THE goal of an entrepreneur setting up an industrial or commercial enterprise is to earn profit and grow his business. He requires a congenial environment to conduct his business to achieve his objective. Unfortunately, figures available regarding the business climate in Pakistan, and the bottlenecks and barriers in the way of productivity are not encouraging.

Pakistan is ranked as the second least-efficient country on The Economist’s Intelligence Unit’s Creative Productivity Index. Among the 24 Asian economies, Pakistan is ranked 23rd when it comes to measuring efficiency in converting inputs to outputs — after Bangladesh, Fiji and Myanmar. The Creative Productivity Index takes into account six key elements that determine the efficiency of any country to become competitive: human capital, infrastructure, competition, firm dynamics, financial institutions and governance.

In terms of human capital, Pakistan secured the lowest ranking, with the education system being out of reach for low-income groups. As for infrastructure and competition, Pakistan ranks at 20th position. Snags in the regulatory mechanism, high entry barriers, and low productivity of state-owned enterprises, have been attributed as key reasons behind the unfit competitive positioning of the country.

Ease of doing business needs improvement.

In 2015, a World Bank Group flagship report was issued, comparing business regulations for domestic firms in 189 countries and showing Pakistan’s and comparative economies’ rankings on their ‘ease of doing business’. Pakistan’s ranking, at 128, is ahead of India’s 142 and Bangladesh’s 173. However, compared to GDP growth for the same period, Pakistan lags behind at 2.6, against India at 6.0 and Bangladesh at 4.8. Why does Pakistan lose advantage against the two countries when compared with their GDP growth? Due to low productivity.

Once business is started, the Pakistani entrepreneur faces difficulties in the availability of electricity, gas and water; corruption handling; markets’ accessibility; hostile environments; and dealing with laws that impede smooth operations. Issues which affect output adversely are:

(a) Lack of education, skills training, proper planning and discipline.

(b) Behavioural issues such as employee absenteeism. These affect an organisation in several ways; the reasons for these might include excessive absenteeism due to social, economic, family or medical reasons; because work is perceived as dull, unrewarding, stressful or hazardous; or due to a dysfunctional supervisor-worker relationship.

(c) The environment may not be conducive to rewarding good performers and charting out further development plans for them.

(d) Wages are not linked with productivity improvement and do not distinguish between performing and non-performing employees.

(e) Changes brought about in labour laws since the 18th Amendment have not contributed to an increase in productivity. In fact, they have created uncertainty among employers of trans-provincial organisations.

To counter such challenges, one of the government’s priorities should be the building a firm education system, focusing mainly on primary and secondary schooling. It is also high time that the government fixed loopholes to make better use of the country’s resources and deploy technological solutions to social issues. There should be some coordination among respective provincial governments in order to not create disparities in labour laws, which may generate employee dissatisfaction and adversely affect organisational output.

Improving employees’ skills and changing management styles through aggressive training and development programmes will go a long way towards overcoming the malaise of low productivity. The agricultural sector needs to be brought within the ambit of labour laws in order to boost rural economy and uplift the living standards of people engaged in this sector. This matter is also the top priority of the International Labour Orga­ni­sation’s Decent Work Programme for Pakistan.

In furtherance of the ILO’s programme, appropriate and com­pre­hensive leg­­islation for the inclusion of informal vulnerable workers’ groups, such as domestic and home-based workers, into the formal economy must be in place. Once included in the formal economy, the responsibility of providing them with social security and insurance — ie the old-age security — should rest with the government rather than increasing the liabilities of employers. This will be one of the better utilisations of the huge social development funds at the government’s disposal.

According to Roberto Azevedo, director general of the World Trade Organisation, Pakistan can only reap benefits from the physical infrastructure of the China-Pakistan Economic Corridor if it enacts efficient business-friendly rules, regulations and procedure at the borders. Unless the aforementioned challenges are given priority and addressed, it will not be possible to improve Pakistan’s business environment.

The government’s focus, therefore, should be on capacity building of human resources and institutions so that regional integration is expedited as much as possible and business output can boost the economy.

The writer is an industrial relations professional.

Published in Dawn, June 29th, 2016