State of Technology and Productivity in Pakistan’s Manufacturing Industries: Some Strategic Directions to Build Technological Competence

Zafar Mahmood, Rehana Siddiqui


Historically, Pakistan’s economic growth record, especially of
the manufacturing sector, has been quite satisfactory. However, since
the late 1980s Pakistan has been facing a slow growth of manufacturing
industries, particularly of the large-scale manufacturing units. This
has led some economists to express the apprehension that perhaps
de-industrialisation is taking place in the country. A careful analysis
of the causes of this sluggish growth suggests that one of the main
contributory factors is the slow growth in total factor productivity
(TFP)—the best overall measure of competitiveness. What has caused this
productivity slow-down? For Pakistan there is clear evidence of a
relationship between the growth in total factor productivity and the
ailing S & T apparatus. The results presented in the study also lend
support to the hypothesis that knowledge capital, human capital,
openness, and government policies are crucial determinants of total
factor productivity growth. Given a liberal economic environment in the
country, which is essential to improve efficiency and productivity, the
paper offers four strategic directions in order to improve the status of
the S & T system in Pakistan: (1) augment the public sector S &
T apparatus with the private sector funding and oversight; (2) take
measures to upgrade scientific research institutions to the
international standard; (3) streamline the technology creation,
absorption, and diffusion system; and (4) enhance the demand for S &
T in industries. These strategic directions are designed in such a
manner that they work together towards a series of phased reforms, which
can create incentives and market-based mechanisms to enhance the
technology system without relying on a radical shift in the governance
element of the bureaucracy.

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