Deficit Balance of Payment of Pakistan

Deficit Balance of Payment of Pakistan,
Causes and Control

Posted by : Ahsan KhanMonday, 23 April 2012
DIFFERENTIATE BETWEEN BALANCE OF TRADE AND BALANCE OF PAYMENT. GIVE
THE CAUSES OF ADVERSE BALANCE OF PAYMENT. ALSO SUGGEST MEASURES TO
IMPROVE IT?
Introduction:
Balance of payments (BOP) is a record of economic transitions between the
residents of one country and the rest of the world during one year. The balance of payment
like all balance sheets must balance. The items, which lead to, an inflow of foreign earnings
are placed on the credit side of the balance sheet, whereas the items, which give, rise to an
outflow of foreign currency are placed on the debit side.
Definition:
Balance of payment is a systematic record of a nations total payments to foreign
countries, including the price of imports, the outflow of capital and gold, and the total
receipts from abroad, including the price of exports and the inflow of capital and gold.
According to Pas Taylor:
Balance of payment refers to the difference between the total payments out of a country
during a given period of time. These payments are of visible and invisible items.
DIFFERENCE BETWEEN BOT & BOP
1- Definition
Balance of Trade (BOT)
Balance of Payment (BOP)

BOP is the difference between the values
BOT is the difference between the values of exports and imports of both visible and
of exports and imports of only physical invisible items (goods and services) of a
items (goods) of a country during a given country during a given period of time
period of time (usually one year).
(usually one year).
2- Surplus or Deficit
Balance of Trade
If the value of visible exports is greater
than value of visible imports, the balance
of trade is said to be favourable and vice
versa.
3- Goods
Balance of Trade
It includes only (visible) goods.
Balance of Payment
If the value of the total receipts is greater
than the total payments, the BOP is termed
as favourable and vice versa.
and Services
Balance of Payment
It
includes
both
(visible
invisible) goods and services.
and
4- Revenue and Capital

Balance of Trade
Balance of Payment
It
includes
all revenue
receipts and
payments on account of imports and The BOP includes all revenue
exports.
capitalitems.
5- Relationship
and
Balance of Trade
Balance of Payment
The BOP includes BOT also. Accordingly, it
The BOT does not include the BOP. It is is equal to the BOT plus import & export of
the part of BOP.
services.
6- Economic Position
Balance of Trade
Balance of Payment
It does not show the actual economic Balance of payment shows the real
position of a country.
economic position of a country.
Situation in Pakistan:
Pakistan, since independence, has been experiencing deficit (un-favourable) in its
balance of payment except the following five years i. e., 1950-51, 1954-55, 1955-56, 195859, and 1959-60. In 1965-66, the balance of payment was highly deficit due to war against
India.
Explanation:
Balance of payments of a country has three types of account:
a) Current Account
b) Capital Account
c) Official Reserve Account
a)
Current Account
It includes export and import of all goods and services and transfer payments on
receipts and payments sides respectively.
b) Capital Account
In capital account, on receipts side, short term and long-term capital inflow receipts of
foreign direct investment and foreign debts are posted. Same items are written in payment
side while making payment.
c) Reserve Accounts
It shows the foreign exchange position of a country. Official reserve account has the
records of foreign official holding and increase reserves of gold and foreign currencies.
REPRESENTATION BY SCHEDULE
Fiscal Year
1950-51
Situation
Favourable
1954-55
1955-56
Favourable
Favourable
1958-59
Favourable
1959-60
Favourable
Reason
Due to the Korean War (Rs. 578.0 Crore)
Due to Devaluation and restrictions on
imports (Rs. 09.9 Crore)
Due to 20% increase in exports
Bonus Vouchers Scheme and Restrictions
on Imports
Bonus Vouchers Scheme and Restrictions
on Imports
1965-66
Unfavourable Deficit due to war against India
2007-08
Unfavourable Deficit ($ 16.8 billion)
2008-09
2009-10
2010-11
Up to date Situation:
According to the Economic Survey of Pakistan 2010-11, imports of Pakistan are $
32.3 billion and its exports are $ 24 billion. It is showing a deficit of $ 8.3 billion. Above
situation is showing that Pakistan faces a continuous deficit in its balance of payment
CAUSES OF UNFAVOURABLE BOP -OR- BOT:
These are the permanent problem of deficit in BOP:
A- LIMITED EXPORT CAPACITY
1. Narrow Export Base
Pakistan basically is an agricultural country. Its major exports are rice, cotton, raw
wool, leather, fish etc. Our exports, during the last five years, are remaining around $ 15
billion to $ 20 billion. The reason is that our export base is narrow. It is concentrated in
relatively low value added products. Value of exports during 2010-11 is $ 24 billion.
2. Consumption Oriented Society
People of Pakistan are mostly consumption oriented. Due to rapid rise in population
and increased consumption habits, the domestic manufactured goods are mostly consumed
in the country. The exportable surplus is going on decline. Govt. has to import 4.0 million
tones of wheat and heavy amounts of sugar, pulses and tea in 2005-06, being an agrarian
country.
3. Less Modernization of Machinery
Since 1970s, there have been less modernization, balancing and replacement of
machinery in the private industrial sector. The fall in production and decline in the quality of
products has adversely affected exports.
4. Increase in the Sick Industrial Units
The number of sick industrial units, mainly due to nationalization of industries, has
borne up. It is on record that the performance of most of the industries in the public sector
is not satisfactory. The decline in production of semi-manufactured and manufactured
goods reduces the exportable surplus and adversely affects the volume of trade.
5. Less Production of Value Added Goods
The share of industry in the GDP is 25.8 %. The share of value added goods must
increase to earn over many years. The share of value added goods must increase to earn
foreign exchange and turn the trend of adverse balance of payment. The production of
value added goods is at basic stage in Pakistan that leads to adverse BOP.
6. Devaluation
The repeated devaluation of rupee against US dollar has not helped in the increase
of exports. It has made the imported inputs more costly. The demand for our goods in the
international market is elastic. As such, due to devaluation, as tool for boosting, exports are
not effective.
7. Tough Competition
Stiff competition in the foreign market particularly of our value added goods has
reduced the volume of foreign trade in Pakistan. There is availability of higher standard
goods at lower prices in international market. It causes reduction in exports, which result in
deficit in BOP.
8. Increase in Prices of Inputs
The increase in the prices of fuel, electricity, high capital costs of imported
machinery, exchange rates etc. have inflated. The costs of both imported capital goods and
industrial raw material, on which domestic industry is heavily dependent the inflationary
impact of the rise in the prices of inputs are not helping in achieving the export targets set
in each financial year.
9. Anti-dumping Duties
Japan, Hong Kong and some other nations imposed antidumping duties on our
cotton yarn, fabric and bed linen. Such types of duties on our exportable goods are also a
big hurdle in the way of our exports.
10. Technical Barriers
Imposition of non-tariff, barriers like child labour, ISO 14000 etc., has adversely
affected our exports for the last years. The advanced countries of the world have imposed
technical barriers such as patents, copyrights, trade-marks and designs etc. on their
imports. Pakistan will have to upgrade the standard of purity and quality to compete for its
products in the international market.
11. Political Uncertainty
The political uncertainties in the industrial units have considerably affected the
efficiency of the industries. The fall in the volume of production, particularly in the
manufacturing value added sector has reduced export earnings. Due to reduction in export
earning, our BOP is unfavourable.
12. Fall in Terms of Trade
The import unit values are higher than the export unit values for the last over three
decades in Pakistan. A decline in terms of trade causes imbalance in the balance of
payment.
TOT = [(Export Price Index Import Price Index) 100]
TOT = (296.10 446.01) 100] = 66.39 indices
Above computation is showing that we lost about 33.61 % of our export earnings in 200506. According to Economic Survey of Pakistan 2010-11, terms of trade are 59.3 indices.
13. Foreign Debts Servicing
Pakistan has obtained about $ 59.5 billion from different countries and it pays interest
on these loans regularly. It paid $ 7.8 billion as debts services charges during 2010-11. The
interest payment has adversely affected the balance of payment.
B- UN-RESTRICTED IMPORT NEEDS
14. Import of Capital Goods
Pakistan has to import capital goods for rapid industrialization of the country in order
to build up the economy. The heavy import of machinery has considerable increased the
import bill and has adversely affected balance of payment.
15. Import Oriented Industry
Some of our industries are based on the imported inputs and raw material e.g., oil
and petroleum etc. Most of industries, which were established for achieving the twin
objective of earning and saving foreign exchange, have been eating away roughly 30 % of
aggregate import bill.
16. Rise in Oil Prices
The sharp rise in the prices of oil particularly in 70s and also in the beginning of
1980s and 1990s is taking a big amount of the foreign exchange earnings. Our import bill
of petroleum group is increased to $ 8670.4 million in 2007-08, while it was $ 530 million in
1978-79.
17. Increases in Import Payment for Fertilizer
There is sharp increase in the import payments to the outside world due to increase
in prices of fertilizers, edible oil and petroleum. Our balance of payment shows debit due to
high payments.
18. Defense Needs
We have to purchase modern weapons for our defense at a very high cost from
different countries, which increases burden on our BOP and it becomes adverse.
Expenditure on defense is Rs. 275 billion.
MEASURES TO CORRECT ADVERSE BOP

Measures to correct the deficit balance are of three types:
A. EXPORT LED GROWTH
1. Labour Intensive Industries
Labour intensive industries should be established, because labour is cheaper in
Pakistan, these industries can be set up at lower cost. The products of these industries can
be exported.
2. Manufactured Goods
Instead of exporting primary goods like raw cotton, Pakistan should export
manufactured goods like textiles and garments, leather goods, food products and electrical
goods.
3. Reduction in Export Duties
This step will make our export competitive in the international market. Foreigners
will prefer to import from Pakistan because of low prices.
4. Quality Products
Many of our goods cannot be exported because of poor quality. Thus, electric fans,
cycles, electric motors, shoes, ball pens, crockery etc. cannot be sold abroad. Pakistan is
needed to improve the quality of its products according to international standard.
5. Export Marketing
Agencies should be made more active. Pakistan has already done this. There are
Export Promotion Bureau, Export Development Fund and Export Processing Zones etc. All
these are playing their effective role to increase export and to correct the BOP.
6. Immoral Practices
Many Pakistanis have brought bad name to our trade because they export
commodities of inferior quality than specified in agreements. So, all this should be
restricted.
7. Pricing of Goods
It is necessary for increasing exports that goods should be produced under optimal
conditions and offered at competitive prices in international market.
8. Packing
High quality packing is essential for promoting exports. If packing is not attractive
and durable, it will not capture foreign market.
9. Joint Venture
Establishing industries with joint venture of foreign investors can also push up the
export. The products of these industries can be sold in the foreign market.
B. REDUCTION IN IMPORTS
10. Import of Only Essential Items
Only essential items should be imported which are needed for our industrial
production. Import of luxuries should be banned. People should be educated to come out
from the complex of foreign goods.
11. Exchange Control
Exchange control is also an important step to minimize the imports. Exchange

control should be followed, so that there is no wastage of foreign exchange to import of unnecessary and luxuries.
12. Substitutes for Imported Items
Import substitutes should be manufactured in the country. If home production of
fertilizer, paper, steel, edible oil and electrical goods are increased, there will be less need
for such imports.
C. MISCELLANEOUS
13. Decrease in Consumption
Taxes should be imposed to reduce the consumption of many items. Rich people in
our country are spending freely on unnecessary imported consumer items. So, foreign
exchange reserves are wasted.
14. Control of Smuggling
Bara markets should be eliminated. After atomic explosion, the Govt. is taking strict
measures to eliminate markets of smuggled goods.
15. Population Control
Many of our problems are arising due to fast increase in population. Sincere efforts
should be made to decrease growth rate of population. People should be educated in this
regard.
Conclusion:
Achievement of surplus in balance of payment is difficult but not impossible. It can
achieve through installing import substitution and export promoting industries. Government
should control the forex and check the import of luxuries.
Development of human capital, Human

