While the factors that contributed to this lack of progress in scientific research in Pakistan are multifold, religious bigotry has been one of the main hurdles. Pakistan’s first Nobel laureate Dr. Abdus Salman, who was once leading the country’s efforts to develop its space and nuclear programmes and had founded Space and Upper Atmosphere Research Corporation (SUPARCO), was later shunned due to his Ahmadi faith.

In 1961, Dr Abdus Salam collaborated with late Pakistan Air Force (PAF) commodore WJM Turowicz to set up SUPARCO. When SUPARCO was established, its founders and scientists who were part of it worked tirelessly to develop scientific research in Pakistan. Pakistani scientists were connected with the National Aeronautics and Space Administration (NASA). It was expected that within a decade or two, Pakistan would be able to send its own satellites into space. But this dream soon came crashing down.

Dr Abdus Salam’s collaborations with NASA eventually stopped after he was snubbed with the Ahmadi community being declared non-Muslim through an amendment to the Constitution in 1974. Salam then left Pakistan for England, orphaning the country’s space programmes and quitting his efforts of developing scientific research in Pakistan. Thereafter, the government of Pakistan lost interest in improving Pakistan’s space programme with the help of international researchers and scientists.

Due to his Ahmadi faith, Dr Abdus Salam was never duly acknowledged and celebrated for his achievements despite being the country’s first Nobel prize winner. Salam passed away in 1996 in Oxford, United Kingdom, and was laid to rest in his hometown, the Ahmadi majority city of Rabwah. The epitaph on his tomb initially said “First Muslim Nobel Laureate”, but the then government of Pakistan removed the word “Muslim” and left only his name on the headstone.

The way Salam was shunned for his religious identity in spite of his dream to take Pakistan’s space programme to new heights reflects how bigotry and extremism has always costed Pakistan dearly.

News Desk

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Out of 600 prisoners,  200 will be released on May 12, while the remaining will be released on May 14.

Some relief for fishermen caught in the conflict tween India & Pak & a good move by .@BBhuttoZardari of releasing fishermen b4 departing for India .Reportedly the first batch of 200 fishermen is to be released on May 12, while remaining 400 are expected to be released on May 14.

— Munizae Jahangir (@MunizaeJahangir) May 5, 2023

The development comes as Foreign Minister Bilawal Bhutto Zardari is visiting India to attend a meeting of the Shanghai Cooperation Organisation (SCO).

This is also the first time since 2016 that the most senior Foreign Office representative from Pakistan is visiting India.

Earlier, the National Commission for Human Rights (NCHR)  had launched a campaign demanding the repatriation of prisoners currently being held in prisons in India and Pakistan on humanitarian grounds.

These fishermen were arrested after they had trespassed into Pakistan’s territorial waters.

Earlier this year, Indian authorities had released 12 Pakistani fishermen after they had allegedly violated territorial waters.

The 12 fishermen belonging to Sindh and Azad Kashmir were handed over to Pakistan by Indian authorities at the Wagah border in Lahore.

Last year in July, Pakistan had released 20 Indian fishermen detained in the Malir Jail in Karachi.

News Desk

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The scale of the economic challenge we as a nation face is best summarised by Figure 1. While labour productivity in Pakistan only increased by 45%, labour productivity in Bangladesh, India and China (not reported) saw an increase of 190%, 263%, and 790%, respectively, over the last three decades. What is more revealing is that, compared to these countries, the increase in labour productivity has been the lowest across almost all the sectors in the case of Pakistan.

An obvious question that comes to mind is why has Pakistan lagged behind relative to its neighbouring countries? And what can be done to reverse this trend?

To better understand why Pakistan has lagged behind its regional peers in terms of labour productivity, it is important to start by recognising that labour productivity depends on both the level of productivity and the physical capital available for production. This distinction between the level of overall productivity and the physical capital as two driving factors underlying labour productivity is of critical importance. The popular discourse on labour productivity often ignores the role of physical capital and confuses it with productivity in general. This is a mistake.

