March 2, 1976

In selecting the title of this address, I had in mind above all, the need for greater efficiency in professional management. The more I reflected on this subject, the more it became apparent that the themes which I wished develop were as valid for many of the richer industrial nations as for the developing world, and hold good equally for nationalised industries as for the private sector all over the world. The economic recession from which we are all suffering has at least shown us where the real weaknesses are.

Whether management is operating in the private or the public sector, whether in the field of commerce or social welfare, its first need is a sense of security and stability without which any productive forward planning is difficult if not impossible. The older industrial nations do have an advantage here. Over the years, they have built up a body of law and political and financial institutions which provide relatively secure framework of working rules within which management can operate.

In the developing countries, this institutional framework is of quite recent construction and has, therefore, not yet had time to establish the deep roots which help to create the accepted and consistent working relationship which exists between governments and the business communities in many countries of the western world.

The need to give management an increasing sense of security and continuity is, therefore, a key priority in the developing world. Progress depends entirely on this because research, investment and advanced technologies, and above all the expensive business of training professional management, in turn depend on a degree of profitability over a relatively long period of years.

Again, this is just as true of the public as it is of the private sector. You yourself, Mr. President, have mentioned the Government's positive response in Pakistan in defining as clearly as possible the boundaries between the private and Government sectors. This is certainly very important but management, in its turn, both private and public, must accept a corresponding obligation to the state: the requirement to develop a strong sense of corporate self-discipline, a commitment to the highest business ethics and an overriding duty to serve the nation as a whole.

OVER-DEPENDENCE OF FOREIGN RESOURCES The second major challenge for management is the requirement to balance much needed foreign investment and technology with national interest and priorities. As many countries have found to their cost, over-dependence on foreign expertise and foreign investment can have serious social, economic and military consequences and the solution to these problems is usually very complex.

My own experience in this area stems mainly from the I.P.S. group of companies which we founded some ten years ago and which now operates in seven different countries including, of course, Pakistan. One of I.P.S.'s main functions is to introduce modern technology and modern management techniques to the developing world in a way which is mutually satisfactory to the foreign investors and to the host country. I think we can claim some success in this and the most acceptable formula is usually an international one, example: I.P.S. operates a chain of hotels and safari lodges in Kenya, and this is a striking illustration of partnership between local and foreign interest, each of which involves private as well as para-statal investment supported by loan capital from the International Finance Corporation, a member of the World Bank Group. Most of the local assets are owned by local companies, including East African Airways and the state-owned Kenya Development Corporation. Foreign companies which are also shareholders, like the Inter-Continental Hotel Corporation, Avis Lufthansa, and British Airways contribute capital as well as marketing and other specialized technologies to the overall management structure assembled by I.P.S.

As you probably know, I.P.S. Pakistan, with its wide range of international contracts, is actively planning a similar tourist operation in this country in partnership with P.I.A.

Most developing countries are quickly faced with the choice of planning on a wide economic front rather slowly or in a limited number of specialised fields much more quickly. This is where the limitations of qualified manpower and up-to-date technology are critical.

MANPOWER PROBLEM The manpower problem exists almost anywhere. If there is a brain drain from Pakistan to the Middle East, there is also an outflow from Turkey and Greece to Western Europe and from Europe to North America. The ability to develop and retain first class managers and technicians at all levels is a major challenge. Pakistan is not alone in spending large sums of money to finance university education both at home and overseas, only to find that the successful students acquire a mobility and an international market value which few can afford to pay at home. This dilemma is even more acute in the oil-rich countries where the attempted pace of economic development is unbelievably rapid.

There is no simple or short term solution to the problem. But I suggest that we should try to reward those who do stay behind as much as possible and ensure that the skilled professional manager achieves a social status comparable to this world scarcity value. Of course, this applies as much to the public as to the private sector.

Advanced technology is an even tougher race to run and some degree of specialization is inevitable as no developing country can afford to keep up with the pace of new inventions across the whole spectrum of industry.

It is wrong to assume that by acquiring the latest line in computers for a banking or insurance operation, to take a simple example, that the problem has been solved. Within a few years, the computer is as out of date as the humble ledger clerks it replaced.

Failure to acknowledge these facts - the need to be selective and to recognize that modern technology is constantly changing and thus an on-going commitment - can lead to some expensive miscalculation, not all of which occur in the developing countries.


It remains true, however, that the greatest value of the private sector is usually its adaptability, its flexibility and its motivation - and thus its in-built commercial sense.

By setting standards of quality and by its ability to identify new projects, private initiative is generally better equipped than its Government counterpart to resist stagnation and decline. Management in the private sector can thus become the pace-setter for the public sector. This possibility is being exploited more and more in Europe where, since the war, successive administrations have increasingly tended to nationalise, not entire branches of industry, but simply parts of each sector. In France, for example, the nationalised Renault Car Company competes with Peugeot-Citroen. In Britain, the BBC competes with private independent television companies at both the national and regional level. Similar examples are to be found all over Western Europe.

One could describe this trend as a sort of commercial "detente" although whether it will also lead to peaceful co-existence is still, perhaps, an open question.

Unfortunately, not all private enterprises are efficient of course. A great many of the problems they face today are at least partly of their own making. In Western Europe, several Governments have been compelled, with varying degrees of enthusiasm, to take over big private firms in order to prevent total bankruptcy in key sectors of the economy with consequential heavy unemployment.

In the developing countries, where the private sector generally tends to be under even greater pressures and the base of skilled professional manpower is naturally much smaller, the trend is the same. It is not always a question of ideology, in many cases Governments can see no alternative if the private sector fails to perform.


In that even, the need for efficiency becomes a government problem and when governments move away from pure administration into the tough world of commerce, the problems are often magnified.

It is mainly a question of motivation. However dedicated they are, civil servants find that the nature of their work seldom encourages initiative, so that decisions are taken slowly and checks on performance are very rare.

To motivate efficiency in the public sector is a long and arduous task. It can be done and it almost certainly has to be done in any country with a mixed economy. Once again one only has to look at the recent experience of countries like Italy or Britain to understand the hazards of inefficiency in public enterprises. The fact that this sector often includes the largest industrial units simply increases those risks and the extent of the painful remedies which are ultimately needed to put the situation right.

Indeed only last week in the United Kingdom, a Socialist Chancellor of the Exchequer had the courage to insist that a limit must be set to public expenditure so that additional funds could be made available for much needed investment in private industry. This kind of re-assessment is unlikely to be confined to the British. If the current world economic recession continues much longer, many other countries in the industrialized as well as in the developing world will be faced with a similar dilemma.

The old saying that man's material progress can be achieved by a judicious application of both the carrot and the stick has a great deal of truth in it. It could be argued today that efficient management in many of the world's mixed economies has reached a point where the public sector could benefit from a little more stick and where private initiative would readily respond to a few more carrots.

That, however is not by a long way, the end of the story. If efficiency in the private sector demands a greater sense of long-term security with appropriate incentives, if social activities such as health and education, as well as industry in the public sector, need to be more strongly motivated in terms of initiative and accountability, there is a corresponding and over-riding duty for both.

Most developing countries have inherited, from a colonial past, very wide divisions between the rich and the poor. Nearly all independent Governments are trying to narrow that gap and to give the mass of working people a sense of social justice. Few should question this policy so long as it is applied consistently, with a full understanding of its cost consequences, and that the working people accept that with their improvement comes additional responsibility for the well-being and progress of the country at large. The only financial base on which such policies can exist is the efficient production of goods and services in the public and private sectors alike.

Thank You

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