Consultation Session Addresses Challenges in Textile and Automobile Sectors

The SITE Association of Industry, in collaboration with the International Labour Organization (ILO) and the Small & Medium Enterprises Development Authority (SMEDA), recently convened a consultation session to tackle the problems encountered by the textile and automotive industries.

The primary focus of the session was to pinpoint significant challenges confronting businesses and prioritize incentives aimed at bolstering the formalization of SMEs and their respective supply chains.

Participants were given an opportunity to comment on previously identified issues, provide actionable recommendations and incentives for SMEs, and contribute to the creation of a future national strategy for SME formalization.

M Naeem Ansari from ILO, Syed Nazar Ali from EFP, Mukesh Kumar from SMEDA, and Muhammad Awais, a SME Formalization Project Consultant, were all present during the consultation.

SVP Khalid Riaz of SITE Association of Industry welcomed the attendees, noting that numerous member enterprises have consistently contributed to the Sindh Employees’ Social Security Institution (SESSI) and the Employees’ Old-Age Benefits Institution (EOBI) for years, as required by law. However, these enterprises perceive no benefits or acknowledgment for their ongoing financial contributions to these national organizations.

The SITE Association suggests that SESSI and EOBI contributions should be streamlined with a clear upper limit, particularly for SMEs that operate with narrow profit margins. Riaz emphasized the association’s commitment to facilitating compliance and advocated for reforms that are accompanied by support.

Riaz further elaborated that formalization requires a value-driven approach, extending beyond simple regulations to ensure that employers who contribute to SESSI and EOBI receive prompt and tangible services.

Attendees learned that ILO, in partnership with SMEDA, is developing a National Roadmap for the Formalization of SMEs in Pakistan. This initiative seeks to facilitate the transition of SMEs from the informal to the formal economy through inclusive stakeholder engagement and evidence-based methods, with a focus on the export-oriented value chains within the textile and automotive sectors.

A comprehensive Baseline Study was undertaken to evaluate the current state of informality and examine value chain dynamics within these sectors. Muhammad Awais presented the study’s key insights during the session.

Majyd Aziz, former President of EFP and former Chairman of SAI, lauded the appointment of an ILO representative in Karachi and acknowledged SMEDA’s role in supporting SMEs in Pakistan. He pointed out that Pakistani businesses face significant challenges related to labor standards and environmental compliance, especially in the textile industry, which is subject to constant pressure from buyers. He noted that inspections and audits pose difficulties for SMEs.

Aziz proposed that the government should offer a social safety net to SMEs and allocate 10-15% of its purchases from the SME sector to encourage formalization. Regarding Occupational Safety & Health (OSH), he recommended that larger industries assist SMEs in adhering to these standards.

Anwar Aziz, Regional Chairman of APTPMA, shared his perspectives on minimum wages and their financial implications. He proposed levying a percentage of turnover on all industrial and commercial establishments to ensure social security coverage for all workers. He also commented on gratuity regulations.

Abdul Kadir Bilwani, former Senior Vice President, suggested eliminating WHT to reduce financial strain, revisiting the SME definition, and capping contributions for social benefits. He also advocated for transferring the management of Valika Hospital to SITE, along with its corresponding contribution share, highlighting the current difficulties and tax burden faced by SMEs.

Syed Nazar Ali, Secretary General of EFP, noted that many are hesitant to join the formal sector, despite its numerous advantages. He urged businesses to adopt sustainable practices that encompass climate, social sustainability, and economic viability.

President Ahmed Azeem Alvi, Vice President Muhammad Riaz Dhedhi, Azeem Motiwala, Junaid-ur-Rehman, Ahmed Zulfiqar Chaudhry, and representatives from the textile and automobile sectors were also in attendance. Muhammad Tahir Goreja, Chairman of the Labour sub-committee, gave the closing remarks.