Importance of Social , Political and

Economic Sustainability in

Industrial Growth

Dr Muhammad Jamil Bajwa

FCE, Islamabad

PopulationPopulation• Pakistan is sixth most populous

country in the world with an estimated population of 184.35 million in 2012-2013.

• The growth rate of population during

2012-2013 was 2.0 percent.• Gross national income per capita

(PPP international $4,141 ranking 140th in the world.

• Table 12.2: Population by Age Groups (In Million)

• About 28 per cent of the population is between the age of 15 and 29 years.

• The working-age population is about 55%

• Source: National Institute of Population Studies, Planning Commission of Pakistan.

Age Group 2012 2013 15-19 20.57 20.78

20-24 18.22 18.72

25-29 15.70 16.16

30-34 13.40 13.85

35-39 11.19 11.57

Literacy Rate

• Total adult literacy rate (2012-13) is 57%.

• Youth male(15-24 years) literacy rate (2012-13) is 79.1% and Youth female (15-24 years) literacy rate (2012-13) is 61.5% .

The literacy rate of Pakistan by The literacy rate of Pakistan by province is:province is:

Province Literacy Rate (2012)

Punjab 71%Sindh 69%Khyber-Pakhtunkhwa 60%

Balochistan 50%

Major Crops of PakistanMajor Crops of Pakistan

• Maize• Wheat• Rice• Cotton

Major Exports

• The majority of exports made by Pakistan are based agriculture; wheat and fruits like oranges, mangoes, cotton fiber, furniture, tiles, cement, marble, textiles, clothing, sports goods, surgical instruments, cutlery, leather goods including belts and shoes, electrical appliances, ice-cream, software, carpets and rugs, red and white meat and sea food.

Sustainable Development

• A concept popularised by the Brundtland Report: “Our Common Future”, 1989

• “A sustainable development is able to answer the needs of the present generation without compromising the capacity of future generations to satisfy their own needs”

• It is a development : it aims at improving the well-being and the quality of life for all

• It has conditions for sustainability : this implies to protect the existing resources (i.e. economic, social, political…) which may be required by the future generations to maintain a standard of living at least as good as our .

Sustainability• “The possibility that human and

other forms of life on earth will flourish forever.” (Dr. John Ehrenfeld)

• “Enough, for all, forever.” (Dr. Chuck

Hopkins)

… and Main Characteristics• Three main operational characteristics: – A multidimensional aspect. There are several

interrelated dimensions (economic, social, political and ecological, …). They have to be taken into account together for any analytical and decision process

– Linkages between generations. This raises the issues of (i) impact on the next generation, (ii) transmission between the generations, and (iii) intra and inter-generational equity

– A focus on people’s capacity. This brings : (i) the issue of participation, through stakeholders, in the decision making process, (ii) the inclusion of everybody within a society, (iii) the importance of the capacity

The Bases of Sustainable Systems

Agriculture is often viewed as consisting of three types of systems: eco

l Sustainable improvement in agriculture – usually thought of in terms of farm profitability, environmental stewardship and quality of life for farm families and rural communities

– must be based on these interlocking aspects of agriculture.

Global Issues Concerning Sustainability

1. Population - Dampen growth and stabilize size

2. Biological base - Conserve and restore soil, water, flora, and fauna

3. Energy - Minimize/phase out fossil fuels

4. Economic efficiency - Creation of an economy that functions like an ecosystem (ie. reduce waste, maximize recycling)

Global Issues Concerning Sustainability continued…

5. Social norms - Compatible with natural, technical and flexible centralization

6. Culture - Individualism would be tempered with communitarianism

7. World order - Transformation of the global investment and world trade to support sustainable development

Opportunities and Challenges limiting Economic Growth

• Effective Policies & Institutions– Rule of Law and Political Stability

• Infrastructure– Adequate Transportation System– Roads- rural to markets, ports and

industries for goods & services

• A Skilled workforce– Illiterate working-age adults

Opportunities and Challenges limiting Economic Growth

• Women– Hurdles to full and effective participation– Legal,social,regulatory and cultural

barriers• Agriculture-source of

employement,poverty reduction and food security– Barriers to Trade,market access,high

input costs,poor access to technology and international standards

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The Three-Legged Stool

Low introduces the common model of sustainability made up of a triad of economic, social, and political sustainability.

