NationalVOLUME 15 ISSUE # 16

Economic revival: digitization is the only way

There is a close link between GDP growth and employment generation. We need faster economic growth for providing jobs to the youth. But we are facing a range of economic challenges, including rising prices and shrinking demand. Last year, GDP grew by around 3 percent amid the declining growth of agriculture (0.85%), industry (1.4 %), and services (4.7%) sectors. All sectors of the economy are suffering due to double digit inflation (14.56%) and a high monetary policy rate.

Given the employment elasticity of 0.46 and last year’s GDP growth, the employment growth in the current year will probably be only 1.52 percent, providing new jobs to roughly 1 million people, which is far below the promised and required number of jobs. The present government is aware of its responsibility and trying its best in the given circumstances. Weeks back, the Ministry of Planning, Development and Special Initiatives organized a discussion on “Creating gainful employment opportunities” in which renowned academicians, an ILO representative, and experts from government departments participated and put forward their analyses and recommendations.

A number of useful ideas were discussed to mobilise the energy of youths by engaging them in gainful economic activities. Some speakers suggested making cities the engine of growth, allowing street vendors, hawkers wider space, making effective use of data, evidence-based policy making, encouraging capital venture, adoption and adaptation of technology, promotion of self-employment, start-ups, regularization of jobs in the informal economy, etc.

While discussing the current challenges posed by Pakistan’s youths, one of the panelists rightly said that we are still using the obsolete means of work and unable to adapt ourselves to today’s technology-oriented work delivery – the blend of digital, biological and physical worlds. As a result, our productivity is at the lowest levels.

Everywhere, the private sector plays an important role in job creation. But this is not the case here in Pakistan. The capacity of the private sector in Pakistan is limited and it cannot absorb 60% of young people under 30 years of age. In these circumstances, the main responsibility for employment generation is on the shoulders of the government.

As experts have been suggesting, we need to think in terms of a new growth paradigm. The way forward is the digitalization of the economy. All economic sectors will have to be digitilised to fully utilise their potential to meet the requirements of a competitive world. The two most important sectors of the economy with the highest employment generation capability are agriculture and manufacturing. But their employment structure has seen no transformation in the last few decades.

The agricultural sector’s contribution to growth has been fluctuating around 18 to 22% for the past 30 years. The sector’s employment contribution is 38 to 41%, but with a very low labour productivity. On the other hand, manufacturing sector’s contribution is 18 to 22%. The services sector has recently touched the level of 61%, but its output is not adequate. Within many sub-sectors, the digital economy contributes only 0.5% to the employment generation.

As in the rest of the world, the future of work lies in technology-driven employment opportunities. For the purpose, the policy makers need to pay special attention to the digitalization of the economy while designing the upcoming macroeconomic growth framework. The world’s renowned economists advocate structural transformation for sustained economic growth which could absorb surplus labour. Unfortunately, Pakistan, like many African countries, could not expand its production base and diversify away from agricultural dominance.

It has been observed in many countries that structural change in overall labour productivity along with technological advancement helps improve the economic growth. South Korea and Singapore are among the most celebrated examples in this context. Some of the steps that the government can immediately take include bridging the gap between skilled labour and industrial needs. Apparently, there seems to be no policy in vogue by the government in managing labour demand and supply.

A considerable lot of trained manpower is being produced with skill training (Kamyab Jawan is the recent example) but they are left at the mercy of the market. The government should also consider facilitating and supporting the relevant industries through incentivizing tax, technology adaptation etc. where the skilled youth could be utilized.

Secondly, the government needs to improve agricultural productivity through new technology, irrigation development, market channel improvement and shifting to higher value-added cash crops. Thirdly, in order to engage youths, a new advocacy campaign under a “Skills for All” scheme may be conducted, especially in rural high schools and colleges and motivate and support the students for self-employment and entrepreneurship. The general public awareness pertaining to skill development is also required for rural parents who want their children to leave education at an early age. As now is the time for budget making, the policy makers must make digitalisation the top priority in every sector of the economy.