capital formation, its factors, importance and
problems
WHAT IS MEANT BY HUMAN CAPITAL FORMATION? WHAT ARE THE FACTORS,
IMPORTANCE AND PROBLEMS OF HUMAN CAPITAL FORMATION IN PAKISTAN?
Introduction:
Various economists believe that the quality of labour inputs or human capital is very
important for economic development. Too little population cannot help in the development
of a country but if training, education, skills etc. are provided to population then it can
speed up the growth of economic development.
What is Human Capital?
Human capital refers to the productive qualities that activate the labour force. The
productive qualities are education, health and skills of the labour force.
According to Michael Parkin:
Human capital refers to the skill and knowledge of human beings.
Human capital is the qualities of education, skills, training specialization etc. in
population.
Human Capital Formation:
Expenditure on education and training are called human capital formation. It refers
to the process by which educated, skilled and trained persons are increased in a country.
i.
ii.
iii.
iv.
v.
1-
i.
ii.
2-
i.
ii.
iii.
iv.
3-
i.
ii.
iii.
iv.
5-
Accordingly, human capital formation is the act of increasing the productive qualities of
labour force by providing more education and by increasing skill, health and nutrition level.
In the words of Prof. Harbinson:
The process of acquiring and increasing the number of person who have the skills,
education and experience which are critical for the economic and political development of a
country.
Explanation:
Human capital formation is the process by which educated, skilled and trained
persons are increased in a country. Therefore, it is the allocation of resources to improve
the value of population. If the people of a country are well educated, well nourished, skilled
and healthy that will be said to have more human capital.
METHODS OF CAPITAL FORMATION
According to Schultz:
There are five methods of developing human resources:
Providing health facilities which increase the life expectancy of the people
Arranging on the job training
Provision of education at primary, secondary and higher level
Allowing migration to individuals for changes of jobs
Organizing study and extension programmes for the adults
FACTORS OF HUMAN CAPITAL FORMATION IN PAKISTAN
Following factors are important for the development of human capital:
Better Education
Increase in education is the major factor of human capital formation. Education is a
major form of investment in human capital, which provides as a key input in human
resource development. Education improves the quality of manpower and enables the
skilled workers to manage the developing technology of the country.
Literacy rate is just 57.7 % in Pakistan, i. e., almost 100 % in developed countries
Expenditure on education sector is just 1.8 % of GDP i. e., lowest in Asia
On-the-Job Training
Low literacy rate leads to low efficiency of workforce. Heavy amount of investment is
needed to provide training to the on job employees.
Provisions of training facilities, practical applications and refresher courses will lead to:
Improvement in the treatment method of a Doctor
Advanced means of teaching for a Teacher
Introduction of new inventions and discoveries to engineers
It makes possible to connect the technicians with modern technology
Non-material Capital Development
More attention is given to material capital formation rather than human capital formation
in Pakistan. In fact, more concentration should be given to human capital formation
because it improves the services of engineers, technicians and administrators, which cause
in economic growth and development.
4- Manpower Planning
Rapidly growing population and improper manpower planning are resulted in
unemployment and under-employment. Due to improper labour market, there is brain drain
in Pakistan. Availability of proper manpower planning is also a main factor of human capital
formation.
Population growth rate is 2.1 %
Unemployment rate is 5.6 %
Under-employment rate is 16 %
Disguised-unemployment rate is 20 %
Health and Nutrition
Poor population is backward also in Pakistan. Rapidly growing population has not
proper health and nutrition facilities. If a worker is not healthy and fully nourished then it is
impossible for it to maintain the efficiency.
i.
Total expenditure on health sector is only 0.23 % of GNP in Pakistan.
ii.
Death rate is 0.73 % and life expectancy is 67.2 years
iii.
One MBBS doctor is available for 1222 persons
iv.
One hospital bed is for 1701 persons
v.
Per capita food intake is targeted at 2526 calories per day, against the required
2550 calories per day
6- Housing Facilities
Appropriate housing facilities are the basic right of the population. It is the basic
necessity of life and an important factor of human capital formation. Housing facilities are
not in a satisfactory situating in Pakistan. Effective planning of government is required to
provide proper houses and shelters to the existing population.
7- Water and Electricity Facilities
Drinking water and electricity facilities in Pakistan are insufficient and irregular. There is
problem of load-shedding, which inversely affect the productivity level. These facilities are
compulsory for the human capital formation in their advanced form.
i.
50 % population has to go to outside the house to obtain water in Pakistan
ii.
65% population has access to clean water
iii.
Only 44 % population has facilities to sewerage and sanitations
iv.
Number of continuous air pollution monitoring stations is only 7
v.
Growth rate of electricity and gas sector 21.1 %
IMPORTANCE OF HUMAN CAPITAL FORMATION
Human capital formation is the most essential source of economic growth. It is a source
for both to increase productivity and to achieve technological advancement. Importance of
human capital formation can know through following aspects:
A. HISTORICAL ASPECTS
1- Economy of Japan and Germany
Japan and Germany are the nations which built their economies on the basis of
technological advancement, know how and educations.
2- Economy of United States
There is a general agreement among government advisors in US that it will be necessary to
increase investments in human capital. They tell us that a dollar invested on education
brings a grater increase in national income than a dollar invested on dams, roads and
factories.
B. ECONOMIC ASPECTS
3- Co-existence of Capitals
Capital is one of the most important factors of production. But only the capital is not
enough to utilize the resources properly. Increase in saving and investment is not
responsible for the utilizations of resources. Capital without human capital has less
importance in economics. Accordingly, co-existence of both capitals is necessary for
economic growth and development.
4- Full Utilization of Resources
Better utilization of available resources is impossible with the help of only saving and
investment. Human capital formation is also required for the optimal allocation of resources
of a country.
5- Effective Planning
The effective planning is possible only if there are a large number of educated engineers,
trained doctors and healthy labour force etc. in the country.
6- Maintenance of Machinery
The more import of machinery and technologies are not enough for economic development
but skilled people are also required to operate and maintain the machines.
7- Improved Infrastructure
Human capital formation creates more educated person, trained doctors and efficient
engineers. All these result in efficient management, better health and proper system of
transport and communication.
8- Industrial Performance
Industrial sector is the second major sector of our economy. It is still backward. Only more
investment and use of modern techniques of productions are not necessary for its
improvement. Human capital formation is required for the development of industrial sector.
9- Extra Production
The productive capacity of the labour is very low in less developed countries like Pakistan.
There is a need of human capital creation to increase the productive capacity of labour.
Extra production can be achieved with the help of human capital formation.
10- Self Employment
Pakistan is facing a major economic problem of unemployment. Educated, skilled and
trained labour forces can create self-employment opportunities due to human capital
formation. So, human capital formation is resulted in reduction in unemployment.
11- Modern Technology
Sufficient amount of capital is required to import modern technology. But it is impossible to
operate the modern techniques of production without human capital formation.
12- Increase in Efficiency of Factors
It is possible to improve the efficiency of factors like labour and capital due to human
capital formation. Productivity level is low that can improve through human capital
development in Pakistan.
13- Modern Means of Production
Human capital formation leads to introduce the new, better and improved methods of
production. Modern means of production cause in more output by using less raw material in
less time period.
14- Reduction in Poverty
There is unemployment and poverty due to illiteracy, lack of skill and shortage of
training facilities. Poverty can be reduced through human capital formation. Reduction in
poverty is the great symbol of economic progress.
C. SOCIAL ASPECTS
15- Increase in Literacy Rate
Human capital formation makes it possible to invest in education sector. Today
return in education sector is not low. Low literacy rate of 57.7% in Pakistan can increase
with the help of human capital formation.
16- Improvement in Health
Human capital formation encourages the more investment in health sector.
Investment in health sector introduces modern tools and means of treatment, all this
causes in improvement and maintenance of better health.
17- Better Living Standard
Human capital formation increases the income and standard of living of the people. More
education, skill and training will improve the living standard of the population.
PROBLEMS OF HUMAN CAPITAL FORMATION
The main problems of human capital formation in developing countries like Pakistan are
as follow:
1- Rapidly Growing Population
Growth rate of population is very fast. Increase in resources is less than increase in
population. High population growth rate of 2.1 % is a big problem in way of human capital
formation.
2- Lack of Awareness
People of Pakistan are not aware of with the role of the available resources. Due to lake
of education, people are ignorant and have not enough knowledge to evaluate the hidden
benefits.
3- Unequal Distribution of Wealth
There are various disparities in the country due to unequal distribution of income and
wealth. Only rich class can participate in economic activities and in the creation of human
capital. A little portion of population can afford the higher education, which is so costly. 20
% poor population has control on only 6 % national resources in Pakistan.
4- Investment in Buildings and Equipments
People in less developed countries like to invest in building, equipment, gold and silver
ornament and other real states. They have little trend to invest in human resources that is
also a big problem to develop the human capital.
5- Inappropriate Education
Education system in developing countries is backward. Literacy rate is 57.7% and
expenditure on education is only 1.8 % of GDP in Pakistan.
6- Ill-health and Ill-nutrition Facilities
There is shortage of trained nurses, qualified doctors, medical equipments and
medicines etc. in the less developed countries of the world. The less availability of health
facilities create risk to the million of the people living there.
7- No Proper Training for Employees
There is no availability of training facilities for the employees in Pakistan. Training
facilities are necessary for the up-dating and refreshing the knowledge. These are also
some other problems of human capital formation.
8- Less Promotion for Employees
Another problem in way of human capital development is that there is high rate of
unemployment and under-employment in developing countries. On the other hand, there is
less reward of the hard work and efficiency.
9- Agriculture, the Main Occupation
Mostly people have outdated knowledge and almost 2/3 of the population is attached
with agricultural sector. In this situation, people have no or less trend to be educated,
skilled and trained.
10- No Manpower Planning
There is absence of manpower planning. Sometimes, due to non-availability of exact
information about population it is not possible to plan about manpower.
Conclusion:
Investment in human capital is also required to raise the general living standards of
the people in developing countries. This is possible when education and training make full
and rational utilization of surplus manpower by providing larger and better job opportunities
in both rural and urban areas. There is more return raise in income and improvement in
living standard of the population due to capital formation.
WHAT IS DIFFERENCE BETWEEN ECONOMIC

GROWTH AND ECONOMIC DEVELOPMENT?
Posted by : Ahsan KhanThursday, 22 December 2011
In general, the terms Economic Growth and Economic Development are used to
express the same idea i. e., Economic Advancement. But the term economic development
is more comprehensive in its scope. Growth means persistent increase in per capita
income. While development includes growth and structural changes like, infrastructural,
social and political in the country.
ECONOMIC GROWTH:
Definitions:
According to Micheal P. Todaro.
Economic growth is a steady process by which the productive capacity of the economy is
increased over time to bring about rising levels of national output and income.
According to Simon Kuznets.
Economic growth may be defined as a long term process wherein the substantial and
sustained rise in real national income, total population and real per capita income takes
place.
Essentials of Economic Growth:

Above definitions are showing following basics of economic growth:
i.
Economic growth is a long run process; it includes a period of decades.
ii.
Economic growth shows higher rate of increase in real per capita income than rate
of growth of population.
iii.
Economic growth is always linked with large increase in productive ability of the
economy.
iv.
Economic growth is connected with the fair distribution of income and wealth.
v.
Economic growth is attached with the reduction in poverty and unemployment.
ECONOMIC DEVELOPMENT:
Definitions:
Simple Definition.
It refers to the process whereby the total supply of goods and services of the society
increases leading towards improved living standard.
According to Micheal P. Todaro.
Development must be conceived (considered) for as a multi-dimensional process involving
major change in social structures, popular attitudes and national institutions as well as the
acceleration of eco-growth, the eradication (end) of poverty and reduction of inequality of
wealth.
i.
Structural Changes of Economic Development:

Economic development represents following structural changes in various sectors of the
country:
There is a change in the occupational structure. In economic development there is
decrease in the share of labour force in primary sector (farming, fishing and mining etc.)
and increase in the share of labour force in secondary sector (industry etc).
There is a change in the structure of national output. The contribution of primary
sector in the national output falls and the share of secondary and tertiary (3 rd ) sector slowly
go up.
ii.
iii.
iv.
v.
There is a change in the structure of industrial production. There is an increase

in the production of capital goods and decrease in the production of consumer goods.
There is a change in the structure of foreign trade. The share of primary goods in
exports decreases and the share of capital goods in imports increase. Accordingly, in
economic development there is an increase in exports of manufactured and final goods.
Similarly, there is decrease in the imports of consumer items.
There is a change in the structure of technology. In the economic development
modern and advanced techniques are used in all the sectors of economy.
There is a change in the social and institutional sector. Due to economic
development there is an increase in the self-esteem and living standard of the population.
Conclusion:
We conclude that, normally the terms economic growth and economic development are
used for the explanation of encouraging changes in the economic achievements of a
country.
Economic Growth
Economic Development
= Annual increase in per capita income

= Economic Growth + Structural Changes
DIFFERENCES BETWEEN ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT:

Both the terms seem similar, but there are various following points, which create
difference between these two:
1- Definition
Economic Growth
The term economic growth is only
concerned with raising income level and The
basic
feature
of
economic
volume of production of goods and development is to raise income level and
services.
improve the human being.
2- Nature in Economic Literature
Economic Growth
Economic growth is the key issue
undertraditional economics. According to
this approach take care of growth and
poverty would eliminate automatically.
Economic development is the main issue
under modern
economics literature.
Accordingly, take care of poverty and
growth would take care of itself.
3- Scope
Economic Growth
Scope of economic development is
wideand comprehensive than economic
Scope
of
economic
growth is growth. Its link is not only with income but
narrowbecause it is concerned with also with the prosperity of the society and
changes in income level only.
economy.
4- Institutional changes
Economic Growth
In case of economic growth strong and
Efficient
institutional
set-up is
effective
institutional
necessary.
necessary.Effective and strong institutional

set-up is
not revolution is the sign of economic
development.
5- Type of Approach
Economic Growth
According
to
various
economists,
economic growth is said to be quantitative Economic
development
refers
approach.
thequalitative approach.
6- Importance
to
Economic Growth
The Concept of economic development
Economic growth is less important due to ismore important because it discusses an
the attachment with income level only.
economy in wider sense.
7- Time Span
Economic Growth
Economic
growth
is
a short-term Economic development is a long-term
process.We can measure income changes process about 20 to 25 years. Because it
yearly. So, its time span may be of one takes years to change social, economic and
year.
institutional set-up.
8- National Problem
Economic Growth
Economic
growth
is
the
problem Economic development is the problem
ofdeveloped countries of the world.
ofdeveloping countries.
9- Political Changes
Economic Growth
Economic growth is not concerned with the The concept of economic development
political stability.
isincomplete without political stability.
10- Dependence and Self-Sufficiency
Economic Growth
Economic growth does not ensure the In case of economic development our
freedom from the dependence of foreign dependence on other countries reduces
countries.
and country adopts the self-reliance policy.
11- Economic Application
Economic Growth
Economic
development
basically
Economic growth first checks the statistical emphasizes on the balanced growth of
upward movement in the economy.
economy.
12- Social Impact
Economic Growth
There may or may not be any social Social changes, in case of economic
changes in case of economic growth. It development, are compulsory. It refers to
ignores the human beings and it is only the better jobs, availability of food, better
concerned with income level etc.
health and education etc.

13- Economic Welfare
Economic Growth
Economic growth is not much attachedwith In
economic
development, more
the human beings. It has no link with the importance is given to the mankind as
good or bad.
compare to the economic growth.
14- Practical Significance
Economic Growth
Now,
Pakistan
is more
developed
countryas compare to 1960s and 1990s.
In Pakistan, in 1960s, growth rate was Today in Pakistan there is more industries,
higher than the growth rate in 1990s.
universities and other infrastructure etc.
15- Measurement
A. Economic Growth
Measurement of economic development is
Economic growth is measured only by based on the reduction in poverty,
comparing income levels of different years. development of human being and living
It also can be measured numerically.
standard etc.
16- Quantity and Quality
Economic Growth
Economic
growth
is
concerned Economic development is concerned with
withquantity of goods and services only.
not only quantity but also with the quality.
17- Problem of Assessment
Economic Growth
It is very difficult to estimate exactly the
level of economic growth in developing
countries like Pakistan.
18- Use
B. Economic Development
Computation of economic development
isnot a difficult task in developed nations of
the world.
of Technology
Economic Growth
In economic growth, use of advanced
technology is not appreciated.
For the economic development use of
modern technology is compulsory.
Conclusion:
From all above points of difference, we conclude that economic growth is attached
to the increase in production and income etc. while in economic development more
importance is given to man and it tries to remove poverty.
PRE-REQUISITES -OR- DETERMINANTS OF

ECONOMIC DEVELOPMENT MAINLY IN
PAKISTAN
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.
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.
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 %.
2.
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.
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.
Sources of Capital Accumulation:

Sources of capital formation includes:
a)
Internal resources
b)
External resources
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.
3.
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.
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 %.
4.
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.
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.
5.
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.
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.
6.
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.
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.
MAJOR ISSUES IN THE ECONOMY OF PAKISTAN

/ BASIC CHARACTERISTICS OF DEVELOPING
COUNTRIES LIKE PAKISTAN BY AHSAN KHAN
2013
Posted by : Ahsan KhanTuesday, 23 April 2013
q.1 MAJOR ISSUES IN THE ECONOMY OF PAKISTAN / BASIC CHARACTERISTICS

