PILLAR VI:: DEVELOPING A COMPETITIVE KNOWLEDGE ECONOMY THROUGH VALUE ADDITION

1.Join the ranks of the top 75 countries as measured by the World Economic Forum's Global Competitiveness Report.
2.Triple labour and capital productivity.
3.Improve Pakistan's score on the World Bank Institute's Knowledge Economy Index from 2.2 to 4.0, and increase internet penetration to over 50% .
4.Increase the number of tourist arrivals to 2 million.

National competitiveness refers to the ability to produce and deliver products and services effectively and profitably in relation to other, competing countries. Improving our national competitiveness in this new era of globalization is therefore critical to our ability to utilize our resources in a productive manner based on merit, quality and innovation.

Pakistan Vision 2025 envisages fundamental improvements in competitiveness across the industrial/manufacturing, services and agricultural sectors. Competitiveness is about achieving efficiency, quality and productivity to enable self-sustaining enterprises thereby increasing output, boosting their share in the international market and raising the overall level of prosperity and wellbeing of the nation. Innovation, value addition and continuous improvement are keys to improving competitiveness.

Pakistan compares poorly on the World Economic Forum's (WEF) Global Competitiveness Index (GCI) versus the average for upper middle income economies. On a scale of 1 (worst) to 7 (best) Pakistan lags behind significantly in 8 out of the 12 indicators.

The GCI ranks Pakistan 133rd out of 148 countries in competitiveness, far behind comparator countries.

Furthermore, our performance has deteriorated in some of the most critical and basic areas of competitiveness. Pakistan's public institutions (126th) are crippled by inefficiencies, corruption, patronage, and lack of property rights protection. The security situation is taking a huge toll not only on the population, but also on businesses. The macroeconomic situation is also worrisome (145th). In 2012, the public deficit widened to near 10 percent of GDP, inflation remains in double-digit territory, and the savings rate dwindled to just 10 percent of GDP. Pakistan's infrastructure (121st)—particularly for electricity (135th)—remains in a dire state. Moreover, the country displays some of the lowest education enrollment rates in the world and basic education is poor (137th). Pakistan's competitiveness is further penalized by the many rigidities and inefficiencies of its labor market (138th, down eight), with female participation in the labor force among the lowest in the world (144th). Finally, the potential of ICTs is not sufficiently leveraged in Pakistan, where access to ICTs remains the privilege of a few (118th). Paradoxically, Pakistan performs worse on the Basic Requirements compared to Efficiency Enhancers and Innovation/Sophistication factors (see table below). This inverted base is unsustainable.

Pakistan is largely left out of global value chains, relegated to a situation of exporting relatively low-value products, and earning remittances from mostly low-skill workers who go abroad, rather than adding value at home by participating in the increasingly interconnected world service economy. These issues are cross-cutting and improvement of one will promote the growth of others. It is also important for Pakistan to continue to highlight and promote promising areas such as innovation and sophistication. A comprehensive strategy will be formulated to improve upon key challenges while leveraging competitive strengths, thus enabling Pakistan to improve its overall competitiveness.

Firm Commitment to Enhancing Competitiveness

Pakistan Vision 2025 seeks to drive income growth through sustained improvement in total factor productivity, rather than increasing input levels. We are committing ourselves to driving national competitiveness by leveraging knowledge to increase efficiency. Enterprises across all sectors will be made viable and sustainable without requiring long-term protection or subsidies. Viable enterprises will be developed to compete successfully in the regional and global markets. Our aim is to be ranked in the GCI top 50 most competitive countries by 2025. The National Productivity Council (NPC) will be revived under the chairmanship of the Prime Minister with relevant experienced professional members. Regular capacity and competitiveness audits will be conducted by the NPC and published in annual competitiveness reports. The knowledge and capacity for the NPC will be acquired in collaboration with domestic and international leaders in competitiveness. Competitiveness Index will be introduced at the provincial level, and Annual Provincial Competitiveness reports will provide implementable recommendations. The following areas will be addressed to improve Pakistan's competitiveness:

Fixing the Basics for a Healthy and Educated Workforce

As detailed in Pillar 1, improving access to and quality of Primary Education and Healthcare is a top priority of Pakistan Vision 2025, and a significant sustained increase in public spending on Health and Education is foreseen in upcoming Five Year and Annual plans. Pakistan will aim for universal primary education completion and high levels of secondary education while improving educational quality and relevance at all these levels for preparing a world class work force.

