KARACHI, May 29 The national budget 2004-2005 may come out with a skill development policy to improve labour productivity, which, many consider, is among the lowest in the region and discourages investment.

Researchers say that there is no ready data available on labour productivity. But it is widely acknowledged that there is a mismatch between skills churned out by educational institutions and the requirements of industry to produce quality goods at competitive prices.

Sources here said that the Planning Commission is working on a training and development policy designed to meet industry's need for vocational and technical skills. Finance Minister Shaukat Aziz has indicated that the next national budget may provide for investment/incentives for skill development. It is reckoned that a training development fund may be created for this purpose as is the practice in some developed economies.

Zarrar R. Zubair, director, Pakistan Institute of Management, says that it is the quality of human capital, which to a large extent, determines the pace of economic development.

Speaking at a recent MAP seminar he quoted from the World Bank Human Development Report 1999: The real wealth of a nation is its people. This simple but powerful truth is often forgotten in the pursuit of material and financial wealth. Not a single country has succeeded in moving towards balanced development without first investing in human capital.

Quoting World Bank figures Zarrar Zubair listed three main components of economic growth. The contribution of the three factors to growth are: Human capital 64 per cent, physical capital 16 per cent and natural capital 20 per cent.

The skills of a nation's work force and the quality of its infrastructure are what makes it unique and uniquely attractive for the world economy, say leading economists.In developed countries like Germany, skills development is subsidized. Many governments finance upgradation of technical education and skills. Pakistan lacks adequate infrastructure for development of human capital. The standard of vocational and technical education has deteriorated. Not enough technical schools are functioning properly.

As the trend to acquire cheapest possible contract labour is gaining ground, the scope for training of workers to improve skills and raise productivity is getting reduced. Ninety per cent of the labour in textiles, the largest segment of industry, is run by contract labour.

The contract labour is secured at the lowest possible cost and no training is imparted. It means low productivity. Some companies have regular staff but they prefer to employ low levels of skill. The only exception are big companies, which have training programmes for their workers and managerial staff.

With the induction of new technologies and the WTO deadline of January 1, 2005 fast approaching, there is a critical need to upgrade skills. Multinationals relocate their manufacturing facilities to countries where cost of production is cheaper to make their products globally competitive. Locations like Pakistan suit MNCs for labour-intensive production with cheap labour. But innovations that add value to products and for which human skills are required, suffer.

Zarrar Khan says multinationals look at human skills and infrastructure, essential factors in improving productivity before making investment. There is a tendency to locate manufacturing at a few industrial hubs from where products are marketed in the region.

The significance of human resource development has been recognized by scholars centuries ago but forgotten in practice. As far back as 450 BC, Chinese sage Sun-Tzu said "When you sow the seed once, you will reap a single harvest. When you teach the people, you will reap 100 harvests."