Posted by : Ahsan Khan Thursday, 22 December 2011


       

A.      ECONOMIC CHARACTERISTICS

Following are the economic characteristics of developing countries:
1- General Poverty and Low Living Standard
Poverty cannot be described, it can only be felt. The most of the less developed countries (LDC) are facing the major problem of general as well as absolute poverty and low standard of living. Most of the people in developing nations are ill-fed, ill-housed, ill-clothed and ill-literate. In LDCs almost 1/3 population is much poor. But in Pakistan, 21.0 % population is living below poverty.
2- Burden of Internal and External Debts
            Under developed countries (UDC) are loans and grants receiving nations. Most of the developing countries of the world are depending on foreign economic loans. An amount of foreign loans is increasing as the years pass. Their foreign trade and political structure is also dependent on the guidance of foreigners. The outstanding total public debts are Rs. 8160 million (55.5 % of GDP) and the value of external debts and liabilities is $ 53.9 billion and its services charges are $ 5369 million in 2009-10 in Pakistan.
3- Low Per Capita Income
            Due to low national income and high population growth rate, per capita income in developing countries is very low. At constant prices (Base Year 1959-60) per capita income of Pakistan was Rs. 985 and according to the Economic Survey of Pakistan 2009-10 per capita income of Pakistan is $ 1095.
4- Over Dependence on Agriculture
            68% Population in Pakistan is living in 46,894 villages. Backward agriculture is the major occupation of the population. Agriculture sector is backward due to old and traditional methods of cultivation, in-efficient farmers, lack of credit facilities; un-organized agriculture market etc. 66.7% population is directly or indirectly depending on agriculture sector in Pakistan. It contributes to GDP 21.5 % while in advanced nations it is less than 10 %. It employed 45.7 % of labour force while it is less than 5 % in developed countries.
5- Unemployment
            An outstanding problem of developing countries is their high rate of un-employment, under-employment and disguised-unemployment. More than 2.93 million people are unemployed in Pakistan. There is 16 % underemployed and 20 % disguised unemployed of total labour force. Unemployment rate is 5.5 %; it is mainly due to high population growth rate, which is 2.05 %.
6- Backward Industrial Sector
            Backward industrial sector is an additional feature of under developed countries. Industrial sector of Pakistani economy is backward since independence. Pakistan got only 34 (3.7 % of total industrial units) industrial units out of 921 units in sub-continent. Small and backward industrial sector is based on:
  1. Low level of capital formation
  2. Low level of technology
  3. Low level of training and education
  4. Over dependence on agriculture sector
13 % labour force is attached with industrial sector in Pakistan. Its share to GDP is 25.2 % and to exports is about 60 %.
7- Low level of Productivity
            The productivity level is very low in under developed countries as compared to developed countries. Low level of productivity is due to economic backwardness of people, lack of skill, illiteracy and ill-training. Value of annual productivity of labour is about $ 100 while it is more than $ 2500 in advanced nations in Pakistan.
8- Deficit Balance of Payment
            To make economic development, third world countries have to import some finished and capital goods, on the other hand they have no products to export but raw material. In case of Pakistan, during July-March, its exports were $ 14.162 billion and imports were $ 25.107 billion. So, its deficit balance of payment was $ 10.945 billion in 2009-10.
9- Dualistic Economy
            Dualistic economy refers to the existence of advanced & modern sectors with traditional & backward sectors. Pakistani economy is also a dualistic economy as other developing countries on the following grounds:
  1. Co-existence of modern and traditional methods of production in urban and rural areas.
  2. Co-existence of wealthy, highly educated class with a large number of illiterate poor classes.
  3. Co-existence of very high living standard with very low living standard.

