ISLAMABAD, July 25: Pakistan’s competitive rankings are stagnating, rather than improving, and the new government faces new economic challenges which have far-reaching implications for poverty reduction, fiscal and trade balances, inflation and economic growth, says annual report of the Competitive Support Fund.

Pakistan’s business competitiveness index (BCI), which captures firm level strategy and operations, registered a decline of 15 positions from last year, from 64th to 79th position, says the 2008 CSF report released here on Friday.

The report says that Pakistan is among the lowest one-third countries in global competitive ranking as it ranked 92nd out of 131 countries in the latest Global Competitive Index (GCI).

In a globalised economy, competitiveness is the key to Pakistan’s future prosperity but its ranking shows that much work remains to be done to achieve this.

These performance rankings are mirrored by the struggles being faced by many of its key export industries, such as apparel and textile, sports goods and surgical instruments, the report said.

The report said Pakistan’s scores were quite low at 107th and 108th place on a scale and were “influenced by very poor performance related to human resources: primary education, higher education and training and labour market efficiency.” This indicates the need to focus priority attention on workforce development. This focus will have the benefit of boosting incomes for the average worker while better productivity will provide benefits to Pakistani industries.

It said there is a growing perception that business competitiveness at the firm level has been getting worse in Pakistan as showed by a sharp decline in scores for 2007-08. Pakistani companies are finding it increasingly difficult to compete as industries in other countries continue to improve their competitiveness. The same Pakistani companies facing stiffer economic competition may now be more aware of their true competitive position – affecting a more realistic self-scoring than in previous years.

“And there may indeed have been a falling off in the underlying competitiveness as represented by loss of orders, market share and profitability. There was also a significant decline in good market efficiency scores, indicating that market force may not be fully at work.”

The report said business environment still limited the performance of firms. The increasingly unreliable electricity supply, a weak judicial system and the lack of world-class commercial courts are among the areas highlighted in the report, saying improvements in the business environment were needed at the federal, provincial and local levels.

The report said that Pakistan was not competitive in cost, quality and product differentiation. Although improvements have been made in the service and financial industries and in areas of the government, the country has fared poorly compared with its neighbours in key areas, such as provision of health and education services, in the development of a modern infrastructure and in the cost of doing business.