Pakistan’s Neglect of Human Capital is Costing its Development

Pakistani flags

It would not be an exaggeration and overstretched argument if Pakistan’s current economic plight is attributed to a major extent to its failure in development of human capital. Although the worsening of forex reserves to less than USD 4.5 billion, not sufficient even for import of essentials for the next one month has got much attention, the poor state of human capital in the country has not received adequate attention. As remittances which constitute the main source of foreign exchange of the country have not picked up post Covid-19 pandemic, Pakistan is drifting closer to default with nearing of its debt servicing due in next two months to the tune of USD 3.5 billion.

Majority of critics blamed the unprecedented crisis and its repetition in a vicious circle getting on short intervals due to non-serious policy decisions and mis-management by the economic managers. But one of the underlying factors behind the reserve crisis is Pakistan’s poor human resource which is now not much employable in the age of emerging technology.

Analysts blame that the human capital, which is the basic requirement for economic development is undeveloped in Pakistan, even after seven decades of independence. According to a recent World Bank’s Pakistan Human Capital Review (HCR), under developed poor human capital has become a real hindrance to growth. Pakistan’s human capital is low in both absolute and relative terms. Pakistan’s HCI value of 0.41 is much lower than the South Asia average of 0.48, even with Bangladesh (0.46) and Nepal (0.49). Pakistan is more comparable to those in sub-Saharan Africa.

Human capital shortfalls and equity gaps explain Pakistan’s low earnings, low economic growth, low poverty reduction leading to economic crisis, repeating itself as a vicious circle. Its investment in education is just 2.5% and health is 0.9% of GDP, much lower than the global average and the average for similar economies. While its military expenditure is about 4% of GDP, the highest among the least developed economies. Further, there is an enormous gender inequality with the utilization adjusted HCI value of just 0.08 for women in Pakistan which underscores the low female labour force participation at just over 20%. It is not surprising that Pakistan is a unique country with about 60% of working-age women are not in employment, education, or training. A great deal of labour productivity is simply lost!

Pakistan’s parameters in some human capital are humiliating in terms of statistics and the condition is very serious, right from the birth of the child to adulthood and ageing. About 7% of newborns do not live to their fifth birthday. Around 40% of children under the age of 5 are stunted, relegating them to a lifetime of physical and cognitive deficits. Only 41% of new born children in Pakistan would be able to achieve their potential, considering inequalities in human capital. Early childhood development outcomes in Pakistan are far low relative to those in middle-income countries, according to the World Bank Review. Less than 60% of young Pak children’s developments on track against 75% or above among the peer countries.

Islamabad failed to provide right atmosphere and education for its even tiny kids, forget about their higher education. It is estimated that more than 20 million school-age children are not in school and 65% of primary school children are failing to achieve minimum proficiency in reading. Further, an estimated 75% children of the age of 10 were in learning poverty, unable to read and understand a simple age-appropriate story in Pakistan, even before the Covid-19 pandemic. The pandemic and the 2022 catastrophic floods have further deepened Islamabad’s human capital challenges and increased malnutrition in the affected districts.

Pakistani workers on whose remittances it has depended for foreign exchange earnings are either unskilled or semi-skilled. When technology is fast changing, Pakistani workers are fast getting irrelevant and unemployable abroad because of poor education and technical training. Pakistan thus remains far from realizing its potential and forgoes substantial growth and development. Despite favorable demographic tailwinds, Pakistan is currently unable to reap its rightful dividends due to inadequate investments in education, health, social protection and the labour force.

Pakistan needs investment heavily in human capital to ensure its full utilization which is aspiring to become upper-middle-income country by 2047. To boost the human capital, Pakistan needs to invest more in improving health and education through domestic resource mobilization, shifting resources from giving popular subsidies like energy to the masses. Pakistan needs to build more schools, particularly in rural areas and give quality education. Further, it needs to increase the proportion of female teachers to promote girls’ education which is a real asset to the society. Low human capital development is limiting Islamabad’s economic growth, both sustainable as well as inclusive. However, the present conditions tell a different story. Islamabad does not have enough money or resources even to sustain its day to day functioning. It is no wonder that the long hope of becoming an economic giant by 2047 may be pushed by a century, certainly due to wrong placed priorities of its policy makers who neglected the human capital.

Pakistan’s manufacturing sector growth and foreign remittances earnings are facing huge constraints due to poor human resources which in turn affect overall growth, productivity, savings and capital formation adversely. The cycle repeats itself while unemployment and poverty continue to increase. Pakistan is a classic case how a country deliberately chooses to remain in a self-denial mode while it is getting worse from bad. As the saying goes, it is true that time and tide spare none, but it is about accidents and not about self made crises like that of Pakistan. The country desperately needs introspection and positive action.

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