Pakistan’s slow growth explained by failure to utilize technology and human capital, say experts

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July 11, 2019
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Pakistan is hardly faring well in the economic landscape, with the incessant devaluation of the rupee and the GDP growth rate slowing down to sluggish levels. As a country, it does tend to experience periods of explosive growth, but they are deplorably short-lived. While the root causes may be painfully obvious, a group of experts recently wrote an article in The Express Tribune where they attempt to get to the bottom of the situation.

According to the economists Rai Nasir Ali, M Mubashir Ehsan, and Aimen Tayyab, Pakistan has experienced an average economic growth of 5.4% per year over the past five decades. This growth has been characterized by short cycles of immense growth, followed by the all too familiar stagnation. They believe that the growth has been following this cyclical trend because it has always been driven by inputs, as opposed to having a focus on productivity.

Drawing from this basic fact, the authors emphasize that the key metric that the country needs to get a  grip on is total factor productivity (TFP), which essentially the efficiency and intensity with which inputs are utilized for the achievement of productivity and a healthy GDP.

Unsurprisingly, with rankings of 150 and 107 in human development indicators (HDI) and Global Competitiveness Index (GCI) 2018-19 respectively, Pakistan is doing a poor job when it comes to TFP. Therefore, the reason why we lag behind our neighbors in terms of competitiveness and productivity can be explained by our relentless focus on inputs and inability to utilize human labor and technology to our advantage.

The authors go on to suggest two underlying issues that hinder Pakistan’s ability to do well in terms of TFP: dismal levels of job creation, and a massive technology gap as compared to our neighbors, let alone other advanced nations.

Considering that a considerable 64% of Pakistan’s population is below the age of 30, the country has an immense workforce, and simply not enough jobs. According to the authors, Pakistan needs to have sustained growth which will come about with a focus on TFP; faster productivity is indeed going to reduce employment for the short term, but it’s also going to drastically boost it in the long run.

On the other hand, it has been suggested that the technology gap can be minimized and eventually overcome by continuing to invest in science and IT sectors, and promote initiatives focused on innovation, R&D and technological readiness.

Pakistan is in hot water right now, but there’s no reason why it can’t utilize its greatest asset – its people – to clamber out of it. A focus on higher productivity is going to drive wages and living standards, and the country will eventually be on track to become one of the fastest growing economies once again.

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