SBP emphasises human capital development for sustainable growth

KARACHI: The State Bank of Pakistan (SBP) has underscored the need of investment in human capital development to achieve sustainable economic growth.

The SBP said the poor state of human capital proved to be a major hurdle towards achieving high growth and development. “The existing vocational and technical training ecosystem of Pakistan is not adequate to meet the needs of the present and incoming labor force,” it said in a latest state of economy report.

There are 3,740 institutions in the country, including both from the public and private sectors, having a combined enrollment capacity of 187,393. However, Pakistan had 3.8 million people from its workforce as unemployed as of 2018, with 1.8 million being added into the unemployed pool every year.

The SBP said a majority of the vocational training institutions is situated in major urban centers, which makes acquiring skills for the people in far-flung areas difficult. This proves particularly challenging for the female labour force, as they often cite distance to workplace/training institute as one of the principal barriers to employment. Transport facilities are usually provided to address this issue, and 22 percent of the institutions in Punjab offer this service. However, this is followed by just 3 percent in Sindh and 1.4 percent of institutions in federally-administered tribal area and Gilgit Baltistan providing such facilities.

“Besides increasing the labour productivity, skill-building also helps make the interplay of capital and labour inputs more efficient and effective,” it said. “The situation has improved only marginally since: the share of population aged 15 and above enrolled in any stage of education stands at just 11.1 percent as of 2017/18.”

The SBP said this has impacted the overall performance of businesses in the country severely. The firms situated in the knitwear cluster in Lahore registered higher productivity, more product orders, more innovations, and better marketing strategies due to the presence of highly-educated entrepreneurs and a skilled workforce, it said, citing an empirical research.

With severe resource constraints and a high share of agriculture sector workers, Pakistan's post-partition economic development strategy gave virtually no attention to labour, except as an industrial input to be drawn from rural areas at subsistence wages, said the SBP.

“Resultantly, public policies were oriented towards creating the circumstances which lead the share of profits in the national income to increase,” it added. “This agenda continued during the 1960s, with the government regarding the wealth maximising element of economic growth a functional justification for inequality of income”, i.e. initial concentration of capital was deemed necessary to reap equitable socio-economic welfare later.”

The SBP said the unemployment levels rose and real wages in the industrial sector actually declined by a third while Pakistan was experiencing healthy growth rate in the 1960s. This was the time when the high concentration of wealth in the country became a widely debated issue.

However, over the period of time, the government started focusing extensively on workforce welfare, social security, and productivity enhancement. In particular, virtually all the national and later provincial labor policies have included clauses on ensuring employees’ learning and development. “This is primarily why the technical and vocational training in Pakistan has come to revolve around a broad-based and multi-layered ecosystem.”