Sustainability

Political

Society

Economy

The Social Dimension of Sustainable Development

• Greater focus at Johannesburg World Summit (2002)

• The social dimension is twofold:– The social sectors : education, health, culture...– The social links : networks, social cohesion, exclusion…

• The main objective is the reduction of poverty : – Income and consumption, access to goods and services

(education), assets and potentialities, capabilities • Other issues are also related to poverty :

– inequality, inequity, vulnerability, social exclusion. – Reducing poverty may not be enough: the issue becomes

that of social sustainability (in the human development)

Ensuring Social Sustainability

• In this context ensuring social sustainability means : – an improvement in the people’s capability of well-being, – equity in the distribution of capabilities (assets, rights,

skills) within the current generation – equity in the transmission of capability between

generations• One may note that :

– Poverty traps and social exclusion makes the inter-generational transmission of capabilities extremely difficult

– Inequality prevents the reduction of poverty and inequity jeopardizes the social capabilities (social cohesion)

– Vulnerability can be reduced with the strengthening of capabilities

• The various forms of sustainability are inter-related• All these aspects have be taken into account for

sustainable poverty reduction policies

The Strengthening of Capabilities

• Improving the people’s capability for a better quality of life implies a development which focuses on the strengthening of the persons’ capabilities (sustainable human development)

• It differs from a development focussing on the individual’s income (growth), even if the two may be interrelated (well-being, quality of life)

• It should reduce the capability poverty: lack of capability which implies other forms of poverty

• This implies appropriate policies : education plays the major role through it four pillars (learning to know, to be, to live together, to do)

The Transmission of Capabilities

• Protecting and transmitting human and social capabilities (human and social capital) from one generation to the others is a condition for sustainability

• It implies the transmission of potentiality (assets), ability, knowledge, rights… (If not…, e.g. HIV/AIDS)

• An intergenerational transmission which has to be equitable– E.g. this implies a low impact of armed conflicts, protection of

natural resources, improvement in the quality of education…• But it also requires equity in the present generation to

avoid social exclusion, to suppress poverty traps, etc.• A double gender dimension in the transmission process :

– The role of women for children’s education within the family– Their vulnerability due to gender inequalities and the risk of

poverty

Definitions of Politics

• Politics is the exercise of power.• Politics is the public allocation of things

that are valued• Politics is the resolution of conflicts.• Politics is the competition among

individuals and groups pursuing their own interests.

• Politics is the determination of who gets what, how, and when.

Political influences on incentive structures

• Political institutions: Which institutions, whether part of the state apparatus or informal, influence reform implementation?

• Connections between state and society: How to mobilise the support of political parties and civil society?

• Political agency: How to package reforms, moderate scope and pace, identify levels and arenas for reform

Structural features of politics and society

• Institutional depth: longevity, adaptability, and legitimacy of formal and informal institutions that shape pacts and bargaining strategies

• Composition of governing elites: resistance to reform efforts and pro-reform coalitions

• Composition of civil society: scope for building new reform coalitions and sources of political support to offset opposition

Political agency and political institutions (1)

• Political leadership: vision of potential benefits, willingness to consider reform options, reliance on technocrats

• Political commitment: importance of visible political commitment, sustainability more vulnerable

Political agency and political institutions (2)

• Political feasibility: severity of crisis (war or fiscal crisis) creates space for reform

• Political longevity: durability of political institutions enhances credibility and predictability, but creates opportunity for entrenchment and backsliding

Strong Political System ensures……

• Establish Political System • Strengthen Political Leadership• Encourage public–private dialogue.• Boost industrial policy management

capabilities• Increase Exports

Three Major Economic Impacts

1. Increasing foreign exchange earnings

2. Increasing income

3. Increasing employment

Strategies for Maximizing the Economic Impact

1. Encouraging import substitution

2. Implementing incentive programs

3. Dealing with multinational companies

Definition of Economic Development: 1950s

• In economic terms, development is the capacity of a nation to generate and sustain an annual increase in its GNP of 5% or more.

• Traditional economic measures: – GDP: is the market value of all final goods

and services produced within a country in a given period of time.

– GNP: is the market value of all final goods and services produced by permanent residents of a country in a given period of timeGNP= GDP+ net factor income from abroad

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Definition of Economic Development

• Common alternative index is the rate of growth of income per capita or per capita GNP – Per capita GNP: is the per-head value of final

goods and services produced by permanent residents of a country in a given period of time. It is converted to USD using the current exchange rate.

– PPP Measure: the number of units of a country’s currency required to purchase the same of basket of goods and services in the local market that a US $1 would buy in the USA. Under PPP (purchasing power parity ), exchange rates should adjust to equalize the price of a common basket of goods and services across countries. Penn World Tables rank countries using the PPP method.

