Ayesha Mudassar

Pakistan is witnessing low productivity mainly due to unskilled workers, lack of technological adaptations, complex regulatory procedures, and low level of trade openness, says Dr. Nadeem ul Haque, Vice-Chancellor of Pakistan’s Institute of Development Economics (PIDE).

Talking to INP-WealthPK, Dr. Nadeem said the negative trend of productivity was affecting the output of all sectors, including agriculture, manufacturing, and services. Low productivity causes an increase in production cost which in turn results in price escalation and loss of competitiveness in the international market, he added.

“Given various reasons for the low productivity, there is a need to adopt a set of prudent measures, including investing in human capital, improving regional and global integration, rethinking the export strategy, and adopting technological advancements. Reforming and strengthening the financial sector and relevant government departments is also a must for overcoming the issue,” he added. Referring to the China-Pakistan Economic Corridor, he said the project completion will create favourable opportunities.

Labor productivity represents the total volume of output produced per unit of labor during a given time period. As per the International Labour Organization (ILO), Pakistan’s labor productivity is $7.64, while Luxembourg has the highest labour productivity of $136.45.

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Talking to WealthPk, Dr. Mehmood Khalid, a senior research economist at the PIDE, said investment in human capital was required to boost productivity. Better health conditions, access to quality education, a strong academia-industry linkage, and strengthening technical education and vocational training authority will help boost creativity, he added.

“The collaboration between academics and industry has boosted knowledge and innovation, and played an integral role in the economic growth of developed countries. However, the industry-academia linkage is not encouraging in Pakistan,” he added.

Furthermore, a market-based economy is perhaps the most effective option for enhancing productivity. The competition-based economic system directs the efficient utilization of scarce resources. Only the fittest and the most adaptable can survive in such a system. Mexico adopted it and as a result, managed to improve productivity significantly.

In addition to the market economy, the export basket needs a rethink. It is imperative to ensure that the exporters participate in global value chains. One of the major drivers of export growth in Vietnam was the ability of its producers to convert the imported inputs into exportable output. Moreover, improving environmental conditions, streamlining regulations, and encouraging innovation all lead to enhanced productivity.

Credit: Independent News Pakistan-WealthPk