OF DEVELOPING COUNTRIES LIKE PAKISTAN
Introduction:
A country where the average income of the people is much lower than that of developed
countries, the economy depends upon a few export crops and where farming is conducted
by primary methods is called developing country. Rapid population growth is causing the
shortage of food in many developing countries. Criteria to an Under-developed Nation:
i. Potential to become economically developed.
ii. Low or no rising trend of per capita income.
iii. Countries very poor in resources.
Prof. Harvey Leibenstein, in his Economic Backwardness and Economic Growth divides
these characteristics into four categories: A. Economic characteristics: Following are the
economic characteristics of UDCs:
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.
12024 billion (58.2% of GDP) and the value of external debts and liabilities is $ 60.3 billion
and services charges on all types of debts are Rs. 730.733 billion during 2011-12, in
Pakistan.
3- Low Per Capita Income.
Due to low national income and huge 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 2011-12 per
capita income of Pakistan is $ 1372.
4- Over Dependence on Agriculture.
61% Population of Pakistan is living in more than 50,000 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 21.0% while in advanced nations it is less than 5
%. It employed 45.0 % of labour force while it is less than 5 % in developed countries.
5- 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 in 1947. Small and
backward industrial sector is based on low level of capital formation, technology, training
and education and over dependence on agriculture sector. 13.7% labour force is attached
with industrial sector in Pakistan. Its share to GDP is 25.4 % and to exports is more than 60
%.
6- Unemployment.
An outstanding problem of developing countries is their high rate of un-employment, underemployment and disguised-unemployment. More than 3.5 million people are unemployed in
Pakistan. There is 16 % underemployed and 20% disguised unemployed of total labour
force. Unemployment rate is 6.0%; it is mainly due to high population growth rate, which is
2.03%.
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. Minimum wages are Rs.8000/- per
month against the average gross salary of $3,950 (Rs.3,79,200) per month in United
States.
8- Deficit Balance of Payment.
Third world countries have to import some finished and capital goods to make economic
development, on the other hand they have no products to export but raw material. During
July-April, its exports were $ 20.474 billion and imports were $ 33.15 billion in case of
Pakistan. So, its deficit balance of payment was $ 12.68 billion in 2011-12.
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: Co-existence of modern and traditional methods of
production in urban and rural areas, Co-existence of wealthy, highly educated class with a
large number of illiterate poor classes and 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. National saving is 10.7% of GDP and
total investment is 12.5% 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. Natural resources are available in various poor countries
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, improper
government actions and limited home market. Natural resources contribute to the GDP
about 1%.
12- Market Imperfection.
Market is imperfect in accordance with market conditions, rules and regulations in the most
of developing nations. There exist monopolies, mis-leading information, immobility of
factors; hoarding and smuggling etc. that cause the market to remain imperfect.
13- Limited 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 $
33.15 billion and exports are $ 20.474 billion that cause into unfavourable balance of
payment of $ 12.676 billion.
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 she is poor.
15- Inflation.
High rate of inflation causes economic backwardness in poor nations. Due to high level of
price, purchasing power, value of money and saving of the consumers tend to decrease.
Rate of inflation (CPI) is 10.8% in 2011-12 in Pakistan.
B. Demographic characteristics:
Following are the demographic characteristics:
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 180.71 million with
the rapid growth rate of 2.03% and death rate 0.72 % in 2011-12. Pakistan is at 6th number
in the list of the most populous nations. Basic needs like food, clothing, housing, education,
sanitations and health facilities are not available for the huge portion of population in these
countries.
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 65.2 year against 75 years in developed countries. One Doctor is for 1206
persons and one Nurse is for 2369 persons, one Dentist for 16420 persons, number of
hospitals is 972 and one hospital bed is available for 1665 persons. The total expenditure
on health sector is just 0.27 % (Rs. 55.12 billion) of the GDP.
18- Pollution.
There is too much pollution in poor 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-installation of
treatment plants. Number of continuous air pollution monitoring stations is only 7 in
Pakistan. Pakistan is at number 29th at the chart of the most polluted nations and at
number 6th in Asian countries.
19- Brain Drain.
An outflow of the best, brightest and talented student from poor nations to rich nations is
called brain drain. There is less reward for the talent, which causes an outflow of best brain
in the backward countries. Reward is not paid in accordance with the capability, skill and
efficiency in less developed countries.
20- Inadequate Infrastructure.
Adequate infrastructure is needed which is not available in poor economies to enhance the
process of economic development. Roads, transport, telecommunications, sanitation,
health and education facilities are not at their best level in these nations. 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 LDCs:
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 58% during 2011-12. Expenditure on
education sector is just 1.8 % of GDP during last year.
22- Low Level of Organization.
There is absence of developed minded leadership in economic activities in third world
nations. Decision making power of entrepreneur is very low due to illiteracy, less training
and backward techniques. Most of educational institutions are producing employees rather
than employers.
23- Low Self-esteem.
There is less respect, honour and dignity of people in the lower developed countries.
People are honoured due to their powers, relations and castes instead of capabilities.
There is poverty, poor health, poor education and shortage of other social services.
Government and population of poor countries are under the external influence.
24- Un-productive Expenditures.
Population mostly copies the styles of population of developed nations due to
demonstration action in poor economies. 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. which reduces their savings and
investment.
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 level of economic
development.
26- Influence of Feudal Lords.
The poor class is under the influence of feudal lords and tribal heads in lower developed
nations. 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.
The unproductive expenditures are rising day by day in developing countries like Pakistan
due to socio-economic and administrative reasons. 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.
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 in poor countries. 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.
Revenues and expenditures policy of government 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. Use of advanced technology is impossible due to shortage of
capital, lack of skill and training, high cost of production and lack of foreign exchange
reserves. 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. 30.88 % population is working population and remaining 69.12 % 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.
People have to move abroad for advanced study due to illiteracy and lack of training
institutes. They adjust them in foreign countries due to low remuneration and less selfesteem. 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.
3
Role and Importance of Agriculture Sector in
Economics Development of Pakistan.
3 Posted by : Ahsan KhanMonday, 23 April 2012
WHAT IS THE IMPORTANCE OF AGRICULTURE SECTOR IN ECONOMIC
DEVELOPMENT OF PAKISTAN?
Introduction:
About 50 years earlier, agricultural sector was not considered as a commercial sector
for economic development in a large number of developing and developed nations. During
the last 50 years this sector is realized as a major productive sector of Pakistani economy.
61% population is living in more than 50,000 villages in Pakistan.
Latest Information:
(According to Economic Survey 20010-11)
Backward agricultural sector contributes 20.9 % to GDP.
Its growth rate is as low as 1.2 %.
It employs the 45.0 % of total labour force.
Its contribution to exports (Food Group) is 8.62 %.
1-
2-
3-
4-
5-
6-
7-
8-
9-
ROLE OR IMPORTANCE IN ECONOMIC DEVELOPMENT

Importance of agricultural sector can be shown as below:
Increase in Per Capita Income
Per capita income is the annual average income of the individuals of a nation. We
derive it by dividing national income on total population. Agricultural sector provides more
jobs to unemployed people. It increases the individuals as well as national income.
Agricultural sector is essential to increase the PCI, which is $ 1254 at present.
Major Source of Employment
Agriculture sector provides employment to major portion of our labour force. More than
45.0% of our labour force is directly involved in agriculture sector, while 66.7% of our rural
population is dependent on agriculture. This is the major sector, which provides
employment to a large portion of our population. Agriculture sector is helpful to reduce the
unemployment and disguised unemployment.
Reduction in Poverty
Agriculture development has significant impact on rural development. If productivity
increases in agriculture it reduces poverty and stimulates non-farm employment, too. They
are able to get basic services of life such as water supply, sanitation, provision of health
and educational facilitates. About 21.0% population of Pakistan is much poor.
Supply of Food
Food is the first in basic necessities of the life. The agriculture sector is the sole
provider of all type of food like wheat, rice, corn, sugarcane vegetables and fruits etc., to
the population engaged in various sectors of the economy. Agricultural sector also provides
food to those animals that provide milk, cheese, butter and meat to population to maintain
the efficiency. According to economic survey of Pakistan, exports of food group are $
2007.3 million.
Source of Forex Earning
Agriculture sector is the main source of foreign exchange (forex) earning which is used
to import capital goods. Total forex resources of Pakistan is $ 17.1 billion out of which share
of agriculture is $2007.3million. Major cash crops of Pakistan are cotton, rice, tobacco etc.
that is helpful to correct the balance of payment.
Supply of Surplus Labour
About 61% population is living in more than 50,000 villages in Pakistan. This sector is
the major source for supply of labor force to industrial sector due to farm mechanization
and disguised unemployment. In this way an increase in the income of the people leads to
improved living standard.
Source of National Income
At the time of partition, contribution of agriculture sector to GNP was 60%, which
decreased to 29.4% in 1980-81. Now its share to GDP is 20.9% in 2010-11. Accordingly,
agricultural sector is the major contributor to Pakistans national income.
Supply of Raw Material
Agricultural sector provides not only food but also provides cotton, sugarcane, tobacco,
rice, oil-seed, meat and milk to various agro-based, small scale and large-scale industries
as a raw material.
Development of Industrial Sector
There is inter-dependence and inter-relationship between agricultural and industrial
sector, both are helpful to develop each other. Due to use of modern techniques of
production in agricultural sector, when income of the agriculturists increases, they will
demand for industrial articles, like threshers, harvesters, tractors, tub-wells and various
other consumer goods, which results in industrial growth and development.
10- Balance of Payment Position
Promotion of agriculture sector will provide surplus production for exports and our
foreign exchange reserves will be increased. This will be helpful in the improvement of
balance of payment. At present Pakistan is facing a deficit of $ 8.3 billion in its balance of
payment.
11- Improvement in Living Standard
There is an increase in the income of the farmers due to development of agricultural
sector. It will improve their living standard by constructing better houses, demanding
luxuries of life, television, computer, mobile, motor-cycles and a lot of other items. So,
growth of agricultural sector will cause to improve the standard of living of the population.
12- Extension in Market Size
There is more output in agricultural sector due to farm mechanization. It enlarges the
size of market. If there is more production, then surplus production can be export to the
other countries of the world. So, agricultural sector expands the market at national and
international level.
13- Capital Formation
Role of agricultural sector in capital formation cannot ignore. It increases the incomes of
the people that lead to more saving and more investment. Here, more investment leads to
rapid capital formation. Capital formation rate in Pakistan is 5%.
14- Increase in Investment
Total investment is only 13.4% of GDP in Pakistan. This low investment is mainly due
to low income and low savings. Agricultural sector increases the income of people that
caused in more saving and more investment. Accordingly, agricultural sector is helpful in
increasing the investment.
15- Economic Development
Economic development, progress and prosperity cannot achieve without agricultural
sector. It provides employment opportunities to a lot of people. It produces exportable
items, which increases the foreign exchange resources. So, agricultural sector is helpful to
make rapid economic development. Real GDP growth rate is 2.4%.
16- Self Reliance Policy
Agriculture sector is helpful to achieve the self-sufficiency. Our country will not only
become self-sufficient in food but supply of raw materials for industries will also expand our
industrial sector.
17- Direct Foreign Investment
Now a day, use of advanced technologies in farming is common. It boost-up the
industries like tractors, harvesters, thrashers, chemicals etc. It has increases the foreign
direct investment in our country. It provides employments to our population and also
increases the national income. Foreign investment is $ 1.8 billion in Pakistan.
18- Controlling Inflation
Inflation refers to the increase in general price level. It may be due to increase in
demand and shortage in supply. Agricultural sector is very helpful to control the inflation. It
produces more goods and maintains the equilibrium in demand and supply. Rate of inflation
is 14.1% in Pakistan.
19- Reduction in Regional Disparities
Agriculture sector is the life-blood of our economy. Development of agriculture sector
will increase the living standard of the rural population. This leads to reduce the urban and
rural differences in the country.
20- Demand for Industrial Goods
As the agriculture productivity increases, the income of farmers goes up. With the rise
in income the demand for both agricultural goods (tractor, fertilizer, pesticides, tube-wells
etc.) and industrial goods (television, mobile, computer etc.) will increase in rural areas.
21- Balanced Growth Economy
There exists close inter-dependence between agricultural sector and industrial sector.
Agricultural sector will develop the industrial sector also. Income received by cultivator will
develop the demand for the industrial goods. Its results are in balance growth of the
economy.
22- Increase in Govt. Revenue
There is no direct tax on the agricultural income. But indirectly government receives a
huge amount of tax form agricultural sector. It imposed some duties on imported
technologies applied in farming. It imposes tax on chemicals etc. So agriculture sector is
also a source of income for the government.
Conclusion:
Agriculture sector is playing an important role in the economic development of
Pakistan. Our all-economic activities are based on agricultural sector. But, unfortunately it
is still backward and government should take some effective steps for its improvement.
MAJOR PROBLEMS OF AGRICULTURAL SECTOR

OF PAKISTAN
DISCUSS THE MAJOR PROBLEMS OF AGRICULTURAL SECTOR OF PAKISTAN. WHAT
MEASURES DO YOU SUGGEST TO IMPROVE THIS SECTOR?
Introduction:
Agricultural sector is the backbone of our economy. But the growth of agriculture in
Pakistan is facing a lot of problems. Due to various causes, per acre yield is very low in
Pakistan as compare to other developed countries.
PROBLEMS OF AGRICULTURAL SECTOR
Problems of agricultural sector are categorized as below:
A.
TECHNO-ECONOMIC PROBLEMS
1) Limited Cultivable Area
The total area of Pakistan is about 79.6 million hectares, out of which only 23.7
million hectares (28%) area is used for agricultural purposes. About 8 million hectares area
is idle and un-utilized. There is vast sub-division and fragmentation of land holdings, as a
result modern technology cannot be applied in agriculture sector.
2) Water Logging and Salinity
Water logging and salinity are twin problems of agricultural sector due to salinity,
deposits of salt in land have appeared on the surface of land and they have adversely
affected the performance of agricultural sector. Water logging and salinity affect about 0.10
million acre of land in every year. It is not only waste of land but also reduction in
productivity.
3) Slow Growth of Allied Products
Allied products refer to those productions, which are not agricultural but indirectly,
help the farmer to improve his living standard. Pakistan is in-sufficient in the production of
fruits, milk, poultry, fisheries, livestock and forestry. As a result not only our food quality is
poor but also industries such as furniture, textiles and dairy cannot be developed.
4) Low Per Hectare Yield
The most important problem of agriculture is its low yield per hectare for almost
every major crop. 45.0% of labour force is engaged in this sector in Pakistan while it is less
than 5% in developed countries. But, other countries of world are getting higher yield per
hectare due to use of modern technology and trained labour.
5) Inadequate Infrastructure
Rural infrastructure like, roads, storage facilities, transport, electricity, education, sanitation
and health facilities etc. is inadequate to meet the requirement of growth of agriculture.
Total length of farm-to-market road is not only shorter but their condition is also poor. Many
villages have no metal-led road at all. Electricity is available to only 3/4 rural populations.
6) Uneconomic Land Holdings
Due to increasing population and division of land under the law of inheritance, landholdings
are subdivided over and over again. The result is that very large number of farmers has
less than 2 hectares of area. Moreover holdings are scattered. It is difficult to use modern
machinery on small pieces of land.
7) Old Methods of Production
No doubt, mechanization of agriculture is increasing in Pakistan, but in most of the
areas, the old implements are still being used for agricultural production. Old and orthodox
techniques of production cannot increase the production according to international levels.
8) Inadequate Supply of Agricultural Inputs
The supply of modern inputs like high yielding variety (HYV) seeds, chemical
fertilizers, pesticides, mechanized machinery etc. not only costly but also inadequate and
irregular in Pakistan. Numbers of fertilizer producing units are just 10 in Pakistan.
9) Lack of Irrigation Facilities
Shortage of irrigation facilities causes a serious limitation in the expansion of crop
area in Pakistan. The lower water supplies, loses from water course in the fields are the
serious problems of farm sector. Actual surface water availability is 91.8 million acre feet.
10) Inadequate Agricultural Research
The average crop yield in Pakistan is very low as compared to the production levels of the
advanced countries of the world. In order to raise the potential of agricultural production,
there should be continuous improvement in the research for agricultural growth. Total
agricultural universities and colleges are only 16 in Pakistan.
11) Problem of Land Reforms
Land reforms have been implemented against the will of people. There is an urgent
need to conduct a proper land reform for improving agricultural growth. Due to this problem
agricultural production cannot increase to desired level.
12) Defective Land Tenure System
Defective land tenure system is also responsible for low yield per acre in agricultural
sector. Landlords and feudal-lords live in posh urban areas while tenants and peasants
have no or less incentive for their hard work. So, the productivity in agricultural sector
remains low.
13) Subsistence Farming
Our farmer is attached with subsistence farming; a huge of portion of production is
consumed at farmers own house to support large family. Hence, less portion of the
production is available for market supply. It causes low income of the farmers. Farming is
not conducted at commercial level in Pakistan.
14) Low Cropping Intensity
Cropping intensity means the number of crops grown on a piece of land in one year.
At the present stage of our development, there is low level of cropping intensity as
compared to advanced countries. Cultivable area under double or multiple cropping is
inadequate in Pakistan.
15) Improper Crop Rotation
Proper turning round of crops is essential to re-establish the fertility of the land. The
constant cultivation of one crop or two; exhausts the fertility of the soil. Proper rotation of
crops is necessary in order to restore the fertility.
B.
NATURAL PROBLEMS
16) Various Plant Diseases
Various agricultural crops like cotton, sugarcane, tobacco, wheat and rice often
come under attack of pests and insects. Pests and plant diseases reduce the annual
productivity of agriculture.
17) Natural Calamities
Labour is in the hand of mankind but its result is in the hands of ALLAH in agriculture
sector. So, growth of agriculture is dominated by nature. In case if there is too much rain,
reduction in the productivity. There is 20% reduction in productivity due to unnecessary rain
and unfavourable climatic situations in Pakistan.
18) Scarcity of HYV Seeds
Our poor farmers have to use lower quality seeds due to non-availability of High Yielding
Variety (HYV) seeds. On the other hand, if seed is available they cannot be purchased due to
low income. Agricultural production is badly affected because of inferior quality of seeds.
19) Under Utilization of Land
Mostly poor population is attached with agricultural sector in Pakistan. They are
using orthodox and traditional means of cultivation. Our farmer is not interested to use the
advanced and modern means of farming, as a result area under cultivation remains under
utilized, un-utilized or mis-utilized.
C.
SOCIO-ECONOMIC PROBLEMS
20) Consumption Oriented
Our farmers have no proper records of their incomes and expenses. Mostly, they
spend more when they have more due to illiteracy. A huge part of the farmers income is
consumed on occasions of marriage, birth, death and several other rural ceremonies and
festivals in Pakistan.
21) Farmers Litigation
There are frequent and continuous litigations among the farmers directly or indirectly. They
are often seen in courts, police stations, irrigation offices, revenue boards and other official
problems. Due to mentioned problems, our farmer cannot devote his time, energy,
efficiency and labour to agricultural productions.
22) Joint Family System
Joint family system is also a big problem in agricultural sector. Our farmer is poor;
on the other hand he has to support his big family. It creates deficiency in saving and
investment. A huge part of farmers productivity is consumed at his own house.
23) Illiteracy and Ill-health
Most of the farmers, labourers and tenants in our country are illiterate. They are
untrained and inefficient to boost up the agricultural productivity. On the other side, the
health of our farmers is improper due to rural backwardness. Literacy rate is only 57.7 % in
Pakistan. Economic Survey of Pakistan shows that literacy remains higher in urban areas
(73.2 percent) than in rural areas (49.2 percent).
24) Political Instability
Political instability has affected development in all economic and social sectors.
Unfortunately, the political situations in Pakistan are not stable. It creates unrest among the
farmers to sell the productions to various industries as a raw material. On the other hand,
people hesitate to invest in agricultural sector due to political unrest.
D.
FINANCIAL PROBLEMS
25) Lack of Credit
Basically our farmer is poor and he has low level of income. Agricultural credit facilities are
not common in Pakistan. Credit that can facilitate agriculture is not available easily.
Moreover non-institutional sources are available but these are not reliable due to high rate
of interest. About 50.8% poor borrow from landlords in Pakistan.
26) Poor Financial Position of Farmers
It is a common saying about our farmer that he borns in debts, grows in debts and
dies in debts. It means that financial position of Pakistani farmer is weak and poor.
According to Pakistan Human Development Report 2003 about 57.4% poor are working
for feudal-lords without wages.
27) Instability in Market Prices
The price market of agricultural goods generally remains unstable in the country.
Cobweb theorem is very popular in case of market prices; it means that a price of one
commodity is much high in this year and much low in the next year and vice versa. The
farmers, do not get due reward from the sale of their productions. So, they remain
unsatisfied.
28) Shortage of Agricultural Finance
Agricultural credit facilities are not sufficient in Pakistan. Rate of interest on agricultural
credit is high and loan is not provided in time. According to Pakistan Human Development
Report 2003 in Pakistan about 50.8% poor borrow from landlords at very high rate of
interest.
MEASURES TO REMOVE THESE PROBLEMS
Following measures are suggested to improve the agriculture:
1) Supply of Agriculture Credit
Poor farmers cannot afford the expensive technology from their own resources in Pakistan.
So, supply of agriculture credit at easy terms and conditions is very necessary. An amount
of Rs. 85,177 million is disbursed by commercial banks in 2009 and Rs. 49 billion was
distributed by ZTBL. ZTBL issued credit or Rs. 37.4 billions during 2010-11.
2) Water Logging and Salinity Control
Water logging and salinity destroys about one million acre of land every year in
Punjab and Sindh. It reduces our cultivable area. For this purpose, installation of tube
wells, repair of canal banks and drainage of water etc. are needed. The Ministry of
Agriculture proposed to invest Rs. 18.5 billion with the objective of converting 2,00,000
acres of irrigated land to drip and shower irrigation system.
3) Construction of Dames
Sometimes, due to heavy unwanted rains and floods agricultural productivities
destroys. To tackle this problem it is necessary to construct dames and bands on rivers.
4) Provision of HYV Seed
High yielding variety seed is not available at suitable price in Pakistan. So, farmers
have to depend upon low quality of seeds that causes 20% reduction in total production.
Government should provide HYV seed at minimum price in this case.
5) Mechanization
Farm mechanization is necessary to remove the problems to agriculture sector.
Sowing, cultivation and harvesting of crops through agricultural machines increase the
productive quality and quantity.
6) Agricultural Research
Agricultural research is compulsory to remove the backwardness of agriculture

