March 19, 2007	Monday	Safar 29, 1428

FAR be it for the writer to comment on the power of the presidency or the sublime status of the highest pillar of the judiciary. But one cannot but draw the conclusion that the unsavoury row between the two, have cast a dark shadow on the perception that outside world may hold about how things are handled in this country.

The question inevitably leads to the institutional autonomy. Who would deny that improving corporate governance and protecting the independence of judicial system are crucial to advance Pakistan’s competitiveness?

Business leaders prefer to keep themselves aloof from the sordid affair. As a general rule, they fail to see the link between issues related to the judicial system and the prospects of the industrial/commercial activity in the country. Majyd Aziz, President Karachi Chamber of Commerce and Industry said he did not see the act of President Musharraf or reaction of brother lawyers of the Chief Justice to have a major impact on trade and industry.

“We are more concerned about the rising cost of doing business in the country which is making us uncompetitive both in domestic and international market”, he said and added that the current political situation would go on to cast its shadow on trade and business if the protests by lawyers spill over and cause disruptions in the chain of production or marketing.

A business tycoon, on condition of anonymity, told Dawn that as a class, business people were overwhelmingly opposed to any move that might lead to weakening of the current set up. “The reason is that we find it more receptive to our demands”. It might cause a little heart burn to the leaders in politics, but several industrialists and businessmen categorically said that they prefer military rule over a democratic set up for they do not have fond memories of the democratic pauses in the country. “The fact is that dictatorships provide a more stable economic environment conducive for promotion of businesses”, a top notch business leader told Dawn.

“I am concerned that the current clash could delay the reforms of corporate dispute resolution framework in our judicial system. It is a key area of concern for international investors and local businesses exploring joint projects with partners overseas, who are keenly waiting for development on this front”, Chaudhry Saeed ex-president FPCCI told Dawn over telephone from Kashmir.

Though the private sector representatives seem preoccupied with their more immediate business concerns, stakes are high for a country struggling to climb the index of international competitiveness by removing snags and improving productivity at the micro level.

The first ever country report “The State of Pakistan’s Competitiveness 2007” launched by the government last week confirms that weak institutionalisation and mismatch of judicial framework to the demands of a developing economy are areas that need improvement before higher level of competitiveness is achieved.

The report produced by the Competitive Support Fund (CSF), a joint project of USAID and ministry of finance, government of Pakistan, has borrowed the criteria practiced by the World Economic Forum (WEF) for assessing economies.

The competitiveness has been defined by the forum as “the degree to which, under open market conditions, a country can produce goods and services that meet the test of foreign competition while simultaneously maintaining and expanding domestic real income”.

The low ranking of Pakistan at 91st on World Economic Forum’s Global Competitive Index (which included 125 nations from across the world), despite the country’s high GDP growth, exposes the soft belly of our economy. What does it portray? It demonstrates the weaknesses in the quality of growth. It brings into question the sustainability of the growth trend. It also indicates that the performance of the economy is much below its real potential.

According to WEF assessment, Pakistan fared comparatively better on business related indicators but performance was weak in areas related to social and institutional development that carried more weight in the index for the country. The current Global Competitive Index rests on what WEF calls nine pillars of competitiveness. These are: i) institutions, ii) infrastructure, iii) macroeconomy, iv) health and primary education, v)higher education and training, vi) market efficiency, vii) technical readiness, viii) business sophistication, ix)innovation.

All countries surveyed and assessed were categorised in one of the three stages according to GDP per capita. Those included: a) Factor-driven stage ($2,000 GDP per capita) where firms compete in prices taking advantage of cheap factors, b) Efficiency-driven stage ($3,000_9,000) where efficient production practices are applied to increase productivity, c)innovation-driven stage ($17,000 and above) where economies are needed to produce innovative products using sophisticated production methods.

Pakistan, with $2,225 GDP per capita, falls in the category of factor-driven economy. In this category first four pillars carry weightage of around 50 per cent. In those areas, Pakistan’s performance was found to be weakest. That also explains why the country could not fare well on the index.

There is a possibility discussed in Pakistan Competitiveness Report 07 that WEF used stale figures that led to lower than expected ranking. However a closer study of the methodology and criteria shows that while improving the quality of economic data will not only be useful for overseas economic monitors but could also improve the quality of economic planning. Broadly speaking, the placement of the country on competitive index does not seem to be totally misplaced. The CSF report can most certainly serve- if nothing else- to improve understanding of the multi -layered economy of the country, crucial for better utilisation of country’s potential for the benefit of the people and to improve country’s ranking on the index of prestigious Global Competitive Report. This would surely be a good omen in attracting more foreign direct investment that the expanding economy needs. It is all too important to bridge the gap between capital deficit and rate of investment required to sustain the trend of robust growth.