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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
JUNE 2011
VOL 3, NO 2
6.1 Change of Government Adversely Affect Industrial Policies
In Pakistan, we are having the problem of system instability which directly hitting the economic
policies of the country. But specially the SMEs are vulnerable to such change, because, the large
industries are having some protection in the form of political shelter, while the SMEs are
organized by the lower/middle class of society that are having no proper shelter from the
political system of the country.
Economic policy distortions including over-regulation, price interventions affecting both outputs
and inputs, high tax rates and poor tax administration, trade restrictions, poor credit accessibility
and inadequate infrastructure are adversely affecting the industrial policies.
6.2 Unpredictable and Depress Market Conditions
Local market are suffered from the state unpredictable policies implementation on one side,
while on the other side, the foreign goods/smuggled goods are freely coming in the markets that
dark the future of the local market. Today, market forces were allowed to promote industrial
production, commerce, banking, insurance, shipping etc. clustered in certain localities and
regions, leaving the rest of the country in a state of backwardness. Disparities between the
regions widened the capital and labor flow from the backward to the relatively more developed
regions.
6.3 Physical Hindrances to the SMEs in Khyber Pakhtunkhwa
Following are the primary reasons causing physical hindrances in growth of SMEs in Khyber
Pakhtunkhwa:
a) Private sector development in industrial and mineral sector remained minimal till
1980s.
b) Khyber Pakhtunkhwa suffered from location, financial, technical, skilled manpower
and infrastructure setbacks.
c) Entrepreneurial culture and experience is virtually non-existent.
d) Subsistence agriculture approach could not absorb higher population growth, which
led to unemployment and poverty.
e) Khyber Pakhtunkhwa is landlocked and is over a thousand miles away from Karachi
sea port. As it is highly dependent on the south for both of its inputs, raw materials
and markets, higher transportation costs make it difficult for Khyber Pakhtunkhwa
industry to compete.
6.4 Impact of Incentive Packages withdrawal by the Government
From time to time, the Governments of Pakistan, announcing different packages for the
development of the area. For example, Gadoon Free Industrial Zone, for ten years tax free zones.
Such type of Fiscal and monetary incentives had been allowed to the investor’s of Khyber
Pakhtunkhwa. Along with other backward areas of the country which included the following:
a) Income Tax holiday.
b) Exemption of custom duties on the import of machinery.
c) Sales Tax exemption.
COPY RIGHT © 2011 Institute of Interdisciplinary Business Research 277