Statistically significant is the fact that aviation has a positive correlation with economic growth of nations. Developing countries, and most economies of the world in general, have widely observed that aviation is a business enabler and a global market share enhancer for many businesses across the globe. Indeed, aviation is a catalyst for socio-economic growth of nations.
Notwithstanding this logically understandable and intuitive statement, it is interesting to note that the aviation policy of most developing countries undervalue the potential socio-economic gains that the nation can accrue from a forward-looking strategy and investment in aviation infrastructure and aviation related Human Resource development.
Apt, visionary, and forward-looking policies and strategies at national level can lead to a path that can change the destiny of nations. History is replete with such strategic moves initiated by national leaders of vision. Over the years, many countries have re-modeled their economies and boosted their growth trajectories by laying more emphasis on a specific industry or a few industries. China is an unprecedented example of economic growth where emphasis on education and infrastructure spending are reaping benefits for the country.
Similarly, Singapore�s growth is yet another glaring example to reckon. The country�s first Prime Minister, Lee Kuan Yew is credited for transforming Singapore into a giant business hub. One of the major steps taken by Singapore�s leader was to lay unprecedented emphasis on the aviation industry. As per StraitsTimes, Singapore, the Aviation could be worth $88b to Singapore�s economy in 20 years. Singapore has displayed phenomenal growth that portends leaving all regional countries behind in economic growth as indeed its Changi airport and Singapore Airlines become an epitome of success.
As can be seen in the Table 1 below, according to IATA 2015 report, Singapore leads all other countries in the region and excels in the projections in terms of passenger traffic, employment rate (jobs) and contribution to GDP.
Projections up to 2035 are tabulated above and Singapore�s growth in passengers is anticipated to grow by 216%, while jobs and contribution to GDP are expected to double.
The benefits go beyond the economic footprint of aviation. The global connectivity that air transport facilitates has a positive impact that enhances overall productivity and economic growth in the long run. Like Singapore, the leaders of United Arab Emirates and their strategic plan to stay focused on promoting and enhancing aviation has visibly impacted socio-economic growth in the country.
Education & Economic Growth Relationship
Specialized education is critical to the growth of the specialized industry. Growth of an in-demand industry yields economic growth at the regional and national level. To paraphrase Gautam Mukerjee in his book Economics of Globalization (2017) where he quotes Adam Smith�s logic discussed in his famous book Wealth of Nations (1776), mentioning the impeccable logic that prosperity of a nation depends on trade, and both are intimately tied to: a) Division of labor and productivity, and b) Specialization and efficiency. To relate this logic to Aviation, it can be stated that Aviation domain is a specialization and division of labor and productivity in this specialized field can only be attained through education, training, and human resource development. Therefore, to reword Adam Smith�s concept, the prosperity of a nation is, in today�s terms, tied to Aviation, which is indisputably one of the fastest growing industries.
Soft Power of Aviation
In an increasingly complex and interdependent world, national leaders and strategic planners are faced with cognitive dissonance to adapt a path or the other to best achieve their relatively short- term political and socio-economic objectives or achieve long-term strategic goals going way beyond their anticipated term of office.
In such a dynamic but hazy and convoluted geo-political environment, reliance on military might and economic strength alone is not enough. The hard power (i.e., military), must also be augmented with soft power. According to Professor Joseph Nye, who introduced the concept of �soft power� in late 1980s, states: �Power with others is more effective than power over others.� Strategy consultant on soft power, Jonathan McClory beautifully states: �While it may not seem immediately obvious, aviation is a crucial source of soft power for nations. Well-run national carriers can lift global perceptions of their home country, but more broadly, aviation is a great facilitator of soft power, closing distances and connecting people, cultures, companies, ideas, innovation, and opportunity.� Thus, aviation as a potent instrument of soft power that should be accorded due importance to exploit aviation�s potential soft power. Turkey attracts one of the highest numbers of annual visitors, drawing them in with ancient architecture, stunning beaches, and a magically blended international experience. As Turkish Airlines further ramps up its international branding efforts, Istanbul’s role as a global travel hub is a boost to Turkish soft power. In recent times, Turkey has shown an exemplary growth in aviation that has resulted not only in substantial soft power but has also acquired reckonable economic prowess.
Aviation�s Contribution to Jobs & GDP
Globally, aviation�s contribution to employment and GDP as per Oxford Economics� prognosis (post COVID-19) by 2024 is demonstrated by the illustration below.
