Deteriorating economic competitiveness
By Shahid Javed Burki
Monday, July 27, 2009
WHILE there is not a great deal of academic interest in Pakistan, its economy is being studied and analysed by a number of multinational institutions.
The World Bank continues to issue reports on the country’s macroeconomic situation and on some of the more important sectors of the economy. The Investment Climate Assessment, 2009 is one of the recent World Bank efforts focusing on some of the salient features of the country’s industrial economy.
The most recent entry into this genre of reports about the prospects of the economy is the State of Pakistan’s Competitiveness Report, 2009 launched by in the United States by Shaukat Tareen, Pakistan’s de facto finance minister. The report should be of tremendous interest to the policy makers since it presents the picture in Pakistan in the context of a comparative country framework.
Not unlike the World Bank report on investment climate, the Competitiveness Report by the Islamabad - based Competitiveness Support Fund, has both, good and bad news about the economy. It uses the methodology developed over the years by the World Economic Forum, a prominent international institution, perhaps best known for its annual meeting in Davos, Switzerland. WEF also publishes comprehensive reports on competitiveness, trade, information technology, gender and tourism.
The Global Competitiveness Report published by the institution is, “ the most widely read and respected ranking of the competitiveness of the countries since its inception 30 years ago.” The most recent report examined 134 countries across 113 different macroeconomic and microeconomic indicators. The indicators are grouped into what the World Economic Forum calls, the “pillars”. The assessment about the performance, of the countries is based on hard quantitative data and surveys. Last year 12,297 business leaders were surveyed across the developing world.
The bad news for Pakistan is that its overall ranking has slipped by nine places, from 92nd out of 131 countries included in the assessment in 2007-08, to 101st out of 134 countries examined in 2008-09. What is even more troubling is the fact that this slippage has occurred across the entire spectrum of indicators. Deterioration has occurred in all the categories into which the 12 pillars are grouped. These are “basic requirements”, “efficiency enhancers“ and “innovation and sophistication.” In terms of Pakistan’s place in the array of countries, the most significant slippage has occurred in the area of “financial market sophistication” where the country’s position has dropped by 23 places. In “goods market efficiency” the country is down by 18 places; in macroeconomic stability by 15 places; in innovation by 13 places; and in both infrastructure and tech nological achievement by 11 places each. Not surprisingly, the least amount of slippage has occurred in market size where Pakistan has dropped by one place. This indicator is based on the size of the population.
Another way of reading the results is to look at those pillars of competitiveness in which Pakistan’s place is even worse than its overall rank. These are four of these.. Again, not surprisingly, the country does very poorly in the area of “higher education and training” where it ranks 123rd among the 134 countries included in the analysis. “Labour market efficiency”, with a rank of 121st is the next worst followed by “macroeconomic strategy” and “health and primary education” where the rank for both is 116th.
In what lends importance to this work is that it provides a rich array of public policy tools, Islamabad could use to place Pakistan’s economic performance on to a higher plane. In that context the 2009 report includes information from some other areas surveyed by the World Economic Forum. These include the Global Enabling Trade Report, where Pakistan ranks 84th out of 118 countries included in the survey.
In terms of the indicators used in this analysis, Pakistan has the worst ranking _ the 100th -- in what the authors call the “proclivity to trade”. This measures the importance, both public policy makers and the entrepreneurial class attach to trade. The best reading in this area is “regulatory environment” in which the country ranks 40th.
The Global Information Technology Report is the second World Economic Forum document from which the authors of the 2009 report get their information. Here Pakistan ranks 98th among the 134 countries included in the survey. The troubling feature of this report is the sharp decline in Pakistan’s rank over the last three years, from 67th in 2005-06 to 98th in 2008-09. The number of countries examined increased by 19 in the three year period which means that Pakistan’s drop of 31 places cannot be explained entirely by the expansion in the size of the universe surveyed.
According to the report, the deterioration in Pakistan’s relative position was “led largely by steep falls in the indicators relating to the government’s use of technology (a drop of 23 places), business readiness (a drop of 15) and political and regulatory environment (a drop of 14). “Compared to last year, all indicators declined except the individual usage indicator which increased by nine ranks”.
The news for Pakistan gets really bad when the 2009 report brings in information from the Global Gender Report. The assessment is even worse than what the development community believes is happening in Pakistan.. . According to the report, “despite the notable example of women playing leadership roles, the World Economic Forum’s hard data and surveys show that Pakistan’s ranks 127th out of 130 countries”.
Discrimination against women is across many fronts, particularly in education, health care and economic participation and opportunity. In the education of women – enrollment in primary education _ Pakistan now ranks 127th out of 130 countries; in terms of women’s life expectancy the rank is 129th and in economic participations and opportunity, it is 128th.
Culture is an important contributor to women’s backwardness but it is not the only reason. Poor policy has played a significant contribution. In the report on the budget for 2009-10, Hina Rabbani Khar pointed with some pride in her budget speech to the fact that she was the first woman to take on that task in Pakistan’s history and she was doing it in front of the first female speaker of the national assembly. Women were doing relatively well in the political field but that presence had not translated effectively into public policy for importing women’s wellbeing.
The broad conclusion one reaches from the findings in these important reports is that Pakistan has to do hard work across a wide front to improve the competitiveness of the economy.