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Definition of Economic Development: 1970s

• Increasing emphasis on non-economic social indicators

• Economic development consists of the reduction or elimination of poverty, inequality and unemployment within the context of a growing economy.

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Human goals of economic development : Sen’s

“Capabilities” Approach: 1985• Economic growth is not an end in itself

and has to enhance the lives people lead and the freedoms that they enjoy

• Capability to function is what matters for status as a poor/non-poor person and it goes beyond availability of commodities

• Capabilities: “freedom that a person has in terms of the choice of his functionings.…”

• Functioning is what a person does with commodities of given characteristics that they possess/control 32

Definition of Economic Development: 1990s

• World Bank in its 1991 WDR asserted that the “challenge of development is to improve the quality of life.”

• The improved QOL involves higher incomes, better education, higher standards of health and nutrition, less poverty, a cleaner environment, more equality of opportunities, greater individual freedom, and a richer cultural life.

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The Nested Box Model of Sustainability

(LOW AND GLEESON 2003, HART 2006)

Sustainable industrialization

Sustainable industrialisation is a long-term process of transformation towards a desired vision of an industrialised economy that contributes to wealth creation, social development and environmental sustainability.

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Industry: engine of transformation of an

economy• Applying technological progress

• Driving and diffusing innovation

• Developing new skills and attitudes

• Stimulating modern services

• Internationalizing economies06/10/2011

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• Resource-based industries (for instance : processed

food, wood, leather, refined petroleum & rubber products);

• Low technology industries (for instance : textiles, garments, footwear, furniture, glassware, toys);

• Medium technology industries (for instance : automotive industry, chemicals, metal products, machinery)

• High technology industries (for instance : electronics, pharmaceuticals, biotechnology, precision instruments, aerospace ).

Technological Classification of

Industries

The Sustainable Industrialization Triangle

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Industrial sustainability

Economic Development

Socialdevelopment

Politicalsustainability

High Tech

The industrial innovation path

Medium Tech

Low TechResource based

Low value added segments

High value added segments

The sustainable industrialization process:

The High Road to compete

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• The path to a sustainable industrialization is for firms to compete through innovation; the alternative is to compete through lower wages and standards or through currency depreciation ;

• To innovate means to improve products and processes in existing industries; to compete in higher value added industry segments; and to enter in technologically more complex industries;

• In developing countries, the innovation process is usually based on the mobilization, adaptation and learning of existing technologies and management practices ;

• To innovate requires firms to up-grade their technological, managerial and marketing capabilities ; it is a risky and difficult process with important efforts of investment, research and learning;

Global transformations

The on-going and important global transformations strongly affect the dynamics of sustainable industrialization in developing countries and provide new challenges and opportunities for firms and in particular for SMEs to compete and innovate.

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Global trends and issues

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• Very high level of wealth creation and improvement in quality of life during the last 50 years but not everywhere and not for everybody.

• Globalization of financial, trade, investment an knowledge flows• Rapid and accelerating technological progress with many

applications for product and process technologies: ICTs; biotechnology; new materials; fuel cells; nanotechnologies;etc…

• Emergence of a global network society and new consumption patterns

• Global governance with new international treaties, regulations and standards ( trade, quality, labor, environment, intellectual property rights, etc..) and new actors (global corporations, civil society, media)

• However,alarming and unsustainable trends: poverty, environment, social development, economic marginalization,

Global transformations of industry

• Globalization of product markets and research characterized by complexity, uncertainties and changes.

• New and difficult challenges for sustainable industrialization: environment, social issues, poverty.

• key factors of success : price, innovation, quality, flexibility, understanding and addressing local markets

• New managerial and organizational processes and systems to design, produce and distribute products

• New concept of industry: not only production but also design,, marketing, distribution and recycling

• Globalization of value chains governed by MNCs and localization of the segments in specialized and localized clusters of firms which offer unique competitive advantages.

• Rapid transformations of the world industrial map with the emergence of new and dynamic industrial centers in developing countries.

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Innovation strategies of SME clusters

in Global Value Chains• The industrial success of developing

countries in particular in Asia and now in other regions as well, including Africa, is based on the links between local industrial clusters and global value chains and in the capability of the local firms to innovate and up-grade their capabilities by networking and learning with the global corporations and the other clusters of the global network.

• A key factor of this industrial success is the support to this process provided by an innovation system of technical and financial institutions. 06/10/2011

“The possibility that

sustainable enterprises will flourish

forever.”

IN SUMMARY …

SUSTAINABILITY IS

$MART BUSINESS

Thank you for your kind

attention

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