A note on competitiveness and structural transformation in Pakistan

A note on competitiveness and structural transformation in Pakistan

Published Jan 2007

Author

J. Felipe

Publisher

Focus themes

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Using industrial policy to accelerate structural transformation in Pakistan

Pakistan’s structural transformation has been slower than that of other Asian countries. Discussing recent research on growth and structural transformation as well as analytical tools for policy makers, this note finds that:

  • labour productivity in Pakistan has increased very slowly since the 1970s
  • services are the major contributor to total output and labour productivity growth
  • intrasectoral labour productivity growth has contributed substantially more to overall labour productivity growth than the reallocation of labour
  • the absorption capacity of Pakistan's service sector is not large enough to compensate for the falling absorption in agriculture
  • the share of Pakistan’s manufacturing sector in total output, albeit not low, has been stagnant since the 1970s
  • the manufacturing sector has a low level of technology and is heavily concentrated in food, beverages and textiles
  • the share of Pakistan's top 10 exports in total exports and GDP has decreased significantly as even poorer countries have begun exporting those products
Accelerating the country's structural transformation should be a key objective for Pakistan’s policy makers. Most notably, they should seize the momentum of Pakistan's recent high growth rate to foster industrialisation and diversification. Industrial policy can be an important development tool for Pakistan.

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