It has become fashionable these days to moan about the lack of growth and job creation in Pakistan, and how the country is moving towards an economic collapse. Well, I can’t really argue much against the observation per se, but as a Pakistani I am more interested in the solutions rather than time and again listening to the obvious. What one instead wants to know are important global initiatives on the subject like, for example, on how Spain (in the lead and other Eurozone countries not far behind) is seriously contemplating to bifurcate its Finance Ministry and carve out a ministry just dedicated to focus on growth and job creation or what steps are the Europeans taking to unleash a new work culture that by 2015 requires the average European worker to be amongst the most ‘worked’ and ‘productive’ in the world. The European overall idea, of course, being to once again kick start economic activity in a continent that was once an economic leader, but of late has consistently lost space to emerging players from other continents of Asia, South America and Africa.

Interestingly, since the global outlook changed, arguably post the worst financial disaster in 2008, the most striking effort on growth and employment generation has in fact come from Britain. And this, more notably, amidst a period where the British have had to simultaneously grapple with budget cuts, reduction in administrative and development spending, and nearly 50 percent capping on all financial management overheads; measures which on the contrary tend to put direct pressure on growth and job creation. So, what have the Brits actually done? Primarily, two things:

    Realise that innovation is the key driver of growth; and

    Invest in its people.

As we know, innovation isn’t just about having good ideas, but it is about new ideas being successfully exploited to create economic, social and environmental value. With this in mind, the UK government consciously prioritised resources to enable innovation to take root. To this end, there are now permanent endeavours such as the UK Innovation Investment Fund, Global Science and Innovation Network, Annual Innovation Report, Innovation Index - to name but a few.

Like in Britain, or for that matter like anywhere else in the world, there is no shortage of ideas in Pakistan, but what we lack is the necessary State support and apparatus to tap these ideas and then convert them into reality. Going back to 2001 (year of China’s entry into the WTO Club), when the Chinese realised the need to graduate from being just cheap global suppliers to real market players, they also needed to embark on the Western trail of innovation. For this, the government started out by creating more than 20 technology and innovation centres - whether real or figurative - that use economies of scale to enable companies to pool resources and innovate. These centres look at and guide high value manufacturing, cell therapies and domestic plus offshore renewable/alternate energy options.

It is about taking away some of the risks for the small and medium sized enterprises (SME). The idea is to help more and more companies get bigger and quicker with an underlying need of complementing each other, instead of competing internally. Incidentally, the recent developments and shoddy economic governance in Pakistan are having the opposite effect on ‘competitiveness through economies of scale’ in our country - a trend, which if not quickly arrested and reversed can have profound negative repercussions vis-à-vis growth, job creation, balance of trade and ultimately inflation.

Where the experiences of Britain and China are most relevant to our needs are in establishing that the selection of research areas should almost always match with national strengths to ensure efficient use of taxpayer’s money and the realisation that the future is not only in high-tech. In its report, entitled Vital Growth, UK’s apex authority on innovation, Nesta, explains that high-tech firms are only one part of an overall growth picture that depends just as heavily on businesses that innovate in other ways: New services, new business models, new assembly lines, new production techniques, improving labour skills for enhanced productivity, innovative work environments, new reward and recognition endeavours and new operational processes, which are often as important to growth of businesses as new technology. Even within the high-tech companies, in fact, innovation in business models, services and processes may at times tend to be more important than the technology behind the products. In short, the good news for countries like ours is that encouraging high growth should not be confused with encouraging or picking high-tech sectors and public money, therefore, should be used to back concerns that either already exist and need backing, or on developing concerns that bear strong relevance to manufacturing realities cum needs of the country - I have all along maintained that the proponents of quickly placing our key public sector enterprises under the auctioneer’s hammer should be restrained!

However, this is only half of the story. For both the examples (UK and China) that we have chosen, the most striking growth has come from the sectors that bear direct correlation with ‘investment in the people’ - business and financial services. Over the last three years, in UK, these two sectors together have almost accounted for 53 percent of all economic growth and have successfully created close to 2.2 million jobs in the last two decades. Although Britain has possibly the most competitive business services sector in the world, with a trade surplus of almost Sterling 21 billion, countries like Singapore, India and China are also now posting impressive figures in these two types of services. Nearly 38 percent of Singapore’s growth last year came from business and financial services, and India and China have also moved into double digits, as a percentage of their total growth from these areas. Even globally, these two areas can be looked upon as the most thriving ones since the early 90s. Since 1991, global exports of business services have been increasing by an average of 9 percent per year and financial services have also been registering a healthy growth figure of close to 5 percent every year.

Finally, what is important for the Pakistani policymakers to remember is that with regional and international competition heating up all the time, the national growth policy needs to stand on multiple legs. They need to remember that in Pakistan encouraging growth in companies should not be confused with picking high-tech sectors, since our present strength lies in basic manufacturing that requires labour intensiveness. Further, in order not to lag behind our competition, we need to promote companies that innovate in ways that bear relevance to our ground realities: New processes, new services, new products, new business models, new assembly lines, etc. And last but not least to stay abreast of the global knowledge curve, we need to invest heavily in our people. With business and financial services accounting for a large chunk of global growth, Pakistan also should strive seriously to be a stakeholder in this fast growing global arena.

    The writer is an entrepreneur and economic analyst.

    Email: kamalmannoo@hotmail.com