The economic performance of the two Asiatic countries in the second half of the 20th century makes a glaring contrast. The two countries are, Singapore and Pakistan. Singapore is a small country which comprises of the main Island and 60 other islets with the total area of 622 square km.

It has a total population of four million which generates a gross domestic output of $100 billion. However, Singapore exports goods worth $140 billion annually through a built-in system of seaport value addition and re-exports. Pakistan as compared to Singapore is a much larger country with a total area of 796,100 square km and a large population of 145 million. However this large population produces an annual GDP of $65 billion out of which goods worth $9 billion are exported. With the employed labour force being 38.3 million in the case of Pakistan and 2.5 million in the case of Singapore, the average productivities of labour in Pakistan and Singapore come to be about $1700 and $ 40,000 respectively. In other words, the average productivity of a worker in Singapore is 24 times the average productivity per worker in Pakistan. The absolutely large gap in the average output per worker in the two countries depicts a significant productivity paradox. The growth economists over time have developed plausible theories of development and productivity which could help explain this vast gap in the per worker outputs of the two countries. If one was to focus only on economic factors, ignoring the non-economic factors for the time being, the well-known theory of “ vicious circle of growth” could provide a good starting point.

In the case of Pakistan, the extremely low level of per capita income causes in sequence a low level of saving, a low level of investment, a low level of capital formation and finally a low rate of economic growth. This in turn forces a low level of output and a low level of productivity per worker. The productivity and growth are therefore caught in a reinforcing vicious circle.

The vicious circle theory however, being too general misses the critical link between the important economic variables and between economic stake-holders as the country moves from one stage of growth to another following the Rostowian paradigm. In this case study of Pakistan and Singapore, the diagnostics of growth and productivity offered by the Rostow are quite relevant for explaining the productivity paradox.

The most significant prerequisites identified by Rostow for reaching a take-off stage include the rapid expansion of new industries, reinvestment of a large proportion of profits into new plants and the expansion of the new entrepreneurial class. These elements combine together to create a “modern industrial sector” in the economy, which becomes the prime mover of the economic growth as it helps in introducing new techniques of production in agriculture as well as industry. Unfortunately, these prerequisites of sustainable growth and productivity have not been created in Pakistan during the last 55 years of its history. As a consequence, Pakistan remains without a “modern industrial sector” even today which clearly reflect upon its “structural” under-development.

The predominant mode of production in the economy of Pakistan continues to remain agricultural and feudalistic. The agriculture sector contributes about one-fourth to the GDP while industrial sector comprising manufacturing, mining, construction and electricity and gas distribution contributes another one fourth and the remaining one half is the share of services sector.

The feudalistic structure of the economy is inherently static, inefficient and inequitable, with the result that it does not allow the full potential of productivity to be realized. For that reason, most of countries which have made rapid progress economically, have done away with the feudalism through sweeping land reforms.

In the case of Singapore, industry and services sector respectively contribute 35 per cent and 65 per cent to GDP with agriculture virtually having no share in the national output. With the non-existence of the agricultural-cum-feudalistic mode of production, Singapore represents a modern industrial and entrepreneurial model economy oriented towards high levels growth and productivity.

For Pakistan, the outcome of the agricultural sector primarily determines the growth performance of the economy. The growth rate of the agricultural sector by and large is determined by the growth performance of the four major crops namely cotton, wheat, rice and sugar-cane. Within these four crops, cotton carries an exceptionally high weight in determining the growth rate of the agricultural sector and of the economy as a whole.

Paradoxically, however, the agricultural productivity remains extremely low in Pakistan by world standards. At $1995, the agricultural productivity for Pakistan for the period 1997-99 has been estimated at $626 which compares most unfavourably with the productivity in the agricultural sector achieved by the developed industrialized countries such as Sweden ( $ 34,285 ), UK ( $34,730 ), France ( $50,171 ) and Japan ( $30,620 ) etc.

This brings us to the differentials in the level of human development, which are assigned immense importance in explaining the wide gaps in productivity per capita across countries. Out of 173 countries ranked in terms of Human Development Index (HDI) in the UNDP Report on Human Development for the year 2002, Singapore is placed at 25 with Norway, Sweden and Canada holding the first three top positions in that very order. The HDI which is an indicator of a country’s achievements in terms of life expectancy, educational attainments and real per capita income, places Pakistan at 138, a place far too below that of Singapore with a difference of 113 places. The large gap in human development partially explains the wide differences in the per capita productivity of the two countries.

Propelled by its high levels of human development, Singapore has registered an average annual growth rate in GDP of 7.8 per cent during the ten-year period of 1990-2000 against Pakistan’s 3.7 per cent for this decade. Singapore has kept an investment/GDP ratio of 31 per cent against Pakistan’s 15 per cent. Life expectancy for Singapore is 78 against Pakistan’s 63 while the mortality rate per 1000 births is estimated at four for Singapore against Pakistan’s 126. The literacy rate for Singapore is 92 percent against Pakistan’s 45 per cent. These vital data about the basic economic conditions of Singapore and Pakistan provide a basic clue to the difference in their national productivity levels.

Technology is development. This axiomatic statement embodies and explains the role of technology as a major source of the phenomenal growth performance of Singapore during the last three decades. Lack of technology means a state of perennial under-development. That explains why Pakistan despite its planned growth of the last five and half decades has not been able to build even the “pre-conditions of take-off”.

As Pakistan did not lay any foundations of technology at the initial stage of its development, it deprived itself of a viable industrial base. Without a technological-cum-industrial base, the economy of Pakistan could not move along the path of self-sustaining growth. As a corollary, the full potential of growth and productivity could not be exploited and the productivity frontiers of Pakistan could not shift outwards. Growth and productivity therefore remained stinted in case of Pakistan. The critical role of technology as a source of economic growth has been well established by the actual growth experience of advanced countries. The developed countries are correctly identified as industrial countries because technology, industrial growth and productivity have moved in harmony in a synchronized rhythm, continuously moving outwards their production possibilities curves. In case of the US, for example, Professor Edward F. Denison established that from 1929 to 1982, the total output of the US grew by 3.2 per cent annually and more than half of this growth was attributable to improvement in the technological and management capabilities while the other half was due to additional factor inputs namely labour ( 34 per cent ) and capital (17 per cent).

Historically, Pakistan’s GDP growth has been entirely due to factor accumulation while the share of total factor productivity ( TFP ) has been negligible. Since total factor productivity is synonymous with the gains from technological advancement, it establishes that technologically Pakistan belong to the category of world’s countries most backward. One need not be surprised therefore, to discover that the technology content of Pakistan’s exports has been estimated to be zero percent while for Singapore it is 66 per cent which is highest in the world.

(The author is Joint Chief Economist {Macro} in the Planning Commission. The views expressed are personal to the author and do not represent his employing agency.)