sector. Major agricultural colleges and universities are only about 16 in Pakistan.
Government should increase the research work in the field of agriculture.
7) Agro-based Industries
Agro-based industries like poultry, fisheries, dairy and livestock should establish.
These industries indirectly lead to improve the agricultural sector.
8) Tax Concessions
Mechanization is necessary to remove the problems of agriculture sector.
Government should give tax concession on imports of agricultural technologies to enhance
the process of farm mechanization.
9) Training of Farmers
Our farmers are illiterate and ill trained so, their efficiencies are poor. Government
should start special education programme for farmers and give them training about farming.
10) Prices of Agricultural Productivities
Sometimes, our farmers receive low prices of their crops. There is no proper
effective price policy of government. Government should set reasonable prices of
agricultural productions to develop the living standard of farmers.
Conclusion:
Being an agrarian country, agricultural sector of Pakistans economy is still
backward. Use of modern techniques, provision of credit facilities, basic infrastructure and
agriculture research facilities are needed to remove all the problems of agriculture sector.
CAUSES AND REMOVAL OF INDUSTRIAL

BACKWARDNESS IN PAKISTAN
DISCUSS THE MAJOR CAUSES OF INDUSTRIAL BACKWARDNESS IN PAKISTAN?
WHAT ARE THE MEASURES TO REMOVE INDUSTRIAL BACKWARDNESS?
Introduction:
Backward industrial sector is the second major sector of the economy of Pakistan.
Industrial sector plays an important role in the development process of any country.
Manufacturing is secondary economic activity after agriculture.
Origin & History:
Since the latter part of the 18 th century manufacturing as a human occupation got
much importance. The modern concept of industry-manufacturing goods began in Great
Britain in the late 18 th century.
PROBLEMS OR CAUSES OF INDUSTRIAL BACKWARDNESS:
Causes of industrial backwardness may be divided into following four major categories:
A. HISTORICAL CAUSES
1) The Policy of British Rulers
There were no favours for the Muslims due to British government, before
independence in the sub-continent. British exported the raw material at cheaper rate to
Britain so that the industrialization process in the sub-continent is to be stopped.
2) Lack of Technical Knowledge
Modern technology was introduced in the beginning of 20 th century. British used the
modern methods of production in Britain. But in sub-continent they used old method of
production in all the manufacturing units. So, quality and quantity of production was very
low it creates a bad view of our industry at world level.
3) Industrial Share
Before partition, there were 921 total industrial units in sub-continent. But out of 921
industrial units, Pakistan got only 34 industrial units that are just 3.69 % of total industrial
share. Accordingly, we started our economy without industrial sector.
B.
ECONOMIC CAUSES
4) Disputable Industrial Strategy
It is a huge barrier in the way of industrial advancement. In the history of Pakistan,
there was a policy of import substitution, in the early 1950s. There was a trend of
industrialization in the 1960s. The policy of Nationalization was adopted in Z. A. Bhuttos
period and Zia-ul-Haq adopted the policy of Privatization. The investors are always hesitant
to make investment in such situations.
5) Lack of Mineral Resources
There is acute shortage of mineral resources like oil and coal etc. These resources
are necessary for industrial development. Due to lack of mineral resources, rate of
industrial development in Pakistan is very low. Contribution of natural resources to GDP is
0.8 % in Pakistan.
6) Low Investment and Low Savings
Deficiency of capital is one more major problem in the way of industrial
development. Pakistan is fundamentally, underdeveloped and there is shortage of capital in
the country. Industrial development is impossible without capital. Sufficient capital is a
major condition for industrial development. Total investment and domestic saving are 13.4%
and 9.5% of GDP respectively.
7) Lack of Technical Know-how
There is lack of technical and skilled workers in the country due to high rate of
illiteracy. Efficiency of labour is very low due to use of backward and orthodox technology. It
is also a main cause of industrial backwardness.
8) Lack of Infrastructure
The infrastructure for industrial development is necessary. There is shortage of
infrastructure in Pakistan. For example, gas, electricity, transport, roads, railways network
and communication are not available up to the requirement of industrial development.
9) Inflationary Pressures
Rate of inflation is very high in Pakistan. The prices of imported machinery, oils,
chemicals and spare-parts are rising very sharply. These factors contribute toward
industrial backwardness. Very high rate of inflation is 14.1 % in Pakistan.
10) Inadequate Industrial Credit
There is shortage of active financial institutions in Pakistan, which may provide
credit services to industrialists according to their needs. Terms and conditions for the
provision of credit are so tight.
11) Unfavourable Industrial Structure
There are inequalities in industrial growth in Pakistan. Manufacturing of consumer
goods is preferred over capital goods. No doubt, return on consumer goods is more but
capital goods are necessary for economic development.
12) Limited Market for Capital Goods
The narrowness of domestic and foreign markets for the industrial goods is also a
major hurdle in the way of industrial development. Small size of market is due to low
purchasing power, low standard of goods and high cost of production etc.
13) Lack of Industrial Consultancy Firms

The investment in modern industries is not only costly but also risky. The capitalists
are regularly withdrawn and hesitant in investing their capital in new industrial ventures. No
doubt, deficiency of capital is a problem in Pakistan but the major problem is that existing
capital is not properly utilizing due to lack of consultancy firms.
14) Lack of Industrial Research
Research work for industrial sector is not satisfactory due to lack of technical
education and shortage of technological universities in the country. Improvement in
production and reduction in cost of production is impossible due to lack of research.
Number of technical and vocational institutions in Pakistan is more than 1522 out of which
1140 are in public sector. These are providing training to 3,00,000 persons.
15) Frequent Breakdown of Electricity
Like other power resources, electricity is also insufficient in Pakistan to meet the
domestic needs. There is irregular supply and frequent breakdown of electricity in Pakistan.
It is affecting the industrial production in the country. Growth rate of electricity and gas
sector, in Pakistan is -21.1%.
16) Economic Sanctions
Advanced countries are not willing in the improvement of backward countries. They
have created various trade zones among themselves. As a result, they import and export
among themselves. So, export volume of developing countries remains very low. On the
other hand, developed nations have imposed various sanctions on import and export with
poor nations.
17) Global Recession
The global economic recession in the last years adversely affected the growth of
manufacturing sector. The donor countries usually interfere in our internal affairs and
economic activities in the time of recession.
18) Adverse Balance of Payment
Adverse balance of payment is a new cause of industrial backwardness. To make
industrial development, we have to import modern machinery and advanced technology
from other countries. But due to shortage of foreign exchange, we cannot import such items
to make rapid economic development. Pakistan is facing the deficit of $ 8.3 billion in its
balance of payment during 2010-11.
A. SOCIAL CAUSES
19) Lack of Education
People have no idea how to set up the industry due to high degree of illiteracy. They
have no sufficient resources to start heavy projects. Efficiency of unskilled, untrained and
illiterate labour is very low that causes in industrial backwardness. Literacy rate is just 57.7
% and expenditures on education sector are only 1.8 % of GDP, which is lowest in Asia.
20) Faith & Fate
Man should work hard first and then put the result in the hands of ALLAH. Mostly,
our people are irrational, they believe on faith and fate. They do not want to take the risks.
They are working just to meet their basic needs. There is absence of commercial mind in
Pakistan.
21) Corruption
Corruption is a great evil, which is still increasing at very high rate in Pakistan. It is
found in government as well as private sector also. Due to corruption, illiterate and
dishonest workers come forward and cause industrial backwardness. Pakistan is at number
34th at the table of the most corrupt nations and at number 1 st in South Asia.
22) Climate and Weather
Climate and weather conditions are also a big cause of backwardness in various
industries. There is inter-relationship between industrial and agricultural sector. If weather
is not well, it causes agricultural backwardness and it results in industrial backwardness.
23) Cultural Disturbance
The cultural disturbances in the country have slow down the production in
manufacturing sector. In addition to this, shortage of raw material has an adverse effect on
production. There are various caste systems in the country.
B. POLITICAL CAUSES
24) Political Instability
An additional cause of industrial backwardness is political instability. Since partition,
political situation of Pakistan is not satisfactory. There are regular changes in the
governments and government policies. Domestic as well as foreign investors feel risk in
making investment due to political unrest. All these result in industrial backwardness.
25) Kashmir and Water Issues
Since freedom, the Kashmir problem has been disturbing our economy. People in
Pakistan remain worried about the danger of war with India due to Kashmir and water
issues. So, Pakistani and especially foreign people hesitate to invest.
26) Burden of Refugees
At the time of partition, Pakistan had to face a serious problem of refugees coming
from India and there was shortage of resources in Pakistan. But now Pakistan is also facing
this problem in the form of Afghan refugees.
27) Wars with India
The two big wars fought in opposition to India in 1965 and 1971. It creates a lot of
economic problems. Now situation is that both Pakistan and India has to keep up a huge
part of their budget for defense.
MEASURES OR SUGGESTIONS TO IMPROVE INDUSTRIAL SECTOR:
The following measures are suggested to improve industrial sector of Pakistan:
1) More allocation of funds for industrial research is required, which is necessary, for the
industrial development.
2) Industrial sector can be promoted by increasing capital .
3) Saving and investment should be increased to develop industrial sector.
4) To promote industrial sector, there should be technical know-how.
5) Tax concession is also needed to increase the investment in new industries.
6) In time supply of raw material is necessary for the improvement of industrial sector.
7) Advanced infrastructure is necessary for industrial development of Pakistan.
8) Financial institutions should provide credit facilities to industrial sector at flexible terms
and conditions.
9) There should be expansion of markets, at domestic and foreign level, of industrial goods.
10) Foreign investment should be encouraged; more incentives should be given to investors.
11) Political stability is compulsory for the development of industrial sector.
12) High degree of technical education is required to produce skilled, technical and efficient
work force.
13) Problem of load-shedding and irregular supply of electricity should be removed.
14) Commercial policy and self-reliance policy should be adopted to remove industrial
backwardness.
15) Foreign exchange reserves and the balance of payment position should be favourable to
develop industrial sector.
Conclusion:
All above factors are causing industrial backwardness. Backwardness is not bad but
remaining backward is so bad. So, Pakistan is needed to make industrial development
through:
Use of advanced technology
Development in infrastructure
Provision of credit facilities
Increase in industrial consultancy firms
BASIC, MAJOR AND COMMON

CHARACTERISTICS OF DEVELOPING
COUNTRIES LIKE PAKISTAN
DISCUSS IN DETAIL THE BASIC CHARACTERISTICS OF DEVELOPING COUNTRIES

LIKE PAKISTAN.
Introduction:
The total major countries of the world are 182 out of which only 34 are
developed and remaining 148 are under developed. Developing Country (DC) is a
nation which, compare to developed nations, lacks industrialization, infrastructure,
developed agriculture developed natural resources, and suffers from a low per capita
income as a result. Developing countries and developed countries are differentiating on
the bases of self-esteem, freedom of choice and influence of externals. A country where
the average income of the people is much lower than that of developed countries, the
economy depends upon a few export crops and where farming is conducted by primary
methods is called developing country. Rapid population growth is causing the shortage of
food in many developing countries.
Developing Country:
Developing countries are also called under-developed nations (UDN) or the South. Most
of them are in Africa, Asia and Latin America.
According to Prof. R. Nurkse:
Under developed countries are those which when compared with the advanced countries,
are under-equipped with capital in relation to their population and natural resources.
Developed Country:
A group of industrialized nations including Australia, Austria, Canada, France,
Germany, Italy, Japan, the UK and the United States . In some contexts such countries are
collectively called the North.
According to Kofi Annan , former Secretary General of the UN:
"A developed country is one that allows all its citizens to enjoy a free and healthy life in a
safe environment."
Definitions of Developing Nations:
According to United Nations Experts:

