By Sajid Chaudhry
The World Economic Forum (WEF) has revised downward the Pakistan’s global competitiveness ranking from 101 in the world to 123rd place among 139 nations.
Although continued security challenges, setbacks from the global economic downturn, continuing electricity shortages and mixed macroeconomic results combined to reduce Pakistan’s score in WEF’s annual Global Competitiveness Report, it also contained good news from the country’s private sector, the Competitiveness Support Fund (CSF) announced on Thursday. CSF is a joint initiative of the Ministry of Finance and the US Agency for International Development (USAID).
In the report, Pakistan’s score dropped from 3.58 in 2009 to 3.50 this year. While this is a relatively modest decrease in numeric terms, it was sufficient to move Pakistan from 101st to 123rd place among 139 nations ranked by the WEF. The annual Global Competitiveness Report is the most comprehensive competitiveness ranking of its kind and has been published annually for many years. The WEF gathers data from economic indicators and survey data and presents the results in 12 pillars that drive competitiveness.
Switzerland retains the top overall ranking in the Global Competitiveness Report of 2010-2011. The United States fell two places to the fourth position, overtaken by Sweden (second) and Singapore (third). The Nordic countries continued to be well positioned in the ranking, with Sweden (seventh), Finland (eighth) and Denmark (ninth) among the top 10, and with Norway at 14th. The United Kingdom, after falling in the rankings over recent years, moves back up by one place to 12th position.
According to the Global Competitiveness Report, China continued to lead the way among large developing economies, improving by two places this year and joining the top 30. India dropped two places and is now at 51; Bangladesh is at 107 from 106, which is a drop of one but showing stability. Sri Lanka showed a remarkable improvement of 17 places and is now ranked 62.
Positive news in the report: Scores for the competitiveness of the Pakistani private sector held their own or improved. Rankings for the sophistication of business strategy and operations were relatively good. Furthermore, recent government efforts in partnership with the university, research and private sectors to boost innovation also showed up on relatively strong scores for the innovation pillar of the Global Competitiveness Report. Pakistan has a large market size (ranked 31st overall).
Improvements were noted in intellectual property protection (95th place to 86th), judicial independence (95th to 74th), national savings rate (114th to 89th), venture capital availability (66th to 51st) and flexibility of wage determination (97th to 95th). However, technological readiness needs greater support given the low level of access or utilisation of computers, the Internet and broadband connectivity. Good scores for equity finance, venture capital and improved scores for access to credit are noted.
Main causes of decline in Pakistan’s competitiveness ranking: A review of Pakistan’s lowest scores reveals that Pakistan’s performance is negatively affected by three major factors—the security situation, human resources and macroeconomic performance. The continued low rates of enrolment in primary, secondary and tertiary education brought down Pakistan’s score as does the low rankings for the efficiency of labour markets. Many human resources related scores inhibit a stronger performance for the country. Despite notable advances on some macroeconomic indicators such as reduction in the debt and deficit, inflation and interest rates suffered low marks and Pakistan ranks low given the objective data on the macroeconomic situation compared with the results of other countries. Infrastructure rankings also were low, brought down in part by very low marks from the electricity situation. Load shedding is widespread in Pakistan and takes a great toll on productivity of people and companies while raising costs of production. Low scores related to institutions reflect the impact of security on economic activities noted by CSF. This includes not only the current military operations and terrorist activities but also reports of criminal activity and the added costs of private security on business. Similarly, other business environment constraints were also reported.
Prospects for Pakistan’s competitiveness in 2011: For the past several years, the CSF has urgently called attention to the need to address Pakistan’s competitiveness. These results validate and underscore the urgency and importance of focusing on competitiveness in a coherent, consistent and comprehensive way. The CSF will continue to identify in the coming weeks and months the specific measures that can increase Pakistan’s competitiveness in 2011 that will result in improved rankings. Continued progress on the macroeconomic front, including the need for robust economic growth policies, government effectiveness and renewed efforts to addressing the electricity deficiency and improving the business environment at the federal, provincial and district levels will help Pakistan recover its double digit ranking of earlier years.
Recovering from the devastating floods Implications for competitiveness: Pakistan has now suffered the tragic setback of the 2010 flood which has taken a terrible toll on human life, animal stocks, housing, tools and infrastructure. This will require enormous investment in recovery. The current priority is on relieving human suffering. As Pakistan turns its attention to rebuilding, the focus of the investment should be not only on rebuilding the existing infrastructure but on making the kinds of investments in the affected regions that will best boost the long term economic productivity and sustainable economic competitiveness of these cities, villages, towns and regions, says CSF. Just as countries have used economic stimulus funding to focus on new technologies, so too Pakistan can use the rebuilding effort in strategic ways.
Since a relatively modest decline in Pakistan’s score had an inordinate impact on its rank this year, even a modest improvement in raw scores next year would enable Pakistan to improve its ranking substantially while improving the business environment at the same time. The CSF announced that it would continue to work closely with federal and provincial governments and private sector leaders to address the constraints to competitiveness. Competitiveness is seen as being the key determinant for improved productivity, economic growth and poverty reduction.