Islamabad, Pakistan: The International Labour Organization (ILO), in partnership with the Small and Medium Enterprises Development Authority (SMEDA), has launched a significant initiative aimed at facilitating the transition to formal enterprises for small and medium-sized enterprises (SMEs) and home-based workers in Pakistan. This project, titled “Facilitating the Transition to Formal Enterprises for Small and Medium-sized Enterprises (SMEs) and Home-Based Workers in Pakistan,” seeks to create a comprehensive roadmap for regulatory changes and process simplification to promote enterprise formalization.
According to United Nations Pakistan, the initiative will engage with major enterprises in the textile and automotive sectors to develop tools that encourage their suppliers to formalize operations. Additionally, the project will offer capacity-building opportunities to help suppliers adapt to market changes driven by digitalization and the just transition.
The launch event of the project saw participation from representatives of federal and provincial governments, chambers of commerce, SME representatives, the private sector, and the International Trade Center. The event provided a platform to identify the key bottlenecks that the project aims to address and foster collaboration among various agencies to support enterprise formalization.
Pakistan’s informal economy poses challenges for SMEs, with many operating without market access, finance, or the capability to provide workers with social protection and essential labor rights. Studies by ILO and SMEDA highlight that while formalization can be initially cumbersome and costly for businesses, it offers long-term benefits that many enterprises struggle to access independently.
Geir Tonstol, Country Director of ILO Pakistan, emphasized the importance of addressing informality, stating that it presents both opportunities and significant obstacles. “This project is built to support the transition to formal employment for SMEs and home-based workers, aligning with Pakistan’s aspirations for sustainable development, global competitiveness, and environmental responsibility,” he said.
Socrat Aman Rana, Chief Executive Officer of SMEDA, remarked, “SMEDA is actively pursuing the agenda of enterprise formalization in Pakistan. The collaboration with ILO on the Enterprise Formalization Project is a crucial initiative aimed at strengthening Pakistan’s economy by formalizing the country’s informal SME sector.” He also highlighted the collective commitment of SMEDA, ILO, and the Ministry of Industries and Production towards fostering a sustainable and inclusive economy.