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Developing Pakistan’s human capital for global export By Kashif Mirza

Byadmin

Dec 15, 2023

The writer is an

economist, anchor,

analyst and the

President of All

 Pakistan Private

Schools’ Federation

president@Pakistan

privateschools.com

The significance of the Technical and Vocational Education (TVET) sector requires to creation of better synergies between all the stakeholders of the TVET eco-system to boost the quality and productivity of the Pakistani workforce. In this regard, a meeting of the SIFC Working Group (WG) on “HR Training and Accredited Certification” was held at NAVTTC HQs, Islamabad, chaired by the Secretary of Federal Education and Professional Training for improvement and up-gradation. Pakistan’s export performance in the light of emerging global challenges and identifies key structural and policy issues that stifle Pakistan’s exports, it is argued that Pakistan has lagged behind its comparators due to a combination of factors including lack of modern technology and human resource development, shortage of required skills, lack of quality certifications and conformity to international standards, poor physical infrastructure, lack of foreign direct investment, and high cost of doing business. The regional economic integration can help Pakistan boost its exports, especially skilled HR exports. More than 800,000 Pakistanis left the country in search of jobs in 2022, according to the Bureau of Emigration and Overseas Employment, and there is a strong uptrend established now. In the developed world, as per a report published by the US Labour Statistics, there is a shortage of 40 million skilled workers in the post-pandemic recovery. Moreover, the report suggests that if the trend continues, the companies may stand to lose $8.4 trillion of revenue due to the shortage of skilled manpower. Being the fifth most populous country in the world with an employable population of 64%, we can turn this impending crisis of skills shortage into an incredible opportunity. By adopting the models employed by many countries that rely heavily on exporting skills such as the Philippines, we can become a reliable supplier of skilled manpower and gain our rightful share in the global market, which currently remains untapped. These strategies require the alignment of national curriculum to global demands by increasing cultural adaptability and employability through focusing on the specific regional requirements such as teaching spoken Arabic with GCC dialect for better adaptability in Saudi Arabia and the UAE or teaching German or French language for adaptability in Europe, etc. The World Bank in its recent report states that Pakistan’s potential annual exports are $88.1 billion, about four times the current level. The opportunity cost of these missing exports is estimated at 893,000 jobs and $ 1.74 billion in foregone taxes alone, of which 152,000 jobs could have been created in the agriculture export sector, and 741,000 jobs could have been created in the manufacturing export sector. However, neglecting this potential by seeking short-term economic fixes, raising the cost of doing business, and making procedures unnecessarily bureaucratic has retarded any progress in the economy. Despite the liberalization of its trade regime, Pakistan has not fully benefitted from opportunities emanating from the growth in international trade during the past decade. Our industrial sector which initially grew under import substitution bias with substantial governmental support has not prepared itself for global market competitiveness. The lack of entrepreneurship and gaps in business support policies have kept Pakistan from moving up on the technology ladder preventing the country from achieving higher value addition and greater export diversification. Pakistan is reforming its industrial strategy to meet domestic and external challenges and attract foreign investment, improve export performance, and move towards further integration at the global and regional levels. But at the same time, the challenges faced by Pakistan are how to improve its growth, attract more FDI, skill formation, build technological capability, and enlarge and diversify exports. In the dynamic areas comprising electronics, machinery, and metal products, progress is nominal in terms of exports for Pakistan. Industries like automobiles have progressed rapidly but are confined to the domestic market only. The engineering sector, in general, is dominated by either assembly operations based on imported parts, or the production of basic and simple components. Pakistan has not been able to develop a strong capital goods and services sector. Relocation of industries from developed to developing countries in the wake of global restructuring and increasing outsourcing opportunities from developed countries offer greater opportunities for Pakistani exporters.

The SIFC must stress the need to finalize National Action Plan for skills development and training for domestic and international job market, aligning with directives, federal and provincial entities must be given tasked with developing short and long-term action plans, aim to train a workforce that is exportable, fostering collaboration with the private sector to boost foreign remittance comprehensively. 

