Pakistan spending less than two percent of budget on research

[Neo]

Pakistan spending less than two percent of budget on research

KARACHI (May 24 2007): Pakistan is among 162 countries in the world for contributing less than two percent of the budget on research, which is the major reason for deterioration in economics and technology.

Academia in the country has failed to develop linkages with the industry and presently there are no sign of creativity of knowledge to enhance industrial and trade activities, Dr Ayub Mehar, Head of Research Department, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) told Business Recorder on Wednesday.

Dr Mehar identified three missing links in the system of higher education and said that these gaps should be bridged on priority basis for country's economic growth in the arena of free trade. "First missing link is between the strategy for promotion of research culture and the curriculum. The policy for the development of academic research and the system of examinations work in opposite direction," he said.

This system stresses on the memorisation of texts and mechanical use of the concepts and formulas, he said and added that this problem was created because of the stereotyped lectures and the extensive use of the study guides and short notes.

The second missing link is the disconnection of research degrees with knowledge creation. This system has checked only the ritual requirements and unable to verify the objectivity, originality and acceptability of research work, Dr Mehar said.

The third missing link is between the academic research and economic development, he said and added that universities have failed to convert knowledge into economic development, which leads the industrial growth.

FPCCI research head said that country's trade bodies have to enhance research activities and have to play important and non-traditional role. He said that industries in the country are contributing in the employment generation, participating in national revenue, building of foreign exchange reserves and addition in the GDP. But they have also to become the part of economic planning and decision making.

"During the recent years the responsibility of economic development has shifted to corporate sector from government agencies and in the age of globalisation, the role of trade bodies have become more important," he said.

He said that FPCCI is going through restructuring and enhancing phase of research activities. Several types of research work including applied and policy research in the areas of business competitiveness, fiscal and monetary policies and the globalisation related issues were being carried, simultaneously.

The apex trade body was also establishing links with the institutions of higher education. While, two research projects were assigned to the Applied Economics Research Centre, University of Karachi for the study on the Industrial Competitiveness and Protection in Free Trade Regime.

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[Shehz]

Pakistani enterprises are not high tech, and the need for research is not there, as yet.

MVA (Manufacturing Value Added) in Pakistan grew at a compound real annual rate of 5.5 percent between 1980 and 2000, and its per capita GDP at 2.2 percent. Performance was better in the 1980s than in the 1990's, MVA grew at 7.2 percent per annum in the former and at 3.8 percent in the latter (and in the 1990's growth slipped from 8.7 percent in 1990-95 to -1.6 percent in 1995-2000). In South Asia, its MVA growth was higher than in Bangladesh but lower than in the other large economies; in terms of per capita incomes, it had the lowest growth rate in the region. In comparison to Southeast Asia, Pakistan did better than the Philippines but significantly worse than the other economies.

While Pakistan’s exports have moved from primary products to manufactures, in manufactures it has a heavy and growing reliance on low technology products (primarily textiles and clothing). The ‘fashion cluster’ accounts for over 70% of total exports and for 80% of manufactured exports. Such concentration is inherently risky, but the nature of the products makes it even less desirable. These are not dynamic activities: as noted, they are among the slowest growing industrial activities in the world. Their export growth is reaching a plateau as the relocation from high to low wage countries matures. They offer limited potential for learning or technological and skill spillovers. They attract relatively little and low value FDI. Its current export structure gives Pakistan a weak competitive base that is also unlikely to drive sustained industrial growth.

It is now a truism that the acceleration in the global movement of capital and goods, termed conventionally ‘globalization’, carries both immense opportunities, but also serious potential threats. Ultimately it will be the international competitiveness of firms in particular economies that will determine how far opportunities are converted into lasting national benefits and how far potential threats from heightened international competition result in serious cost. There is widespread agreement that currently with important domestic policy changes and with the imminent end of the international textile and clothing quota regime the economy of Pakistan is at an important crossroads. The competitiveness of the industrial sector in the new more liberal international and domestic environment will have a critical bearing on economic prospects for the foreseeable future.

