LAHORE: Pakistan’s economic challenge lies not in the effort its people make, but in how effectively the economy converts skills and education into productive opportunity, said Vice Chancellor LUMS Dr Ali Cheema while speaking at ThinkFest Day 3 on Sunday.
Addressing a session titled “Growth, Growth, Where Are You? Why Does Pakistan Remain Poor,” Dr Cheema said research shows that the return to education in Pakistan is positive, reflecting the value of learning and skills in the economy. However, he noted that Pakistan remains among the countries with the lowest returns to education, largely because the economic structure does not generate sufficient demand for skilled labour.
He explained that Pakistan has one of the lowest rates of structural transformation among developing countries, with most jobs being created in low-productivity agriculture or low-productivity services. “These jobs do not create strong returns on skills,” he said, adding that this limits social mobility despite high household spending on education.
Dr Cheema said Pakistan does not have a clearly defined growth policy, despite the presence of multiple growth strategies. Policymaking, he noted, often focuses on managing financial inflows, while the deeper challenge is ensuring that available resources catalyse investment, structural change, and job creation.
He referred to international research showing that increased sovereign borrowing in Pakistan is associated with a decline in gross investment, reinforcing the view that growth constraints are structural rather than financial. “The challenge is not that money does not exist,” he said. “The challenge is that money does not translate into investment or structural change.”
He emphasised that households in Pakistan spend among the highest shares in South Asia on their children’s education, describing this commitment as a major national strength. However, without an economy that rewards skills, these investments do not fully realise social mobility and improvements in living standards.
At the same time, Dr Cheema said addressing low investment levels, limited female labour force participation, and governance frameworks is essential for sustained growth. Improving public investment in safe transport, security, and education, he added, would have a catalytic effect on productivity, workforce participation, and long-term development.
Drawing comparisons with regional peers, Dr Cheema said Pakistan has experienced long-term stagnation rather than sustained growth. Had the country grown at the same pace as Bangladesh since 1990, he said, average incomes in Pakistan would have doubled.
He stressed that global growth models consistently highlight investment, productivity, and human capital as core drivers of development. Strengthening these pillars, alongside decentralised governance and clear federal-provincial coordination, he said, is key to re-imagining Pakistan’s growth framework.
Copyright Business Recorder, 2026
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