Laying the Foundations of a Knowledge Economy

Higher education is imperative to reap the benefits of technological advancements and compete effectively. Vision 2025 aims to double Pakistan's Higher Education coverage. Moreover, quality of higher education, research and development and university industry linkage are also critical factors. The emphasis will be to promote improvement in the quality of science and technology education in particular the natural sciences, mathematics and ICT. Every school, college and university will be digitized and computerized by 2025. Partnerships will be developed between specific industries and their education and training providers to achieve more effective results for workforce development. Vocational training will be made responsive to emerging technologies and to the changing needs of the private sector. The missing link between our knowledge and production platforms shall be established through government, private sector and academia/ research partnerships.

Increasing Goods Market Efficiency

Steps will be taken to liberalize markets and improve efficiency. Ease of Doing Business will be improved. The Board of Investment (BOI) plan will cut the number of steps, reduce time and cost with respect to starting a business, getting a license, approval or permission, submission of tax returns, trading across borders and contract enforcement. This will include making it easier to start, grow and disband formal business entities. A competitive market for goods and services is essential for promoting national competitiveness. Therefore, competition will be promoted for which the Competition Commission of Pakistan will play a vital role.

Increasing Labour Market Efficiency

Pakistan's labour market will be made more flexible by addressing issues of unnecessarily restrictive regulations such as, and intrusive and uncoordinated inspections by different authorities that continually disrupt production. Formal companies face substantial compliance costs not faced by informal companies, thus the aforementioned labor market reforms will improve the prospects of job creation in the formal private sector. However the rights of the workers shall be safeguarded.

Workforce development would provide the impetus for increased labour productivity, through improving the skill base of the youth, addressing on one hand the youth bulge issue and on the other improving industrial output. Both sector-specific and place-based approaches to workforce development would be adopted through NAVTEC and collaboration with provincial technical and vocational training bodies. This would be further supported through a thorough labor market assessment, developing demand-driven curriculum and developing better linkages with the employment market. Comprehensive labor market assessments will be undertaken by the provinces, which would be updated periodically. Due focus would also be given on developing skill standards that can then serve as the basis for quality certification of different qualifications offered by the TEVT institutions. Youth Employment Exchanges would play a vital role in linking the labor force with local, national and international labor markets.

Female participation in the workforce will be encouraged as Pakistan cannot be competitive without utilizing the work potential of half its population. Vision 2025 aims to inspire Pakistanis to participate in the country's development, and provide them local opportunities to reduce brain drain.

Greater Financial Market Sophistication

An efficient financial sector channels resources to those entrepreneurial or investment projects with the highest expected rate of return. Pakistan does comparatively better in this area. It ranks 67th in the financial development pillar of GCI. The outreach of the capital market will be expanded beyond stocks by developing a secondary market for corporate and government bonds. The capital market will be integrated into world and regional markets. Similarly expanding the coverage of inclusive financial services is a key priority. The gradual expansion and diversification of financial products will be encouraged. The operational independence of regulatory bodies like the Securities and Exchange Commission and the State Bank of Pakistan will be ensured and their management and supervision capabilities will be enhanced through integration of technology and adoption of global best practices.

Information and Communication Technology- Putting Pakistan on the ICT Map

Information and communications technologies (ICT) are a key driver of innovation, economic competitiveness and greater social inclusion. Pakistan Vision 2025 seeks to lay the foundation of a knowledge economy by promoting efficient, sustainable and effective ICT initiatives through synergic development of industrial and academic resources. Due to the large youth bulge Pakistan has strong digital potential to develop a knowledge-based industry fostering innovation and entrepreneurship.

Urgent attention will be paid to computer literacy, and strengthening Pakistan's IT infrastructure. Pakistan will drive wider Broadband Internet access, facilitate access to computers, and ensure the requisite education and training in schools to improve technological readiness. Pakistan's information and communication technology (ICT) sector will be revolutionized with the recent introduction of 3G and 4G/LTE (Long Term Evolution) networks offering huge increases in bandwidth and internet speed.

