Higher growth crucial for mounting productivity: study.

ISLAMABAD -- The growth of productivity is a crucial determinant of an economy's growth that has to be pushed higher to over 3% to achieve the targets of raising the country's Gross Domestic Product (GDP) to over 7-8% on a sustainable basis.

A study titled 'Sectoral Total Factor Productivity in Pakistan,' conducted jointly by the Planning Ministry and Pakistan Institute of Development Economics (PIDE) shows that in Pakistan, average productivity growth has been 1.5% from 2010-2020. However, 1.5% productivity growth is not enough if Pakistan wants to achieve GDP growth of around 7-8 percent.

The study reveals that economies that had total factor productivity (TFP) growth of more than 3 percent had a GDP growth rate of 8 percent or more, whereas, the TFP growth of less than 3 percent was associated with a GDP growth rate between 3 and 7 percent, enunciating a positive correlation between productivity growth and GDP growth.

Having higher factor productivity, or simply productivity, is a key building block for global competitiveness, without high productivity, we cannot compete at the international level, said Asim Saeed, a Member of Private Sector Development and Competitiveness at the Planning Commission of Pakistan.

Asim being a key player behind this study noted that the only sustainable way for Pakistan to rid itself of the perplexing macroeconomic woes was to substantially substitute foreign currency refinancings and more foreign debt with a foreign currency stream of export dollars. "This is possible only if we wholeheartedly embrace productivity as our national emblem,' he remarked.

The study used unique listed and non-listed data from 1,321 firms divided into 61 sectors, to estimate the productivity growth in Pakistan.

According to the study's results, high-productivity growth sectors are mostly services-based or tech-based, whereas most of the sectors that have medium to low or negative productivity growth are in manufacturing.

The study maintains that one plausible reason for the afore-stated sectors could be greater competition in services. The study further finds states, 'the manufacturing sectors are protected in Pakistan, which insulates them from the competition; protecting a sector retards any incentive to improve efficiency.'

It is noted that since the incumbent government came into power in April last year, Planning Minister Prof Ahsan Iqbal has been constantly emphasizing adopting export-oriented policies for the...