To increase exports, especially HR exports, first, there is a need to increase the production of goods and services in all sectors in general but in the exportable sector the most. There is a need to devise policies and strategies to increase production through capacity utilization, capacity expansion, and productivity growth. There is significant capacity in every industrial unit that cannot be utilized because of expensive raw materials, lack of finance, and shortage of expertise. A comprehensive analysis of all such export units may provide guidelines for the optimum utilization of their excess capacity. To improve global competitiveness, Pakistan needs to create competency in more skilled labor-intensive components of complex products gradually advancing to more skill and technology-intensive activities. Moreover, there is a need to devise policies and strategies to promote technology upgradation, improve the business climate, enhance institutional quality, and support small and medium enterprises. These initiatives can be instrumental in achieving greater competitiveness which is essential to galvanize exports and thus enhance the country’s long-term growth prospects. Human Resources experts provide an interface into how globally competitive a country is. Likewise, a robust HR export base secures a country against a deteriorating current account balance. In general, exports facilitate the exploitation of economies of scale; allow resource allocation according to comparative advantage; improve foreign exchange reserves position and guarantee easy financing of imports; increase efficiency and productivity through competition; increase employment, and allow for knowledge spill-overs that will encourage domestic innovation. Information Technology (IT) sector presents an opportunity for developing economies to leapfrog due to its transformative nature and lower entry barriers. IT facilitates this transition by improving efficiency and productivity across public and private sectors, potentially benefiting nearly all aspects of socio-economic life. However, IT-led leapfrogging depends on various factors such as the absorptive capabilities of individuals, businesses, and governments; effective coordination among stakeholders; and availability and access to IT. The recent growth in Pakistan’s IT service exports and tech start-up funding appear as emerging signs of digitalization amid Pakistan’s large young population alongside regulatory developments aimed at increasing digital adoption and online payments. Further benefitting from Covid-19, which led to increased demand for digital services, the growth in Pakistan’s IT service exports averaged 24 percent between FY20-FY22, whereas start-up funding between CY21-CY22 reached around US$ 709 million compared to approximately US$ 100.8 million in CY19-CY20. However, to continue this trajectory and benefit from the transformative impact of IT, the digitalization of the economy has to be prioritized across public and private sectors with a focus on bridging the increasingly noticeable human resource gap in the sector, providing a facilitative environment for investment in local start-ups, addressing the issue of availability and affordability of IT services, and the provision of cross-cutting technology and ancillary frameworks. Pakistan adopted a private sector-oriented approach somewhat earlier than other economies in the region but has not been able to expand its exports, especially skilled HR exports, compared to other economies in the region. Though the contribution of private sector enterprises is increasing significantly, there is an urgent need to assist private entrepreneurs who are dynamic, open to innovation, and have managerial capabilities, by providing a favorable business environment with good governance, appropriate institutional and financial support mechanisms, an adequate legal and support framework and other physical and social infrastructure. Additionally, creating awareness among enterprises to bring in professional managers and skilled manpower to operate export-oriented industries would lead to higher overall productivity. The government’s role should be confined to legislation, policy development, regulation, capacity building, and facilitation with an objective of increasing productivity in all export sectors. The private sector should take the lead in investment and value chain development on its own. The focus of policymakers should be on the broader components of national competitiveness, specifically health, education, and infrastructure. We should learn from the experience of China, especially how they have promoted their exports, especially skilled HR exports while neutralizing import substitution. For sustainable competitiveness, Pakistan may begin by creating competency in the more skilled labor-intensive components of complex products, gradually progressing to more skill and technology-intensive activities. In this regard, industries and services which have lost their competitive edge should be ignored. For capacity expansion, we need to diversify the production base in favor of goods and services with comparative advantage, global demand, and growth potential. Some of these industries are electronic and telecommunication equipment, automotive parts, biological pharmaceuticals, renewable energy, petrochemicals, and aerospace. Further, as our auto industry is beginning to look efficient other downstream and upstream industries should be established. Within the textile sector clothing and value-added products should be expanded. Finally, productivity growth will come automatically from investment in human capital and promoting innovation.
Small and Medium Enterprises can play a crucial role in any economy. There is a need to involve SMEs in an organized production network for exports. Currently, SMEs are playing an important role in our manufacturing activities but for exports their weak technological base and management practices and limited access to information are creating major issues in terms of quality, delivery delays, and reliability. Without integrating the export-oriented SMEs in an organized production network for exports we cannot stimulate our exports. The formal industrial sector, through strategic alliances, subcontracting, and outsourcing can bring the SMEs into the production network and lead to overall productivity gains. The state will have to play a proactive role to ensure easy and affordable access to information, and finances and create facilitation centers in cluster areas.