Pakistan cannot rely on ICT infrastructure development alone. A holistic strategy will be followed to create conditions for skills, innovation and entrepreneurship to flourish alongside modern infrastructure. Strengthening data protection and Intellectual Property rights laws will be a key component of this strategy. Introduction of e-education, e-commerce, e-health and e-government, in addition to improving governance, will increase the adoption and promotion of technology in the Public Sector. Pakistan is poised to move to the next level in ICT sector with a very talented youth and workforce. ICT parks will be set up all over the country.

Tapping Large Domestic and Regional Market Size

Pakistan's large domestic market of 184 million consumers provides a great platform for developing scale efficiencies and competitiveness. Brazil, China, and India have been able to maintain high growth rates during the global economic downturn by ensuring robust domestic demand. Steps to improve the business environment aim to enable local firms to respond effectively to growing domestic demand, with both greater efficiency and innovation.

However, to improve international competitiveness of the country, maintaining an outward orientation of the economy is vital. This will entail expanding the existing quantum and composition of international trade. Opportunities for bilateral, multi-lateral trade and investment agreements and will be actively pursued particularly with markets within the region. The Government will work with Pakistan's leading export industries to remove obstacles to competitiveness, lower costs of inputs, enhance efficiency of trade logistics, increase productivity, and introduce innovative technology and business practices. Export Processing Zones will boost the Pakistani export drive. Pakistan's leading wholesale and retail markets and industry clusters will be challenged to develop strategic plans for growth and competitiveness and for repositioning themselves in world markets.

Pakistan's economic growth will be boosted with the help of open trade and investment regimes, sound macroeconomic policies and structural reforms. High and sustainable economic growth will be achieved during and after the Vision 2025 period through rapid and sustainable development by, inter alia, deploying knowledge intensive import items. Overall trade policy has been focused on reducing protection, achieving a more outward-oriented trade regime, obtaining better market access for Pakistan's exports, and promoting greater integration into the global economy through increased economic efficiency, and thus international competitiveness, which will contribute to export-led growth.

Cluster Based Development

A cluster based development approach will be used to promote economic development within the clusters by improving the competitiveness of designated business sectors. These clusters will be organized as collaborations between private firms, the government, and academic and research institutions. Competitiveness will be enhanced throughout the value chain including e.g. supply-chain development, market intelligence, incubator services, attraction of foreign direct investment, management training, and joint R&D projects, marketing of the region, and setting technical standards. New business clusters will be developed, and existing clusters will become better established. In particular, SME sector will become significantly more competitive through common facilities, training centers, and benefits of scale that clusters provide. Issues of financing, access to market and technology, and labour training will be resolved.

Value Chain Improvements

ncentives will be given to promote innovation thereby mobilizing investments in new product areas and export to new markets. This would be further supported through a host of initiatives such as strengthening business development service providers; strategic review and capacity development of sector development companies; technology up-gradation; focused investment for upstream and downstream enterprise development; and facilitating access to market. Incentives will be created to promote strategic strengthening of firms and commercial organizations. Public support or grant of business licenses will be tied to requirements from firms' enhancing their functional, strategic and technical capabilities. Industry relevant collaborations will be encouraged to enhance the capacities of industry associations, chambers of commerce and trade bodies.

Driving Innovation

A national initiative will be launched to promote innovation. We will institutionalize mechanisms for commercialization of research at Pakistani universities and research organizations, and provide direct assistance to those seeking to file patents with local and international patent offices. Business-academic partnerships will be made for designing and implementing innovations. Intellectual property rights and patent protection will be strengthened and enforced.

In order to encourage investment in new technologies and innovation, we intend to reduce tariffs and taxes on R&D equipment, raw materials and costs related to human resource development. Value addition of goods or services will be facilitated through close connections between technology developments in agriculture, manufacturing and services with productive enterprises.