A developing country is that in which per capita income is low when compared to the per
capita incomes of U.S.A., Canada, Australia and Western Europe.
According to Prof. R. Nurkse:
Under developed countries are those which when compared with the advanced countries,
are under-equipped with capital in relation to their population and natural resources.
According to Michal P. Tadaro:
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.).
Criteria to an Under-developed Nation:
Potential to become economically developed.
Low or no rising trend of per capita income.
Countries very poor in resources.
Prof. Harvey Leibenstein, in his Economic Backwardness and Economic Growth divides
these characteristics into four categories :
A. ECONOMIC CHARACTERISTICS
Following are the economic characteristics of UDCs:
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, illclothed 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.
10020 billion (55.5 % of GDP) and the value of external debts and liabilities is $ 59.5 billion
and its services charges are $ 7.8 billion in 2010-11 in Pakistan.
3- Low Per Capita Income
Due to low national income and huge 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 2010-11 per
capita income of Pakistan is $ 1254.
4- Over Dependence on Agriculture
61% Population of Pakistan is living in more than 50,000 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; unorganized agriculture market etc. 66.7% population is directly or indirectly depending on
agriculture sector in Pakistan. It contributes to GDP 20.9 % while in advanced nations it is
less than 10 %. It employed 45.0 % of labour force while it is less than 5 % in developed
countries.
5- 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 in 1947.
Small and backward industrial sector is based on low level of capital formation, technology,
training and education and over dependence on agriculture sector. 13.2 % labour force is
attached with industrial sector in Pakistan. Its share to GDP is 25.8 % and to exports is
about 60 %.
6- Unemployment
An outstanding problem of developing countries is their high rate of un-employment,
under-employment and disguised-unemployment. More than 3.05 million people are
unemployed in Pakistan. There is 16 % underemployed and 20 % disguised unemployed of
total labour force. Unemployment rate is 5.6 %; it is mainly due to high population growth
rate, which is 2.1 %.
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
Third world countries have to import some finished and capital goods to make
economic development, on the other hand they have no products to export but raw
material. During July-March, its exports were $ 24 billion and imports were $ 32.3 billion In
case of Pakistan. So, its deficit balance of payment was $ 8.3 billion in 2010-11.
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: Co-existence of modern and traditional
methods of production in urban and rural areas, Co-existence of wealthy, highly educated
class with a large number of illiterate poor classes and 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 9.5% of
GDP and total investment is 13.4% 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. Natural resources are available in various poor
countries 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,
improper government actions and limited home market. Natural resources contribute to the
GDP about 1%.
12- Market Imperfection
Market is imperfect in accordance with market conditions, rules and regulations in
the most of developing nations. There exist monopolies, mis-leading information, immobility
of factors; hoarding and smuggling etc. that cause the market to remain imperfect.
13- Limited 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 $
32.3 billion and exports are $ 24 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 she is poor.
15- Inflation
High rate of inflation causes economic backwardness in poor nations. Due to high
level of price, purchasing power, value of money and saving of the consumers tend to
decrease. Rate of inflation (CPI) is 14.1% in 2010-11 in Pakistan.
B. DEMOGRAPHIC CHARACTERISTICS
Following are the demographic characteristics:
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 177.1 million
with the rapid growth rate of 2.1 % and death rate 0.73 % in 2010-11. Pakistan is at
6th number in the list of the most populous nations. Basic needs like food, clothing, housing,
education, sanitations and health facilities are not available for the huge portion of
population in these countries.
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 66.04 year against 78 years in developed countries. One Doctor
is for 1222 persons and one Nurse is for 2369 persons, number of hospitals is 972 and one
hospital bed is available for 1701 persons. The total expenditure on health sector is just
0.23 % of the GDP.
18- Pollution
There is too much pollution in poor 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-installation of treatment plants. Number of continuous air pollution
monitoring stations is only 7 in Pakistan. Pakistan is at number 29 th at the chart of the most
polluted nations and at number 6 th in Asian countries.
19- Brain Drain
An outflow of the best, brightest and talented student from poor nations to rich
nations is called brain drain. There is less reward for the talent, which causes an outflow of
best brain in the backward countries. Reward is not paid in accordance with the capability,
skill and efficiency in less developed countries.
20- Inadequate Infrastructure
Adequate infrastructure is needed which is not available in poor economies to
enhance the process of economic development. Roads, transport, telecommunications,
sanitation, health and education facilities are not at their best level in these nations;.
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 LDCs:
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 57.7 % during 2010-11. Expenditure
on education sector is just 1.8 % of GDP.
22- Low Level of Organization
There is absence of developed minded leadership in economic activities in third
world nations. Decision making power of entrepreneur is very low due to illiteracy, less
training and backward techniques. Most of educational institutions are producing
employees rather than employers.
23- Low Self-esteem
There is less respect, honour and dignity of people in the lower developed
countries. People are honoured due to their powers, relations and castes instead of
capabilities. There is poverty, poor health, poor education and shortage of other social
services. Government and population of poor countries are under the external influence.
24- Un-productive Expenditures
Population mostly copies the styles of population of developed nations due to
demonstration action in poor economies. 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. which reduces their savings and
investment.
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 level of economic
development.
26- Influence of Feudal Lords
The poor class is under the influence of feudal lords and tribal heads in lower
developed nations,. 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
The unproductive expenditures are rising day by day in developing countries like
Pakistan due to socio-economic and administrative reasons. 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
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 in poor countries. 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
Revenues and expenditures policy of government 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. Use of advanced technology is impossible due to
shortage of capital, lack of skill and training, high cost of production and lack of foreign
exchange reserves. 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
People have to move abroad for advanced study due to illiteracy and lack of
training institutes. They adjust them in foreign countries due to low remuneration and less
self-esteem. 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.
ROLE AND PROBLEMS OF TECHNOLOGY IN

THE ECONOMIC DEVELOPMENT LIKE PAKISTAN
At the early stage of classical economists for economic growth and development,
labour was the only factor of production. Later on neo-classical economists introduce the
capital as a major factor of growth and development. But, today use of modern technology
is the most important item of economic growth and development.
Meaning:
The application of science, especially to achieve desirable industrial and commercial
objectives is called technology. In other words technology refers to a technique of
production that gives large and superior quality of production within a short span of time.
Definitions:
In simple words:
Technology is the use of knowledge or the mechanical arts and applied sciences to
business, trade, commerce and industry.
According to David N. Hyman:
Technology is the knowledge of how to produce goods and services.
Explanation:
At present technology is necessary for every nation. Without technology a nation
cannot get all its requirements. Technology is cause of improvement of physical and human
capital.
Technology comes into a country by following ways: Inventions Innovations
1.
2.
3.
4.
5.
6.
7.
ROLE OF TECHNOLOGY IN ECONOMIC DEVELOPMENT

Agricultural Growth
For a long time old seeds, traditional techniques, ploughs and waste & garbage etc.
were used in agriculture. So, the productive quality and quantity was very low. But due to
use of modern techniques of production, there is invention of High Yield Variety (HYV)
seeds, fertilizers, threshers, tractors and harvesters, tube-wells and water pumps,
insecticides, weedicides and pesticides all this result in growth and development of
agriculture. Growth rate of agriculture sector is 2.0 %.
Industrial Development
In the past, life was limited of limited population. In easy life, the use of industrial goods
was very low. But now in modern age, use of industrial goods is increasing day by day.
Rapidly increasing population is also demanding more industrial goods. In this situation,
industrial growth and development is necessary which is possible due to use of
technology. Growth rate of industrial sector is 4.9 %.
Increase in Employment Opportunities
Due to use of technology, better quality and quantity of various goods can be produced.
This will lead to increase in the demand for labour. Increase in the demand for labour will
reduce the unemployment. Rate of unemployment is 5.5 % that is very high in Pakistan.
Increase in Factors Productivity
Technology plays very important role in increasing the productivity of factors of
production. Modern technology is helpful to increase the efficiency of labour, which results
in increase in production and standard of goods. Value of annual productivity of labour in
Pakistan is $ 100.
Reduction in Poverty
Use of technology is also caused in reduction in poverty. Use of technology makes it
possible to reduce in cost of production that results in fall in price level. Availability of high
standard goods at low prices increases the real income of the people and increase in the
purchasing power. Technology opens the new economic sector that creates more jobs for
unemployed population. All this results in reduction in poverty. 21.0 % population is living
below poverty line in case of Pakistan.
Time Saving
Today, time is considered as a power and life is so busy. Lengthy and old production
process is not affordable now. Technology is helpful to shorten the lengthy production
process, it caused in quick yielding and rapid return. Due to technology, production quality
and quantity can be improved in minim time period.
Cost Minimization
Because of modern technology, the firms are in a position to reduce the cost of
production. By employing technology it is possible to use the same raw material for more
output or same output by using less quantity of raw material. On the other hand, wastage of
large industries can be used in small industries as a raw material, which caused in
reduction in cost of production.
8.
Increase in Marginal Efficiency of Capital (MEC)
Marginal efficiency of capital is the rate of return or profit on capital invested. With the
help of technology, a firm can use the capital effectively. There is less wastage and more
increase in the efficiency of labour that results in increase in the marginal efficiency of
capital.
9.
Increase in Investment
16.6 % investment of GDP is not desirable for the economic development in Pakistan.
Use of technology caused to increase in profit margin of the producer. Increase in profit
margin will leads to increase in flow of investment. At least 25 % investment is needed for
economic growth and development.
10.
Expansion in Foreign Trade

Use of modern techniques of production leads toward better quality and quantity of the
products. In foreign trade there is stiff competition among different countries of the world.
Use of technology enables a country to compete with other nations, expansion in foreign
trade and to earn more foreign exchange reserves.
11.
Increase in Foreign Exchange Reserves
Foreign exchange reserves of poor nations like Pakistan are very short. Our imports are
higher than our export that causes scarcity of foreign exchange reserves. Due to
technology, it is possible to produce import substitutions and exportable goods. So,
technology will help a country to increase its foreign exchange reserves. Foreign exchange
reserves of Pakistan are $ 15.0 billion.
12.
Best Use of Capital
Capital is an important factor of production. Technology is useful to use the capital in
the best way. Technology can increase in production and standard of goods in minimum
time period. So, the return on capital will increase due to use of technology. Profit margin of
the producer also increases with the use of technology. Rate of capital formation is only
5%.
13.
Specialization
Technology is helpful to increase the division of labour and specialization in all sectors
of economy. Due to technology, division and specialization is possible which leads to
inventions and innovations. Division of labour and specialization are helpful to increase in
production quality and quantity.
14.
Discovery of Natural Resources
The nature has hidden a lot of its deposits under lands, seas, mountains and in the
atmosphere. It is the modern technology that enables the man to find, explore and utilize
these resources. Without technology, we cannot use these resources like oil, gas, iron,
coal, gold, silver, copper etc. for the betterment of mankind. Share of natural resources to
GDP is less than 1 % in Pakistan.
15.
Optimal Use of Resources
Optimal use of resources without using advanced technology is impossible. Backward
country can remove its poverty through using modern techniques of production. In
developing countries including Pakistan, technology is very helpful to use properly available
resources to make development.
16.
Development in Infrastructure
Technology itself is a component of infrastructure. However with its use countrys
infrastructure developed. Such as the use of atomic energy, use of CNG in place of petrol,
use of computer, improvement of transport and communication network etc. Government
has reserved an amount of Rs. 133 billion to develop the infrastructure in the country.
17.
Price Stability
Another role of technology is price stability. Sometimes, due to shortage of production
there is increase in the prices of some products. Use of technology makes it possible to
produce more within limited time period that helps to maintain the price stability. Rate of
inflation in Pakistan is 13.3 %.
18.
High Living Standard
Reduction in poverty and inflation, more opportunities of employment and sufficient
availability of goods and services are the symbols of high living standard. Accordingly,
technology also helps to develop the living standard of a nation.
19.
Increase in Productivity
In developing countries like Pakistan, still backward methods of production are being
used. But use of technology makes it possible to increase the quality and quantity of
production in short time.
20.
Better Quality of Product
Through adopting technology, better goods can be produced in a large quantity.
Technology is helpful in discovering new designs of the commodities. There is reduction in
technical defects of the production due to the use of technology.
21.
Improvement in Efficiency of Labour
Due to illiteracy and low level of training, our labour is less efficient. Technology has
also improved the efficiency of labour output per hour. Due to the use of modern tools and
implements, efficiency of labour increases that results in more and better output.
22.
Breakdown of Vicious Circle of Poverty
Uses of technology encourage the saving and increase in investment. Technology
improves the efficiency of labour and removes the instability in prices. Accordingly, vicious
circle of poverty can be removed with the help of technology. 21.0 % population living
below poverty line in Pakistan.
23.
Rapid Rate of Capital Accumulation
Rate of capital formation is just 5 % in Pakistan, which is very low as compared to the
advanced countries. Low rate of capital formation leads to poverty and unemployment.
Technology is helpful to increase the capital formation rate for the economic growth and
development. Rate of capital formation should be 20 % to 25 % for economic development.
24.
Economies of Large-Scale
It is impossible to operate large-scale industries without use of technology. Use of
technology helps to the producer to manage the business at large-scale. Use of technology
causes to install, operate and maintain the industry at large-scale. Due to use of
technology, achievement of economies of large-scale is possible.
25.
Expansion in Market Size

In developing countries like Pakistan, market is so limited. Technology causes in more
output and more supply of goods, which enlarges the market size. Technology expands not
only domestic market but also foreign market.
26.
Removal to Economic Backwardness
Poor countries can remove their economic backwardness through using technology.
Technology increases the rate of growth in all sectors of an economy. More and better
products are available for population. Use of technology enhances the process of economic
development and removes the economic backwardness.
27.
Development of By-Products Units
Use of technology is helpful in establishing by-products units. By-products units refer to
those, especially small industries, which use the waste of large industries as a raw
material. With the use of technology, it is possible to establish the board, chipboard and
hard board industry because it uses the wasted straw of sugar industry.
28.
Helpful for Research
Technology has led to increase of huge investment in scientific research in various
sectors of an economy. This scientific research can be used to develop the various sectors
of economy.
29.
Inventions and Innovations
Due to use of modern technology, there is division and specialization of labour.
Specialization is the foundation for high standard of the goods that leads to inventions and
innovations.
PROBLEMS -OR- OBSTACLES IN WAY OF TECHNOLOGY IN PAKISTAN
1.
Deficiency of Capital
Cost of advanced technology is very high. Poor countries cannot use the technology
due to deficiency of capital. Domestic savings are 9.9 % of GDP and investment is 16.6 %
of GDP.
2. Illiteracy
Due to illiteracy, our labour is less efficient and less trained. Accordingly, our labour
cannot use the modern technology appropriately. In Pakistan, literacy rate is 57 %. On the
other hand expenditure on education sector is 2.0 % of GDP.
3.
Traditionalist Society
People are backward in developing countries like Pakistan. They are passing
subsistence life and they do not want to use modern techniques of production.
4.
Import of Technology
Import of technology itself is a big problem. In developing countries, there is shortage of
foreign exchange to import the technology.
5.
Adverse Balance of Payment

