IT is no more natural endowments that decide the fate of a country and its people. It is rather the way resources are put to use or competitiveness of an economy that decides its position in the integrated modern world of today. Sustainable development, therefore, depends on the level of productivity and competitiveness in an economy.
A tiny Asian island city state Singapore would not have achieved the status it has compared to countries many times its size, rich in natural resources of wide varieties. Singapore is a country smaller in size to many bigger cities of the world. Karachi is about four times more populated than Singapore, peopled by 4.3 million.
The country has neither land nor drinkable water. It has to import both drinking water and earth from neighbours to quench the thirst of its citizens and to reclaim land to meet the needs of a fast expanding economy.
Singapore is a fascinating example of how sincerity of purpose, focused effort and effective planning can work wonders. It invested in its people and coastline and developed into one of the most business-friendly economies, housing offices of several thousand multinationals and overseas businesses.
It handles more than 20 per cent of containerised world cargo. The country is clean and green with enviable living standards. In the business world it is regarded as an efficient, peaceful and predictable country that serves as an excellent gateway to the world for trade.
Singapore was ranked fifth as one of the most competitive economies in league with US, Sweden, Switzerland and Denmark. And one significant reason for it is that its hunt for talents is worldwide. Singapore’s Ministry of Manpower runs an international talent department.
Pakistan stood at 91st position in the current Global Competitiveness Report released by the World Economic Forum among 125 countries surveyed. India was ranked 43rd, Sri Lanka 79th.
The nine factors that were taken into account by the World Economic Forum to asses the competitiveness are: institutions, infrastructure, macro-economy, health and primary education and training, market efficiency, technological readiness, business sophistication and innovation.
Does this low ranking of Pakistan matters when it is growing at rates comparable to Asian giants— India and China? Before attempting to answer this question, it would be appropriate to define competitiveness.
There are several ways to understand competitiveness but in essence at macro level it is determined by the level of productivity, that is, returns to capital from investment. Logically productive economies are far more likely to create wealthy countries.
Professor Micheal Enright, director of the Competitiveness Programme at the Hong Kong Institute of Economics and Business Strategy, defines it for firms as the ability to succeed against competitors in ways that lead to higher profits. At macro level, he says, that it is the ability of a nation to support productivity that allows a high and rising standard of living. This involves competitiveness in a sufficient range of firms and industries to foster economic growth and development, he says.
In the light of this definition low ranking of Pakistan indicates that businesses and most industries at the micro level are less productive and therefore cannot compete with their counterparts in the global market. Implying that return on per dollar of capital per unit of labour is lower than in most other countries. This certainly is a dismal situation and should ring the alarm for both public and private sector.
It was only after much of the petty business was wiped out from local market as a result of influx of cheap imports from China and increasing threat to exportable surpluses from competitors that the issue of productivity popped up on the development agenda of the government. Cynics, however, feel that the issue was taken up because of external pressure. They feel the government was sensitised by the western nations who need competitive trading partners in the developing world to support their economies.
Whatever the inspiration be, the government did create a company— National Productivity Organization in 2003 under the ministry of industry and production. Though three and a half years later, the company is still without a CEO, it is said to be acting as a think tank to identify factors leading to low productivity.
The NPO collaborates with other private bodies such as Pakistan Business Forum to address the issue. Kamran Rasool, secretary ministry of industry and production admitted that the situation is not gratifying and the country has a long way to go before our industry and businesses can respond in a befitting fashion to the challenges of a dynamic international market. He felt that NPO will have to be made effective with sufficient budget to assist industry in training manpower and achieving sophistication.
A senior source in Islamabad told Dawn that so far the NPO has trained 22,000 people from management to shop floor cadres. The company is also said to be working to evolve benchmarking facilities for different categories of firms. A study was conducted for the spinning industry. Currently, the organisation is said to be working on a project to promote energy efficiency in industries.
Another company, Competitiveness Support Fund (CSF) has been launched this year in collaboration with USAID with $20 million seed money. An insider told Dawn that company was initially placed under the ministry of industry. However, donors on more comfortable terms with the ministry of finance got the CFS placed under this ministry to suit their interests.
When confronted the CEO of competitiveness support fund Arthur Bayhan told Dawn from Islamabad that they favoured placement of the CSF under ministry of finance as it is the core ministry compared to the ministry of industry which is a side ministry.
“Competitiveness is a cross cutting subject much wider than the scope of a side ministry catering to one specific area of the economy”. He said that a study identified a gap in Pakistan’s efforts to become more competitive: it lacks a vehicle to finance and promote innovation. The CSF, he said is designed to address this gap.
He told Dawn that his company has identified four industries: motorcycle, food processing, fishery and automobile sectors where Pakistan has a comparative advantage. The CSF has decided to assist to improve competitiveness in these sectors.
An effort will be made to commercialise research at the academic institutions and develop linkages between universities and industry. The CFS also plans to create business incubators to get knowledge based industry promoted, he said.
Chaudhry Mohammed Saeed, President the Federation of Pakistan Chamber of Commerce and Industry was skeptical as he does not see any focus on research and development in private or the public sector.
“Who does not know that six per cent R&D duty concession offered to the textile sector is not directed to research. It is a subsidy to exporters to compete internationally”. For all the BMR in the textile sector it is still not in a position to compete without government support internationally, Saeed said.
The head of the apex private sector representative body pointed out that well positioned vested interest does not want promotion of innovative practices for petty gains. He quoted the example of powerful lobby of pesticides importers who assure that disease resistant seeds are not made available to growers for their business to thrive even if it costs dearly to the country.
Saeed accepted that the private sector has yet to realise the worth of research and development in promotion of their business in the long-run. “We want immediate returns whereas research is a long drawn process. R&D is not a part of our culture. Till the time we understand and appreciate the role of innovation in successful business operation we will continue to drag” he said.
Independent analysts saw the issue of competitiveness more of a political than an economic subject linked directly to investor perception of stability of the country. “When the mindset of the elite is to keep dual nationality to move out of the country with their assets at the first sign of political upheaval who in the right mind would invest in research?” an analyst posed a question. Given an option, investors prefer short-term investment in capital market or properties or at best in a trading venture where money rolls back in months.
This adds up to the sad reality that the despite all pomp and show, the growth bubble can bust anytime. For a long-term sustainable development, the government will need to improve the competitiveness by investing in most dependable asset of the country, its people. It will need to create institutions but above all it needs sincerity of purpose to climb up the said index.
IT is no more natural endowments that decide the fate of a country and its people. It is rather the way resources are put to use or competitiveness of an economy that decides its position in the integrated modern world of today. Sustainable development, therefore, depends on the level of productivity and competitiveness in an economy.
