Global Competitiveness Report 2010-11

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.

Where will the aimals go?

This article appeared in daily the Nation, September 11, 2010 issue

Roaming around anywhere in rural Pakistan where floodwater has receded reveals the effects of flood 2010 on human as well as animals. The bloated corpses of buffalos, cows, donkeys and goats can be seen at many places in flood hit areas. Many of the surviving animals are seen suffering from lameness, fever, muscle contractions or swelling of shoulder, chest, back, neck or throat, foot rot and more.

One wonders where the animals would stand on the scale of importance when so many human lives are at stake. The fact is that the survival of the livestock is crucial to the survival of human beings, particularly so in agrarian society like ours.

Livestock is vital for the Pakistan’s agricultural economy and fabric of rural society. Livestock makes up 52.2 percent of the agriculture value and 11.3 percent of the national Gross Domestic Product. The value of livestock is 6.1 percent more than the combined value of major and minor crops, according to the Ministry of Food, Agriculture and Livestock. In addition to providing mutton and dairy products, Livestock is one of the major sources of raw material for different industrial sectors of the country including hides to leather sector, animal bones for preparation of crockery and animal blood for preparation of chicken feed to name just a few. Animals are also extensively used for transportation and cultivation.

As a consequence of the large scale extinction of livestock by the devastating floods this year (as per one estimate some 5 million animals were either killed or swept away by the rising tides in Sindh alone whereas another 5 million in other parts of the country), the industrial activities in the country are likely to suffer a major setback and they would have to rely on import of raw material.

Similarly, many who live in the flood prone rural areas rely on animal farming, large and small as per the capacity of the holdings, to make a living and support their families. Depletion of the livestock during the current floods in the country has deprived millions of people from their sources of revenue.

“My betal specie goat was all that I had. Goat was expected to deliver two lambs next month. I was planning to sell one of the lambs to raise money to repair the roof of my house that is leaking since last year and keep another for selling on the eve of Eid ul Azha next year. Selling milk would have been enough for me to live a comfortable life,” narrated Fateh Shahi, an old lady living in a mud and straw hut on the outskirts of village Mirkhan on the bank of Chenab. “I have lost my goat in the flood,” she added with tears in her eyes. Water had entered in Mirkhan during the month long floods that have destroyed homes and marooned people and animals.

Gulzar is a village shepherd. Personally, he does not own any animal. People of village Karyanwala give their goats to Gulzar everyday for grazing. Gulzar takes the herd out early morning and brings them back by sun set when owners collect their animals and keep them at home for night till Gulzar takes them out again next morning. This is a wonderful model of small scale animal farming common in rural areas. Gulzar gets the compensation for his work and people can keep their animals. This system allows everyone in the village to keep animals (mostly goats, cows and buffalos) for fresh milk and as a source of additional income.

“These animals are very important for us,” said, Gulzar Ahmed, while standing in the middle of his herd of goats that he had shifted from village Karyanwala on the Bank of Chenab to the safety on the bank of Rasul-Qadarabad Link Canal. Problem with goats is that they fall sick on wet ground what to talk of grazing. There are no veterinary doctors in our area and I have nowhere to graze and feed them. I am waiting when I will be able to go back to village and normal life.

Hundreds of thousands of cattle have drowned in the floods and the surviving animals are starving. Deaths due to drowning during the floods, deaths after the floods due to disease and hunger caused by loss of animal feeds has exacerbated the livestock related problems which are quite serious even under normal conditions. This loss of animals is expected to be higher after the ground data comes in. It is also feared that animal feed will not be easily accessible for at least six months, which could result in widespread starvation.

Why would anyone want to live in a place that is visibly exposed to floods every year?

UN's International Strategy for Disaster Reduction remarks, “Communities should have been kept away from flood-exposed river banks in Pakistan. If people had not settled on the river banks, definitely the disaster would have been less, because that is the main cause of the disaster.”

Some analysts have also attributed the current flood disaster to unregulated construction and development on river banks. They think that widespread build up and construction along the river banks and even on dried up riverbeds across the country had blocked the natural course of the rivers. Some others point out that fragility of natural environment in upstream areas of Indus river basin has exacerbated conditions of vulnerability. Pakistan has been left with only 4 percent forest and vegetative cover, in contrast to the required 25 percent, thereby experiencing an intense and uninterrupted discharge of water, especially during monsoon seasons. This coupled with increasing snowmelt in the Himalayan glaciers has intensified flood risks.

Given the local context, “it may never be possible to displace indigenous people from where they are living since generations, says Dr. Hamid Ghani Anjum. “What seems wise is that these areas may be made safer for them to live on,” he adds.

For ages, the Indus River has been a lifeline for the land we call home. The Indus has its source in Tibet. From there, it skirts China, heads into India then enters Pakistan south of the Karakoram Range before starting its long journey — some 1,976 miles — through the heart of the country into the Arabian Sea near Karachi. People and their animals have been happily living all along the banks of Indus and its tributaries since the Bronze Age, when the region was home to the thriving Indus Valley Civilization. Even now Indus Basin is called the breadbasket of Pakistan.

“There should be permanent protective embankments to check and regulate water in flood seasons,” says Dr. Anjum. Sadly, the empirical observations show that embankments, where they were present, did not stand in the face of current floods. “After the flood warning, the villagers had brought their animals on the protective band and at night the flood washed away the whole band along with the animals, thanks to the quality of construction,” tells Qasim Ali a volunteer who had visited flooded areas in Sindh during August.

This social segment living in the flood risk areas cannot be expected to make safe arrangements for themselves and their animals on priority. Need is to release the pressures upon them by providing sustainable rehabilitation and safer environment for future.


Related: Flood 2010

Pakistan 1951-2001: The Forgotten Asian Economic Success

Lahore School of Economics Center for Research in Economics and Business is organizing a seminar by Dr. Mathew McCartney on Monday April 5, 2010 at Mahmood Chaudhry Library.

The topic of the seminar is: Pakistan 1951-2001: The Forgotten Asian Economic Success. There is an almost uniformly negative perception of Pakistan’s economy in current media and academia, this view is sharpened by the very positive reporting of India – the new Asian Giant/ Miracle. It is firstly interesting to remember how such images have changed dramatically over time. In the 1960s for example Pakistan was widely seen as a ‘miracle’ economy with a modernizing and pro-western leader and India as a country becoming increasingly impossible to govern and facing a future of likely mass famine.

Making a judgment about whether a country/ economy has been a ‘success’ or ‘failure’ is too often based on media perception and heavily weighed by recent economic events. There are more rigorous means of making such a judgment about Pakistan since 1947. Those included in this seminar are a comparison with Pakistan’s own history before 1947, a comparison with similar developing countries after 1947 and a comparison of Pakistan’s development after 1947 with the initial conditions and constraints prevailing at independence. Using these more substantial and rigorous measures it can be possible under certain circumstances to say that Pakistan is indeed ‘the forgotten economic success of Asia’ of the last sixty years.

Dr Mathew McCartney is visiting Center for Research in Economics and Business (for two weeks.) He is currently a lecturer in Economics and admissions tutor in the department of Economics, SOAS (School of Oriental and African Studies, University of  London). He has an MPhil from Oxford and a PhD from SOAS. He has also taught at Korea University in Seoul and JNU, New Delhi. His recent publications include ‘India-The Political Economy of Growth Stagnation and the State, 1951-2007’, London, Routledge (2009), ‘Political Economy, Growth and Liberalization, in India 1991-2008’, London, Routledge (2009). His research interests are “role of the state in late development, industry and industrialization, economic growth, comparative political economy of South Asia, India and Pakistan since independence.”