Pakistan must improve infrastructure to unlock growth: World Bank

Advantages of demographic transition, clustering waiting to be realised.


Shahram Haq September 17, 2013
According to the report, like other South Asian countries Pakistan is experiencing a shift from an agriculture based economy to a services-based economy. DESIGN: JAHANZAIB HAQUE

LAHORE: Rising share of services and manufacturing in an economy are generally associated with urbanisation as the economy increases its sophistication through stronger productivity and growth. Unfortunately Pakistan is unable to use its increased urbanisation and agglomeration to generate the growth and high productivity jobs, says a recent World Bank report.

The report highlighted key issues that hampered economic activities in Pakistan, with infrastructure, agglomeration and urbanisation ranked as top issues which governments have failed to address for decades, putting the country’s economy at risk.

According to the report Pakistan is in the midst of two key trends that can provide increased manufacturing potential: significant migration to urban areas, and the development of agglomeration economies. Agglomeration economies are the advantages of the clustering effect of industries.



Though Pakistan does have a few industrial clusters, they are not providing the best results due to the fact that they are not properly planned, have missing facilities, a majority of them are not environment friendly and above all these clusters have weak infrastructure services which often fail to connect these clusters together and to important markets throughout the country. The report termed this as one of the main bottlenecks for doing business in Pakistan.

According to the report, like other South Asian countries Pakistan is experiencing a shift from an agriculture based economy to a services-based economy. But at the same time, a young and largely low skilled unemployed labour force has also been rising.

To address these issues and to jolt Pakistan’s manufacturing into increasing its share of gross domestic product (GDP) involves a range of measures. These include improving labour skills and the commercial environment, harnessing positive forces of agglomeration, promoting inclusive green industrial growth, addressing bottlenecks in supply chains, taking advantage of cleaner industries and certification for exports, and ensuring that regulations are in place and enforced to avoid the negative externalities of agglomeration.

Urbanisation facilitates agglomeration as face to face exchange of information is important in allowing labour and production to learn from each other to apply technological advances. Agglomeration economies help creating internationally connected cities, concentrating production and further facilitating economic growth. As cities catalyse agglomeration, they are important engines of economic growth.

The report recommends that cities and industrial clusters need to be better interconnected by upgrading, extending and rehabilitating infrastructure.

Investments in freight transport should be developed, coordinated with efforts to establish or strengthen industrial clusters. Synergies between freight transport and cluster development would boost the structural and spatial transformations that Pakistan is undergoing.

Published in The Express Tribune, September 18th,  2013.

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