Steps will be taken to foster an entrepreneurship eco-system within educational institutions, encourage entrepreneurial centers of excellence and incubators, facilitate "proof-of-concept" financing and lower the cost of entrepreneurial failure. National Innovation Awards shall be instituted.

Technology Parks and Business Incubation Centers

Technology parks will be established to enhance the national technology base, develop efficient systems in public and private sectors, promote R&D, produce goods and services of global standards, develop a regional innovation system, facilitate the transfer of knowledge and technology from universities and public research centers to the business sector, stimulate quality in all management processes, and to oversee the quality of the research, development and innovation activities carried out. The parks will contribute, through technology and innovation, to increasing business competitiveness and development in Pakistan.

Incubation centers will be set up in the parks to promote technology entrepreneurship, and redefine the use of technology in achieving sustainable growth, by directing institutional funding, investment & mentorship in commercializing tech innovation using technology incubation as a tool. The centers will encourage setting up of new technology firms, and help them seek and intensify interactions with R&D managers, scientists and management faculty. On-site presence of established transnational corporations will facilitate the transfer of technology, and involvement with academia will help in finding quality knowledge workers. In addition, training institutes will be set up onsite to provide relevant skilled workers. Advice will be provided on business planning and business development.

Applying Knowledge for Increased Productivity in Agriculture

Pakistan's agricultural potential is severely under-exploited. This is substantiated by the fact that progressive farmers are getting more than twice as much yield as traditional farmers and that too by applying fewer inputs. Pakistan Vision 2025 focuses on bridging the vast yield and productivity gap between the national average and the far higher performance benchmarks of progressive farmers – leveraging baseline and advanced techniques and technologies. The strategy of this Vision is to utilize multiple channels – including the provincial 'agriculture extension services', electronic media and expert advisory services through helplines – to educate and incentivize farmers to make efficient use of inputs, adopt leading farming techniques, optimize crop selection and maximize their yield. The broad-based agriculture growth will be achieved through narrowing the yield gaps and diversifying toward high-value agricultural products.

Farmers consider themselves as 'information poor', and news about new agricultural technologies that improve productivity is not reaching them. High mobile penetration will be leveraged for disseminating and collecting information. Information on area/crop specific and solutions tailored to farmer's budgets will be provided, along with advice on yearly crop planning to maximize return on investment. Incentives will be put into place to shift towards progressive farming. Knowledge and application of progressive farming techniques and best practices will help improve overall output in the agriculture sector and in particular boosting yield and productivity. Measures will be taken to ensure adequate supply of quality inputs such as seeds, pesticides and fertilizers. Support price mechanism will be reformed to ensure that the full benefits reach the intended farmers and have the desired policy impact. Irrigation policies will be designed to ensure efficient use of water that will promote diversification into high value added products, agro-processing, and better integration in supply chains. A Rural Economy Endowment Fund will be created to finance modernization of agriculture.

The federal government in collaboration with provincial governments will develop plans for building scientific research capacity and reform existing federal orientation of national research organizations. Reforms in wheat procurement system towards strategic reserve building and removing distortions in the market for agricultural products to lessen the role of the middle man will be implemented.

An important part of Pakistan Vision 2025 is the structural transformation towards production of high value-added products particularly in dairy, fisheries, livestock, poultry and horticulture. By introducing measures such as basic hygiene practices, compliance with international standards for export, and packaging, more productive animal care and better branding and marketing, the productivity of these subsectors will be greatly enhanced. Cluster based development approach will be used as a means to stimulate rural economic growth by promoting agro processing industries.

Livestock accounts for more than half of the agriculture sector but is characterized by low yielding varieties of cattle. Apart from poultry, the unmet demand in dairy products and meat is huge even in the domestic market. The large market for halal food in the Middle East and overseas also offers enormous prospects for this sector. This sector will be a key area of modernization and high value addition for the agriculture sector. Information dissemination, trainings, awareness, enhanced access to finance and linkage with domestic and global markets will provide boost to this sector.