Aviation�s Global Growth and Growth in Asia Pacific
In 2019, aviation statistics show that globally about 12.5 million passengers flew every day in over 128 thousand flights (see Table 2), and in the Asia-Pacific region (where Pakistan is also located, as per delineation by ATAG) the stats are is 33% of global figures (highest in the world). The figures depict the volume, the depth, the width, and the breadth of the aviation industry.
Travel Tourism Competitive Index (TTCI)
The Travel & Tourism Competitiveness Index (TTCI) measures the set of factors and policies that enable sustainable development of the Travel & Tourism sector in a country. The index is expressed on a 1 (worst) to 7 (best) scale across 90 indicators and assesses 140 economies of the world.
In 2019, the Travel & Tourism Competitive Index (TTCI) of Singapore was #6 (globally out of 140 countries) in comparison with Pakistan which was #121. Both countries are comparable in many ways but one that has given priority and emphasis on Aviation while the other has not done so and has lagged. Emphasis on Air Transport infrastructure in Singapore and way below average of the same in Pakistan is a visible sign of why Pakistan is ranked so low while Singapore enjoys a leading position in the Asia-Pacific region.
Pakistan and Singapore: Comparative Study of Growth Patterns in Aviation and Economy
If passengers carried is proxied as a benchmark for aviation growth, in 1970, Singapore had only 0.75 million passengers enplaned, while Pakistan had almost double the traffic (1.34 million passengers) in the same year. In 45 years (up until 2015), Singapore, by paying serious attention and importance to aviation, grew by 44 times its 1970 level, a growth unprecedented in the region. In comparison, in the same time frame, Pakistan grew by only six times its volume in 45 years. Table 3 gives the extracted data from ICAO that reveals that the comparison of growth profile of Singapore is 7 times that of Pakistan. This is how aviation�s infrastructure development by Singapore contributed to growth of its nation.
Also, interesting to note is the data extracted from World Bank (Table 4), wherein the GDP per capita of the two countries also grew with the same ratio during the same period, i.e., 7:1 in favor of Singapore.
Aviation, Education & National Economy
Using appropriate econometric techniques other researchers have conclusively determined that air-transport impacts national economy, and the causality is bi-directional between the two variables. Panel Data Granger tests as well as empirical studies and analyses confirm this relationship. Many authors including Percoco (2010) have sequentially categorized the effects of airport (and therefore, air-transport or aviation) as direct, indirect, induced, and catalytic impacts. A modified schematic Flow Chart representation is given below:
Education, training and human resource development through dedicated and specialized institutions, schools, and universities (for tertiary specialized education) are a pre-requisite to aviation industry�s growth. Summarized in Illustration 3 below, is a depiction of how education leads to Human Resource engagement that leads to jobs in various aviation entities.
Education, training and grooming as per industry demand and prognosis is essential for gainful engagement of skilled and educated workforce. Resultantly, the aviation industry, the academia, the engaged individuals, and the national economy shall be the prime beneficiaries of growth in aviation.
Catching-up with Agile and Innovative Education Strategy and Pedagogy
While there are some limitations, the use of air-transportation, specifically for longer distances, is faster, cheaper, flexible, reliable, and safer than other modes of transportation. And having established that air-transportation has a causal relationship with economic growth it is also pertinent to establish as to what needs to be accomplished to foster aviation. The first and foremost step in this direction is specialized education and training focused to groom and develop Human Resource that may be gainfully employed in the aviation industry.
Notwithstanding this, educational and training systems, have remained mostly static and under- invested for decades, and are largely inadequate for catering the needs and demands of emerging markets. We must, therefore, rethink the way talent is developed and deployed in the world of aviation. As per World Economic Forum�s report, this will require breaking down old silos between education systems and labor markets, adopt more agile approaches to regulation, new forms of public-private collaboration, and new norms and values must be inculcated.
The air-transportation system development, including infrastructure as well as policies is the responsibility of the government. The fact is that Human Resource that is required for managing and operating the air-transportation system are also required to be trained, groomed, and educated to meet the growing industry demand. Again, government�s role in establishing and promoting institutions and universities that cater for such specialized education is warranted. Failing this important emphasis on the aspect of specialized education, the entire system will be built on a framework that may not be sustainable in the long run.
Aviation impacts economy by providing employment to people, enabling access to markets, enhancing trade, attracting capital, adding innovations in business and technologies, fostering labor supply and skills enhancement, and above all opening opportunities for entrepreneurs. The economy, on the other hand, reciprocally provides capital injection and generates demand for travel of passengers and freight (John Hanson, et al, MIT, 2012). For Pakistan, skilled training, and education (from primary and secondary to tertiary levels) is required to catch up after falling behind in the race by regional and global aviation industry players. At this stage, the best way is to team up with recognized and reputable players in the industry, including top aviation universities, to acquire internationally acceptable educational standards and best practices. Use of technology and innovative techniques to hasten the learning process is now necessary for Pakistan. Such a move can only be successful if government�s acquiescence of the concept, support, policy implementation and policy buy-in by stake holders is forthcoming.