In the rest of this article, I discuss both the role of productivity and physical capital to explain why labour productivity in Pakistan has increased by so little since 1990s.

In an exercise done by this author, a one percent increase in productivity can potentially increase Pakistan’s GDP by 2.53%. This is significantly higher than what Jones (2011) estimates for most other economies. However, the overall productivity growth in Pakistan has remained abysmal to say the least.

Figure 2 plots the annual productivity growth for Pakistan for the period between 1968 and 2018. Since 1968, the average productivity growth is estimated to equal 1.24%. It was only for the short period in the 1980s that the average productivity growth reached close to 3%. The 1990s and the 2000s once again saw the annual productivity growth fall below 1%. It then increased to 2.5% during the recent decade. The key message that comes out of this exercise is that, despite significant benefits in terms of economic prosperity, the productivity growth rate has continued to fall short of what is required to sustain long periods of high economic growth.

But once again we are forced to ask a question, why has productivity growth remained low in the case of Pakistan? In one of his lectures, Charles Jones notes, “Poor countries are poor partly because of few inputs but also because of inefficiency in using those inputs.” In a similar spirit, Franklin Fisher had earlier remarked, “In dealing with actual economies, the barriers (for resources to move) may be more important than the frontier.” It is easier to appreciate this if one considers that, over the past five decades, almost 40% of the growth in GDP per person for the United States came from the better use of its human resource i.e. right person for the right job. The potential benefits for developing economies from improving how they use their existing resources are also enormous.

To better understand why Pakistan has lagged behind its regional peers in terms of labour productivity, it is important to start by recognising that labour productivity depends on both the level of productivity and the physical capital available for production.

Conceptually, the poor use of resources affects a country’s development prospects by undermining overall productivity. For example, Hsieh and Klenow (2009) show that inefficient utilisation of resources may reduce productivity by about two to three times in the case of China and India. In its vision document, the Economic Advisory Group cites several examples from the literature showing how several of the developing countries improved their overall productivity by letting their existing resources move to more productive activities. Meza et al. (2019) show that 41% of the increase in Mexico’s productivity between 2003 and 2012 was because of improvement in allocative efficiency, i.e. due to economic resources moving from less productive to more productive activities. Improvement in allocative efficiency was an important part of productivity growth during Chile’s decade-long period of growth following the debt crisis of the early 1980s (Chen and Irrazabal, 2015).

At the onset of the 2013 crisis, organised sectors and businesses linked to powerful families successfully lobbied to increase trade protection in the form of non-tariff measures to protect themselves from international competition.

In the context of Pakistan, the two broad themes which have the potential to cover much of the ground on inefficient use of economic resources are trade protection and the low levels of labour mobility. Pakistan undertook significant trade liberalisation during the 1990s and the 2000s. The tariff rate came down from more than 50% in the 1990s to less than 20% in the late 2000s (Malik and Duncan, 2022). The authors show that much of this progress was partly reversed during the last decade. However, while the focus on the average tariff rate gives useful information on the degree of protection from international competition, it hides important sources of distortions. A closer look at the data shows that the effective rate of protection enjoyed by the sectors dominating Pakistan’s economy is substantially higher (Varela et al., 2020). It is this excessive protection of traditional sectors from international competition which prevents Pakistan’s economy from adapting to the requirements of the 21st-century economy.

The second theme centres around low levels of labour mobility. Consider the fact that only 15% of the total migration that happens within Pakistan happens for economic reasons (LFS, 2021). Understanding why this is the case requires asking if this is due to a lack of affordable housing; poor transportation network; issues around security of life and property; dependence on social networks due to unreliable provision of public goods such as health care; Or lack of opportunities. Pakistan, as a country with a relatively abundant labour force, has enormous potential in competing globally in products which use labour more intensively in production. But if the country’s labour force cannot relocate in response to the needs of the economy, the potential benefits from integrating with the rest of the world will not materialise.

