Top advisors to the prime minister of Pakistan have continuously asserted
that Pakistan’s economy is improving, but not in a way that has created jobs.
The implication of this is that sectors typically linked to job creation–such as
the agriculture and industry sectors–will be neglected. This is a potentially
alarming situation. If this is the case, Pakistan’s economic improvements will
be one-legged and shaky. Therefore, the government must pay attention to
the labour-intensive agricultural and industrial sectors. These sectors have
long production chains; meaning that they have excellent job-creating
potential.
Unfortunately, these sectors have struggled over the last decade and have
lost their market share to regional competitors. For example, textile and
clothing exports dropped from USD 13.8 billion to USD 13.5 billion from
2011 to 2018.
During the same period, Pakistan’s Asian competitors significantly gained a
market share in textiles in clothing exports. Vietnam’s exports increased
from USD 15.2 billion to USD 33.5 billion (a 120 per cent increase) during
the same period. Similarly, India, Bangladesh and Sri Lanka raised their
textile and clothing exports by 36 per cent, 72 per cent, and 24 per cent,
respectively, during this period.
Pakistan’s negative growth in this industry makes it a clear outlier, despite
having an exceptional textile industry infrastructure. A comparison between
Vietnam and Pakistan highlights some significant changes that Pakistan can
make to regain its competitive edge in the textile industry.
The economies of Pakistan and Vietnam were very different in the early
1980s. During this period, the economy of Vietnam faced multifaceted
problems against the backdrop of the Vietnam-US war.
The country heavily relied on its agriculture and primary goods production
sectors. Almost all Vietnamese state-owned enterprises were inefficient, and
no foreign direct investment was available. Thus, the country depended on
donors and foreign loans.
Meanwhile, the opposite situation occurred in Pakistan. In 1980, Pakistan
was 40 to 60 per cent richer in terms of income per capita than its three
neighbours (India, China and Bangladesh). So, how did Vietnam acquire the
status of “new manufacturing powerhouse” over the last three decades? The
country took several holistic steps on several fronts, the most important of
which was the “rethinking” of policy.
The Doi Moi economic reforms of 1986 shifted the paradigm in Vietnam
from “political relations” to “political-economic relations.”
This changed the mindset of Vietnamese policymakers. As a result, Vietnam
made new friends. For example, it withdrew all troops from Cambodia and
actively participated in resolving Cambodia’s problems. Then, it normalised
relations with China and became the Association of Southeast Asian Nations
(ASEAN) observer.
Most importantly, it improved relations with the US. Consequently, the US
lifted the economic sanctions it had imposed on Vietnam. Afterwards, a
bilateral trade agreement was forged between the US and Vietnam; further
strengthening the relations between the two countries. During this time,
Vietnam also improved its political-economic relations with China.
Source: The Daily Times, Pakistan Monday, 30 December 2019