News:Pakistan’s competitiveness: WEF spots 14 factors leaving bad effects
Name of NewsPaper: Daily Times
Date of Publication: Friday, November 2, 2007
URL: http://www.dailytimes.com.pk/default.asp?page=2007\11\02\story_2-11-
2007_pg5_11

By Sajid Chaudhry

ISLAMABAD: The World Economic Forum (WEF) on Thursday identified 14 factors leaving bad effects on the competitiveness of Pakistan.

Most problematic factors for doing business in Pakistan and making it un-competitive in the world were identified as inadequate supply of infrastructure, inefficient government bureaucracy, corruption, policy instability, inadequate educated workforce, government’s instability and coups, poor work ethics in national labour force, access to financing, crime and theft, tax regulations, inflation, tax rates, restrictive labour regulations and foreign currency regulations.

WEF in its Global Competitiveness Report 2007-2008 said Pakistan has improved its competitiveness by seven ranks as compared with last year. Considering methodology used for 2006-2007 for 122 countries Pakistan would have secured the 84th position.

WEF has also said that Pakistan’s overall competitive performance is hindered by its poor position in some of the key pillars, mostly related to human capital: higher education and training, health and primary education, and labor markets. Health and primary education pillar shows a negative delta of 0.31 with respect to last year, due to the fact that data on expenditure for education, used by the World Economic Forum is from 2004-2005, which is used by the World Development Indicators (WDI). Nevertheless many variables are stable and the net primary enrollment rate has actually improved. It is also important to note that the hard data included in the GCI were the most recent available at the time of the index computation. However the majority of the data used by WEF for this pillar is from 2005. WEF used the figures of 2005-2006, which has calculated the expenditure in education at 1.60 percent of GDP. This means that the increase in public expenditure in education (2.42 percent of the GDP) implemented by the government of Pakistan in 2007 is not reflected in this year’s index, but will be reflected next year.

Pakistan has shown significant improvements in improving the rankings on Property Rights (95 to 92) and Intellectual Property Protection (79 to 62). Pakistan especially showed significant improvements on the corporate governance indicators, where it showed improvements in the Ethical Behaviour of Firms (82 to 52), Strength of Auditing and Reporting Standards (68 to 60), Protection of Minority Shareholders Interests (57 to 39) and the Willingness to Delegate Authority (97 to 78).

Pakistan scored relatively well for Prevalence of Foreign Ownership (72 to 64), Business Impact of the Rules on FDI (66 to 24), Cooperation in Labour-Employer Relations (77 to 70), Pay and Productivity (65 to 43) and Effectiveness of Anti Monopoly Policy (79 to 66).

On Technological Readiness Index, Pakistan’s was Firm Level Technology Absorption (85 to 60), FDI and Technology Transfer (75 to 61), Use of Personal Computers (113 to 87) and Number of Internet Users (107 to 87).

The GCR also indicates that Pakistan has done sufficient work in improving the domestic value chain, which is reflected in improving the local supplier quality from (61 to 48). Although, Pakistan did well in the financial market sophistication, it performed well in financing through Local Equity Market (60 to 57), Ease of Access to Loans (42 to 41) and Soundness of Banks (84 to 66), the indicator on Venture Capital Availability declined (61 to 89).

On education and training, the country has low primary, secondary, and tertiary enrollment rates, (ranked 120th, 120th, and 116th, respectively), a poor assessment for the quality of the educational system, and the availability of staff training. Health indicators are also worrisome, placing the country 106th overall, this is however also due to the fact that the WEF used the data available prior to 2005-2006. Finally, the country receives poor marks for labour market efficiency (ranked 113th), with low female participation in the labour force, high firing costs, little reliance on professional management within companies, and wages that are not flexibly determined.

Pakistan ranked as follows on the overall pillars: Institutions (81), Infrastructure (72), Macroeconomic Stability (101), Health and Primary Education (115), Higher Education and Training (116), Goods Market Efficiency (82), Labour Market Efficiency (113), Financial Market Sophistication (65), Technological Readiness (89), Market size (28), Business Sophistication (79) and Innovation (69). However Pakistan maintained its overall position at 92 out of 131 countries.