Definitions: In this paper it is proposed to use the definition of selfemployed, small scale (2-9 employees), medium scale (10-99 employees) and large scale (100 employees and above) to discuss the issues relating to the Small and Medium Enterprise (SME) sector in Pakistan. The national pension (regulated through the Employees Old Age Benefit Institution Legislation) and health insurance (The Provincial Social Security Institutions Legislation) is applicable to institutions with 10 or more employees and provides a natural cut off point between the small scale and medium and large scale sectors. The cut off between the medium and large scale at 100 workers is also appropriate. Sources: Major sources of data were the: (i) The Census of Establishment 1988; (ii) The Labour Force Survey 91-92; (iii) The Report of the National Manpower Commission 1991; (iv) The Employment and Management Situation in Pakistan (ILO) 1997 and (v) The Economic Survey 1997-98. A large number of other sources were also used as required and these are indicated wherever possible.