Scholars discuss road to development for Pakistan
LAHORE: The Lahore School of Economics (LSE) organised Two-Day 12th International Annual Conference on Management of the Pakistan Economy with the theme “Technology, Entrepreneurship and Productivity Growth – Where Pakistan stands and where it must go” at its main campus here on Burki Road during March 30-31, 2016.
Dr. Naved Hamid (Director Centre for Research in Economics and Business, LSE) in his welcomed address said the conference aimed to address the issues confronted by Pakistan’s economy at present. He said the timing of the conference was very important given the issued confronted by the country. Dr. Bilal U. Haq, Research Professor at the Smithsonian Institute, Washington and at the Sorbonne University, Paris, outlined some of the issues that Pakistan faces that encumber innovation and enterprise. Drawing lessons from international experience, he concluded that scientific research does not always require large investment of funds. In fact, it requires a special mix of encouragement and R&D incentives from the government and industry.
Dr Irfanul Haque, Special Advisor, Finance and Development, South Centre, Geneva, concluded the first session with his presentation on Productivity growth-technology-entrepreneurship nexus: Implications for Pakistan. He discussed the critical importance that innovation
plays in economic growth and concluded with a few suggestions on how science and technology can be promoted in Pakistan.
The second session of the Conference focused on Pakistan’s Productivity Performance. The first speaker, Dr Rashid Amjad (Professor of Economics and Director, Graduate Institute of Development Studies, Lahore) and Namra Awais (Research Fellow) explored the contribution that physical capital, human capital and TFP (total factor productivity) make to labour productivity in the overall economy as well as for agriculture, industry and services over the last 35 years in Pakistan. In conclusion, Dr Amjad highlighted a better-educated and trained workforce to be one of the key factors that can lead to substantial gains in economic performance.
Carrying forward the discussion on Pakistan’s productivity performance, Dr. Matthew McCartney (Director of South Asian Studies; Associate Professor in the Political Economy and Human Development of India, University of Oxford, UK) highlighted the remarkable robustness of GDP growth in Pakistan since the time of independence, despite significant transformation in the structure of its economy. He concluded with a discussion on the historical and comparative productivity performance of Pakistan in the context of successful technological change in South Asia.
The second session concluded with a presentation by Ms. UzmaAfzal (Assistant Professor, Lahore School of Economics) onher co-authored work with Ms. Maha Khan (Teaching Fellow, Lahore School of Economics). Their paper discusses the diversification and technological sophistication of the large-scale manufacturing sector in Pakistan and summarizes that while Pakistan’s exports are more diversified, its total exports show a downward trend as opposed to a rising trend for India. They conclude that, in addition to diversification, the nature of exports is of huge significance.
The third session of the day discussed Innovation, Entrepreneurship and Technological Progress. Dr Waqar Ahmed Wadho, Assistant Professor, Lahore School of Economics, discussed the innovation in the textiles sector of Pakistan, from his co-authored work with Dr Azam Chaudhry (Professor and Dean of Economics, Lahore School of Economics). In a sample of 614 textile manufacturers, they find that innovation is an increasing function of firm size, with the acquisition of newer vintages of equipment being the dominant innovation activity. Lack of funds and high costs of such innovation were found to be the most important factors hampering innovation. Their paper provides a useful analysis of regional variation of technical innovation in the country.
Dr Rajah Rasiah, Professor of International Development at the Faculty of Economics and Administration, University of Malaya, spoke on the experience of East Asian Economies in
their efforts to promote economic growth. He analysed the different policies in China, Vietnam, Indonesia, Malaysia, Thailand, and other South East Asianother countries to draw important lessons for policy formation in Pakistan.
Dr Hanns Pichler, Vienna University of Economics and Business, former Senior Schumpeter Fellow, Centre for European Studies, Harvard University, USA, presented his analysis of the innovations in Austrian small and medium enterprises. The Austrian experience has shown that the SMEs are the mainstay of innovation, outperforming larger enterprises in most ca
Ms. AnumElahi (Teaching Fellow, Lahore School of Economics) presented the results from her co-authored study with Ms MahnoorAsif (Teaching Fellow, Lahore School of Economics) on the impact of education, age, gender and ability on entrepreneurial activity in Pakistan. Using the Global Entrepreneurship Monitor (GEM) data for the years 2010-2012, they find that predominantly, it is technical innovation that results in business creation.
The last session of the day was devoted to discussions on Productivity Differences and the Technological catch-up process in industries of Pakistan. Dr Theresa Chaudhry (Associate Professor, Lahore School Economics) presented her co-authored paper with Ms. MahvishFaran (Teaching Fellow, Lahore School of Economics). The paper maps the manufacturing process in the denim jean production industry in Pakistan.
Mr. Tariq Raza (Project Coordinator, Centre for Economic Research in Pakistan and Research Assistant, Lahore School of Economics) presented the results from production mapping exercise (co-authored with Dr AzamChaudhry) conducted on the soccer ball manufacturers
in Sialkot. They find that upgrading technology comes a cost that is not justifiable for most small and medium producers in the sector.
Ms. Saba Fazal Firdousi (Teaching Fellow, Lahore School of Economics) presented her analysis from her co-authored work with Dr Azam Chaudhry, on technology adoption in sport gloves manufacturing in Sialkot. They compare different technological processes in the sector and find that technology adoption is positively related to firm profits and retained earnings.
The day concluded with a talk given by Dr Azam Chaudhry, summarizing the findings from production mapping conducted in the aforementioned studies. He highlighted the insights these studies provide into the catch-up process in Pakistan and what implications we can draw for policy formation.
