Dr Hafiz A Pasha
An assessment of the level and change of Pakistan in key international indices and measures is important for two reasons. First, it provides a, more or less, objective evaluation of the performance of the economic, social and governance indicators of the country is relation to other countries, especially in South Asia, at a similar stage of development. This helps to identify critical areas where there is need for greater focus and in prioritizing the reform agenda, both for the short and the long-term. Second, the various indices influence international perceptions of Pakistan especially of potential foreign investors.
This article covers four key international indices. These are provided on an annual basis by international institutions like the UN agencies, World Bank and World Economic Forum. The focus is identify the relative position of Pakistan and to study the change in the country’s ranking during the last few years, from 2010 or 2012 to the latest year for which information is available. A comparison is made of Pakistan with three South Asian economies, viz., India, Bangladesh and Sri Lanka. Other Asian countries included in the analysis are Thailand, Indonesia, Turkey and Philippines.
The most commonly referred to index is the Human Development Index (HDI) prepared by the United Nations Development Program (UNDP) Dr. Mahbub ul Haq played a major role in the development of this index. The HDI has three components, with equal weights, relating to health status of the population, the level of education and the per capita income of a country, adjusted for differences in purchasing power. The first ranking of the HDI was prepared in 1990. The latest ranking is of 2015 for 185 countries.
Unfortunately, Pakistan does very poorly in terms of human development. Out of the eight countries included in the analysis, Pakistan has the lowest ranking, at 147th. Turkey has the highest ranking at 71st followed by Sri Lanka at 73rd. Pakistan is also the lowest ranked country among all countries in the world with a medium level of human development.
The particularly worrying aspect is the poor performance with respect to other South Asian countries, Even Bangladesh has a better ranking of 139th while India is ranked 131st. Between 2010 and 2015, Pakistan’s ranking has fallen by two places. The absolute value of the HDI has also shown little change. In fact, Pakistan ranks much higher in terms of per capita income than in the HDI.
The worst performance by Pakistan among the three components of HDI is in education. For example, the mean years of schooling of the population is only 5.1 years in 2015, as compared to 8.2 years in India and as high as 10.9 years in Sri Lanka. Clearly, Pakistan needs to invest more on education, especially at the secondary and higher levels.
The next index of importance is the Global Competitiveness Index (GCI) of the World Economic Forum, which has twelve pillars of performance ranging from market size, infrastructure and institutions to technological readiness and innovation. The latest ranking is of 2016-17 for 139 countries. Here again, Pakistan has the worst ranking at 122nd, among the eight countries included in the analysis. The highest ranking among these countries is of Thailand at 34th, followed by India at 39th. There is apparently a close correlation between a country’s GCI ranking and the performance of its exports.
Pakistan’s ranking in the GCI has improved somewhat from 124th in 2012-13. The areas of relative weakness of the country are in health and education, labor and goods market efficiency and technological readiness. Interestingly, Pakistan performs relative better in terms of market size, innovation and in business sophistication. The World Economic Forum in its assessment of the competitiveness of Pakistan has ranked in descending order the following negative factors: corruption, crime and theft, tax rates and government instability.
This takes us the next very widely used index, that is, the Corruption Perceptions Index (CPI) of the Transparency International. As highlighted recently by the Federal Minister for Planning and Development, there has been an extraordinary improvement in Pakistan’s ranking in recent years. It has gone up from 139th in 2012 to 116th in 2016, out of 174 countries.
However, other countries in the sample of eight countries generally do better. India has a ranking of 79th, Turkey of 75th and Indonesia of 90th.The only country in the sample which performs poorly in relation to Pakistan is Bangladesh, with a ranking of 145th in 2016.
Another index, which is potentially of interest particularly to potential investors, is the Ease of Doing Business Index (EBI) of the World Bank. In this index there has been a substantial worsening in Pakistan’s ranking from 105th in 2012 to 144th in 2016, out of 190 countries. Consequently, it has now the second worst ranking among the eight countries, only better than Bangladesh. Thailand is ranked 46th. Turkey stands at 69th and India at 130th.
The critical areas identified by the EBI which require improvement in the Pakistani context are of getting electricity, trading across borders, registering property and paying taxes. The country does well in protecting minority investors, getting credit by an investor and resolving insolvency in the event of failure.
On the whole, Pakistan will have to do much better in facilitating business, especially the setting up of new projects by investors. Given the big deterioration in Pakistan’s relative position internationally with regard to ease of doing business there is need for establishing an independent Commission, with possibly the Federal Board of Investment as the Secretariat. This Commission should be charged with the task of identifying ways of eliminating ‘red tape’ and facilitating transactions, especially through use of information technology, with different Governmental and public sector agencies.
The broad conclusion from analysis of the above four more popular international rankings is that Pakistan generally performs poorly. Also, in terms of change from 2010 to 2015, the results are mixed in character. If the country is to attract more investment from diverse sources, a systematic effort will have to be launched by focusing on areas where the country does poorly currently in these rankings. (The writer is Professor Emeritus and former Federal Minister)
