Economic growth linked to export of higher value-added goods

LAHORE: Economic growth has been linked to export of higher value-added goods, renowned scholar Dr Attaur Rehman said on Saturday.

In a briefing of a report issued by the Institute for Policy Reforms, he advised planners to focus on science and technology.

Dr Atta, who is a former federal minister and HEC chairman, recommends that the country must commit in earnest to a science and technology strategy. This is critical for the country’s future or else “Pakistan risks being left behind permanently,” he warned.

The report also said textile constitutes 60 percent of Pakistan’s exports, but it has a mere six percent share in world exports. Overall, manufactured goods are 67 percent of the world trade. Resultantly, Pakistan’s role in the world trade is limited because it does not have the value-added products to participate in bulk of the world market.

No economy grows on a long-term basis without a dynamic and continually modernising manufacturing sector, Dr Atta said, adding that the share of manufacturing in Pakistan’s GDP is under 14 percent, whereas it ranges from 37 percent to 43 percent of GDP in middle income East Asian economies.

India and Bangladesh have a share of 30 percent and 28 percent of GDP, respectively, he added. To boost manufacturing and economic growth, the S&T strategy must integrate into all aspects of the economy: industry, agriculture, SDGs, as well as government.

IPR’s S&T strategy has several components. It focuses on education, technical training, R&D, setting up of specialised technology institutions, and effective enforcement of standards and testing.

As its starting point, Dr Atta refers to the weak state of education in Pakistan and emphasises the need for immediate declaration of a National Education Emergency.

Another key component of the strategy is setting up of specialised training and research institutions. He recommended such institutions in a wide range of specialties to build industrial and agricultural competitiveness. As a third component, the strategy advocates incentives for development of knowledge industry. Proposed incentives include public sector R&D support, tax incentives, risk sharing for new industries, funds for venture capital and for innovation, and creating knowledge hubs by linking industrial clusters. To ensure consistent quality of goods produced in the country, the strategy also recommends establishment of standards and testing institutions.

Knowledge transfer from overseas is also a key instrument to upgrade industry. The strategy, consequently, recommends making all FDI approvals contingent on transfer of knowledge. Training and R&D facilities must be a part of investment proposals. These will enhance the country’s absorptive capacity for use of technology in production.

Underpinning the strategy is earmarking sufficient public funds for its implementation. IPR recommends allocation of 3 percent of GDP for the purpose. Adequate funding is necessary though not enough to ensure successful implementation of the S&T strategy. Effective institutions are necessary. This needs political will. That is why direct engagement of the Prime Minister is crucial.

IPR cautions that the world is now into the fourth-generation industrial revolution. Pakistan must prepare for this new era as many manufacturing sectors evolve and take new shapes. Driverless cars will populate roads and robots are staffing factory floors. So, for Pakistan the challenge is not merely to catch up in manufacturing, but to be ready for an evolving manufacturing sector based on AI and robotics. For this, Pakistan must radically and immediately upgrade its engineering capabilities.

Successful implementation of the S&T strategy will bring a boon to industry and agriculture. “Rapidly emerging branches of agricultural engineering offer Pakistan enormous opportunities for increasing output and yield”. Pakistan’s severe energy deficit requires that it also diversifies into renewable energy and development of energy storage systems. Based on these capabilities, Pakistan can later move to advanced areas such as nanotechnology, biotech and genomics, and robotics and AI.

Reliance on Science and Technology is critical for the country’s future because the sector is progressing so fast that a country may be left behind forever, if nothing is done to improve the situation.