ISLAMABAD: A new World Bank report says that aggregate productivity in Pakistan has been stagnant or declining during the past decade, mostly driven by firms and farms becoming less productive over time.
The World Bank report, titled “From Swimming in Sand to High and Sustainable Growth” focuses on growth in Pakistan, and key aspects of its proximate determinants: productivity, capital and talent accumulation.
The report released on Wednesday, also called ‘Pakistan’s Country Economic Memorandum 2022’, has been prepared under the guidance of World Bank Country Director in Pakistan, Najy Benhassine.
The Covid-19 pandemic exacerbated the decline in firms’ productivity, with a contraction of 23 per cent in 2020.
Productivity declines are seen across different types of firms located in different parts of the country, though stronger contractions can be identified for family-owned firms.
In the agriculture sector, focusing on Pakistan’s main crops, while yields have grown over the past decades, this has been due to more intensive use of inputs.
At the same time, total factor productivity has been falling for most crops, although, in this case, with provincial heterogeneity: Punjab and Sindh have been relatively good performers, compared with Khyber Pakhtunkhwa or Balochistan.
Allocative efficiency gains — visible in the reallocation of resources away from low-productivity and into high-productivity firms — have not been strong enough to compensate for declining within-firm productivity.
In agriculture, the analysis of farms in Punjab shows instead systematic allocative efficiency losses over the period, with resources flowing from high to low-productivity farms.
Published in Dawn, October 14th, 2022