Consultation session held to address the challenges facing textile and automobile sectors

KARACHI: The SITE Association of Industry, in collaboration with the International Labour Organization (ILO) and the Small & Medium Enterprises Development Authority (SMEDA), recently organized a consultation session aimed at addressing challenges faced by the textile and automobile sectors.

The session focused on identifying key obstacles faced by enterprises and prioritizing incentives to support the formalization of SMEs and their supply chains.

The session offered members a chance to provide feedback on the already identified issues, share practical recommendations and incentives for SMEs and assist in shaping the future national roadmap for the SMEs formalization.

M Naeem Ansari, National Project Coordinator ILO, Syed Nazar Ali, Secretary General EFP, Mukesh Kumar, Deputy General Manager SMEDA and Muhammad Awais, Project Consultant SME Formalization were present in the consultation session.

Welcoming the guests and members to the consultation session, SVP Khalid Riaz of SITE Association of Industry said that many of our member enterprises have, for several years, dutifully contributed to the Sindh Employees’ Social Security Institution (SESSI) and the Employees’ Old-Age Benefits Institution (EOBI), in line with their legal obligations. Enterprises themselves see no return or recognition for their consistent financial input into these national institutions.

We, at the SITE Association, strongly propose that the contributions to SESSI and EOBI should be rationalized with a defined ceiling or cap, especially for SMEs operating on thin profit margins. Our Association has always played a facilitative role on compliance matters. We are ready to deepen this role further, but reforms must go hand in hand with facilitation, he added.

Khalid Riaz further said that formalization cannot succeed through regulation alone, we must ensure it is value-driven. This includes not just simplifying registration and inspection systems but also ensuring that employers who contribute to national institutions like SESSI and EOBI receive visible, timely services in return.

The participants were informed that ILO in coordination with SMEDA is undertaking the development of a National Roadmap for the Formalization of SMEs in Pakistan.

This strategic initiative aims to facilitate the transition of small & medium enterprises from the informal to the formal economy through evidence-based approaches and inclusive stakeholder engagement. The textile and automotive sectors, particularly their export-oriented value chains, are key focus areas of this roadmap.

As part of this initiative, a comprehensive Baseline Study has been conducted to assess the current landscape of informality and analyse value chain dynamics within these sectors. Muhammad Awais, who led this study, presented the key findings of the baseline study insights during the consultation session.

Speaking on this occasion as Former President of EFP, Former Chairman SAI, Majyd Aziz welcomed nomination of ILO representative in Karachi and appreciated SMEDA’s role in promoting SMEs in Pakistan. He said that labour standards and environmental compliances are big challenges for Pakistani businesses. Textiles are our main exports but we remain under buyers’ pressure all the time. Inspection, audit or checking is problematic for the SMEs.

The SMEs should be given assurance for the social safety net by the government. Majyd Aziz suggested the government make 10-15% purchases from the SME sector so that they get orders and automatically come in the formal sector. Speaking about Occupational Safety & Health (OSH), he suggested that large industries should help out SMEs to follow these standards.

Regional Chairman APTPMA Anwar Aziz expressed views on minimum wages and its overall financial impact. He suggested to charge a certain percentage of turnover on all industrial and commercial establishments to provide social cover to each and every labour, either covered or not. He also expressed views on gratuity law.

Former Senior Vice President Abdul Kadir Bilwani, in response to the presentation, said that WHT should be abolished to reduce the burden, the definition of SME need to be revisited, contribution for all social related benefits has to be capped, expressing views on Valika Hospital he suggested the management control to be handed over to SITE along with the contribution share of Site, he strongly voiced the current SME sectors difficulties and burden of taxes.

Secretary General EFP, Syed Nazar Ali said that despite many benefits, people are reluctant to come into the formal sector. Businesses should follow sustainable business practices including climate and social sustainability and economic viability.

President Ahmed Azeem Alvi, Vice President Muhammad Riaz Dhedhi, Azeem Motiwala, Junaid-ur-Rehman, Ahmed Zulfiqar Chaudhry and representatives of textile and automobile sectors were also present in the session. Chairman of Labour sub-committee Muhammad Tahir Goreja proposed a vote of thanks.