Import of technology causes more increase in imports of the poor countries. It creates
more gaps between the imports and exports. It results in deficit in balance of payment. At
present, deficit in balance of payment is $ 10.945 billion.
6.
Limited Home Market
The markets are limited in their size in developing countries like Pakistan, while the
advanced technologies are concerned with the industries of large-scale.
7.
Lack of Natural Resources
In Pakistan, natural resources are available. But these resources are remained unused, ill-used and mis-used. That feels no need for advanced technology. Natural
resources contribute to GDP less than 1 % in Pakistan.
8.
Backward Social Set-up
The orthodox and backward social set-up is also an obstacle in the way of use of
modern technologies. People are not ready to use modern instruments and thinking.
9.
Lack of Foreign Exchange Reserves
Foreign exchange reserves are necessary to import the modern technology but
Pakistan has shortage of foreign exchanges reserves. Foreign exchange reserves of
Pakistan are $ 15.0 billion.
10.
Backward Economic System
Most of the developing countries are using the backward economic systems, which are
also a hurdle in way of economic development. Implementation of Islamic economic system
is required for economic growth and development.
11.
Monopoly of Developed Countries
Advanced technology is under the influence of advanced countries. They charge higher
prices while transferring technology to poor countries. Sometimes, advanced nations
transfer backward and out-dated technology to poor nations.
12.
Lack of Infrastructure
Technology without infrastructure in developing countries is impossible. Transports and
communications are not available in fully advanced form in Pakistan. There is shortage of
sanitations and health facilities. Supply of electricity is also less and irregular.
Conclusion:
Now, in any production process, technology is as important as factors of production.
By employing the modern technology, economic growth and economic development is
possible. If a country uses backward methods of productions it will remains backward
forever.
MAJOR OBSTACLES IN THE WAY OF ECONOMIC

DEVELOPMENT OF PAKISTAN AND OTHER
THIRD WORLD COUNTRIES
A.
B.
C.
D.
E.
There are many barriers and difficulties in the way of economic development of less
developed countries. Development for developing nations is desirable but not achievable
due to a lot of hurdles. These obstacles are grouped into the following five categories:
Economic Obstacles
Social Obstacles
Cultural Obstacles
Political Obstacles and
Administrative Obstacles
A. ECONOMIC OBSTACLES
Some of the main economic obstacles are given below:
1- Deficiency of Capital and Foreign Exchange
There is scarcity of capital and foreign exchange in Pakistan. Lack of capital and
foreign exchange are a big hurdle in way of economic development. Per capita income is
very low i.e., $ 1095. Low level of per capita income results in low saving and low
investment. Domestic saving is just 9.9 % of GDP in Pakistan; it should be 25 % for rapid
economic development. Foreign exchange reserves of Pakistan are just $ 15.0 billion.
2- Vicious Circle of Poverty
According to Ranger Nurkse, vicious circle of poverty is the greatest obstacle in way
of economic development. In developing countries there is low income that leads to low
saving and low investment. Low level of investment causes low rate of capital formation,
which stops the economic development. Rate of capital formation is just 5%.
3- Backward Natural Resources
No doubt, developing countries including Pakistan have rich and many resources.
But due to backward state of technology these resources are un-utilized, under-utilized or
mis-utilized. So, the improper utilization of natural resources is also a hurdle in the
development procedure. Share of natural resources to GDP is less than 1 %.
4- Backward State Technology
Use of backward technology is another problem of economic development. Due to

use of backward technology productivity level of our labour and its efficiency is very low.
Productive quality and quantity is also inferior due to use of old means of production.
Annual value of productivity of our labour is about $ 100 as compare to the more than
$2500 in advanced countries.
5- Inflation
High rate of inflation is also a hurdle in way of economic development. Rate of
inflation is 13.3 % in Pakistan. Due to inflation purchasing power of people decreases, their
consumption increases and saving decreases. Low saving leads to less investment and a
country remains poor and backward.
6- Low Per Capita Income
Per capita income of Pakistan is very low as compared to the rich nations. Low per
capita income is due to low level of national income and high rate of population growth.
Low per capita income results in low saving and low investment. So, in the economy,
capital formation rate is low that is a serious obstacle in way of economic development. Per
capita income in Pakistan is $ 1095.
7- Internal and External Debts
To operate some major projects, government has to take loans from national and
international resources. These debts and their services charges are increasing day by day.
While taking loans from abroad we have to follow the terms and conditions of foreign
donors that is the obstacle in our growth and development process. Today, the burden of
total public debts is Rs. 8160 billion and an external debt is $ 53.9 billion.
8- Dependence on Agriculture
In Pakistan, about 68% population is living in 46,894 villages. Their main occupation
is agriculture that is at backward stage. Old methods of cultivation, less credit facilities,
unorganized markets and limited irrigation facilities are factors, which are hurdle in the
process of economic development. Total cropped area of Pakistan is 23.8 million hectares
which is about 28% of total area.
9- Dualistic Economy
Dualistic economy refers to the huge difference between various economic sectors.
There are vast regional and income disparities in Pakistan. There is co-existence of fully
advanced and fully backward state of technology in the same sector at the same time.
Similarly, population of Pakistan is very rich and very poor; it is also a hurdle in economic
development.
10- Deficit Balance of Payment
Pakistan is facing the persistent deficit in its balance of payment since 1947 with the
exception of 5 or 6 years. Higher imports volume than exports are an obstacle in way of
economic development. At present, imports of Pakistan are $ 25.107 billion, exports are $
14.162 billion and deficit in balance of payment is $ 10.945 billion in 2009-10.
B. SOCIAL OBSTACLES
These are the major social obstacles in way of economic development of Pakistan:
11- Illiteracy
Only 57 % population is literate in Pakistan. Due to illiteracy our farmer and
industrialists are ignorant. Efficiency and productivity level of our labour is poor due to
illiteracy. Use of modern techniques of production is impossible due to illiteracy.
Accordingly, illiteracy is a difficulty in way of economic development.
12- Low of Living Standard
Low level of living is a hurdle in the way of economic development. Our population is
backward and its growth rate is as high as 2.05 %. Poor population is not provided
appropriate facilities to make high standard of life. Low level of living, low income,
inadequate housing facilities, poor health etc. are the problems of economic development.
13- Joint Family and Caste system

Joint family system is also one of the main obstacles in the way of economic
development. In joint family system all the members of the family do not work. They depend
upon one another. Similarly, due to caste system rich and superior class do not work hard.
32.17 % population is working and 67.83 % is depending upon them in Pakistan.
14- Unproductive Expenditure
Most of the expenditure of people is unproductive like expenditure on various rural
fairs and festivals. People in developing countries prefer to keep resources in cash form in
lockers at home. They invest in real estates and in gold and silver ornaments. These
resources can be used for economic development.
15- Consumption Oriented Society
Most of the population of Pakistan is consumption oriented. People have to make
huge consumptions due to demonstration effect. Due to posh locality, friends and relatives
people have to adjust their consumption styles. Consumption of people is very high due to
fulfillment of customs, traditions and habits.
16- Rapidly Rising Population
In developing countries like Pakistan population growth rate is very high i. e., 2.05 %.
The rapid backward population growth is also a hurdle in way of economic development.
This rapidly increasing population leads to starvation and various social crimes.
C. CULTURAL OBSTACLES
Cultural obstacles are given below:
17- Customs and Traditions
In developing countries like Pakistan, people spend huge portion of their incomes on
customs and traditions. Sometimes they have to take part in the arrangements of rural
festivals that reduce their savings. People have to spend more on marriage, birth and death
times in our country.
18- Wastage of Resources in Litigations
Legal process is very costly and lengthy in Pakistan. Especially, the large part of our
farmers income is wasted in litigations. It is wastage of resources and reduction in the rate
of saving.
19- Low Participation of Women
Almost 49 % population is female in Pakistan and out of them only 20 % takes an
active part in economic activities. These facts are showing a little participation of women in
economic activity that is also an obstacle in the way of economic development. Woman
labour force is just 10.96 million.
20- Out-flow of the Best Brain
Brain drain is also a problem in way of economic development. In our country,
honour, dignity, self-esteem and authorities of qualified person is very low. So, they are
bound to go abroad to provide their services for other nations.
21- In-efficient Entrepreneur
Due to illiteracy and lack of training institution in our country entrepreneur is inefficient. In-efficient entrepreneur is a cause of economic backwardness. Illiterate
entrepreneur cannot maintain the proper record of his business to earn maximum profit.
D. POLITICAL OBSTACLES
These are political obstacles in the way of economic development:
22- Political Instability
There is political instability in Pakistan; the policies of the government are also
instable. Due to political instability, rate of economic growth and development remains low
in all the sectors of the economy. Investors feel hesitation while making investment if
political situation is not stable.
23- Mis-use of Authorities
Mis-use of authorities and powers is a big problem in the way of economic

development. Mis-use of authority leads to corruption and nepotism. Accordingly, there is
no regard for talented, intelligent and brilliant brain.
24- Insincere Leaders
Politics in Pakistan creates insincere leaders. Political leaders have no interest with
the welfare of population but their own interest. In Pakistan rich industrialists join politics to
safeguard their industries. The Feudals involve in politics for the sake of status and power.
25- Changes in Fiscal Policy
In developing countries there are frequent changes in fiscal policy. Change in price level
and tax rate is a common practice. It is also a hurdle in economic development.
E. ADMINISTRATIVE OBSTACLES
Following administrative obstacles are problems in the way of economic development:
26- Corruption
In developing countries most of the officers are included in the curse of corruption.
Sometimes, they have to make corruption due to any big administrative or political
pressure.
27- Favouritism and Nepotism
Nepotism means selection according to relationship, not according to ability. In
developing countries like Pakistan, there is favouritism and nepotism, which causes in
economic backwardness. Preferences are given to the friends and relatives for the jobs.
28- Lengthy Legal Process
In developing countries law and order and legal process is very lengthy and costly.
To obtain social justice, people have to waste their income and time. People have to
depend upon the mood of the officer for their work in Pakistan. The official matters and
domestic problems are highly inter-related.
29- Mis-use of Authorities
In our country, use of authorities is not reasonable. Officers use their powers for
their personal interest. They give first preference to their own benefits and second
preference to the public welfare.
30- Law and Order
Improper situation of law and order is also a problem in the way of economic
development. Law and order conditions are not satisfactory in case of Pakistan. Here, Chief
Justice Iftikhar Muhammad Chohdery was demanding for justice and justice was not
provided him for a long time.
Conclusion:
Economic development in developing countries is facing a lot of problems. It is very
difficult to remove all these obstacles but not impossible. Government should adopt selfreliance policy and adopt modern technology to remove these complications.
what are the MAJOR MOTIVES AND

OBJECTIVES of economic development?
The process in which simple, low-income national economies are transformed into
modern industrial economies. The term Economic Development is sometimes used as a
synonym for economic growth; generally it is employed to describe a change in a country's
economy involving qualitative as well as quantitative improvements.
A.
C.
D.
1)
3)
4)
5)
Origin and History:

Economic development first became a major concern after World War II. Developing
countries to compare their economies with the developed countries, which were understood
to be Canada, the United States, European countries, Japan, South Africa, Australia, and
New Zealand.
Economic Development:
Definition.
It refers to the process whereby the total supply of goods and services of the society
increases leading towards improved living standard.
According to Micheal P. Todaro:
Development must be conceived (considered) for as a multi-dimensional process involving
major change in social structures, popular attitudes and national institutions as well as the
acceleration of eco-growth, the eradication (end) of poverty and reduction of inequality of
wealth.
According to Kindle Berger:
Economic development relies both on more output and changes in technical and
institutional arrangements by which it is produced and distributed.
MAJOR MOTIVES AND OBJECTIVES OF ECONOMIC DEVELOPMENT:
Following are the major objectives of economic development in Pakistan. These may be
divided into four parts:
Economic Objectives
B. Demographic Objectives
Cultural & Political Objectives
Technological & Miscellaneous Objectives
A. ECONOMIC OBJECTIVES
Following are the economic objectives of economic development:
To Reduce Poverty
The most of the developing countries including Pakistan are facing the problem of
general as well as absolute poverty. Poverty is not only itself bad but it produces a lot of
economic and social crimes. Reduction in poverty is one of the main goals of economic
development. 21.0 % population was living below poverty line in Pakistan during 2009-10.
2) To Reduce the Burden of Internal and External Debts
Economic development helps a nation to adopt the self-reliance policy. Poor nations
like Pakistan are loans and grants receiving nations. The most of the developing countries
are receiving domestic and foreign loans. Another aim of economic development is to
reduce the burden of debts. Burden of foreign debt on Pakistan is $ 53.9 billion.
To Increase the Per Capita Income
Per capita income of developing countries is very low. Economic development leads
to increase in per capita income of poor countries. Increase in PCI leads to more saving
and more investment. High per capita income is a symbol of progress and prosperity. Now
per capita income of Pakistan is $ 1095.
Development of Agricultural Sector
Backward agricultural sector is the largest sector of the economy of Pakistan. Here
due to use of traditional means of production productive quality and quantity is very low.
Economic development is required to develop the backward agricultural sector that is
essential for a country. Contribution of agricultural sector to GDP is 21.5 %.
Development of Industrial Sector
Industrial sector is the second largest sector of our economy. Since partition,
development of industrial sector is not satisfactory. Economic development also helps to
develop the industrial sector. Without industrial development progress and prosperity is
impossible. Share of industrial sector to GDP is 25.2 %.
6)
To Reduce Unemployment
One more objective of economic development is to reduce the unemployment.
Unemployed population is a burden on our economy. Economic development creates new
employment opportunities. Rapidly raising population creates a problem of unemployment
that can be solved through economic development. Rate of unemployment in Pakistan is
5.5%.
7) To Enhance the Productivity Level
Productivity level in agricultural and industrial sector is very low in Pakistan. Another
objective of economic development is to increase the productivity level with the help of
using modern technologies.
8) To Correct the Balance of Payment
Since 1947, usually Pakistan has been facing deficit in its balance of payment. It is
due to more imports and less exports. To correct the balance of payment economic
development is necessary. Economic development will increase the exports and decrease
the imports of a country. During July - March 2009-10 deficits in balance of payment was
$10.945 billion.
9) To Remove the Deficiency of Capital
Pakistan is also facing the problem of shortage of capital. Economic development
will increase the income of people and overall nation. It will lead to more saving and more
investment. So, economic development is helpful to remove the deficiency of capital.
Economic development will increase the rate of capital formation. Total investment and
domestic savings are 16.6 % and 9.9 % respectively in Pakistan.
10) To Use Resources Optimally
Economic development enables a nation to utilize the existing resources optimally.
Developing counties have a lot of natural resources that remains un-utilized, under-utilized
or mis-utilized due to poor state of technology.
11) To Remove Market Imperfection
Market forces in developing countries are not acting freely. Monopolists have a
complete control over the economy. They create artificial shortage of goods to charge high
prices. Problems of market imperfection can be removed through economic development.
12) To Remove the Vicious Circle of Poverty
According to Ragnar Nurkse, vicious circle of poverty is the biggest reason of
backwardness of developing countries. Economic developments will lead to remove the
vicious circle of poverty. Due to vicious circle of poverty national income, national savings
and national investments all are very low. 21.0 % population is living below poverty line in
Pakistan.
13) To Control Inflation
High rate of inflation in developing counties is also creating a lot of problems.
Economic development is required to control the increasing inflation. Now rate of inflation
(CPI) is 13.3 % against the 22.3 % in last year. Food inflation is 14.5 % and non-food
inflation is 12.2 %.
B. DEMOGRAPHIC OBJECTIVES
Following are the demographic objectives of economic development:
14) To Improve the Living Standard
Population is rapidly increasing in developing countries. On the other hand already
existing population has non-availability of basic needs. Living standard of population is very
low in Pakistan. Economic development also contains the objective to improve the living
standard of population. The living standard of 21 % population is very low in Pakistan.
15) To Remove Pollution
Due to industrialization in poor countries, the air pollution and water pollution is
common. Economic development will lead to installation of treatment plants which will
reduce pollution. Pollution is creating a lot of diseases and causing the efficiency of labour.
16) To Achieve Better Health
Developing countries have less health facilities. Economic development causes, the
production of more and better instrument for treatment. Reduction in death rate and
improvement in life expectancy is possible due to economic development. Expenditure on
health sector is 0.5 % of GDP.
17) To Check Brain Drain
Brain drain is the out flow of best brain. It takes place due to misuse of their talents
and abilities. Economic development has an aim to engage these people within the country,
which is better for a nation.
18) To Develop Infrastructure
Better infrastructure like education system, better health facilities, sanitation and
quick means of transportation & communication creates attraction for foreign investment.
An additional objective of economic development is to develop the infrastructure facilities.
A. CULTURAL & POLITICAL OBJECTIVES
Following are the cultural & political objectives of economic development:
19) To Attain Higher Education
An extra target of economic development is to provide higher education to
population within the country. In Pakistan literacy rate is very low. Low literacy rate leads to
backwardness and ignorance in population. Literacy rate is 57 % and amount allocated for
education is 2.0 % of GDP in Pakistan.
20) To Control Un-productive Expenditure
Our government has to allocate a huge amount for un-productive expenditures.
Objective of economic development is to control the un-productive expenditure.
Government has to pay 2.9 % of GDP as an interest charges on internal debts.
21) To Maintain Political Stability
Political situation is not satisfactory in Pakistan. There is instability in government
and its policies. An extra objective of economic development is to maintain political stability.
Government is strongly criticized by almost the whole population in Pakistan.
22) To Remove the Feudalism
Feudal-lords and landlords are exploiting poor tenants. One more objective of
economic development is to remove the bad role of feudalism.
23) To Productive Use of Funds
An additional objective of economic development is to use the funds of government
in productive ways. Use of funds must provide more utilities to public. It will increase the
social welfare.
24) To Stabilize the Polices
Stability in fiscal and monetary polices is necessary for the economic stability.
Another aim of economic development is to maintain the stability in various policies.
B. TECHNOLOGICAL & MISCELLANEOUS OBJECTIVES
Following are the technological and miscellaneous objectives of economic development:
25) To Use Modern Technology
The purpose of economic development is to enable a country to use modern
technology. Use of modern technology will lead to more output and better quality.
26) To Reduce the Dependence
Developing countries have to depend upon rich countries. Poor countries receive
loans and grants from them. So they interfere directly in the policies of developing countries
for their own interests.
27) To Fair Distribution
Distribution of resources is not suitable in Pakistan. A lot of resources are in the
hands of only some people. Fair distribution of resources is also an objective of economic
development. 20% extremely rich population has 50.02 % of national resources, while 20%
poorest population has just 6.37 % of national resources in Pakistan.
28) To Improve Skill
Economic development improves the skill and training of worker. It increases the
efficiency of labour that causes more and better output.
29) To Self Reliance
Adoption of self-reliance policy is possible due to economic development. Economic
development reduces the dependence on other countries and their interference.
30) To Develop Money Market
Another motive of economic development is to develop the money market.
Developed money market is essential for a country. It will create social welfare for
population. Growth rate of finance sector is 3.6 %.
Conclusion:
Today, economic development is compulsory for every nation. Without economic
development social welfare, progress & prosperity, high living standard and reduction in
poverty & unemployment are impossible.
Natural Resources of Pakistan

