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December 8, 2019

Efficient, skilled HR must for sustained economic growth

Business

December 8, 2019

LAHORE: We are striving for sustained growth, but lack the enablers needed for this purpose. Sustained growth with boom and bust episodes, besides fiscal and monetary measures, requires other ingredients that are missing in our culture.

Macroeconomic stability is one necessary factor, but other aspects relating to the economy are also essential. You have to develop an efficient, skilled, educated and healthy human resource.

You have to have a government that can exert its writ. You need rule of law where every citizen is liable to punishment if he/she breaks the law.

Countries that have attained and sustained rapid economic growth show three prominent commonalities which include investment in their human resource.

The planners must realise one cannot develop the country with underdeveloped people.

A country cannot have productivity or become globally integrated until and unless it has people with capacity and skills. We are far behind in skills required to operate efficient, productive and technologically advanced equipment.

We in fact do not have a national agenda to improve our human resource according to the needs of modern times.

Moreover, it must be kept in mind that no country has developed without being able to sell its products to others as well as acting as a destination for goods, services, and capital from others. By squeezing even essential imports one makes sure that the country lags behind in technology.

Trade regime has to be tackled very carefully to ensure that only luxurious items remain out of reach of people and not the raw materials, services and technology.

It is also unlikely that a country can accelerate growth without encouraging exports and foreign investment. On both counts we are far behind our regional economies. The sudden increase in foreign portfolio investment is practically a high cost loan.

We need foreign investment in Greenfield projects. We have a very narrow export base in terms of products as well as geography.

We were the most suited location to act as a global hub for garments. We lost the advantage in value-added garment exports to Bangladesh in late ‘90s; Vietnam in first decade of this century and to Cambodia in this decade.

Private sector is the engine of growth in all successful economies. Countries like ours with economic strategies relying heavily on the public sector were left behind.

Indeed, even countries with authoritarian political structures have made rapid economic progress by liberalising their economic structures.

The most important measures needed to improve the profitability of private investment fall under the domain of what is commonly termed “governance.”

These, for example, would require addressing the workings of the bureaucracy, judicial system, taxation system, regulatory framework, price mechanism, institutional arrangements for education and technical training, and so on.

We have seen that the bureaucracy lacks the capability to even implement existing laws that could bring improvement in the system. We for instance, Pakistan has the best environmental law in the region, but its implementation is almost zero.

Regulators that are supposed to operate independently work under the thumb of the government. The judicial system is too slow to address the immediate needs of the businesses.

There is no price mechanism and businessmen are at liberty to increase the rates at will. The education system is in shambles while technical education mostly outdated.

Another crucial element for ensuring sustained growth is to increase the productivity of investment. Studies of long-term productivity growth in Pakistan show that from 1970 to 2005, productivity growth accounted for roughly 20 percent of the growth of Pakistan's GDP while it is 30 percent of GDP for India and East Asian and Pacific region.

In fact, the report points out that in the decade 1998-2008, productivity accounted for 11 percent of the growth of Pakistan's GDP. The figures for the next decade are not available, but the productivity in Pakistan is definitely on further decline.

The writ of the government on business affairs is also very important. We still are predominately an informal economy. Smuggling goes on unabated and under-invoicing is the order of the day.

Tax evaders operate without fear. There is no check on the quality of products. Food is not the only item where quality check is essential; the quality of electronic appliances, gas burners and all other products is also important. Countries that ventured into exports paid full attention to product quality.

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