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Thursday March 28, 2024

Pakistan lacks economic competitiveness: experts

LAHORE: Pakistan is not making any progress in economic competitiveness, including its exchange rate, labour productivity, wages and energy costs, experts said on Friday. “Our country is carrying the backlog of unadjusted exchange rate of previous high inflation era,” economist Faisal Qamar said. The turmoil created by the Greek crisis

By Mansoor Ahmad
October 10, 2015
LAHORE: Pakistan is not making any progress in economic competitiveness, including its exchange rate, labour productivity, wages and energy costs, experts said on Friday.
“Our country is carrying the backlog of unadjusted exchange rate of previous high inflation era,” economist Faisal Qamar said.
The turmoil created by the Greek crisis in the European Union has disturbed the exchange rates globally with all currencies declining against the US dollar, he said.
"How come the local currency remained stable when best performing economies like China, Turkey and India devalued their currencies more aggressively than Pakistan," he said
Pakistan's exports are half the value of imports. The rupee, Qamar said, does get support from remittances and foreign loans; still the current account deficit is there.
He said the recent taming of inflation has reduced new pressures on the rupee. It is impacting Pakistan's exports adversely and encouraging imports, he added. “This is the reason that despite drastic decline in global crude oil prices, our imports continue to rise,” he said, adding that consumptive imports are on the rise.
Financial analyst Amina Usman said Pakistan is perhaps one of the few countries in the world where wages are not indexed with productivity gains.
“Our planners have tripled the minimum wages in the last eight years without any significant increase in wages. Gains in output per manufacturing worker productivity in all manufacturing sectors remained stagnant during this period.
She said the way minimum wage is implemented is a disincentive for more experienced workers. A worker employed in 2008 has been getting regular salary increase through minimum wage announced every year by the state, she said. The worker remained deprive of the routine annual increments, as the increase in minimum wages is considered suffice by the manufacturers. However, she said, when employers hire a raw hand in their factory, they are bound to give him the minimum wages. The current minimum wage is Rs13,000 per month that is given to an inexperienced worker, which is the same that they give to a worker having experience of that job of seven years.
She said this demotivates the experienced workers to enhance their productivity. The state and the manufacturers should enhance the skills of their workers that are willing to attend skill upgradation classes. After proper certification their productive capabilities will increase and they will automatically get better wages, she said.
She warned that Pakistan would continue to lose its export markets if the productivity is not improved. In the last 10 years, the manufacturing productivity rose by more than 50 percent in India and South Korea, which has enhanced their exports, as well.
Certified Public Accountant Asif Ali Shahid said that around a year back high energy and power costs were understandable in Pakistan that produced 40 percent of electricity from expensive furnace oil. In other countries the power production from furnace oil ranged from five to seven percent, as electricity was generated from low-cost fuel, he said, adding that now the furnace oil rates are at 30 percent of June 13 level despite enhancement of sales tax on this fuel. He said the power production cost of furnace oil-based fuels has drastically reduced that called for a similar reduction in the power rates.
The government instead of taking a productive enhancement measure opted for public appeasing measure of reducing the rates of petrol and diesel. The power rates, he said, have been kept at December 2013 level. The government is technically correct when it says that the power rates have not been increased in the last two years; however, the benefit of lower oil rates has not been passed on to the power consumers that have kept the manufacturing costs high, Shahid said. This was the right time to bring the power rates at par with the regional economies because of lowered oil rates, he said, adding that other issues impacting the competitiveness are logistics costs.
Railways is practically non-functional as far as the goods haulage is concerned. The truck fares have not declined in line with the decrease in fuel rates. Competitiveness has also been impacted due to many other factors that increase the cost of doing business, including cost of registering, starting and winding up a business, cumbersome tax procedures and presence of corruption, he added.