WHAT ARE THE MINERAL, POWER, WATER AND FOREST RESOURCES OF

PAKISTAN? DISCUSS THE INFLUENCE OF RESOURCES ON ECONOMIC AND SOCIAL
DEVELOPMENT.
Introduction:
Resources like mineral, power, water and forest have a huge influence on the
economic and social development of a country. Availability of natural resources is the
necessary but not a sufficient condition of economic and social development. If a country is
rich in resources and these resources are optimally used then there is more possibilities of
economic and social development. Accordingly, there is positive relationship between
natural resources and economic and social development.
MINERAL RESOURCES
The Pakistan Mineral Development Corporation (1974) is the responsible authority for
the support and development of the mining industry. Gemstones Corporation of Pakistan
Limited (1978) looks after the interests of stake holders in gem stone mining and polishing
as an official entity. Baluchistan is the richest province in terms of mineral resources
available in Pakistan. While recently Sindh discovered coal deposits in Thar. Khyber
Pakhtoonkhwa is rich in terms of gems. Most of the mineral gems found in Pakistan exist
here. Apart from oil, gas and some mineral used in nuclear energy purposes which comes
directly under federal control mining of other minerals is provincial issue. Currently around
52 minerals are minned and processed in Pakistan.
1. Coal
Coal which is also named as black gold is found into huge quantities in Thar ,
Chamalang, Quetta and other sites. Thar reserves are estimated 850 Trillion Cubic Feet.
There is enough coal in Pakistan Thar area (though a part of coal is not of good quality)
that it can be used for power generation for next 100 years without relaying on other i.e.
hydro / oil resources. Pakistan recently discovered one low and four low-to-medium quality
coal seams in the Punjab. Low sulfur coal was recently reported at the Baluchistan and
near Islamabad. Bituminous, sub-bituminous, and lignite coal have been found in Pakistan.
About 80% of coal is produced by government and 20% is produced by private sector.
It is one of the oldest industries. Its major users are iron, steel and bricks industries.
Coal reserves are estimated at 175 billion tons. This would equate to 618 billion barrels of
crude oil. When compared to oil reserves this is more than twice the amount of the top four
countries. If At KSAs current usage, the reserves would last more than 200 years.
2. Natural Gas
Natural gas production is at a high level in Pakistan. Estimated reserves are 885.3
billion cubic meters (as of January 2009). Gas fields are expected to last for another 20
years. The Sui gas field is the largest, accounting for 26% of Pakistans gas production.
Gas deposits of Sui discovered in 1953. Daily production is 19 million cubic meters a day.
Under the barren mountains of Balochistan and the sands of Sindh, there are untouched oil
and gas reserves. Major users of natural gas areas are Karachi, Lahore, Faisalabad,
Multan, Rawalpindi and Islamabad.
3. Crude Oil
Pakistan 's first oil field was in the late 1952 in Baluchistan near a giant Sui gas field .
The Toot oil field was not discovered in the early 1960s in the Punjab . It covers 122.67
square kilometres (47.36 sq mi). Pakistan Petroleum and Pakistan Oilfields explored and
began drilling these fields with Soviet help in 1961 and activity began in Toot during 1964.
Pakistan has more than 326 million barrels of oil the Senate was told on Wednesday 29
January 2009.
4. Uranium production
Pakistan has a long history of exporting small amounts of uranium to the west. The
Tumman Leghari mine in South Punjab , Baghalchur mine, Dera Ghazi Khan Mine and Issa
Khel / Kubul Kel mines in, Mianwali District . Pakistan has recently used some in its
ownnuclear power and weapons programs. Pakistan produced about 45 tonnes of Uranium
in 2006
5. Mineral Salt
Salt is being minned in the region since 320 BC. Khewra Salt Mines are among
world oldest and biggest salt mines. Salt has been mined at Khewra since 320 BC, in an
underground area of about 110 square kilometres (42 sq mi). Khewra salt mine has
estimated total of 220 million tonnes of rock salt deposits. The current production from the
mine is 325,000 tons salt per annum.
6. Copper & Gold
In Reqo Diq , Baluchistan deposits of copper and gold are present. Antofagasta the
company having possession of Reqo Diq field is targeting initial production of 170,000
metric tons of copper and 300,000 ounces of gold a year.The project may produce more
than 350,000 tons a year of copper and 900,000 ounces of gold. There are also presences
of copper deposites in Daht -e- Kuhn, Nokundi, located in Chaghi district.
7. Iron Ore
Iron ore found in various regions of Pakistan including Nokundi, Chinot and the
largest one in Kalabagh(Less than 42% quality),Harripur and other Northern Areas.
8. Gems and other precious stones
A number of precious stones are minned and polished for local as well as export
purposes. The centre point of this operation is Khyber-Pakhtoonkhwa. These includes
Actinolite, Hessonite, Rodingite, Agate, Idocrase, Rutile, Aquamarine, Jadeite, Ruby,
Amazonite, Kunzite, Serpentine, Azurite, Kyanite, Spessartine (garnet), Beryl, Marganite,
Spinel, Emerald , Moonstone, Topaz, Epidote, Pargasite, Tourmaline, Garnet (alamandine),
Peridot, Turquoise, Garnet (green, grossular), Quartz (citrin & others) and Vesuvianite. The
export from these gems is more than 200 Million dollar.
POWER RESOURCES
Electricity is one of major source of power in Pakistan due to improper use of coal and
oil resources.
A. HYDRO ELECTRICITY:
Nature has provided suitable environment in Pakistan. To produce hydroelectricity

environment is better for it. The northern and north western area of Pakistan is suitable for
building of dams. We can produce hydroelectricity to create steep slopes in rivers and
canals. Its best example is the Ghazi Barotha project in river Indus. Both public and private
sectors have planned to increase the production of hydroelectricity in Pakistan. Pakistan's
total hydroelectricity production is 4963 Megawatt. Pakistan has the capacity of production
of 30000 MW from its river Indus, Jehlum and Chenab.
Important Hydroelectricity Stations
There are three hydroelectricity stations working in Pakistan:
1. Tarbela Dam
This dam is situated on Indus River. The Tarbela dam produces 70% of the total
hydroelectricity production of Pakistan. Its installed generation capacity is 3478 MW. The
Tarbela Dam was constructed in 1976 and its cost was about Rs.18 billions. This dam is
about 9000 feet long. The Tarbela is one of the biggest dams of the world.
2. Mangla Dam
This dam is located on Jehlum River. This dam installed generation capacity of
power is 1000 MW which is 20% of total hydroelectricity of the country. This dam was
constructed and completed in 1967 the height of this dam is 110 meters. This dam is made
of concrete. This is second biggest dam in Pakistan.
B. THERMAL ELECTRICITY:
The Thermal power stations are generating electricity by gas, oil and coal in
Pakistan. The 49.8% of the total electricity is produced by the thermal power. The thermal
power production is 4921 MW in Pakistan. There are 13 thermal power stations working in
Pakistan. The biggest station is working in Karachi this station generates 1756 MW. The
second biggest station is working in Multan. It generates 260 MW.
Important Thermal Stations
Other important thermal plants are in Faisalabad, Kotri, Pasni, Guddu, Jamshoro,
Muzaffargarh, Sukkur and Larkana etc.
Future Plans
A large number of projects have been planned to meet future energy requirements
of Pakistan. This project is working rapidly. If this project works better than our country will
make progress by leaps and bounds.
C. SOLAR ENERGY:
The energy that we get from sun is called solar energy. The climate of Pakistan is
extremely hot and dry. Pakistan is situated near the Tropic of cancer so the sun rays are
vertical most of the year. These days are hot. That's why the season of summer is longer
than winter in Pakistan. The sun rises most time. We can use this energy to the maximum
in life. This is the cheapest source of energy.
Use of Solar Energy
We have abundance of this energy but important thing is the maximum use of it.
This energy is used to operate small machines and motor in future the solar energy will
become the biggest source of energy of the world because other sources are costly and
difficult to exploit.
D. ADVANCE SOURCES:
1. Atomic Energy
Atomic energy is the advance source of this world. Although this source of energy is
very sophisticated and multi disciplinary system. As the rapid growth of population sources
are also increasing at the same rate. That's why it is an important source of energy
indeveloping countries.
2. Pakistan is an Atomic Power
By the grace of Allah Pakistan has become a great Atomic Power. Pakistan has
operated Atomic blasts in Chagi in Balochistan on 28 May 1998. Pakistan had to face many
difficulties to achieve progress in the atomic program.
3. Nuclear Power Technology
Nuclear Power technology was introduced in Pakistan in 1971 when a plant of 136
MW capacity namely Karachi. Nuclear power plant (KANUPP) was installed. This plant has
been operating safely for more than 31 years. IN other important Cheshma nuclear power
project is also working with the help of China. This has been connected to the national grid
on June 13 2000. It has a gross capacity of 325 MW and is located near Cheshma Barrage
on left bank of river Indus.
WATER RESOURCES
As per World Health Organization (WHO) report 80 percent of the diseases are due to
unhygienic conditions and unsafe drinking water. Safe drinking water and proper sanitation
are inseparable and critical to health.
Access
According to ESP 2010-11 in Pakistan, currently over 65% of population is considered

to have access to safe drinking water. More than 0.884 billion people lack access to safe
water, and 2.5 billion lack access to basic sanitation. However, access to water remains
difficult in Southern Khyber Pakhtunkhwa, parts of Baluchistan, Tharparker and Cholistan.
IMPORTANCE OF WATER:
1. Power Generation
Water is also essential for power generation in Pakistan, since about 29% is
generated through hydropower .
2. Fishing Industry
The fishing industry plays a role in the national economy of Pakistan. The coastline
is 814km and fishery resources still have room to grow. Fishing in Pakistan is a major
source of export earnings.
3. Water for Home
We drink water, cook with it, bathe in it, sprinkle our lawns with it, fill our backyard
swimming pools with it - even create theme parks based on it. We need water in our
homes, to brush our teeth, cook food and wash dishes.
4. Base for Life
Without water, there can be no life. In fact, every living thing consists mostly of
water. Your body is about two-thirds water. A chicken is about three-fourths water, and a
pineapple is about four-fifths water.
5. Water for Agriculture Sector
Every plant, animal, and human being needs water to stay alive. We need water for
irrigation, to raise crops in regions that do not get enough rain. It is estimated that 70% of
world-wide water use is for irrigation. In some areas of the world, irrigation is necessary to
grow any crop at all, in other areas it permits more profitable crops to be grown or
enhances crop yield.
6. Water in living things
All living things need a lot of water to carry out their life processes. Plants, animals,
and human beings must take in nutrients (food substances). If the body loses more than
20 per cent of its normal water content, a person will die painfully. Human beings must take
in about 2.4 liters of water a day.
7. Water in our homes
In our homes, we use far more water than the amount we need simply to stay alive.
We require water for cleaning, cooking, bathing, and carrying away wastes. For many
people, such water is a luxury. Millions of homes in Asia, Africa, and South America have
no running water. The people must haul water up by hand from the village well, or carry it in
jars from pools and rivers far from their homes.
8. Waterpower or Hydropower
Water power, or hydropower, furnishes about 7 percent of the world's commercial
energy. Where water flows from a high place to a lower one, the gravitational energy of the
falling water can be captured and used to produce other forms of energy.
9. Water for Industry
It is estimated that 15% of world-wide water use in industrial. Major industrial users
include power plants, which use water for cooling or as a power source (i.e. hydroelectric
plants), ore and oil refineries, which use water in chemical processes, and manufacturing
plants, which use water as a dissolving something.
10. Fisheries
Pakistans in land water bodies also support a thriving inland fisheries industry. Fish
catches vary from place to place, with the largest yields associated with major lakes and
dams.
11. Water for Transport/Recreation
Today, people still depend on water transportation to carry such heavy and bulky
products
as
machinery,
coal,
grain,
and
oil.
People build most of their recreation areas along lakes, rivers, and seas. They enjoy water
sports, such as swimming, fishing, and sailing.
12. Environment and Tourism
Explicit environmental water use is also a very small but growing percentage of
total water use. Environmental water usage includes artificial wetlands, artificial lakes
intended to create wildlife habitat, fish ladders around dams, and water releases from
reservoirs timed to help fish eggs.
IRRIGATION SYSTEM OF PAKISTAN
1. Wells or Tube-wells
It is the oldest method of irrigation in Pakistan. Wells and Tube-wells system is
successful where water level is high and where canal system is not common. Animal power
and electricity is used for to obtain water from wells and tube-wells. To utilize ground water
0.7 million tube wells have been installed.
2. Canals
Canal is an artificial waterway constructed for purposes of irrigation, drainage, or

