The World Economic Forum has ranked Pakistan way down on the global manufacturing index, which measures the countries in the best position to gain from the production systems due to improving technology. The global report titled “Readiness for the Future of Production Report 2018” ranks 100 countries against two key components of manufacturing: Structure of Production and Drivers of Production.
To understand what these factors mean for the country, let’s look under the hood. In Structure of Production category comes the economic complexity and scale that make the baseline of manufacturing processes. Pakistan ranks 74 in that. Drivers of Production category is about key enablers for a country to capitalise on technology revolution that’s happening globally in production. In this category Pakistan ranks 93, where its performance is unfortunately poor along almost all the sub-indices like human capital, trade and investment, sustainable resources, technology and innovation and government.
On the other hand, India from the region – the fifth largest manufacturer ranks way up where the report highlights the demand for Indian manufactured products to be on the rise.
Large scale manufacturing (LSM) growth in Pakistan has been higher in the last two fiscal years exceeding 5.5 percent in both FY16 and FY17. It has largely been due to consumerism and construction related sectors and in import oriented items like the auto sector, whereas growth in export-oriented items like example textile is much tepid. While these sectors have brought growth in the country’s big manufacturing, the market is also cautioning a slowdown in growth going forward as growth initiatives are largely limited to CPEC projects. This means Pakistan needs to fix things at home.
Pakistan is not alone in the nascent country category. Over 90 percent of all countries in Eurasia, Middle East and Africa lie in the same category. This report should not be taken as a means to make Pakistan a capital intensive and technology-led manufacturing country. Rather it should help the policy makers fix some wide gaps in production process while simultaneously taking advantage of its abundant cheap labour. Authorities should work on improving production efficiencies, processes, trade facilitation, market access, value addition and volume and diversity of exports in global context.
There should be efforts to raise the capabilities of the country’s huge young human capital. Upgrading the education levels, overhauling the vocational training programmes as well as improving digital skills are all needed to fix the lacunas in the labour force. Resource sustainability which primarily entails water issue and energy efficiency are areas where the policymakers can work to lift the manufacturing growth.
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