PAKISTAN’S present economic model, distinguished by its dependence on agriculture, textile-dominated manufacturing and remittances, is progressively perceived as unable to address the demands of the contemporary global economy. In contrast, countries like India, Bangladesh and China have adopted more adaptable and diverse economic models, leading to robust growth and progress.
Recently, Pakistan’s economy has grown more slowly than China’s, Bangladesh’s and India’s. Pakistan’s economy, for example, is expected to expand by 4% by 2023, lower than India’s 7%, Bangladesh’s 6.5% and China’s 5.5%. These differences arise because these countries have different economic and industrial approaches. Pakistan was particularly active in its old industries, while India and China spent heavily on new technologies and improved factories. This allows for more creativity and new ideas. Bangladesh has also done well in textile manufacturing, attracting much foreign investment.
Another area where Pakistan’s economic policy exhibits limitations is in its energy sector. Pakistan relies heavily on imported energy which strains foreign reserves and increases its trade deficit. China and India have significantly allocated resources to renewable energy, decreasing their reliance on imports and promoting sustainable development. Bangladesh has also been intensifying its emphasis on renewable energy sources.
Furthermore, Pakistan has a less varied export base than its neighbouring countries. Pakistan’s exports primarily focus on textiles and agricultural goods which are sensitive to fluctuations in global prices and have low value-addition. On the other hand, China’s exports include everything from technology to machinery, making it the biggest exporter in the world. India has diversified its exports to encompass medicine, computer programs and high-value services. Bangladesh is progressively broadening its manufacturing sector by extending its operations beyond clothing production and entering the transportation and pharmaceutical sectors.
India has achieved substantial advancements in its economic transformation by implementing a mixed economy policy. Following the economic reforms 1991, India shifted from an agricultural economy to one emphasising service and industrialization. In particular, IT and services industries have emerged as a critical boom area, making India a global hub for IT services and software development. Moreover, India witnessed a boom in production under the ‘Make in India’ initiative which aims to convert India into a global manufacturer.
On the other hand, China initially pursued an export-led growth model, transforming into a manufacturing powerhouse through massive investments in industry, education and technology. However, since 2015, it has shifted focus to an innovation-driven growth model, aiming to upgrade its economy by emphasizing R&D, cutting-edge technologies and high-value industries. This transition, outlined in “Made in China 2025,” seeks to reduce reliance on cheap exports and prioritize domestic consumption and advanced manufacturing, marking a departure from its previous emphasis on mass production and low-cost transportation.
Bangladesh’s growth model is characterized by its extraordinary achievements in the textile industry, making it different from other countries. It used cheap labour to become one of the world’s biggest cloth makers. This industry has contributed to economic growth and transformed society and the economy, such as infrastructure for women’s empowerment and poverty alleviation. Bangladesh has been trying to expand its economy in recent years through investment and has entered industries such as information technology, shipping and pharmaceuticals.
Progress made in neighbouring nations offers valuable perspectives for Pakistan. China’s progress towards an innovation-based growth model highlights the importance of high-value technology and services in modern economic growth. With its current focus on traditional agriculture and textiles, Pakistan may adopt an innovation-based growth model to achieve sustainable growth towards remaining competitive. This includes structural reform and capital investment in education, digital infrastructure and a climate conducive to research and innovation.
Pakistan’s economic system is fundamentally different. Pakistan’s economic potential is constrained by its focus on traditional industries, making its economy more vulnerable to external disturbances and fluctuations in the global market. The main limitation of this model is a country with vital services, such as the addition of low-cost textiles as well as promising areas for future expansion. Regarding the poor allocation of resources to energy technology, insufficient investment can be ascribed to the inadequate allocation of resources towards public education and research and development (R&D) that are crucial for fostering technological innovation and advancing knowledge.
Pakistan must significantly shift its strategy to implement a progressive development plan. First, there is an urgent need to dramatically expand education funding, focusing on STEM fields (science, technology, engineering and mathematics). These changes will facilitate the workforce needed to drive technological progress and innovation. Additionally, structural change should be implemented to encourage innovation and entrepreneurship. This includes simplifying labour laws, strengthening the protection of intellectual property rights and providing tax benefits for research and development,
Furthermore, Pakistan must build a robust digital and physical infrastructure to support a modern economy. Lessons can be drawn from China’s massive infrastructure investments, a cornerstone of its monetary growth. Similarly, fostering public-personal partnerships, as visible in India’s IT sector, can stimulate innovation and boost various industries.
Another critical aspect is diversifying the economic system to reduce dependence on traditional sectors. By exploring new growth areas, including renewable power, technology and excessive-tech production, Pakistan can create new industries and activity possibilities. Bangladesh has efficaciously hired this diversification approach in expanding past its garment industry.
Finally, Pakistan may utilize global cooperation and external financial resources to harness its capital and experience to advance its technology and innovation industries. Pakistan should view Bangladesh’s achievement in attracting foreign investment in its textile industry and India’s success in its IT sector as feasible models.
—The writer is Assistant Professor of Economics, Southampton Malaysia Business School (SMBS), University of Southampton Malaysia
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