The SIFC must stress the need to finalize a National Action Plan for skills development and training for the domestic and international job market especially on NAVTTCs, TEVTAS, PVTC, PSDF, and other ongoing and upcoming training interventions, aligning with directives, federal and provincial entities must be given tasked with developing short, medium, and long-term action plans. These plans must aim to train a workforce that is exportable, fostering collaboration with the private sector to boost foreign remittance comprehensively. The SIFC must formulate and distribute specialized training programs with a specific focus on generating an exportable workforce at both the provincial and federal levels, by highlighting the potential in overseas markets and introducing new regions and job markets for the Pakistani workforce. A concentrated approach in selecting courses related to IT and overseas job markets must be emphasized with high-value returns to maximize foreign remittances. To identify Country of Destination (COD) skill training & certification requirements, there must be emphasized the crucial need to enhance the export of skilled manpower, urging the Ministry of Overseas Pakistanis and Human Resource Development to initiate the identification of main 10-destination countries with high-yield trades. To streamline this process, the main concerned ministries should establish a real-time databank and digital system for sharing information with relevant stakeholders in Pakistan. There must be a vibrant online portal by the Ministry of OP&HRD to showcase emerging overseas markets and high-yield trades, ensuring effective utilization by training entities to prepare a comprehensive training plan included for each country, such as the associated trade or occupation, tentative demand, certification requirements, language prerequisites, and special skill set requirements. There is also a need to examine local and international accreditation requirements and also recommend for Accreditation of public-private institutes. NAVTTC provided through the National Accreditation Council (NAC), in conducting 655 national accreditations of TVET institutions across Pakistan, and has conducted international accreditation of the first 10 Pakistani TVET institutions as well. But, it’s observed that despite readiness to implement the accreditation regime the number of applications from institutes remains low. It’s urged Provincial TEVTAs to actively support accreditation by encouraging TVET institutions to apply, and also plan under DB Project, recommending their inclusion for international accreditation. Moreover, it’s also suggested that certification and affiliation as a cost-effective alternative to international accreditation, ensuring trainee placement, and encouraging private sector institutes to affiliate with reputable international counterparts and to align NVQF in line with regional and COD qualification frameworks to ensure Training programs in line with skill and job requirements of CoDs. The significance of the National Vocational Qualification Framework (NVQF) in ensuring standardization, development of high-quality qualifications, and its conformity with international standards is also emphasized. The Pakistani NVQF draws its foundation from the European Qualification Framework (EQF) with an effort to further refine its alignment with COD Qualification Frameworks, specific revisions are identified as imperative. These revisions encompass the need to reference the NVQF with qualification frameworks in the Middle East, the Far East, and other pertinent countries. This strategic enhancement aims to ensure a comprehensive and globally harmonized approach to qualifications in Pakistan to ensure Training programs are in line with the skill and job requirements of CoDs, and to suggest policy measures for maintenance and synchronization of central database for informed decision-making. There is also a need to develop a central database for the TVET sector to help make informed decisions by policymakers. The CBT training is already managed centrally, however, non-CBT training requires similar central management. The private sector should also be incorporated in a central database, and all the certificates including for private institutes should be issued by Qualification Awarding Bodies (QABs). After the integration of QABs in a central database, the private sector should also be covered. Moreover, those private institutes should also include as well which are not affiliated and recognized with relevant government entities, so that a strategy to manage them should be developed, and the overlapping functions like registration and affiliation of institutes by NAVTTC, PSDA, TEVTA, and QABs should also be addressed. There is also a need for revisions in the National Skills Strategy for Skilling youth in IT, High-End, and Conventional technologies in line with emerging local and international demand. There is a need for revision of the National Skills Strategy, as previously the National Skills Strategy was developed in 2019 for five years, which now needs revision so that for the next 5-years all stakeholders and governments should reform and support the TVET sector in line with the strategy. It’s also suggested to engage International donors who are working on skills development to support the revision and development of the National Skill Strategy with an actionable plan.