The two themes discussed above leave much else to be desired. Some of these include liberalising pricing regimes and replacing minimum support prices with instruments such as crop insurance for small farmers; revamping the education system with the aim to introduce and mainstream pathways for vocational training at the level of higher and post-secondary education; designing appropriate tax policy to discourage speculative investments in both urban and farmland; undertaking judicial and civil service reforms; and, importantly, the democratisation of political parties (EAG, 2020).

However, addressing the structural issues mentioned above is often not straightforward for both political and technical reasons. On political reasons, Jones points to the economic interests of the ruling elite as an important factor behind why a country’s resources are not used efficiently. Jones (2013) says, “The state-of-the-art in that literature suggests that misallocation is the equilibrium outcome of a political process interacting with institutions and the distribution of resources (including physical capital, human capital, ideas, and natural resources). It is, evidently, not in the economic interest of the ruling elite to improve the allocation of resources, despite the potentially enormous increase in the size of the economic pie that is possible in the long run.”

In a recent paper published by PIDE, Adeel Malik and William Duncan document this phenomenon in the context of Pakistan. They show how at the onset of the 2013 crisis, organised sectors and businesses linked to powerful families successfully lobbied to increase trade protection in the form of non-tariff measures to protect themselves from international competition. Likewise, the 2018 crisis saw a sharp increase in import duties in sectors linked to powerful families. The 2022 crisis has proven to be no different.

On the technical side, Fisher reminds us, “It is very risky to look at a planned economy and predict where it will end up if it shifts to a system of free markets.” Likewise, Yao (2014) says, “High growth is not granted when a command economy is transformed into a market economy.”

However, these challenges are not specific to Pakistan alone. As low as it might first appear, the average productivity growth in Pakistan is not too different from what is observed for the rest of the world. For example, since 1980, the average annual productivity growth in the case of India has been 1.5%. The same for Pakistan has been 1.4% over the same time period. In fact, Pakistan’s average productivity growth has been three times higher than the rest of the world. Figure 3 plots the distribution of annual productivity growth for the country-year pair. There are two important points to note. First, there is considerable variation in the annual productivity growth across country-year. Second, the average annual productivity growth across country-year has only been 0.4%.

A cursory look at the data also suggests that there is no obvious relationship between the level of economic development and productivity growth. The correlation between annual productivity growth and the level of GDP is close to zero. In other words, it is not the case that countries at any level of economic development experience faster productivity growth on average.

This observation is not new. There is already considerable literature showing that the contribution of productivity growth to the East Asian growth miracle was rather unimpressive. For example, Collins and Bosworth (1996) estimate that, while GDP per capita grew at an average rate of 4.2% over the period from 1960 to 1994, the contribution of productivity growth to the annual GDP per capita growth rate was only 1.1 percentage points on average.

Admittedly, the above discussion should not be taken as conclusive. There are countries which succeeded in achieving high growth rates driven by continuous improvement in productivity. For example, output per hour increased at an average rate of 3.3% in the US between 1948 and 1973. Jones (2016) shows that almost all of it can potentially be explained by advances in productivity.

Moreover, methodological choices can also change results substantially (Barro and Sala-I-Martin, 2004). For example, taking a different approach, Hsieh (2002) shows that the contribution of productivity growth to annual GDP growth for Taiwan increases from 2.1 percentage point to 3.7 percentage point. The same for Singapore increases from close to zero to 2.2 percentage point.

The more relevant question in the context of this article is how else can the countries sustain long periods of high economic growth. After all, countries across the world have made substantial gains when it comes to improving the living standards of their citizen without a substantial increase in their overall productivity. This provides the motivation for understanding the role of physical capital as the second key driver of improvements in labour productivity.

It is argued that for countries which are broadly similar, the country with less physical capital will offer higher returns on investment. As a result, if these countries were to open up their economies to foreign investment, they will experience an inflow of capital which will contribute to their economic development. While this is not always the case, this is certainly true for several emerging economies, including India and China.

Figure 5 shows that, as India and China opened up their economies to foreign investment in the early 1990s, they experienced a significant increase in inflows from international private investors (blue bars).