Conference Proceedings: Day 2
The second day of the conference started with a session on Entrepreneurship and Innovation in the Technology Sector: Constraints to growth. Dr. Naved Hamid (Professor of Economics and Director, Centre for Research in Economics and Business, Lahore School of Economics) and Mr. Faizan Khalid (Visiting faculty, Lahore School of Economics) highlighted the rapid growth of the digital economy globally since the 1990s. While this phenomenon reached Pakistan with a lag, the IT companies can be a major source of investment and growth for the country in the next decade, and so it is important to identify the constraints to growth of this sector.
Carrying forward the discussion, Dr. Mahmood ul Hassan Khan (Senior Economist, State Bank of Pakistan) discussed the importance of innovation and Science and Technology (S&T) in enabling economies to achieve sustainable economic growth. The paper discussed that firms engaged in medium- to high-tech production tend to gain more from innovation and are on average more productive compared to enterprise which are limited to low-tech systems.
The third paper of the session was presented by Ms. Farah Said (Assistant Professor, Lahore School of Economics) on her co-authored work with Dr. Azam Chaudhry (Professor, Lahore School of Economics), Ms. Mahreen Mahmood (CSAE, University of Oxford, UK). Their paper evaluated the impact of access to microfinance on new business start-ups run by women. The authors find a significant impact of a microfinance product on the likelihood of setting up a business; however this does not translate into any improvement in household asset holdings or independence of women in making ordinary household decisions over the same year.
The first session concluded with a presentation by Ms. Nazia Nazeera (PhD candid
ate, University of Malaya, Malaysia) on her co-authored work with Dr Rajah Rasiah (Professor of International Development at the Faculty of Economics and Administration, University of Malaya, Malaysia). The paper revisits the debate on Pakistan’s premature deindustrialization and analyzes the impact of overdependence on the clothing and textile sector on the economic development of Pakistan. The presentation concludes by exploring the potential for moving towards high value added manufacturing industries.
The second session of the conference focused on S & T upgrading and innovation: Industry Experience. The first paper of the session was presented by Dr. Inayat U Mangla (Visiting faculty, Lahore School of Economics) and the paper emphasizes the importance of developing a comprehensive strategy for harnessing science and technology to promote economic growth on a sustained basis. The paper conceptualizes the role of technology in the process of economic growth and identifies policy areas that can be instrumental in promoting technological modernization and innovation.
Mr. Aezaz Hussain (Chairman, Systems Ltd., Lahore) made the second presentation of the session. He emphasized the importance of the use of IT for improved communication network and mobile computing as a potentially disruptive force for changing governance and economic activity. Taxation at an early stage of the industry can result in slowing down of the growth of the industry. There is a need for the government to provide an enabling environment which includes access to venture capital and entrepreneurial mentoring and support.
The discussion was carried forward by a presentation from Mr. Irfan Aqueel (Chief Executive Office, Millat Tractors Ltd., Lahore). He discussed how vendors and foreign buyers affect the innovation process in terms of technology exposure and development of products as per market needs. Demand from foreign buyers has forced the industry to improve its products and efficiencies for global competition. The MTL’s new export venture with AGCO will accelerate its product innovation and development process and in the years to come local tractor and farm machinery industry is expected to follow its footprints.
The last presentation of the second session was made by Ms. Mahvish Faran (Research Fellow, Lahore School of Economics). Her paper was co-authored with Dr. Azam Chaudhry (Professor, Lahore School of Economics). The presentation highlighted the sources and areas of innovation and technology upgradation in a sample of firms in Lahore. The presentation concluded that firms
plan to upgrade technology in areas of production and marketing. However, energy and access to finance is an impediment to innovation. There is a need to bridge the informational gap between the public sector, academic institutions and the business community.
The third session of the day discussed The role of Pakistan’s public policy institutions in the promotion of technology innovation. Dr. Sikandar Rahim (Former World Bank, Washington D.C) highlighted that the lack of industrial progress over the decades should be a cause for concern about the future. While attracting foreign direct investment into Pakistan seems unlikely given the current conditions, Pakistan can follow the path of China and South Korea by acquiring technical knowledge through subcontracting and joint ventures with advanced economies; and therefore being able to participate into the production processes of foreign firms.
The discussion was continued by a presentation from Dr. Shaukat Hameed (Coordinator General, COMSTECH, Islamabad). Dr. Hameed stressed on Pakistan’s falling competitiveness, slow organizational changes, inadequate workforce skill levels and stalling productivity and innovation. According to Dr. Hameed, Pakistan faces a serious risk of deindustrialization unless the dynamics and disruptive nature of managing modern technology are understood and incorporated in the public policy.
Mr. Fazal Abbas Maken (Federal Secretary, Ministry of Science and Technology, Islamabad) made the final presentation of the third session. He emphasized that the R&D organizations have shifted their focus from In-house R&D to a demand driven R&D culture. The policies of the Government aim to promote entrepreneurship, and different ministries have evolved their policies to create a business friendly environment in order to support new entrants in the market.
The second day of the conference concluded with Conference wrap-up: Where do we go from here? Dr. Bilal U. Haq (Research Professor at the Smithsonian Institute, Washington and at the Sorbonne University, Paris), Dr. Rajah Rasiah (Professor of International Development at the Faculty of Economics and Administration, University of Malaya) and Dr. Rashid Amjad (Professor of Economics and Director, Graduate Institute of Development Studies, Lahore) made the final remarks by tying in all the major findings of the papers presented at conference and discussing the future trajectory of Pakistan’s productive path.