ISLAMABAD (APP) - Without making substantial investments in the education and skills of its people, it will not be possible for South Asia to reap the benefits of the manufacturing sector in the highly competitive and globalised world of today. This was emphasised at a recent report launched by Dr. Mehbubul Haq Development Center on the subject State of Manufacturing Trade in South Asia. The report of the 2009 Human Development in South Asia further said that despite the manifold benefits of the manufacturing sector in terms of growth, employment, poverty reduction and human development, South Asia as a whole has not been able to develop this sector in the same manner as some of the other successfully developing regions have done. This failure - behind which lies a multitude of factors ranging from infrastructure bottlenecks to the shortage of skilled labour and flawed governmental policies - remains one of the major constraints to providing gainful employment and to achieving greater human development in the region, the report said. The annual report of MahbubuI Haq Human Development went on to say that the average years of schooling in South Asia remain the lowest amongst all developing regions. The report further said that the poor performance of the manufacturing sector is also due to the energy crisis that many South Asian countries are confronted with. Pakistan, for instance, is currently undergoing an acute crisis of energy that is threatening the survival of many manufacturing firms in the country, the report observed. It claimed that the total cost of power load-shedding in the industrial sector is estimated to be Rs. 210 billion. This amounts to over two per cent of its GDP and over US $1 billion of export earnings, it maintained. The report said that the South Asias ranking in terms of business environment is quite poor. Corruption, inefficient bureaucratic procedures and poor enforcement of contracts and property rights are other common problems that undermine the business climate in South Asia, the report said. The cost of finance has also gone up lately as many South Asian countries adopted tight monetary policies in the backdrop of the global financial crisis. This has added to the continuing problems of business and industry. South Asias manufacturing sector related trade continues to be dominated by food products and textiles. These are the two sub-sectors that are also the major source of employment in the manufacturing sector in South Asia. Overall, growth in job creation in the manufacturing sector in South Asia has been unimpressive. Particularly in the organised manufacturing sector, employment growth has been more or less stagnant, it added. The report further observed that within South Asia, the manufacturing sector is also an important source of employment for women. In some countries such as Bangladesh, the manufacturing sector employs more women than men. In other countries such as Pakistan, female employment in the manufacturing sector is 16 per cent against 22 per cent for men. In Sri Lanka, this ratio is 35 per cent for females versus 40 per cent for male. There are a number of factors behind the lack of adequate growth in employment in the organised manufacturing sector in South Asia - the most important being the poor performance of the manufacturing sector and the lack of basic literacy and employable skills amongst the labour force. South Asia has one of the most restrictive set of labour regulations in the world. However, from a human development perspective, labour laws should be in place to protect the rights of labour and thus must be seen as an important part of social responsibility. The lack of adequate generation of employment in the manufacturing sector cannot be attributed to rigid labour laws alone. More than 80 per cent of the total industrial employment in almost all the South Asian countries is provided by SMEs. SMEs in South Asia are fraught with several problems such as lack of access to credit as the formal banking structure in most South Asian countries prefers catering to medium and large enterprises; complicated labour laws; worsening law and order situation in countries like Pakistan; and low productivity and lack of competitiveness of their products due to low labour productivity. Infrastructure bottlenecks such as poor quality of roads and transportation facilities and the shortage of energy are other major constraints to the development of SMEs. The exports of manufactured goods in South Asia continue to be dominated by textiles and clothing sector. In particular, countries like Bangladesh, Pakistan and Sri Lanka are heavily dependent upon the textiles and clothing sector for their exports. The major factors that give South Asian countries an edge and a comparative advantage in the production of textiles and clothing are the low costs of labour and cheap supply of raw materials. Two of the largest South Asian countries, India and Pakistan, are indigenous producers of raw cotton. Currently, the textiles and clothing sector lacks diversification both in terms of products and destinations. The over reliance on United States and European Union markets render themselves vulnerable to external shocks. Both the US and EU seem to prefer imports from geographically proximate areas to take advantage of low transportation costs. In the current scenario where global environmental regulations have both benefits as well as drawbacks for South Asia, there is a need for national governments to help the manufacturing sector meet these standards. Countries should have the right to impose restrictions only when the manufacturing products have pesticides or damage the environment in the importing countries. In the case of environmental standards that are set higher than the int'l level, South Asian countries should be able to negotiate with the organizations to formulate new standards, the report added.