For Pakistan's economy to grow sustainably, better resource and talent distribution is necessary, according to the World Bank

Pakistan's economy can only grow sustainably if the country adopts "productivity-enhancing reforms that enable a better allocation of resources and talent," according to a World Bank news release summarising its most recent evaluation.

The study, titled "From Swimming in Sand to High and Sustainable Growth," reportedly called for allocating resources to more dynamic endeavours and talent to more fruitful uses.

According to a press release summarising the report's findings, the nation's inability to effectively allocate these resources "stunted its economic development and showed indications of systematic productivity stagnation across enterprises and farms."

Additionally, it claimed that businesses losing efficiency over time was largely to blame for the output halt in both manufacturing and services.

A "systematic decline in agricultural production" was also noted, and the statement emphasised the "strong relationship" between productivity and both high temperatures and variations in rainfall.

A plan for change

The World Bank study detailed a number of necessary reforms, including harmonisation of sectoral direct taxes, a reduction in the anti-export bias in trade policy, and a reversal of the pro-diversification bias in export incentives. These reforms were all mentioned in the press release.

In contrast to real estate and non-tradeable products, it was argued that by harmonising direct taxes, resources would be directed more towards dynamism in tradable industries, such as manufacturing and tradable services.

The study added that Pakistan's inability to utilise all of its skills hindered the country's productivity further and urged Pakistan to "maximise positive effect on enterprises and productivity across the board."

It was suggested that in order to do this, regulatory complexity should be decreased, the general sales tax should be applied consistently throughout all provinces, investment laws should be altered to encourage more foreign direct investment, and insolvency laws should be strengthened to reduce the cost of liquidating unprofitable businesses.

The report's top and medium-term recommendations included providing safe and affordable mobility, especially for women, as well as "demonstrating the benefits of expanded female labour force involvement to favourably modify established norms," according to the release.

Some of the other suggestions included skill development, reducing sectoral gender bias, boosting digital connectivity, and digitally enabled jobs.

Expert judgements in the study

"Women in Pakistan have made gains in school attainment, but this accumulated human capital is underutilised due to barriers women encounter to enter the labour market," said Najy Benhassine, the World Bank's Country Director for Pakistan, in the news release.

He emphasised that the nation has one of the lowest rates of female labour force participation in the world, with only 22% of women working.

A representative of the World Bank claims that closing the job gap with peers could increase the country's GDP by up to 23%.

According to him, "effective execution of policies to address the demand- and supply-side impediments to female labour force participation" could lead to the creation of 7.3 million new jobs for women, according to the news release.

The nation's economy was observed to be in a "critical stage" by senior economist and co-author of the World Bank report Gonzalo J. Varela.

He stated that the long-term structural imbalances "need to be promptly addressed" and added that the study contained several policy recommendations to accomplish this. He said it might be a "turning point" and used the phrase.

The economist suggested that you start by getting rid of the distortions that unfairly divide talent and resources. Second, make clever interventions to promote company growth rather than using broad subsidies. Third, create a constructive, dynamic loop between evidence and policymaking to improve the feasibility analysis of publicly funded projects or programmes.

According to a World Bank press release, Zehra Aslam, a co-author of the study and another economist, discussed the challenges faced by businesses.

"Pakistani companies find it challenging to grow as they get older. In Pakistan, a young formal company with 10 to 15 years of operation is roughly the same size as one with more than 40 years of operation.

Pakistan's typical exporter is also considerably smaller than Bangladesh's average exporter. This shows the lack of dynamism among Pakistani businesses, according to Aslam, when compared to better-functioning markets, where businesses either expand or exit."