According to the Higher education Commission of Pakistan (HEC), 4000 PHDs in Pakistan are jobless. It is an alarming indicator as colossal time and money has been invested in preparing these PHDs. This unemployment refers to a significant skill gap in Pakistan as firms seek suitable persons and persons seek relevant jobs. National Expert Training Program Institute claims that Pakistan, with the sixth largest population, with a large chunk of the young population, urgently needs to equip its population with updated skills. Unfortunately, 80% of the labor force has poor updated skills. This shortage of skills is a significant hindrance to inviting FDI and kick-starting economic growth processes in Pakistan. Skills Gap Report 2022 of the Pakistan Software Houses Association for IT & ITES has similar findings. The insufficient level of skill development is linked to poor education planning and wrong investment priorities within the education sector of Pakistan. It is also related to resource allocation within the universities in Pakistan. The economy needs soft and hard skills, and we have a supply of MPhils and PHDs, and the market has sent clear signals now. Therefore, the education sector of Pakistan needs to adjust its supply according to the market’s needs by changing its investment priorities. However, the million-dollar question is whether the education sector will follow market signals or be driven by manipulated HEC and government policies. In 2002 when the university grant commission (UGC) was transformed into HEC, it was considered that the most critical problem with the education sector of Pakistan was the lack of PHDs, Mphil, and research activities. As these activities are kick-started, they will increase the economy’s productivity. The Ph.D. faculty of the universities will commercialize their research and earn for the university and the economy. In addition, they will generate consultancy income for the universities. However, the second argument was also coined at the same time: Pakistan was a least developed low-income country, and its economy would not be at the stage of development to absorb research and knowledge as an input to the production process. Instead, it requires skills: soft and hard, to spur the process of economic growth. As the economy grows and reaches the advanced stages of economic development, it will use knowledge as input. The literature about the economics of education also indicates that the rate of return on educational investment in primary and secondary education is high in low-income countries than the return on investment in higher education. Therefore, the efficient allocation of time and money within the education sector demands that developing countries like Pakistan focus more on primary and secondary education. Moreover, their universities should focus more on updating Bs and Ms. Programs to prepare an updated skilled labor force that is the prime determinant of much-needed foreign direct investment (FDI) for these countries. After 22 years of billions of investment in HEC policies, we find more evidence in favor of the second argument in Pakistan. Universities in Pakistan have yet to produce research that can be commercialized and earn income for the universities and the country. Universities are still dependent on students’ fees and government grants. Faculty only have produced articles and heaps of thesis of MPhil and PhDs whose commercial value is questionable. Moreover, billions of rupees were paid for publishing research in foreign journals, whose impact has yet to be seen even after 20 years, nor is it expected in the next 20 years to help in the country’s socio-economic growth. The opportunity cost of the resources invested in these activities is very high. These resources could have been invested in skill development that is critically needed in the country. The Chinese are using their labor force to carry out CPAC projects because they need help finding the required skills from Pakistan. Many start-ups need help finding the necessary skill set in Pakistan to carry out their plans. More investment in PHDs and Mphils and useless research articles while ignoring the upgradation of secondary education: Bs and MS programs indicate the misallocation of scarce resources within the education sector, especially in universities. This misallocation has contributed to low productivity and low export in the country. There is an urgent need to redirect scarce resources within the education sector, especially in higher education. The incentive in universities: promotion and other fringe benefits should be linked to teachers’ performance in introducing and teaching new markets bases courses and programs. These incentives are skewed to produce an unproductive thesis and articles for the movement. The writer is Chairman, Economics Department, Islamia University of Bahawalpur.