FeaturedInternationalVOLUME 15 ISSUE # 06

Competitiveness index: Pakistan’s poor show

In the World Economic Forum’s Global Competitiveness Index, Pakistan’s ranking has slipped from 107 in 2018 to 110 during 2019 out of a total of 141 countries. Experts take it as an indication of the failure of the present government’s economic policies. By comparison, neighbouring countries did better. India was ranked at 68, Sri Lanka at 84, Bangladesh at 105 and Nepal 108. Within the region Pakistan did better than Afghanistan only.
Pakistan’s ranking on the Global Competitiveness Index declined due to deterioration in its position on seven out of 12 pillars. We fared poorer than last year on indicators of corruption and freedom of the press but improved our ranking on reducing organised crime and ensuring judicial independence. 0n the other hand, life expectancy declined by six months to 58 years.
The results are based on the outcomes of surveys and statistics from international sources. The final rating of each country is based on 12 pillars and 103 indices. The report is an annual assessment of the factors driving countries’ productivity and prosperity.
Unexpectedly, Pakistan stays at the bottom of the index of incidence of terrorism despite notable improvement in law and order. It also stays at the bottom among South Asian nations, regarding pillars relating to governance, innovation, productivity and human development in 141 countries.
In a welcome development, this year Pakistan, among 103 global competitiveness indicators, showed improvement on 42 key indices, while it lost its ranking on 39 indices. On the infrastructure pillar, Pakistan’s position slipped by seven notches to 105. On the pillar of business dynamics, the position went up by 15 notches to 52. But the maximum deterioration was on the pillar of macroeconomic stability where it lost 13 ranks and stood at 116 due to a marked deterioration in indices of inflation and debt dynamic
According to the report, one reason behind this poor performance was attributed to the failure of government departments to provide relevant information to international agencies on time and relevant departments like the Finance Division and the Foreign Office not giving due attention to improving the country’s competitiveness against other countries.
Knowledgeable circles say that the decline in our ranking does not make sense as the World Bank recently ranked Pakistan amongst the top 20 improvers in the Doing Business 2020 index with the Country Director tweeting this month, “we laud the collective action of Federal, Sindh, and Punjab governments for an impressive feat.” In other words, this means that the two concepts – Global Competitiveness Index and Doing Business – are not identical, although many indicators are similar.
It is relevant to add here that the World Bank underlined six factors as contributing to the improvement in the Doing Business index. namely: a) starting a business was made easier through more procedures being available through the online one-stop shop; (b) improvements in property registration – obtaining a construction permit was easier after the Sindh Building and Control Authority and the Lahore Development Authority streamlined approval workflows and improved the operational efficiency of their one-stop shops; (c) launching online portals to facilitate getting electricity connections easier; (d) tariff changes announced in advance; (e) tax compliance made easier through online payment modules for value-added tax and corporate income tax, and a lower corporate income tax rate; and (f) trading across borders made easier by enhancing the integration of various agencies into an electronic system and by improving coordination of joint physical inspections at the port.
Underlying Pakistan’s poor performance on the competitive index is the reduced ability of governments and central banks to use monetary policy to stimulate economic growth. This is so because the government is supporting an undervalued rupee and a discount rate that is in excess of headline inflation – policy measures that are crippling the growth rate of the private sector leaving the entire onus of growth on the government sector.
On its part, the government is unwilling or unable to cut expenditure and eliminate waste. Instead, it is relying on unrealistic tax revenue targets (which is crippling private sector activity) and non-tax revenue (essentially from privatisation proceeds, a process likely to drag on for various reasons).
In the opinion of economic experts, with a growth rate of 3.3 percent last year and a projected 2.4 percent this year, stagnant exports due to domestic policies (fiscal and monetary as well as higher utility rates) and external factors including a global recession, Pakistan’s competitiveness is likely to go down further in the next fiscal year. This calls for necessary remedial measures to be put in place without further loss of time. As a first step, the government must ease up on its ill-advised tax collection drive which has crippled trade and commerce and driven away investors.