According to the Economic Survey of Pakistan 2010-11, out of labor force of 55 million people, over three million are unemployed or underemployed, and the official unemployment rate in urban areas is double that of rural areas.
Marred by an acute energy crisis, militancy, political instability and host of other issues, Pakistan’s annual GDP growth rate is stuck at little above three percent, while the population is increasing at a rate of over two percent per year. This means that every year, roughly two million people enter the labor force. If the current situation is unchanged, the unemployment rate in the country will rise precipitously in the years to come.
According to the Planning Commission of Pakistan, providing jobs to the unemployed — both existing and those entering the labor market every year — requires an annual GDP growth rate of nine percent. Given the fact that both industrial and agricultural sectors are observing negative growth in real terms, and largely uneducated youth cannot be absorbed into the relatively well performing services sector, there seems no way the government will be able to curb this ever-increasing unemployed population.
One of the ways out of this otherwise gloomy national economic picture is to promote youth entrepreneurship. For a society like Pakistan, youth entrepreneurship is a new concept, and will require some serious efforts for promotion to an extent where it will start contributing to annual GDP growth and for extending decent employment opportunities to the youth.
In the post-colonial context, where social status and power is wielded with public offices, enterprises, somehow, never inspire the youth of Pakistan. Perhaps that is the reason that after obtaining whatever quality of education is available in the country, they look for public service jobs. Also, most of the education provided to young people is “job-oriented” and vocation-based. Hence, it does not inculcate in them a desire for greater economic freedom, the ability to take risks and to become employers instead of employees.
Thus, in order to create business-oriented youth with a risk taking and entrepreneurial mindsets, public policy makers will have to start providing inspiration and encouragement to youth that are currently missing in both academics and in society at large. This may be done through sharing success stories of local entrepreneurs such as Arif Habib and Faraz Khan who started from scratch and through their hard work became successful and financially independent.
Beyond inspiration, youth will also need proper capacity building training, such as business planning, resource mobilization, registering with the Securities and Exchange Commission of Pakistan, managing accounts, filing taxes, applying for bank loans, business communication, and other essential business skills. Training and mentorship on business planning may come from existing companies, who may also sponsor a venture if they believe it is based on sound planning.
Additionally, the government should consider offering special incentives for young people to start businesses, such as exempting youth ventures from taxes for the initial 2-3 years of business, or providing essential utilities such as electricity and gas at subsidized rates. Moreover, there should be bonuses for the ventures that perform extraordinarily. Such bonuses may include interest waivers, monetary awards or eligibility to request more loans at discounted rates. At the same time, the success stories of these ventures must be documented and shared on social and conventional media as inspiration for others.
Youth entrepreneurs should form local, provincial and national coalition bodies and work with chambers of commerce so that they can push for essential policy reforms and regulation supporting their business agendas.
By announcing a new business loan scheme for youth, the government of Pakistan has made the first step in right direction, but unless this scheme is made more comprehensive with similar steps mentioned in this piece, it has little chances of succeeding in an environment that has a built-in hostility towards small business ventures. And unless this is done, Pakistan will continue to pay social and economic cost of its ever-increasing unemployed youth bulge.
CIPE-Atlas Corps Think Tank LINKS Fellowship brings talented young professionals with strong research backgrounds to shadow researchers and experts at leading U.S. think tanks for six months. Fayyaz Bhidal is part of the Fellowship, serving at the Atlantic Council.