Now, before you guys shoot me, understand Industrial competitveness.
Competitiveness means essentially the ability to compete with firms at the international frontier of best-practice. It must be recognized that it is firms that compete not nations. Firms have their own strategies for lowering cost, improving product quality and finding marketing networks. However, due to the intrinsic failure of markets in critical areas government support for firms has in some contexts proved to be an important component of the process of attaining competitiveness. Use and development of technology is central. However using technologies efficiently is not a passive, automatic process of simply importing a set of machines and instructions on how to use them. It involves building technical understanding and information, skills, managerial practices, links with other firms and institutions: what we may term ‘capabilities’ in a broad sense. Such capability development can be a slow, often costly and risky learning process. Adding to ‘capacity’ (i.e. physical plant and equipment) is only part of this process: what is critical is the ability to understand how to operate the capacity at optimal levels, adapt it to local factors and conditions, and upgrade it as technologies improve and new products appear. There is ample evidence that the same technologies are used by different firms at vastly different levels of efficiency. More importantly, different countries differ greatly in their ability to produce efficient firms, and so in their abilities to compete internationally, even if they start with similar initial factor endowments. Why? Because they tackle differently the intrinsic market failures that affect learning by firms. The secret of competitiveness lies in the effectiveness with which countries promote the development of technological and managerial capabilities.
Note that developing technological capabilities does not mean innovation in the sense of ‘reinventing the wheel’ to create technologies that are available elsewhere, often at lower cost. It does mean learning to use existing technologies efficiently: an enormously challenging task. It can involve a lot of investment, effort, time and risk, and constant interaction with other actors with whom information and skills are shared. It is thus far more complicated than travelling down a given ‘learning curve’, with predictable costs and outcomes. In developing countries, firms often do not know how to go about making new imported technologies work at world best practice levels. They do not understand what new skills, technical knowledge and organisational techniques are involved and where to access them. When exposed to import competition, they find it difficult to ‘relearn’ their capabilities and get rid of inherited practices and bad habits. Interactions with other firms or institutions itself requires effort, and overcoming problems of ‘leakage’ (of trained workers or technical know-how) and trust. Firms may not have access to the information, skills, finance or other factors needed to develop their capabilities.
Of course, not all activities involve the same degree of effort or cost: learning needs may be minimal in simple industries like apparel manufacture, and very large in advanced electronics or machinery making. They also vary with ownership: multinational affiliates may be able to undertake learning more easily because of support of parent companies. But such needs exist in every case, and firms differ enormously in the success with which they conduct learning.
Effective learning faces market failures, both within firms (their reluctance, lack of knowledge, risk aversion or inability to undertake learning processes) and between them (or between them and institutions). These market failures give rise to the need for corrective policies. This is the essence of competitiveness strategy, to promote in-firm learning, skill development and technological effort, to improve the supply of information, skills and technology from surrounding markets and institutions, and to coordinate the collective learning processes that involve different firms in the same industry, or across related industries (popularly known as ‘clusters’, geographical or activity-wise.

At the firm level there are several random (entrepreneurial, managerial or accidental) factors that also affect its success, but these are not directly amenable to policy influence and so are excluded. Also not shown are broad macroeconomic, legal, political and similar factors, which affect the environment within which all firms function. This still leaves a number of critical factors; in product markets are competition and trade policy, providing the incentives, rules and regulations which determine whether or not firms invest in their capability development. In factor markets are five sets of influences: physical infrastructure, human capital, finance, technology and cluster effects, which provide the wherewithal for firms to undertake successful learning.

The need for competitiveness policy arises when any of these ‘markets’ fail to function efficiently.

Manufacturing is becoming more information-intensive: growing parts of value added consist of ‘weightless’ activities like research, design, engineering, marketing and networking.
The policy context for competing is also changing. Most countries are lowering barriers to trade, capital, technology and information flows (and even some ‘people flows’, but on a much more restricted scale).

International competitiveness requires ready access to international inputs at close to world prices and a domestic market subject to competitive pressure, between domestic producers and between them and imports. Experience in Pakistan and elsewhere suggests that highly protected domestic markets not only reduce the incentive to export, but also penalise the economy by allowing inefficient domestic producers to extract policy-induced rents from domestic consumers.

Pakistan is a low wage, labour surplus economy. However, while wages in Pakistan are low by international standards they are not low relative to near neighbours, India and particularly Bangladesh. Furthermore actual cost competitiveness will be determined by productivity and allowance for differences in labour and capital productivity suggests that on average Pakistan may not be a lower cost location than its neighbours.

Competitiveness today requires much more than adequate infrastructure, cheap labour and liberal economic policies. It needs a strong base of human and technological resources, able to support enterprises in handling, adapting and improving new technologies and selling the output to sophisticated and demanding global markets. The range and level of skills required is rising, calling not just for an initial base of schooling but for constant training and retraining of the workforce at all levels, with competence in the use of information technology playing a larger role. No industrial activity or enterprise, regardless of its technological level or size, is immune to this need.

Pakistan, doesn't even compete in sectors such as Computers or Semi Conductors.
Said that, if we need to grow and stand upto world expectations, we do need to invest heavily in the research and development sector, but that's an entity each individual enterprise has to invest in, the Govt. can't do that for us. Example Pfizer, Ford, Shell, etc., they all have their own R&D.

Pakistan's 10 main manufactured exports are:
Textile Yarn, Textile Fabrics, Textile Garments, Leather (including sports related), Clothing accesories, floor coverings, refined petroleum products, Firearms and bullets, marble and ceramic tiles, and medical instruments.

Pakistan's specialization is in low tech products.
Let's face it guys, we have a very limited MVA market.