Saturday June 15, 2024

Enhancing export competitiveness (Part – II)

By Ishrat Husain
November 26, 2021

The writer is the author of 'Governing the ungovernable'.

The business case for investing in a trained, healthy, motivated and satisfied workforce to raise productivity is quite obvious as enunciated earlier. A PIDE study has estimated that increasing productivity from the current level to 3 percent and above can increase GDP growth to more than 6 percent. The tricky part is how to achieve this higher productivity. In the following paras we outline some points to ponder.

As training in house by each firm individually has higher private costs, it is suggested that this task should be done collectively. All export firms in particular should organise themselves and form Sectoral Export Councils under a set of transparent rules and self-regulations. Only genuine exporters should be made part of the Council. The provincial and federal governments should hand over the management and operations of some of the technical and vocational institutes related to the export sectors to these councils.

For example, all institutes under TEVTA engaged in sports goods, surgical instruments, leather garments, gloves and manufactures in Sialkot should be handed over to the respective sectoral councils. These institutes would design, develop, and deliver hands-on training courses to fill the gaps in the skill sets required at present and in the future by these firms. Those selected and enrolled at these institutes should also receive practical training through short attachments with the exporting companies. There should be a continuous stream of short courses too to introduce them to new technologies and methods and processes. Upon satisfactory completion of the courses the trainees can receive apprenticeship in the firms and those who excel and do well can be given regular jobs.

This shift from a credential or certificate-based supply driven approach to performance based, demand driven, and private sector managed-and-operated training and apprenticeship would lift the overall productivity and fetch better values for our improved quality products. The wages to the workers in exporting firms should be variable – one fixed component related to average inflation rate and the other variable linked to performance. They should earn a decent wage level which incentivises them to work diligently and stay at the firm. Experienced workers add to productivity.

Provincial TEVTAs and NAVTTC at the federal level should be given the legal and regulatory responsibilities and financial allocations to set up standards, facilitate in establishing linkages with international accreditation bodies, provide financial assistance to needy but talented students – particularly women – bring in foreign experts to these institutes, and send select faculty members who have demonstrated promising performance to institutes abroad such as Germany, Turkey etc. Competitive grants for innovation, applied R&D should be provided to the instructional staff of these institutes as well as universities and colleges.

Healthcare for the family as well as educational facilities for the children of workers and employees is another motivating factor for retaining them. The owners should broker firm arrangements with social security institutions or charitable hospitals and clinics or ensure that the Sehat Health cards are made available to them. A healthy and fit worker would reduce absenteeism or procrastination. Similarly, schools such as TCF and many others provide quality education to children from low-income families. The owners should use their good offices to get the children enrolled in the schools close to their habitations.

Contributions to the Workers Welfare Fund should no longer be collected by the government because the track record of use and efficacy is not very satisfactory. These funds should be collected by the sectoral export councils and can be supplemented by mortgage loans from the banks for low cost housing for the workers and their families. The mental satisfaction of owning an abode and the security it creates are highly motivating factors for better performance. TDAP should only monitor whether the funds are being used properly and for the intended purpose.

Every organisation has some enterprising young middle level managers who would like to set up their own businesses. The firms should encourage them by tie in arrangements with the purchase agreements for the materials, components, logistics, and other services needed by their employers. The intimate knowledge of these managers about the working and the specific requirements would result in low-cost solutions. The loyalty nexus would thus be extended to these suppliers also.

The other area that deserves some attention is the professionalisation of management cadre. It is gratifying to note that some of the sons and daughters of our first-generation industry titans have or are returning home with academic training at some of the most reputable universities, They are imbibed with innovative ideas and should be given the opportunity to translate their ideas into practice. But as a matter of principle, relatives, kith and kin and friends should be accommodated and absorbed in the company provided they are suitably qualified, adequately trained and are capable of contributing.

Loyalty and commitment to family-owned companies are important but these attributes should be combined with professional and technical skills to realise the productivity potential. Let them compete with other professionals from outside the firm and if they are comparable, preference must be given to family members. Professionalisation would be effective if it is accompanied by automation and digitalisation. Many firms have installed ERPs but they have to go beyond that first step.

The tasks of managing, continuous upgrading of production, distribution and marketing are becoming more complex and to maintain the competitive edge these should be entrusted to those with the requisite capabilities. IBA graduates when asked as to why they prefer to join the multinationals rather than the Pakistani owned companies generally respond that their career progression and job fulfillment in the former depends upon their own performance. In some of the Pakistani seth mentality companies they are apprehensive of some relative being thrust upon them and their chances for progress being vitiated irrespective of their hard work, devotion and performance.

Export firms should induct professionals, compensate them in line with market practices, provide them the opportunities to rise to the top and give them profit sharing incentives. The gains to the companies would once again be a large multiple of the trivial costs incurred. At the same time, incompetent and dead wood should be purged without any considerations of lihaz or murawwat, sifarish etc.

Management consultancy firms should be engaged to look at the strategic positioning, work processes, factory layouts, inventory management, logistics and supply chain management with reference to the benchmarks observed by the competing firms in other countries and design strategies and specific recommendations for implementation. Indian companies work regularly with international consultancy firms that have helped them acquire billions of dollars’ worth of assets all over the world, attract foreign direct investment into India, facilitate joint ventures with foreign partners or marketing arrangements. Most multinationals including giants such as Amazon and Apple are chasing Indian companies to partner with them. These consultancy firms act as informal ambassadors for their client companies in India and keep them informed of the opportunities ahead.

Our firms have remained shy of global consultancy firms to develop future strategic plans because they simply think in terms of high costs without considering the large benefits that will accrue to them over time. According to the World Investment Report produced by UNCTAD, multinational firms from the developing countries are becoming the fastest growing companies but we are losing out on that front. Imagine the footprint of Pakistani multinationals in promoting exports from Pakistan in the markets where they would be present.

To be continued