Q-40= Discuss problems of capital formation in Pakistan
PROBLEMS OF CAPITAL FORMATION
1 Low technology and lack of basic industries
2 Shortage of basic infrastructure facilities
3 Low level of education and technical knowledge
4 Lack of continuity in economic policies of government
5 Increasing foreign debt liability
6 Low rate of domestic savings
1. LOW TECHNOLOGY & LACK OF BASIC INDUSTRIES
Very low-level technology is used in Pakistan. There are less manufacturing
industries whereas packaging and assembling units are more. Basic industries
such as Steel, automobile, chemicals and electronic industries are two few, which
is main hurdle in capital formation and economic development.
2. SHORTAGE OF BASIC INFRASTRUCTURE FACILITIES
It means availability of power, gas, cheap transport, and communications etc,
which are prerequisites for establishing industries. Non-availability of these
facilities are causing problem in capital formation.
3. LOW LEVEL OF EDUCATION & TECHNICAL KNOWLEDGE
Industries and business require expertise knowledge, specialized education and
technical know-how, which is not available in Pakistan. Specialized professional
institutions are very few and are of sub-standard. This creates difficulty in
establishing and operating industries economically.
4. LACK OF CONTINUITY IN ECONOMIC POLICIES OF GOVERNMENT
Economic policies of Govt. of Pakistan are inconsistent and there is no continuity.
Businessman is not aware as to what will be the future decision of the Govt. about
trade and business, he is therefore shy to invest. Departmental formalities are too
much and complicated, there are delays and corruption in sanctioning projects and
in other business related matters. This results in low-level capital formation.
Industrialization in Pakistan requires foreign imported machinery and basic raw
material, for which foreign exchange is required. There is shortage of foreign
exchange in Pakistan. There is huge foreign debt on Pakistan; whatever foreign
exchange is earned by way of exports of raw cotton, rice and other goods is used
for repayment of principal loan and its interest. Thus due to lack of foreign
exchange industrial Plant and machinery cannot be set up which reduces the
capital formation. It is suggested that all these hurdles may be removed from the
economy, so that the pace of capital formation may be increased in Pakistan.
6. LOW RATE OF DOMESTIC SAVINGS
People of Pakistan are poor; they are not in a position to save. Their income is
very low and it has become difficult for them to meet their both hands. It is
therefore, suggested that all above hurdles may be removed as early as possible so
that the rate of capital formation may increase.