Investment in productive sectors to revive Pakistan's economy

Source: The Nation

ISLAMABAD - Reviving Pakistan's economy requires a sustained and coordinated effort to direct investments into the productive sectors. Experts agree that the funda­mental pillars of economic resurgence lie in adopting innovation, nurturing technological advancements, and up­dating traditional industries.

Zafar-ul-Hassan, Joint Chief Econo­mist at the Ministry of Planning, Devel­opment and Special Initiatives, said, "In 2023, Pakistan found itself at a cross­roads as it grappled with a significant economic challenge -- an investment-to-nominal GDP ratio that stood at the lowest in the region at 13.6%, down from 15.7% in 2022." Low investment, he said, is one of the core reasons why Pakistan's growth in exports has been negative over several years. Export di­versification is essential for Pakistan to enhance its competitiveness in the global market and achieve sustainable economic growth. "Specifically, this di­versification entails a strategic focus on the productive sector, which encom­passes industries such as technology and innovation-driven enterprises. Not only does it stimulate economic activity, it also serves as a catalyst for job cre­ation, technological advancement, and heightened global competitiveness," he maintained while talking to WealthPK.

The chief economist stressed that in light of the escalating worldwide de­mand for software and IT solutions, Pakistan must recognize that establish­ing a software house presents a more accessible endeavour compared to set­ting up a manufacturing unit.

"Consequently, it is incumbent upon us to prioritize this type of investment. In formulating our strategic approach, careful consideration must be given to whether we should embrace a broad spectrum of investments or focus on targeted investments to propel our objectives forward." Zafar echoed this concern, saying, "Absence of a concert­ed effort in this regard leaves Pakistan trailing behind in terms of technological advancement and product innovation. The policymakers should consider a strategic allocation of funds, recogniz­ing the importance of R&D as a driver of long-term economic growth."

"Allocating a modest yet targeted por­tion of the budget, specifically for R&D, can yield significant returns in terms of innovation and competitiveness," he sug­gested. Dr Ghulam Samad, trade econo­mist and senior research specialist at the Central Asia Regional Economic Cooper­ation (CAREC) Institute, told WealthPK, "Pakistan, like many developing nations, faces challenges that demand innova­tive solutions. A comprehensive analy­sis of the current economic landscape reveals a pressing need for transforma­tive measures. Historically, the country has relied on traditional sectors such as agriculture and textiles, but diversifica­tion and modernization are paramount to ensure sustained growth. "The gov­ernment should carefully choose which sectors have the potential to grow and compete in the global market. These in­dustries should be identified based on factors such as comparative advantage, technological potential, and market de­mand," he opined. "By fostering a culture of innovation and diversifying economy, Pakistan can reduce its vulnerability to external shocks, such as fluctuations in commodity prices, and create a more sustainable and resilient economic foun­dation," he stated.