In contrast, while Pakistan has also seen investment from international private investors, these inflows have not sustained for longer. In effect, most of the non-debt-creating inflows are concentrated in a few years during the last three decades. Figure 6 shows that the only time net private equity inflows remained above 2% of GDP for more than a year was in the mid-2000s.

By not accumulating reserves, policymakers have effectively prioritised today’s consumption over future consumption. Indeed, in doing so, they have effectively left the citizens worse off.

In addition to foreign investment, domestic investment in these countries has increased as well. For example, the gross savings rate (as % of GDP) increased from close to 15% during the 1980s to more than 30% in the 2000s.

China and Bangladesh have also seen a significant increase in their savings rate during this period, except that the increase for China is smaller due to an already high savings rate, to begin with. In contrast, the gross savings rate for Pakistan has declined over the same period.

Why is it that both foreign and domestic investment has not increased in Pakistan despite Pakistan having comparable socio-economic conditions to the rest of the countries in the region? Like always, there is no one good answer to a question as important as this. Nonetheless, I put forward the reason which I think is most important: macroeconomic risk in the form of frequent currency crises.

The best way to visualise how macroeconomic risk may affect firms’ investment decisions is through Figure 7. Figure 7 plots the annual return on a KSE100 five-year index fund. I select five years since it matches the average duration of the business cycle and, as a result, is most suited to capture macroeconomic risk. Two things stand out. First, the average return on this index fund equals 16%. In real terms, the average return equals 8%. Second, the standard deviation (i.e., risk) is also quite high at 17%.

The two observations are of critical importance. The higher average returns are consistent with the notion that less developed countries tend to offer higher returns on investment. As a result, liberalising the economy should result in an increase in investment. However, there is also considerable macroeconomic risk associated with undertaking investment in Pakistan. The average return of 16% and standard deviation of 17% means that the Sharpe ratio is less than one, thus making both foreign and domestic investment less attractive.

This simple observation has important policy implications. A better set of macroeconomic policies which lower the risk of repeated currency crises can go a long way when it comes to incentivising investment and bringing about substantial improvements in labour productivity. The set of macroeconomic policies which help achieve this is well known. However, in the context of Pakistan, the role of accumulating foreign reserves deserves additional attention.

Figure 8 highlights an important difference between Pakistan and the regional economies discussed above. While all the economies received a varying degree of private inflows over the four decades, all the countries except for Pakistan used these inflows to accumulate foreign reserves. In fact, China accumulated more in foreign reserves than the net private inflows it was receiving in any given year for more than a decade. It is easy to appreciate that the macroeconomic risk in developing countries with large reserve cover is definitely less than in the case of countries which don’t.

In the discussion above, I have stepped back and taken a broad view of both the structural and macroeconomic challenges Pakistan face. Without going into technical details, I have also hinted at several of the reform measures the policymakers can take to address these challenges and lead Pakistan’s economy out of the quagmire it is stuck in.

However, the discussion skips several important questions which are arguably more fundamental to understanding the challenges highlighted above. For example, by not accumulating reserves, policymakers have effectively prioritised today’s consumption over future consumption. Indeed, in doing so, they have effectively left the citizens worse off. But why is it the case that policymakers in Pakistan prioritise today’s consumption more than policymakers in our neighbouring countries? Second, while I am equally guilty of doing this above to get my arguments across, there is no good reason to believe that what is ‘macroeconomic’ is independent of what is ‘structural.’ It is very much likely that the structural problems which prevent sustained growth also force policymakers to bet on expansionary (procyclical) policies to deliver short periods of growth for electoral victory. But, if so, what prevents the politicians from addressing these structural bottlenecks that ultimately give way to irresponsible macroeconomic policies? I leave it to the reader to explore the answers to these questions.

Ahmed Pirzada

The writer is Chairperson of Economic Advisory Group, Pakistan; Senior Lecturer in Economics,
University of Bristol; and, Fellow of Higher Education Academy, UK.

The post Labour Productivity In Pakistan: Why Are We Falling Behind? appeared first on Dissent Today.