10- Deficiency of Capital
            Shortage of capital is another serious problem of poor nations. Lack of capital leads to low per capita income, less saving and short investment. Domestic saving is 9.9 % of GDP and total investment is 16.6% of GDP in Pakistan. Rate of capital accumulation is very low as 5%. On the other hand, capital output ratio (COR) is very high which is not desirable for economic development.
11- In-appropriate Use of Natural Resources
            Mostly there is shortage of natural resources in developing nations and this is also a cause of their economic backwardness. In various poor countries natural resources are available but they remain un-utilized, under-utilized or mis-utilized due to capital shortage, less efficiency of labour, lack of skill and knowledge, backward state of technology and limited home market. Natural resources contribute to the GDP about 1%.
12- Market Imperfection
            In the most of developing nations, market is not perfect according to the market conditions, rules and regulations. There exist monopolies, mis-leading information, immobility of factors; hoarding and smuggling etc. that cause the market to remain imperfect.
13- Un-satisfactory Foreign Trade
            Due to backwardness, developing countries have to export raw material because the quality of their products is not according to international standard ISO etc. Lower developing nations have to import finished and capital goods. Imports of Pakistan are $ 25.107 billion and exports are $ 14.162 billion that cause into unfavourable balance of payment.
14- Vicious Circle of Poverty
            According to vicious circle of poverty, less developed nations are trapped by their own poverty. Vicious circle of poverty is also applied in case of Pakistani economy. Due to poverty, national income of Pakistan is low which causes low saving and low investment. So, rate of capital formation is very low results in “a country is poor because it is poor”.
15- Inflation
            High rate of inflation in poor nations causes economic backwardness. Due to high level of price, purchasing power and saving of the consumers tend to decrease. Rate of inflation (CPI) is 13.3 % in 2009-10 in Pakistan.

B.  DEMOGRAPHIC CHARACTERISTICS

Following are the demographic characteristics of developing countries:
16- Backward Population Explosion
            Another common feature of lower developing nations is population pressure due to high growth rate and reduction in death rate. Population of the Pakistan is 169.94 million with the rapid growth rate of 2.05 % and death rate 0.76 % in 2009-10. In the list of the most populous nations, Pakistan is at 6th number. In these countries basic needs like food, clothing, housing, education, sanitations and health facilities are not available for the huge portion of population.
17- Poor Health and Diseases
            M. P. Todaro in his “Economic Development” states, “Many people in developing countries fight a constant battle against malnutrition, diseases and ill health”. Average life expectancy in Pakistan is 64.15 year against 78 years in developed countries. One Doctor is for 1183 persons and one Nurse is for 2369 persons, number of hospitals is 968 and one hospital bed is available for 1530 persons. The total expenditure on health sector is only 0.55 % of the GDP.
18- Pollution
            There is too much pollution in under developed countries. On the one side huge existing population is not provided basic facilities of life, like sanitation, clean water, infrastructure etc. But on the other side due to rapid population growth, industrialization and transportation air, water and earth pollution is increasing. Industries are causing pollution because of non-availability of treatment plants. Pollution is harmful to people’s health, leads to reduction in efficiency of labour. Number of continuous air pollution monitoring stations is only 7 in Pakistan.
19- Brain Drain
            An outflow of the best, brightest and talented student from poor nations to rich nations is called brain drain. In the backward countries, there is less reward for the talent, which causes an outflow of best brain. In less developed countries, reward is not paid in accordance with the capability, skill and efficiency.
20- Inadequate Infrastructure
            To enhance the process of economic development, proper infrastructure is needed which is not available in poor economies. In these nations; roads, transport, telecommunications, sanitation, health and education facilities are not at their best level. Government has reserved an amount of Rs. 133 billion to develop the infrastructure.

