Why Pakistan runs low on productivity

Updated January 13, 2020

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An improvement in productivity is at the heart of development. The future of countries where productivity levels are falling is certainly compromised. — Reuters/File
An improvement in productivity is at the heart of development. The future of countries where productivity levels are falling is certainly compromised. — Reuters/File

AN improvement in productivity is at the heart of development. The future of countries where productivity levels are falling is certainly compromised.

Sadly, Pakistan is lagging behind other competing nations as it did not strategise for this key quotient that has a direct bearing on growth and its quality, sustainability and living standards.

The asymmetric distribution of resources, the capture of state power by parasitic elements, the culture of patronage and greed, the perpetuation of the idea of shortcuts to success instead of perseverance and tireless effort and the aversion to scientific approach may also have contributed to the sorry outcome.

It is a known fact that there are massive wastages in farms, factories and service stations as a significant percentage of the population lives in subhuman conditions devoid of economic opportunities.

Focused on political survival, successive governments have been experimenting with ad hoc, quick fixes in the economy. The work by the government on containing wastages of valuable resources in men and material to improve economic efficiency has yet to start. Private operators in agriculture, industrial and services sectors share the blame for short-sightedness that is costing the country and its people dearly.

Per-worker labour productivity in the country grew 1.4pc annually between 2000 and 2017 as opposed to 3.9pc in Bangladesh, 5.8pc in India and 8.5pc in China

It is ironic that a founding member of 58-year-old Asian Productivity Organisation (launched in 1961) fares so badly. Pakistan’s track record on the productivity scale is pathetic.

Abdul Razak Dawood, premier’s adviser for commerce, textile, industry and production, expressed concern when reached for his comments on the issue. Without explaining the lack of action in the past, he claimed the current government is not just alive to the issue but is also set to make corrections to create a more conducive environment to address the issue of productivity shortfalls across the economy.

In a recorded message to Dawn, he reasoned: “Attention towards improving productivity happens when the regime of subsidies and other concessions starts to come down or (is) removed altogether. Since in Pakistan the private sector leans on the government, it did not pay attention to improving productivity and achieving competitiveness.

“In the coming years, that is exactly what we intend to do. We will withdraw subsidies and automatically the focus of the businesses will shift on scaling up the productivity”.

He believed that low productivity was not just an outcome of the lack of attention: it is a problem of rationalising the cost of production. “We are not a country that is conscious of productivity. It requires a big change in our culture and the way we conduct our business,” he said.

In an exclusive note to Dawn, the National Productivity Organisation (NPO) made a case for launching a nationwide productivity movement to expand the economy and compete in the international market. Earlier, NPO CEO Muhammad Alamgir Chaudhry told Dawn the current pathetic situation warrants that the issue be taken up as a national cause like Japan, Singapore and India did.

The note confirmed that the productivity graph of the country has been moving southwards from an already low base. In the absence of a local source, NPO mentioned some regional and global studies, including the Global Competitiveness Report 2020. The report ranked Pakistan 110th in 2019, sliding three steps in a year. In 2018, it was 107th in 140 countries assessed.

According to APO’s Productivity Databook 2019, productivity in Pakistan, a founding member, is lower than other countries. It grew at the annual rate of 1.4 per cent in Pakistan from 2000 to 2017 as opposed to 3.9pc in Bangladesh, 5.8pc in India and 8.5pc in China.

The NPO response attributed the shrinking share of the primary sector in GDP and slow exports to depressed productivity levels. The contribution of industrial and agriculture sectors declined from 21pc and 19pc in 2017-18 to 20.3pc and 18.5pc in 2018-19. Exports have also been stagnant for want of innovation, sophistication and a growing per-unit cost.

After making significant strides, experts in the developed world are thinking about making the definition of productivity more comprehensive by integrating the gains of digital services in the concept.

In Pakistan, however, a majority in public and private sectors lacks clarity on the very basics and tends to confuse it with production.

Productivity is a measure of the efficiency of production and value addition. Technically speaking, it is a ratio of output to input where inputs include man, machine, material and method and the output is expressed in quality, quantity, value and sales. A larger ratio of the output volume to the input volume denotes higher productivity.

Employers Federation of Pakistan President Majyd Aziz told Dawn by phone from Islamabad that both the government and the private sector share the responsibility for low productivity rampant across all sectors, including agriculture.

Talking about the short-sightedness of the corporate sector, he said businesses generally tend not to invest in innovation and skill-enhancing training of its workforce. “When a company wants to scale up production, it prefers to get more machines instead of maximising the potential of its current setup,” he said.

Published in Dawn, The Business and Finance Weekly, January 13th, 2020