In his 11th August 1947 address to the Constituent Assembly of Pakistan, our founding father Muhammad Ali Jinnah talked about the curses of bribery and corruption. He also talked about the “great evil” — the evil of nepotism and corrupt employment practices that can weaken any country’s foundation. He also pointed out the biggest obstacle to India’s freedom and the lesson to be learned from the fact that Great Britain was not only able to conquer India, but also hold 400 million souls subjugated for such a long time.

Nearly 76 years later, here we stand, a nation divided and on a pathway toward economic, political, and social ruin. Trust, which is conceptualised as the currency of the realm, has vanished as our elites occupying the various institutions and seats of power focus on a mutually destructive path with the country and her interests turned into a painful casualty of deep and resentful hostility.

Sustained and consistent weakness in policy-making across decades (both external and internal), systematic weakening of the concept of national interest, and constant tension amongst institutions and political elites mean that results of this top-to-bottom deterioration are now here for all to lament.

Let’s analyse what could have been and where this current path is leading towards. Using IMF’s world economic database, which covers data since 1980, one can glean the contours of the divergent paths of Pakistan, India, and Bangladesh over the last 42 years. In 1980, according to IMF data, the GDP per capita in PPP terms (an estimate of economic output per person) tells a story of different starting points with Pakistan’s per capita income being 84% and 34% higher than India and Bangladesh respectively. Fast forward to 2022, the same comparison stands at 20% and 15% below India and Bangladesh respectively.

The lagging trend, which Pakistan has experienced since 1980, shows what lies ahead; For instance, if the current country-specific trends were to continue and Bangladesh and India’s per capita growth were to slow to 7% per annum from the current double-digit pace, Pakistan’s GDP per capita in PPP terms will only reach $16,200 (using 2017 prices) whilst India and Bangladesh would be both at $45,000 and above by 2050, leading to a future of these three countries which would look tangibly and deeply different from each other when it comes to the level of economic and social development and progress.

These statistics and their projections highlight the sustained decline in both the quality and quantity of economic outcomes which have occurred over the last 42 years for Pakistan (and more clearly since the 90s) and in all probability will lead to very different end-points for the various countries.

However, challenges of the 21st century mean that these trajectories of the last four decades can’t even be taken lightly by any of the above countries including Pakistan. According to Burke, Hsiang, and Miguel’s (2015) climate change damage function approach, the whole of the sub-continent is mapped to include some of the most vulnerable countries to the challenge of human-driven global warming. Indeed, all three countries in the absence of meaningful mitigation and adaptation face total economic collapse, if temperatures were to continue to rise 3C and above compared to preindustrial levels.

As a country, our state and our people have systematically underplayed the importance of sound economic policy and its interaction with geopolitics and broader national security. Our record of constant dependence on the IMF for support is a testament to this failed thinking and application (which is factually worse than most other emerging markets).

I am often asked like many members of Pakistan’s diaspora about coming back and changing the country. This question in itself shows our collective thinking and requires self-reflection. Countries are not built and changed by individuals. They change and progress through collective will and the application of national character. Here individuals can certainly lead by example as our forefathers did in their fight for an independent country at the start of the 20th century but they are only facilitators not the cause of the change.

We shouldn’t forget that India and Bangladesh that started the post-independence journey in 1947 along with Pakistan are now breaking free and taking a giant leap, but Pakistan is deteriorating fast into social and economic mayhem.

We shouldn’t forget that two countries (India and Bangladesh), which started the post-independence journey in 1947 (with Bangladesh starting again in 1971) are now breaking free and taking a giant leap, when it comes to creating sustained and meaningful economic prosperity for their people. Whilst we as a nation are not only lagging but deteriorating fast into social and economic mayhem, whilst losing our sense of self and pride along the way.

The rot can be stopped and reversed and countries have woken up from the crisis before to carry out fundamental changes to their approach and implementation (e.g. Asian countries after the 1997 crisis or India after the early 90s balance of payment crisis or Europe after WW2). However, such a turnaround requires acknowledgement of failures, incompetence, and above all, the national will to tackle the challenges and break free from all the forces which are holding us back.

