40pc SMEs expect to downsize, close or switch line of business in one year

KARACHI: As COVID-19 pandemic takes its toll on business activity, 40 percent of small and medium enterprises (SMEs) expect to downsize, close or switch the line of business in one year, a survey conducted by Small and Medium Enterprises Development Authority (SEMDA) on Impact of Covid-19 (Coronavirus) on SMEs has found.

“In wake of the Coronavirus pandemic, majority of enterprises (60 percent) expect to continue with their present line of business over the next 1 year, while 18 percent say they would downsize their business. 6 percent report that they may close down their business, while 7.0 percent would diversify into another line of business”.

‘Impact of Covid-19 on SMEs’; an online survey by SMEDA, was launched on April 3, 2020 until April 14, 2020. As many as 920 businesses having annual turnover of Rs29 billion participated in the survey. 68 percent of the respondents were engaged in services activities followed by manufacturing (16 percent), and agriculture (5.0 percent).

Respondents reported that 73 percent of them have completely stopped operating during the lock down, while 27 percent have halted operations partially.

According to the report, 95 percent of enterprises admitted to have experienced a reduction in production/work activity and contracts due to Coronavirus outbreak. Only 5 percent respondents stated that they had not experienced any reduction in their work activity; while 51.6 percent of enterprises reported that COVID-19 outbreak had affected up to 100 percent of their operations; whereas 22.6 percent reported up to 100 percent loss in export orders.

Majority of enterprises (92 percent) have experienced a disruption in supply chain. 48 percent of enterprises have laid off some of their employees due to lock down while 52 percent report that they have not laid off any of their employees. Almost all enterprises that have laid off employees, plan to rehire them, once lockdown is lifted.

SMEs reported multiple issues during Coronavirus outbreak and lock down including financial issues, problems in selling, supply chain disruption, transportation etc.

While highlighting multiple areas of facilitation required, 33 percent demand a reduction in duration of lock down, while 31 percent percent would want the government to allow all businesses to operate during lockdown.

To cope with the current challenges, SMEs demand financial schemes including loans on low interest rates, grants and relaxation on payments of loans and taxes, and government support to meet operational expenses. Furthermore, export oriented units call for government support for export facilitation, infrastructure support and require amendments in regulations to simplify procedures.

Pakistan is facing the brunt of Coronavirus outbreak as the country is in a partial lock down. This has had a negative impact on businesses. Initial estimates show that the economy will witness sluggish growth in services, manufacturing and agriculture sectors, increase in unemployment, decrease in government revenue, decline in exports and disruption in supply chains.

Lockdown across the country is expected to make the situation dire for the estimated 5.2 million enterprises in the country.

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