority of SMEs, around 53pc, operate in wholesale and retail trade, hotels, and restaurants, followed by community, social, and personal services at 22pc, and manufacturing at 20pc, he said, adding that the study is a crucial first step towards recognizing that informality exists in the economy and that supporting SME formalization can have a significant impact on key development indicators.
He informed that despite being the 43rd largest economy globally in terms of GDP, a significant portion of Pakistan’s economy remains undocumented, resulting in a low tax contribution, with the Tax to GDP ratio never exceeding 13pc, clocking in at 10.2pc.