navigation, or in connection with a hydroelectric dam. Canal is the thing which brings river
water close to the field where it is required to be.
The irrigation system of Pakistan is one of the best one in the world due to the
largest irrigation system in the world. In Pakistan, almost 75% of the land which is in
agricultural use is covered by the irrigation system. Currently there are 3 large dams and
85 small dams, along with these dams there are 19 barrages to fulfill the water need. From
these dams and barrages 12 inter link canals, 45 canals have been taken to provide water
to the fields.
3. Perennial Canals:
These canals supply water throughout the year. Perennial canals are the canals that
are used to supply water to the field and these are taken either from dams or barrages.
Important Perennial Canals of Punjab are Upper Bari Doab, Lower Bari Doab, Sidhnai
Canals, Upper and Lower Chenab, Upper Jhelum canals originating from Trimmu
Headworks and Canals originating from river Sutlej at Ferozpur, Islam, Suleimanki and
Panjnad Headworks.
4. Non-Perennial Canals:
These canals run during the summer and the rainy season. Sidhnai canals from the
Ravi, Haveli canals from the Chenab and some of the Sutlej canals fall in this category.
5. Inundation Canals (Flood Canals):
These canals run only during the rainy season when water level in river rises. The
quantity of water they supply is uncertain. These canals, like other canals, are taken from
the rivers but the difference is that they get water when there is a rise in the water level due
to flood. Many old canals from the Indus and the Chenab fall in this category.
6. Link Canals
Link canals are those canals which creates link between one river to an other rives
to fulfill the shortage of water. There are a number of link canals constructed under Indus
water treaty in Pakistan.
7. Karez
Karez is also an irrigation system which is adopted only in Baluchistan province. It
is an underground-short canal system which is built to carry water at the foothill to the
fields. Karez system is very popular in Pashin and Quetta districts.
FOREST RESOURCES
Forestry
Forests are limited to 4% of Pakistans land; nonetheless the forests are a main
source of food, lumber, paper, fuel wood and medicine. The forests are also used for
wildlife conversation and ecotourism.
According to ESP 2010-11, Pakistan is a forest deficient country, mainly due to arid and
semi-arid climate in large parts of the country. The area of natural forests and state-owned
plantations declined at a rate of 27,000 ha/year but there was a 67 percent increase in the
area of tree over farmlands.
During the year 2010-11 forests have contributed 91 thousand cubic meters of timber
and 261 thousand cubic meters of firewood as compared to 93 thousand cubic meters
timber and 263 thousand cubic meters firewood in 2009-10.
INFLUENCE OF RESOURCES ON ECONOMIC AND SOCIAL DEVELOPMENT
Economic and social development of a country mainly based on the natural resources.
Influence and importance of resources are discussed below:
A. INFLUENCE OF RESOURCES ON ECONOMIC DELOPMENT
1. More Production
Natural resources are helpful to increase in level of productivity by applying modern
techniques of production. If a country is rich in resources it means there are more
possibilities to enhance the production.
2. Agriculture Development
Availability of natural resources like fertile land, favourable climatic conditions and
more water resources are necessary for the development of agriculture sector. Resources
are also required to develop the agro based industries.
3. Industrial Development
Development of agriculture sector means the development of industrial sector.
Power and energy resources like oil and gas etc. are like primary requirement of industrial
development. Iron and steel resources are helpful to develop the industrial sector.
Furniture and fishing industries are mainly depend upon natural resources.
4. Increase in Forex
Pakistan is exporting food items, textile goods, petroleum and some other goods
which is only and only possible due to availability of natural resources. Accordingly natural
resources increase the forex resources of a country.
5. Infrastructure Development
Development of infrastructure like water, sanitation, roads, energy and electricity is

possible only with the help of various natural resources. Developed infrastructure is
necessary for the economic and social development of a country.
B. INFLUENCE OF RESOURCES ON SOCIAL DEVELOPMENT
6. Transportation
Extraction of resources and movement of resources develops the transport system
in a country. Transportations like railways, road, water and air transport is playing a vital
role in the economic and social development of a country.
7. Communication
Economic development mainly based on availability and proper use of resources. It
leads to the development of communication system.
8. High Living Standard
Availability and proper use of natural resources is compulsory to improve the living
standard of the population. Natural resources play very important role in the economic
development that leads to high living standard.
9. More Employments
Natural resources like forests, fisheries and oil extractions have provided a lot of
jobs to population. More employment opportunities develop the social set up of a country.
10. Urbanization
Utilization of natural resources has increased the process of urbanization in the
country. It has developed some new cities and developed the some existing cities.
rticle: Pakistan's export performance: some retrospect and prospect (By: Abdul
Ghafoor & Sarvet Hanif)
By: Abdul Ghafoor & Sarvet Hanif
Trade means exchange of goods and services between or among the parties and is meant for the transactions both
at national and international level. From the barter trade to online trade, world has passed through many
recessions and booms but learning through time now we are at the stage where we have added a number of terms
in the dictionary of trade terminology.
At the international level, trade means both export and import. The word 'Export' can be defined as commercial
sale of goods, services and financial assets in the international market. Export refers to the value of goods and
non-factor services that one country produces and sells to the rest of the world. It includes merchandise, freight,
insurance, travel, and other non-factor services whereas the repetition of the same phenomena with the intention
of purchasing from the international market is declared as imports.
The pattern and nature of foreign trade gives a fairly good indication of pattern and nature of economies. As this
sector has proved itself as a driving force in the development, we can distinguish developing countries from
developed ones based upon their volume of trade. Pakistan emerged on the map of the world on August 14, 1947.
In the beginning, it was a poor and agricultural based economy but now the conditions are different and Pakistan is
on the track of development. According to the most recent statistics, Pakistan's GDP is Rs. 5,458 billion and the
share of Pakistan in international trade 0.22%, hence Pakistan is considered a small country in international
market.
In the early years, potential of available resources could not be exploited in a better way, which later on, proved a
major factor for slowing down the pace of development. That sluggish development resulted in small exportable
surpluses, which delayed the stage of quantum development in Pakistan. In 1950-51 Pakistan exported products
worth of 1343 million rupees whereas during the decade of 1950s, exports decreased by 43.18%. However, in the
decade of development under Ayub Khan's regime, industry was established and nature of production changed, so
did that of trade. In 1960-61 exports were recorded as Rs.763 million, showing a declining trend earlier on but
shortly regained the momentum and during the decade of 1960s exports increased by 161.88%.
The pattern of trade took a different shape after 1971, when Bangladesh was created, because the contribution of
East Pakistan in Pakistan's trade and foreign exchange had been quite substantial. In the decade of 1970s exports
increased from Rs. 1.99 billion to Rs. 29.28 billion and reached at Rs. 138.28 billion in the 1990-91. The figure rose
up to Rs.560.94 billion in the year 2001-02 whereas according to the most recent statistics, in the year 2003-04,
Pakistan's exports are recorded as $10 billion showing an increase of 13.1% from the last fiscal year.
If we look back at the trade of Pakistan, we find that except for first decade, our exports have ever increased, but
Alas! we could not cut down our imports; hence the result is negative trade balance. Except for 1950-51 and 197273, the balance of trade has been negative, implying that Pakistan always imported more than its exports. Even
then exports have made a large contribution to the economy of Pakistan and have proved to be the backbone of
the economy.
The composition of Pakistani exports has changed significantly over the years. The principal changes have been the
steep fall in the shares of primary and semi manufactured exports and equally sharp increase in the share of
manufactured exports. In the early years, share of primary goods was more than semi manufactured and
manufactured goods. In the very beginning, 99% of Pakistani exports were made up of just five primary
commodities i.e. raw jute, raw cotton, raw wool, hides and tea. So, Pakistan fits the classical case of an
unindustrialized, undeveloped country, in the very early years producing and exporting only primary products and
mainly dependent on climatic conditions.
Over the time, the pattern of trade changes as countries move from primary products to finished manufactured
goods and their imports change from consumer goods to capital goods. Similarly, changes began to occur in the
pattern of exports from Pakistan as economic policies shifted towards industrialization. By 1951-52, the five main
primary commodities contributed 93% in export earning, which by 1958-59 had fallen to 75% and further to 45%
in 1971-72. It continued decreasing and it was recorded as 19% in 1991-92 and according to the most recent
statistics, the share of primary commodities, semi manufactured and manufactured goods in the year 2003-04 is
10%, 12% and 78%, respectively.
On the other side, Pakistani exports are highly concentrated in a few items namely cotton, leather, rice, and
synthetic textiles and sports goods. These five categories of exports accounted for about 79.8% of total exports
during 2003-04. Among these categories cotton group alone contributed 62.5%, followed by leather 5.3%, rice
5.2%, synthetic textile 4.2% and sports goods 2.6%. The degree of concentration of these items during 2003-04
remained closed to the last year's level. Furthermore, concentration of exports in a few items is a major source of
instability in export earning. A poor cotton crop seriously affects total export proceeds, as it has been observed
several times in the past. Cotton always has been a major export of Pakistan with 62.5% share in total exports in
2003-04, while in 1990-91 it was 61.0%.
Pakistan is trading with large number of countries but its exports and imports are highly concentrated in few
countries slightly above one half of exports went to seven countries namely: USA, Hong Kong, Dubai, Japan,
Germany, UK and Saudi Arabia. Among these countries the share of Pakistani exports to USA has been rising while
that of Japan has exhibited a continuous decline, mainly on account of a protected recession in the Japanese
economy. In 1990-91, major markets of Pakistani exports like USA contributed 10.8%share in total exports and
Germany, Japan, UK, Hong Kong, Dubai and Saudi Arabia contributed 8.9, 8.3, 7.3, 6.0, 2.8, and 3.6%
respectively. These seven markets contributed a total share of 47.7%. By and large, the same trend continued
during 2003-04, having total share of 52.8% by these countries including 23.6% by US, 5.0 by Germany, 1.1 by
Japan, 7.5 by UK, 4.9 by Hong Kong, 7.7 by Dubai and 3% by Saudi Arabia.
Although, we have made much progress in our exports but even yet we have to walk for a long distance on the
way of progress. Our exports, like other developing countries, are facing several hurdles in the way of
development. For instance, production efficiency of Pakistani industry is low and per unit cost is very high, hence
our goods are not being efficiently demanded at local market as well as in international market because of their
high prices. Stagnation in the economy and recession in production activity cause less exports.
There is a great dearth of foreign direct investment in Pakistan due to which new industries can't be established
and flourished. Pakistan is facing the problem of export concentration both in terms of products and markets. This
situation can be explained with the fact that Pakistani exports are highly concentrated in 5 commodities and to 7
countries only. Moreover, lesser value addition and exports of traditional items caused trade deficit. Exchange rate
also affects the quality of exports. Continuous devaluation in the era of 90's caused an increase in exports but at
the same time, no attention was paid to developing and flourishing the industry, hence the result was increase in
imports. Furthermore, the devaluation of rupee has inflated production cost of export commodities.
Political instability, religious fanaticism with kidnapping and murder of foreign personnel in Pakistan, has caused
threats to foreign investment. Now with the efforts of present government, we have almost regained the
confidence of foreign investor, which was shattered when we seized the foreign currency accounts in June 1998.
After that FDI became more difficult and bumpy due to 9/11 and murder of some Chinese engineers.
As we are back on the right track, we need to continue with the existing policies and also to avoid political
instability, religious fanaticism and vague diplomatic efforts. Although we all know that conditions regarding these
three parameters are not as bad as portrayed by the international media yet we need to continue responding to the
rest of the world with the basic instincts we have i.e. pure proud, patriotic and peaceful Pakistanis who want to
contribute their share in making this world worth living with the lessons they have learnt in the past.
In the similar fashion, Pakistan lacks highly educated and trained technical men power at moderate wages, which
makes it difficult to control the cost of production. Men power is a key to economic success, without that all else
will be a nullified.
The right strategy will be to focus on the vocational training institutes to produce sector specific technical men
power where as to produce highly skilled executives, we can send our staff abroad for training. The massive
investment of sending these executives abroad can be justified if they, on their return, will be trickling their learned
skills down at the grass root level.
Government should lay greater emphasis on investment and growth as the country's exports would be facing
greater competition in world market. It is, therefore, advisable that all the stockholders in foreign trade got
together and got prepared to meet these challenges effectively. Government as well as businessmen should study,
how china has been able to achieve spectacular success with their products with in a short time, which is offering
its products at highly competitive prices. It is important to focus on enhancing value addition in our exports and try
to earn more per unit of exports. Our major export houses should develop their own brands and make them
popular around the world. It is amusing to see the government to open retail outlet in Dubai, London and New York
for promotion of the image and exports of Pakistani products.
Services of reputable international public relations companies are reportedly being acquired in order to launch a
campaign for image building. Two special export zones, one in Karachi and other in Punjab should be established
with modern infrastructure. These will cater primarily to the needs of textile sector.
The ultimate recipe for making balance of trade positive is to diversify its export pattern, both in terms of products
and destination, and to produce products at the lowest possible cost. For this, Pakistan needs to undertake
diplomatic and marketing efforts to search out new destinations for its exports but need of the hour is not only to
focus on the new markets but also to establish and maintain a good reputation for the Pak-Marked exports. The
specification of quality certificate as attached with export consignments should be counter checked both for quality
and quantity. An aggressive promotional campaign by the government of Pakistan, supplemented with the efforts
of private sector will further increase Pakistan's exports in international market.

Deficit Balance of Payment of Pakistan

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Deficit Balance of Payment of Pakistan

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Deficit Balance of Payment of Pakistan,

Causes and Control

Balance of Payment (BOP)

4- Revenue and Capital

MEASURES TO CORRECT ADVERSE BOP

Exchange control is also an important step to minimize the imports. Exchange

Development of human capital, Human

WHAT IS DIFFERENCE BETWEEN ECONOMIC

Essentials of Economic Growth:

Structural Changes of Economic Development:

There is a change in the structure of industrial production. There is an increase

= Annual increase in per capita income

DIFFERENCES BETWEEN ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT:

necessary.Effective and strong institutional

concerned with income level etc.

health and education etc.

PRE-REQUISITES -OR- DETERMINANTS OF

PRE-REQUISITES OF ECONOMIC DEVELOPMENT:

Economic Factors and

Availability of Natural Resources

Role of Natural Resources:

More natural resources mean more possibility of increase in national income.

More natural resources lead to more possibility of using labour force.

More natural resources refer more possibility of attaining self-sufficiency.

Capital formation refers to the creation of capital. It is an increase in the stock of

Role of Capital Accumulation:

Capital formation leads to reduction in poverty.

Capital formation results in more employment.

Due to capital formation there is growth and development of economy.

Accumulation of capital caused to correct the balance of payment.

Sources of Capital Accumulation:

Capital Formation in Pakistan:

Manpower or Efficient Labour

Energy and Power Resources

Transport and Communication

Education and Training

Absence of Joint Family System

Absence of joint family system is necessary for the economic development. In

10. Control the Customs and Traditions

MAJOR ISSUES IN THE ECONOMY OF PAKISTAN

q.1 MAJOR ISSUES IN THE ECONOMY OF PAKISTAN / BASIC CHARACTERISTICS

It employs the 45.0 % of total labour force.

Its contribution to exports (Food Group) is 8.62 %.

ROLE OR IMPORTANCE IN ECONOMIC DEVELOPMENT

MAJOR PROBLEMS OF AGRICULTURAL SECTOR

Agricultural research is compulsory to remove the backwardness of agriculture

CAUSES AND REMOVAL OF INDUSTRIAL

13) Lack of Industrial Consultancy Firms

BASIC, MAJOR AND COMMON

DISCUSS IN DETAIL THE BASIC CHARACTERISTICS OF DEVELOPING COUNTRIES

Definitions of Developing Nations:

According to United Nations Experts:

According to Michal P. Tadaro:

Backward industrial sector is an additional feature of under developed countries.

Following are the technological and miscellaneous characteristics of developing

ROLE AND PROBLEMS OF TECHNOLOGY IN

ROLE OF TECHNOLOGY IN ECONOMIC DEVELOPMENT

Expansion in Foreign Trade

Expansion in Market Size

Adverse Balance of Payment

MAJOR OBSTACLES IN THE WAY OF ECONOMIC

Use of backward technology is another problem of economic development. Due to