Pakistan's Industrial Competitiveness
Market Forces April 2005
Vol. 1 No. 1
PAKISTAN’S INDUSTRIAL COMPETITIVENESS
Javed A.Ansari College of Management Science PAF-Karachi Institute of Economics and Technology The United Nation Industrial Development Organization’s (UNIDO) annual review of industrial performance contains important insights for Pakistani policy makers. It provides overwhelming evidence to show that Pakistan is rapidly losing ground in world manufacturing market.
The UNIDO Index
The UNIDO report ranks 93 countries on the basis of a Competitive Industrial Performance (CIP) index over 1980-2000. There are methodological and conceptual problems involved in the construction of this index. The index shows a pronounced bias in favor of relatively small export oriented countries and therefore under-rates the performance of large industrial powers such as Brazil, China, India, Indonesia, Nigeria, Pakistan and the USA, it over-estimates the performance of Singapore, Ireland, Switzerland and Finland which are shown to have the top four ranks in 2000 and outperform the United States, Germany and Japan. The CIP measures industrial performance in terms of (a) manufacturing value added (MVA) per capita (b) manufactured exports per capita (c) the share of MVA in GDP (d) the share of medium and high technology branches (defined in an excessively aggregate manner on the basis of the SITC three digit classification) in MVA (e) the share of manufacturers in total exports and (f) the share of medium and high technology branches (MHT as defined above) in manufacturing exports Scores obtained on the basis of these indicators are added up and averaged out to yield a CIP value for each country. No theoretical justification is provided for (a) effectively assigning equal weight to all indicators (b) ignoring problems associated with assembly as against manufacturing of MHT products. (This yields an unrealistically high score for Malaysia, Thailand, the Philippines and Mexico) (c) using SITC three digit
Vol. 1 No. 1
PAKISTAN’S INDUSTRIAL COMPETITIVENESS
Javed A.Ansari College of Management Science PAF-Karachi Institute of Economics and Technology The United Nation Industrial Development Organization’s (UNIDO) annual review of industrial performance contains important insights for Pakistani policy makers. It provides overwhelming evidence to show that Pakistan is rapidly losing ground in world manufacturing market.
The UNIDO Index
The UNIDO report ranks 93 countries on the basis of a Competitive Industrial Performance (CIP) index over 1980-2000. There are methodological and conceptual problems involved in the construction of this index. The index shows a pronounced bias in favor of relatively small export oriented countries and therefore under-rates the performance of large industrial powers such as Brazil, China, India, Indonesia, Nigeria, Pakistan and the USA, it over-estimates the performance of Singapore, Ireland, Switzerland and Finland which are shown to have the top four ranks in 2000 and outperform the United States, Germany and Japan. The CIP measures industrial performance in terms of (a) manufacturing value added (MVA) per capita (b) manufactured exports per capita (c) the share of MVA in GDP (d) the share of medium and high technology branches (defined in an excessively aggregate manner on the basis of the SITC three digit classification) in MVA (e) the share of manufacturers in total exports and (f) the share of medium and high technology branches (MHT as defined above) in manufacturing exports Scores obtained on the basis of these indicators are added up and averaged out to yield a CIP value for each country. No theoretical justification is provided for (a) effectively assigning equal weight to all indicators (b) ignoring problems associated with assembly as against manufacturing of MHT products. (This yields an unrealistically high score for Malaysia, Thailand, the Philippines and Mexico) (c) using SITC three digit