COMMENT: Is inefficiency worse than corruption?

LAHORE: Corruption can sometimes be isolated and addressed through accountability mechanisms, at least in theory, whereas inefficiency is systemic. It is built into the culture of complacency that pervades both the public and private sectors.

In Pakistan, corruption is visible; it makes headlines, triggers investigations and fuels public outrage. But inefficiency, which manifests through outdated machinery, wastage of resources, poor management and an unskilled workforce, silently bleeds the economy from within. It reduces competitiveness, discourages investment and limits innovation. While corruption takes away wealth, inefficiency prevents its creation.

A closer look at Pakistan’s industrial base reveals that inefficiency is deeply rooted in outdated production systems. A large segment of small and medium enterprises (SMEs), the backbone of the economy, still operates with machinery that is two to three decades old. Many units rely on manual processes that have been replaced elsewhere with automation or at least semi-mechanised systems. As a result, productivity per worker in Pakistan remains among the lowest in the region, significantly trailing behind India, Bangladesh and China.

Outdated equipment does not merely slow down production, it leads to inconsistent quality, high wastage and frequent breakdowns that disrupt supply chains. In textile, engineering and agro-processing industries, inefficiency arising from obsolete technology is estimated to increase production costs by 15-25 per cent. When manufacturers compete in export markets, this cost disadvantage leaves them vulnerable to cheaper and more efficient producers abroad.

The inefficiency problem extends beyond machines; it affects human capital as well. Workers who operate on outdated equipment are deprived of skill development opportunities. They remain trapped in repetitive, low-value tasks, unable to adapt to modern production techniques. This not only hampers individual career growth but also weakens the broader industrial workforce.

A highly skilled workforce, after all, cannot perform miracles on obsolete machinery. Productivity is a function of both human skill and technological capability. When one of these is missing, the other cannot fully contribute. In Pakistan, even when talented engineers or managers are hired, they often face frustration when outdated systems limit their ability to improve efficiency.

Corruption, of course, worsens these inefficiencies. When industrial loans intended for modernisation are diverted, or when import duties are evaded through under-invoicing, the incentive to invest in better technology diminishes. Corruption in procurement often means that substandard or refurbished equipment is purchased at inflated prices, locking industries into inefficiency for years. Moreover, bureaucratic red tape and rent-seeking behaviour discourage genuine investors who might otherwise introduce modern systems.

Many managers still believe that low labour costs compensate for low productivity, ignoring the fact that efficiency, not cheap labour, drives competitiveness in the modern world.

Pakistan’s manufacturing base urgently needs a technology overhaul. Modernisation should not be viewed merely as a capital expense but as an investment in survival. Incentives for upgrading equipment, through low-interest credit, tax breaks or public-private technology transfer programmes, could help revive efficiency. The government’s role is not to subsidise inefficiency but to facilitate modernisation by removing barriers to machinery imports and encouraging partnerships with technologically advanced countries.

At the same time, human resource development must align with technological progress. Training programmes in industrial skills, automation and maintenance of modern equipment are essential to bridge the gap between workforce potential and production requirements. Technical education institutions must partner with industries to ensure that students are trained on the machinery that actually exists in modern factories, not what has been discarded decades ago.

Pakistan cannot fight corruption effectively without addressing inefficiency, nor can it achieve efficiency in an environment where corruption distorts incentives. The two are intertwined but inefficiency may be the deeper wound. Corruption steals from the present; inefficiency steals from the future. Unless Pakistan modernises its production base and reforms its work culture, it will continue to lose competitiveness, jobs and opportunities to more agile economies.