Pakistan and its neighbors can turn South Asia into an Export Powerhouse only if they improve the business environment, connect to global value chains, leveraging clusters, and strengthening firm capabilities, a World Bank report says.
The report titled “South Asia’s Turn: Policies to Boost Competitiveness and Create the Next Export Powerhouse” speaks about the need for Pakistan and its neighbors to increase the productivity of firms which, it argues, is the only sustainable path to improving competitiveness.
It points to a broad set of constraints that limit the growth and export potential of Pakistani firms vis-à-vis their competitors in East Asia and the rest of the world.
“In order to address these, the report highlights the well-known challenges in the region’s investment climate, but more importantly draws attention to less-well-researched areas such as the role of cities and clusters, global value chains, and firms’ abilities to innovate and efficiently use resources, including technology.”
The region’s potential is evident from the highly successful apparel industries in Bangladesh and Sri Lanka to Pakistan’s light manufacturing cluster in Sialkot which has achieved dominant global market shares in products such as soccer balls and surgical instruments.
“Pakistan, in particular, has important strategic endowments and development potential”, says Illango Patchamuthu, World Bank’s Country Director for Pakistan. “Located at the crossroads of South Asia, Central Asia, China and the Middle East, Pakistan is at the heart of a regional market with a vast population, large and diverse resources, and untapped potential for trade.”
The report says that Pakistan leads many global competitors when it comes to wage competitiveness and proximity to key markets yet continues to experience weakening in exports competitiveness.
Exports remain concentrated in the textiles and food sectors and investment in global value chain capabilities including physical capital, human capital, institutions and logistics remain limited.
With the right set of productivity-enhancing policies, South Asia could more than triple its share in global markets of electronics and motor vehicles and come close to doubling its already significant market share in apparel (excluding textiles and leather) by 2030. All countries, but particularly Pakistan, need to do well to improve their business environment.
Another World Bank report “2017 Doing Business”, issued recently, acknowledged that Such reforms are being implemented in Pakistan, but needs to be accelerated.