Right now, the painful reality is that we have lost our core and now run the danger of losing Jinnah’s dream of a prosperous Pakistan, permanently for us and our future generations.

Salman Haider

The writer is a Pakistani poet and activist based in Canada.

The post Some Key Lessons That Pakistan Can Learn From Its Neighbours appeared first on Dissent Today.

If I had prodigious wisdom as a child, I would have asked my parents why their ancestors chose this part of the border when the majority of the Hindus were moving from the newly-created Pakistan to Hindu-majority India in 1947. I am certain they would have answered that it was due to their love for the land, unchallenged loyalty, ancestral abodes, and deep attachment to their motherland, which they endearingly called Dharti Mata, that they decided to stay here.

So, 5 million Hindus are living in Pakistan by choice today – it does not matter if the choice they made was right or wrong. What is important is that they are not living here by any compulsion or coercion. However, in return, they are persecuted, marginalized, and otherized. They are labeled as “traitors”, “Indians” and “RAW agents”. They are forced to live in fear and a sense of insecurity.

Ironically, Pakistani Hindus who are labelled “Indians” in Pakistan are treated with contempt even when they visit India — where they face the same inhuman treatment because, for extremists in India, their Pakistani identity contradicts their Hindu faith.

So, we are people with no land.

If I raise my voice and write something against persecution, and atrocities committed against minorities or issues like the forced conversion of underage Hindu girls to Islam in Pakistan, my patriotism is questioned, and I am labelled as a RAW agent. If I write something against the Muslim minority in India, the Modi bhakts call me an ISI agent.

In the 75-odd years of post-partition history, the Hindu citizens of Pakistan lost their identity. They are identified in the Constitution, in the State’s narrative, and in public life as non-Muslims, infidels or kaafirs, Indians, and whatnot.

The negation of Hindu identity by using the prefix “non” is so normalised and internalised by the State that it is never realised that this excludes, and otherises the Hindus residing in Pakistan, making them second-class citizens.  Elsewhere in the world, Muslims will never or hardly hear being referred to as non-Christians, non-Hindus, or non-Jews, but here they happily otherise me and negate my identity. Sometimes, I jokingly say Pakistan has a 96% non-Hindus and 4% non-Muslim population. But who cares what I say here?

Under the garb of the two-nation theory, the State discriminates against us through the Constitution, while instilling hatred against us through the curriculum as well.

The bigotry against Hindus is normalised and internalised to the extent that passing funny remarks against Hindus, and using derogatory words against them, their beliefs, and their deities are done very casually here. A Hindu residing in Pakistan feels this discrimination and hatred from people they come in contact with on a daily basis— be it a neighbour, a class fellow, a colleague, or anyone for that matter.

“Why don’t you convert to Islam?” asks our class fellow.

“We can’t share the same plate,” tells our co-worker.

“You can’t celebrate our religious festivals,” chides our neighbour.

The story does not end here: we have to prove our patriotism and review our certificate of loyalty whenever someone demands it. Whether it is the 14^th of August, 23^rd of March, 6^th of September or any other national day, the majority of patriotic zealots expect Hindus to express their patriotism or loyalty publicly.

This is patriotism under the garb of jingoism.

My love for Pakistan should not require me to hate India or its people, but the state’s narrative demands I condemn my neighbours, so I could be considered a loyal citizen.

If I highlight the atrocities committed against Hindus in Pakistan, I am quickly countered with a cliched argument: “Don’t you see what is happening with Muslims in India?” Atrocities against Muslims or other minority communities elsewhere are equally condemnable, but using those incidents to justify violence in your own country is hypocritical.

The State needs to rise against the extremist elements in society and support a narrative of inclusivity and equality by guaranteeing that every religious group is given the same respect and their basic rights are protected.

Anjli Kumari

The writer is a university student and an activist

The post Growing Up Hindu In Pakistan Means Constantly Being Asked To Prove Your Loyalty  appeared first on Dissent Today.