Posted by : Ahsan Khan Thursday, 22 December 2011


Economic growth and development is not the result of any one factor. These depend upon various factors like, natural resources, stock of capital, manpower, technology, attitude of the people and political condition in the economy.

PRE-REQUISITES OF ECONOMIC DEVELOPMENT:
Pre-requisites are those conditions and factors, which are necessary for economic growth & development. Factors of development may be classified into two types:
I-                    Economic Factors and
II-                   Non-economic Factors

I-                    ECONOMIC FACTORS

Economic factors play very important role in the economic development of a country. Some major factors of economic developments are as follow:
    1. Availability of Natural Resources
Natural resources are the material source of wealth, such as mineral deposits, climate, forest, fisheries and fresh water that occur in a natural state and have economic value. Accordingly, natural resources are available on the surface, below the level of earth, in the air and in ocean. If a country has more natural resources then there is more possibility of development. Availability of natural resources is a necessary but not a sufficient condition for economic growth & development.
 Ø      Role of Natural Resources:
a)      More natural resources mean more possibility of increase in national income.
b)      More natural resources lead to more possibility of using labour force.
c)      More natural resources refer more possibility of attaining self-sufficiency.
d)      More natural resources cause more possibility of increase in per capita income.
Ø      Situation in Pakistan:
Natural resources are available in the country but these are not utilized optimally. Contribution of natural resources to GDP is just 0.8 %. Forest area of Pakistan is 4.21 % of its total area. Land area for wild life is 11.3 %.
    1. Capital Formation/Accumulation
Capital formation refers to the creation of capital. It is an increase in the stock of existing capital. Capital formation is an increasing function of saving. Accordingly more saving leads to more capital formation and vice versa.
Ø      Role of Capital Accumulation:
a)      Capital formation leads to reduction in poverty.
b)      Capital formation results in more employment.
c)      Due to capital formation there is growth and development of economy.
d)      Accumulation of capital caused to correct the balance of payment.
Ø      Sources of Capital Accumulation:
Sources of capital formation includes:
a)      Internal resources
b)      External resources
Ø      Capital Formation in Pakistan:
Rate of capital formation is just 5 % in Pakistan, while it should be at least 20 % to make development. Low capital formation rate is due to low investment, which is 16.6 % of GDP and low domestic saving which only 9.9 % of GDP.
    1. Manpower or Efficient Labour
Manpower or labour means physical or mental effort or activity directed toward the production of goods and services. It is an important factor of production. According to classical economists, labour is the only variable factor of production. If in a country there is proper manpower planning and labour is efficient, literate and trained then there is more possibility of economic development.
Ø      Labour Situation in Pakistan:
Labour force is 53.82 million of the total population in Pakistan. Annual value of productivity of labour in Pakistan is just $ 100 and it is $2500 in developed countries. Rate of unemployment is 5.5 %.

    1. Energy and Power Resources
Power resources include coal, gas, oil and electricity etc. Today without use of power resources economic development is impossible. Energy and power resources play very important role in the economic development of a country.
Ø      Situation in Pakistan:
The government has provided a subsidy of Rs. 5.549 billion in March 2007 to WAPDA. The World Bank and the Asian Development Bank have agreed to provide increased funding of $ 4.0 billion for the construction of Diamer-Bhasha Dam estimated tentatively to cost $ 6.5 billion. Growth rate of electricity and gas sector is 0.4 %. Increase in the production of Oil and Gas daily is 1.7 % and 1.3 % respectively.
    1. Transport and Communication
Transport and communication is also an important sector of an economy. Transport includes railways, road, air and sea transport. On the other hand, communication includes postal, mobile, telephone, television and radio etc. Advanced means of transport and communication increase the internal and external trade that leads to economic development.
Ø      Position in Pakistan:
At present total length of roads is 2,59,618 kilometers and total number of registered motor vehicles till March 2010 is 67,57,315. More than 91.4 million population is using mobile phones. The telecommunication sector has attracted an investment of $ 716 million over the last few years.
    1. Education and Training
In advanced countries education and training facilities are available in fully advanced form. But in developing countries high rate of illiteracy and low level of training is a major problem of economic development.
Ø      In case of Pakistan:
Education and training situation in Pakistan is at its low stage. There is shortage of training institutions and literacy rate is only 57 %. The government has decided to raise the public-private investment in the educational sector from the present level of 2.0 % of GDP to a level of 5% of GDP in 2008-09.

II-   NON-ECONOMIC FACTORS

 A- SOCIO-CULTURE FACTORS:

 7.      Absence of Joint Family System
Absence of joint family system is necessary for the economic development. In presence of joint family system, all the members of a family do not take an active part in the economic activities of economy. 32.17 % population is engaged in economic activates in Pakistan and remaining 67.83 % is depending upon them.

8.      Caste-Ridden Society
People in developing countries have strict attachment with the occupations of their castes. Adoption of jobs only with accordance of caste is the status symbol.
9.      Social Behaviour
Social attitude of backward population in developing countries is not desirable. People give preference to fortune instead to work-hard. They have no mind to develop and to improve their living standard.
10.  Control the Customs and Traditions
In developing countries like Pakistan, people have to spend a large amount of their income to maintain the customs and traditions.  A huge proportion of income is used at the time of death, birth, marriages and other circumstance.

 B- POLITICAL FACTORS:

11.  Stability in Govt. Policies
Stable government and stability in the policies of government is also a major factor of economic progress. Stability causes more investment and rapid growth and development of an economy. In most of the developing countries like Pakistan, political situation is not satisfactory.
12.  Law and Order Conditions
Better implementation of law and order is compulsory for the development of economy. Pakistan is a strange country where the Chief Justice (Iftikhar Muhammad Chohdery) was crying for justice and Chief of Army Staff (General Pervaiz Musharf) was depending on security.
13.  Democratic Government
Democratic government is another requirement of economic development. In most of the developing countries there is absence of election but selection exists at political stages.
14.  Efficient Bureaucracy
To enhance the process of economic development an efficient bureaucracy is needed. Public servants and administrators should do their jobs honestly and efficiently. Without efficient and effective bureaucracy economic development is impossible.
15.  Developed Minded
Will to develop is also a factor of production.  Developed minded population is necessary for the development of a country. In Pakistan, people are not of commercial mind, they like to spend subsistence life.
C- ADMINISTRATIVE FACTORS:
16.  Education
An administrator must be highly educated to administrate the economic activities. But in Pakistan, there is lack of training institutions and literacy rate is only 57 % that is very low as compare to the rich countries.
17.  Absence of Corruption
Corruption means dishonesty and immorality. It is a process of receiving illegal money for any legal or illegal activity. Absence of corruption is necessary for the economic development. In Pakistan, corruption is a common practice.
18.  Reward, Pay and Status
In most of the developing countries like Pakistan, distribution of authorities is improper. Some employees of low rank have more powers and some officers of high rank have fewer authorities, less honour, less reward and low status. To make development, it is necessary to provide reward, pay and status according to the capabilities of employees.
19.  Efficient Management
Efficient management is the act, manner or practice of managing, handling, supervision or control of economic activity to make profit or to minimize losses. Efficient management is also required for economic development. If management is educated, trained and efficient then business policies will be in improved form and it will cause economic progress.

Conclusion:
            At the end, we conclude that there are various factors of economic development. Almost in all the developing countries, various factors for economic development are available in better conditions. If government utilize the resources properly by employing modern technology then the target of achieving economic development is not difficult.

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