ishrat husain : the perils of higher skill shortages for pakistana€™s economy what can we do about it? chief guest address by mr ishrat husain, governor of the state bank of pakistan, at the prize distribution ceremony of the institute of bankers, karachi, 26 november 2005. * * * it is highly paradoxical that in a developing country such as pakistan, we are experiencing serious skill shortages and, at the same time, high rates of open and under employment. a lot has already been said about the causes of the mismatch between the skills required by the economy and the skills generated by the educational institutions. in this paper, i am also not going to focus on technical and vocational skills such as carpenters, masons, electricians, plumbers, automobile, air conditioning, refrigeration mechanics, medical technicians, nurses, foremen, etc. but mostly on higher skills such as needed by the i. t. and telecommunications industry, aviation industry, financial sector, accountancy, engineering goods industry, infrastructure industries, bio - medical sciences and bio - medical engineering, media industry, etc. a box, containing my assessment of where the shortages and surpluses are, is presented for provoking further refinement and discussions. ( box i ). the basic thesis of this paper is that in absence of an integrated model of skill formation, upgradation and maintenance, the adhoc and piecemeal approaches will remain unproductive and inadequate. it is true that the start - up costs and time involved in getting this integrated model up and going are high but we have already wasted so much time and energy that we are lagging behind other countries. moreover, this proposed model has been tested and applied in case of the state bank of pakistan ( sbp ). we should, therefore, adopt a bootstraps approach and lay solid foundations for reliable flows of high quality skilled manpower responsive to the changing needs of the economy. the pipeline we have constructed in the state bank in the last six years has already produced 400 out of 800 professional staff easing the shortages of skills in the central banking segment. these young men and women, i am very proud to say, are in heavy demand both within and outside the country. from a situation that we were stuck with people who could not be used anywhere now there is a high degree of mobility and the sbp professionals recruited and trained in the recent years are commanding premiums in

of responsibilities and inputs. the starting stage is the quality and quantity of student intake into our universities, professional colleges and institutes, along with strong accreditation bodies. in pakistan, we all have become familiar, with the passage of time, as to which institutions are the breeding grounds for quality raw materials of skills for various industries. the problem at this stage is that the numbers being produced from the quality institutions are totally inadequate in relation to the demand. for example, the banking industry is now moving to second tier educational institutions for sourcing their recruitment. this may give a false sense of complacency to these institutions that as their graduates are finding jobs in the market they have attained the required standards of acceptance. nothing could be far from the truth. the banking institutions have no other alternative but to scrape at the bottom of the barrel to bring people on board to meet their rapidly growing demands. at this stage, the universities should work closely with the industry associations such as pakistan banks association to revise the curriculum, attract qualified faculty and instructional staff, and modify the testing and examination methodology to produce the required number and quality of graduates. there should be no compromises and short cuts by the universities to meet this upsurge in demand. linkages should be established to train the trainers at world class institutes of learning. this will have a multiplier effect in producing both the numbers and quality. the industry associations or individual large firms can help upgrade the quality of our universities and institutes by setting up endowed chairs and attracting world class scholars, establishing competitive research grants for exploring practical issues of interest to them, funding scholarships for the best and brightest, who cannot otherwise afford to study at the top private universities and provide travel grants to teachers to attend international conferences, symposia, etc. these initiatives will not cost very much in terms of actual outlays but produce highly desirable results in enhancing the quality of our educational institutions and promoting scientific and technological disciplines needed by the economy. the second stage is the recruitment process and post - induction period after the professionals have entered the industry. the recruitment should be based on merit through a highly competitive process. the written test should be more a test of applying knowledge and techniques to solving problems rather than reproduction of memorized material. the interviews should be structured to find out the interpersonal communication skills, suitability to work in a team environment and the values and attitudes. at this post induction stage, the responsibility shifts from individual company to the industry associations which should develop, ce