FACTORS EFFECTING ECONOMIC GROWTH IN PAKISTAN
INTRODUCTION:
It is without fact that Pakistaan is serve with everything naturaaly. Which makes
Pakistan strong economically where agriculture is playing its key role in
development. Economic growth refers to aility of an economy to increase its
productuctive capacity through awhich it become more capable of producing
additional units of goods and services.This economic growth is also seen as holly
grain for economic policies
The developing economies like Pakistan suffering from various issues such as
energy & water shortages, political instability, lack of policy implication,
continuous increase in inflation, security concerns, burden of foreign debt, and
misbalance between import and exports payment etc
The main factors affecting economic development include
Levels of infrastructure – e.g. transport and communication. In recent
years, economic development in Central Africa has been improved due
to increased investment in roads, railways and seaports. Part of this
investment has come from Chinese companies who have a vested
interest in transporting raw materials from Africa to China.
Education. Levels and standards of education have a significant
influence on labour productivity. Without basic literacy and numeracy,
it is difficult for an economy to develop from manual labour to new
higher tech industries in the service sector. For example, good levels of
education in India have given opportunities for growth in service
industries, such as IT and call centres.
Levels of inward investment. Developing countries that can attract
inward investment can see significant growth in development due to
higher levels of capital and benefits of attracting multinational
companies into their economy. For newly industrialised countries
(NICs), inward investment has played a significant role in increasing
economic development. For example in 2011, inward investment in
Brazil stood at $101bn.
Levels of savings/capital In growth models, such as levels of savings
and capital are seen as a key factor in determining economic growth.
Higher savings enables a virtuous circle of increased investment, higher
growth, and therefore, higher savings.
Political stability / Law and order. Political stability and the
protection of private property was ranked as the most important factors
for encouraging firms to invest in developing economies. Any sign of
instability increases the economic and personal risk of investing in
developing countries. The biggest block to development is prolonged
civil unrest/military conflict as this causes investment to dry up and
resources to be wasted in unproductive means.
Macroeconomic stability. Similar to political stability,
macroeconomic stability encourages investment and development. This
involves low rates of inflation and exchange rate stability. Rapid
devaluation can cause capital flight and a decline in growth.
Labour mobility. Is labour able to move from relatively unproductive
agriculture to more productive manufacturing?
Foreign aid. Targeted aid, can help improve infrastructure and living
standards. It can be important for developing economies with low
levels of savings and capital investment. Aid depends on how it is used
– whether it is tied to trade deals or used to overcome market failure in
areas such as education and health care. There is also some criticism of
foreign aid that it can influence incentives and
Regional effects. Economic development is strongly influenced by the
development of an economies neighbours. For example, in the 1980s
and 1990s, south east Asia showed strong levels of economic growth
and development. However, Sub-Saharan African countries
experienced very slow growth. This is partly due to the gravity effect –
the theory that trade is most profitable and efficient with near
neighbours. If a neighbour does well, there tends to be spill over
effects, such as increased trade and increased investment.
Natural resources. Ceteris paribus countries with higher levels of
natural resources can use this for economic development. For example,
the revenues gained from oil have enabled the Gulf states to develop
rapidly gaining high levels of real GDP. For African and Asian
countries, raw materials are an important source of revenue and export
earnings which enables higher development.
Tax rates and levels of corruption – e.g what percentage of tax rates
are actually collected and spent on public services. For foreign
multinationals, a low tax rate may be important to encourage
investment. However, there needs to be a balance as the government
need to collect tax to fund public services and public infrastructure.
Free trade vs protectionism. An important debate in economic
development is between the benefits of free trade versus protectionism.
Removal of tariff barries can lead to a rise in exports, which contribute
towards economic development. Asian countries, such as Korea,
Taiwan and China have all benefitted from removal in tariffs. However,
for developing economies stuck in producing primary products (where
they have static comparative advantage) there is a strong case for
temporary tariffs to enable new infant industries to develop.
Tourism. For developing economies with an attractive climate and
environment, tourism can be an important source of foreign earnings
and incentive to develop infrastructure and new hotels.
Oher possible factors that can effect economic growth
Culture of entrepreneurship. For example, in the past 20 years, India
has seen a shift from a conservative religious society to a more secular
society with a greater focus on material improvement.
Political system. Some argue a Command economy can lead to
economic stagnation, e.g. Cuba. China has successfully managed a
partial economic shift to free-market based economy (with still political
control of Communist Party)
Regulation/free market system. Free market economists, such as Milton
Friedman argue the openeness of an economy is important. For
example, privatisation and deregulation, reduces barriers to invesment
and economic growth.