Horticulture comprising of fruits, vegetables and floriculture is a fast growing sector with rising exports and increasing demand in domestic and international markets. Pakistani fruits, fresh and dry, have great potential for exports due to their availability in volumes, varieties and richness in flavour. These include mangoes, citrus, grapes, dates, apples, peaches and cherries besides prominent fruits of enormous export potential such as plums, pears, guava and loquat. Pakistan has a competitive advantage in production of vegetables like potatoes and onions due to superior variety, volume and price competitiveness. The Horticulture related processing industry will be incentivized to harness the export potential of quality processed food.

Increasing Competitiveness of Industry and Manufacturing

To achieve high GDP growth rate the industrial sector needs to be reinvigorated. The existing industrial policy has led to rent seeking behaviour and low value-added products. A new industrial policy will provide time-bound incentives for key industries to assist them in moving up the global value chain. By investing in technology we will shift from producing low value added products to high value products. Engineering Development Board, PTA, PCSIR and other research and technology institutions will play a key role in modernization and indigenization of technologies.

The government will help the manufacturing sector access regional markets to boost scale economies. It will also help drive sector expansion by supporting the growth of economic clusters; facilitating access to technology; expanding the capital market and improving its efficiency; disseminating knowledge of markets; upgrading labour's technical skills; ensuring adequate incentives for research and development and encouraging movement up the value chain. A Corporate Synergy Development Centre comprising of industrial experts and professionals in the government will implement the manufacturing / industry component of Vision 2025.Development of Industrial parks for small, medium and large enterprises has been initiated, and will be expanded particularly in less developed/under-served areas.

Tapping Natural Endowments in Mining and Minerals:

Pakistan is well endowed with energy and minerals, such as coal, oil and gas, copper, gold, limestone, marble, gemstones, and others. Estimates suggest there are copper reserves 1.9 billion tons and 11.2 million ounces of gold. Similarly there are coal reserves of 184.7 billion tons waiting to be utilized. The present contribution of minerals to the GDP however is not commensurate with its potential. The primary reason for this mismatch is the application of obsolete technologies, poor management and inadequate capital in addition to the adverse security situation in the areas where the bulk of the mineral resources are located.

The strategy for realizing the vision incorporates a number of elements including specialized training, incentives for extraction and value addition; development of adequate infrastructure facilities near mining sites; learning from best practices in other countries regarding development of the mineral sector and will apply those to the country's own sector. Mining policy of the 1990's will be reviewed and updated.

Increasing Competitiveness of the Services Sector

Pakistan's services sector has emerged as the main driver of economic growth, contributing 57.7% of the country's GDP, and is playing a vital role in sustaining economic activities. The transport and communication sectors, financial services, telecommunications and domestic commerce (wholesale & retail) are major contributors.

Regulatory frameworks will be established, and existing ones strengthened, with legislative powers for each service sub-sector. The aforementioned revolutionizing of the ICT sector will serve to boost growth in other service sectors, including transport & communication, wholesale & retail, banking &financial services, educational services and remote services. To gain share in outsourcing revenue from developed markets, remote services like call centers, medical transcription and software development will be promoted. Focus will be placed on export of high skilled value added services to generate foreign exchange. Pakistan has huge potential for e-Commerce, and the government will develop a regulatory framework for contract enforcement, consumer protection against fraud, and introduction of efficient e-payment systems. Domestic commerce is an important area, providing employment to 40 percent of the non-agricultural workforce. Improvements in domestic commerce have the potential to add 2 percentage points to GDP growth. The infrastructure for domestic commerce in whole sale and retail sectors will be improved by developing business centers, markets and shopping malls with necessary amenities with the help of local governments.

Pakistan's rich cultural heritage and diverse topography provides huge potential to promote tourism. Preservation, development, and effective advertising of heritage sites will be undertaken to attract tourists. High quality tourism education and training centres will be set up to provide specialized personnel to the tourism industry. The capacity of foreign missions to promote tourism will be strengthened by equipping them adequately with trainings, materials, and information. National Tourism Board will be established with 50% representation from the private sector. Sports and cultural shows in different parts of the country will promote domestic tourism. Efforts will be taken to improve Pakistan's international image. In this regard, Pakistani consulates can serve in promoting Pakistan as a tourist destination abroad. In addition, the entertainment industry and Pakistani cuisine will be promoted, generating further employment opportunities for the youth and will promote the country's soft image abroad.