In the globalized world, it is no longer necessary to master the entire production chain and to organize the production processes within a single firm. Effective linkages must be put in place to facilitate production and market. Pakistan can attract the Chinese manufacturing sector by developing a trained workforce for industries together with overcoming the energy shortage and improving the business climate. The development projects under CPEC are expected to fulfill energy requirements as well as enhance connectivity. Pakistan’s economy has huge strategic development potential, as it is located at the crossroads of South Asia, Central Asia, China, and the Middle East. CPEC would link a vast sweep of regional markets from China to Asia to the Middle East and to Europe. This will create enormous inter and intra-regional trade opportunities for Pakistan. Pakistan with a vast population, large and diverse resources, and untapped potential for trade can benefit from this regional development provided it gets its policies right on an urgent basis. Pakistan needs to train its workforce to the Chinese standards. Chinese industry if relocated to Pakistan would have a positive impact on our productivity as well as on our exports, especially HR exports. In the changing global environment, another challenge for Pakistan is to build further on suitable international alliances bilateral or regional to foster technological capability in sectors operating at a lower technological level and earn more foreign exchange. Declining exports to the United Arab Emirates, Saudi Arabia, the Middle East, Iran, and Turkey, despite having good political relations is quite worrying. We need to revive economic diplomacy in our foreign relations. The role and effectiveness of the Commercial Councillors in improving the relations with trading partners is extremely important. Pakistan has unfortunately become a more inward-oriented economy in recent years. Furthermore, average tariffs on final goods in Pakistan are 50 percent higher than the average for South Asia, and almost three times as high as the average for East Asia. In this context, a reduction in taxes can be observed from the following data: “In the first decade of the 2000s, the government reduced trade taxes from 23.1% in 1999-2000 to 8.9% in 2014. This had led to gains in exports by 173%. However, this reduction was not consistent and until 2019, the tariffs increased to 11.6%, declining exports to 9.1%.” (PIDE). Our diplomatic missions abroad should play an active role by fostering stronger ties with destination countries through bilateral agreements and memorandum of understanding (MoUs), which can facilitate smoother recruitment processes and ensure the protection of overseas professionals and workers. It is highly recommended to partner with international organizations to create platforms for skill recognition and certification. This not only enhances the credibility of Professionals and workers but also ensures that their qualifications are recognized globally. In the past many decades, we have heavily relied on exporting semi-skilled or unskilled labor force, particularly to Gulf countries such as Saudi Arabia, the UAE and Qatar where there was a huge demand for such workers during infrastructure development. However, as these markets are becoming more mature, there is a shift in demand now for more and more skilled workforce in tourism, travel, services, information technology, finance, and industrial sectors. If we do not align ourselves with these changing dynamics, then chances are that we can easily lose our share in these markets. This transformation can be witnessed by the change in the composition of the workforce entering into these markets from all around the globe, which now mostly consists of highly skilled individuals such as IT engineers, doctors, accountants, and financial professionals. Developing Pakistan’s human capital for global export is a multifaceted task that requires a concerted effort from the government, educational institutions, and the private sector. By tailoring education and training programs to the specific needs of different regions (such as GCC, Europe, the US, and Asia-Pacific), Pakistan can unlock the full potential of its workforce and establish itself as a key contributor to the global economy. As the world becomes increasingly interconnected, investing in human capital development is not only an economic imperative but also a means to strengthen diplomatic and cultural ties with nations across the globe.

By admin

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