Impact of COVID-19 on Aviation & Global Economy
Never has the aviation industry ever suffered such a steep nose-dive. While the loss of 1.6 million lives (up until mid-Dec. 2020, as reported by WHO) is disturbing and unnerving for the world community, the ensuing economic loss is adversely impacting nations across the globe, and that is hurting too. With COVID-19 vaccine in place, hopefully soon for all, a major fear of flying and contracting the virus shall be diminished to a large extent.
Revival of the airline industry is in sight, albeit some experts anticipate slower recovery. Notwithstanding the back-to-normal time frame, it is in the interest of airlines, businesses, traders, travelers and indeed the nations to revive the aviation business as soon as plausible as it is positively correlated with personal, business, and national economies.
Considering the above, it is time for all stakeholders (governments, businesses, travelers, traders, aviation professionals, aspirant aviators, prospective aviation managers and aviation related professionals) to gear up and get prepared to bounce back to recoup and recover. It is time to build speed and nimbly and cautiously pull-back from the post stall nose-dive after the COVID-19�s unprecedented gusting winds of disaster.
Conclusion & Recommendations for Pakistan
Potential to Grow: Despite the general pessimistic perception of near failed nation and the fact that Pakistan is lagging in Aviation and TTCI, IMF�s World Economic Outlook indicates that Pakistan stands out amongst oil importing comparative countries in terms of Real GDP and other prognostic economic indicators. Promoting aviation (with emphasis on education, motivation, grooming and training the Human Resource) with perseverance and dedication is the way forward for success. Albeit it is all history now, Pakistan once had a track record of superb performance (regionally and globally) in the aviation domain. It is not impossible to regain its lost stature. Political will, strategic vision, policy formulation and implementation, and crusader-like approach to recuperate and win back is all that may be required to regain the desired flight path to success. Commencing with awareness and education, it is an uphill task, but it is doable.
Soft Power: The soft power of aviation cannot be over emphasized for growth and success in today�s complex geo-political environment. Aviation plays a major role in gearing up to gain the invisible soft power. In fact, the dominance of hierarchical, state-to-state classical diplomacy is fading away as networks increasingly determine the direction of global events. Aviation develops physical, cultural, psycho-socio-political, business, and economic networks that form the backbone of soft power of nations; and more importantly, developing nations.
Economic Rates of Return from Aviation Investment: Often overlooked is the Economic Rate of Return from Aviation Investment. Evident from an extract taken from an IATA�s analysis report (IATA Briefing 8), the Annual Economic Rate of Return on Investment has been as high as 59%.
According to ATAG (July 2016, Sep 2020): �Unlike other transport modes, the air transport industry pays for a vast majority of its own infrastructure costs (runways, airport terminals, air traffic control), rather than being financed through taxation and public investment or subsidy (as is typically the case for road and railways).� It is surmised that governments and leaders, particularly in developing economies, must plan and invest in the infrastructure and other development areas like educational and training centers/universities/institutions that are dedicated for education and training in aviation and aerospace domains.
Bridging the Gap between Academia and Industry: It is critical and essential that the academia and the industry within the aviation domain must come closer. Research & Development must form a core component of this industry-academia relationship. To attain internationally accepted standards and adopt best practices it is incumbent on institutions to collaborate with globally recognized, reputable and accredited aviation and aerospace educational institutions and universities.
Government Intervention: The above aspects appear to be the most plausible macro level factors that are hindrances to the potential of growth of aviation, specifically in Pakistan. Growth in aviation requires state�s attention, and foremost phase is to establish and support high quality institutions and universities dedicated for enhancing aviation, aerospace, and related disciplines.
Similarly, for infrastructure development and policy implementation, government intervention is a mandatory ingredient for success.
Apt education, training, and grooming is quintessential for the success of aviation, and success of aviation is positively correlated to the economic growth and success of nations.
ABOUT THE AUTHOR Dr. Wali N. Mughni represents his alma mater Embry-Riddle Aeronautical University, USA, in the region and co-conducts several virtual classroom sessions on aviation management related subjects. He is a Fellow of the Royal Aeronautical Society, UK. He is also the Dean and Director of the Aviation Institute of Management. He may be reached at [email protected]