C.  CULTURAL AND POLITICAL CHARACTERISTICS

Following are the cultural and political characteristics of developing countries:
21- High Degree of Illiteracy
            Illiteracy rate is very high in poor countries while it is almost zero in rich countries. There is lack of technical education and training centers, which is necessary for economic growth and development. Literacy rate in Pakistan is 57 % in 2009-10. Expenditure on education sector is just 2.0 % of GDP.
22- Low Level of Organization
            In third world nations there is absence of developed minded leadership in economic activities. Decision making power of entrepreneur is very low due to illiteracy, less training and backward techniques.
23- Low Self-esteem
            According to M. P. Todaro, “the under developed country is that which has low levels of living, (Absolute poverty, poor health, poor education and other social services), low self esteem (Low respect, honour, dignity) and limited freedom (Freedom from external influence and dominance, freedom of choice etc.)” All these three factors cause and affect the process of development.
24- Un-productive Expenditures
            Due to demonstration action in poor economies, population mostly copies the styles of population of developed nations. Their consumption activities not only move around their income but also depend upon the relatives, friends and locality. They spend more on birth, death, marriages and various other ceremonies etc.
25- Political Instability
            There is political instability in the most of the developing countries. There are a lot of clashes between government and the opposition that is a cause to reduction in domestic as well as foreign investment. Political instability keeps low the rate of economic development.
26- Influence of Feudal Lords
            In lower developed nations, the poor class is under the influence of feudal lords and tribal heads. The feudal lords want to keep the people backward and do not appreciate the development of the poor. About 50.8% poor borrow from landlords and 57.4 % poor are working for feudal lords without wages in Pakistan.
27- Unproductive Use of Funds
            In developing countries like Pakistan due to socio-economic and administrative reasons the unproductive expenditures are raising day by day. During the year 2009-10, Rs. 343 billion were spent for defence. About 75 % of the budget is spent on defence, administration, repayments of loan and interest charges in Pakistan.
28- Govt. Control by Wealthy Persons
            In poor countries, wealthy persons, landlords and elite class not only control the government but also they have full control over all the major sectors of the economy. This rich class is not interested to solve the problems of the poor for their welfare but they make government policies for their own improvement.

29- Frequent Changes in Fiscal Policy
            Fiscal policy is not stable in developing countries. Government has to change the fiscal policy according to the will of its own people. Industrialists are the main controller of the government and they adjust the fiscal policy in accordance with their own benefits.
30- Violation of Law and Order
Law and order conditions are at their poor stage in Pakistan like other developing countries. A huge portion of saving of people is wasted in costly and lengthy legal process. As in case of Iftikhar Muhammad Chohdery (CJP), he himself has to wait for justices for a long period.

D.  TECHNOLOGICAL AND MISCELLANEOUS CHARACTERISTICS

Following are the technological and miscellaneous characteristics of developing countries:
31- Backward State of Technology
            Use of modern techniques of production is not adopted in developing countries. It may cause further unemployment. Due to shortage of capital, lack of skill and training, high cost of production and lack of foreign exchange reserves, use of advanced technology is not possible. Backward state of technology is results in low production, high cost and wastage of time.
32- Social Aspects
            Under developed countries have also some factors such as joint family system, caste system, cultural and religious views, beliefs and values that badly affect their economic development.  32.17 % population is working population and remaining 67.83 % population is depending on them in Pakistan.
33- Un-fair Wealth and Income Distribution
            There are not only regional inequalities in developing countries but also wealth and income inequalities. There is unfair wealth and income distribution in less developed nation. 20 % extremely rich population has 50.02 % of national resources, while 20 % poorest population has just 6.37 % of national resources in Pakistan. The difference between rich and poor is increasing day by day.
34- Lack of Experts and Skilled Persons
            Due to illiteracy and lack of training institutes, people have to move abroad for advanced study. Due to low remuneration and less self-esteem, they adjust them in foreign countries. So, there is scarcity of experts, skilled and trained staff that causes the poor nation to remain backward. 
35- Dependence on External Resources
            The international trade, political activities and other economic activities are under the influence of other advanced countries in less developing countries. Their development plans are financed by the loan giving countries; these plans are made to serve the interests of foreign countries. So, poor nations are loans and grants receiving nations.
Conclusion:
            We conclude that all above characteristics are unfavourable for the developing economies. These features are obstacles in way of economic development. All these features are cause of low rate of capital formation, poverty and creation of vicious circle of poverty.                    

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