ECONOMIC DEVELOPMENT AND PLANNNG

CONTENTS
Introduction
Indicators of economic development
Economic under-development
Goals of development
Factors hindering development
Development planning
INTRODUCTION
Economic growth: refers to the increase in a country’s productivity resulting in the
rise in National income over a given period of time.
Conditions necessary for economic growth
There should be good capital formation and creation from investments and
savings
Output rates should be high enough to sustain production and growth levels
Population growth rate should not be higher than the capital growth rate
Presence of favourable micro and macro-economic policies e.g. monetary
policies of a country must be fair
There should be aggressive marketing of a country’s products abroad
Adoption of modern technology which reduces cost of production and improves
quality
There should be a well-developed and strong entrepreneurial culture
There should be an Improved infrastructure
Ensuring the country is politically stable
Economic development: refers to improvement in the standard of living which is
brought about by increase in National income.
Differences of economic growth and economic development

Economic growth Economic development

Refer to a quantitative increase in the Refers to both quantitative and
size of national income qualitative improvement in the country’s
production
Does not account for the distribution of Accounts for the distribution of wealth
wealth
Measured in terms of annual changes in Measured on the basis of the people’s
GNP well being
 There can be economic growth without Economic growth brings about
economic development economic development hence the two
go hand in hand

INDICATORS (characteristics) OF ECONOMIC DEVELOPMENT

Shifting from reliance on agriculture to relying on manufacturing
Increase in the level of literacy
Improvement in medical care services
Increase in the number of skilled manpower
Use of modern technology in production resulting in high quality products
Increase in level of entrepreneurship
Low population growth rate
High levels of per-capita income
Well-developed infrastructure
Factors which hasten economic development
a) Improved infrastructure and social amenities
b) Industrialization
c) Improving research and development
d) Educating and training
e) Use of modern technology in production
f) Improved medical facilities
g) Good governance
h) Good natural resource endowment
i) Presence of strong entrepreneurial culture
ECONOMIC UNDER-DEVELOPMENT
Refers to a situation where there is a decline in the standard of living in a country.
Characteristics of under-development
a) Increase in level of poverty
Under-developed countries have lower per-capita incomes which results in poverty
that is reflected by a decline in the standard of living.
b) High dependency level
Under-developed countries tend to depend to a large extent on developed countries
for financial aid since they cannot sustain themselves financially
c) Poor infrastructure
Infrastructure such as roads and communication networks are poorly developed in
under-developed countries. This s due to lack of adequate finances to improve on
such infrastructure.
d) Low labour productivity
The level of output from production in under-developed countries is extremely low.
This is as a result of poor quality complimentary factors such as tools and
management
e) Out-dated cultural practices
People in under-developed countries tend to resist change; as a result they continue
embracing the old and outdated cultural practices which do not promote
development
f) Disparity in income distribution
Incomes in under-developed countries are unequally distributed since the few rich
people own a big proportion of national income leaving a small proportion to very
many poor people. This results in poor living standards
g) Low level of savings and investments
Due to low per-capita income, people in under-developed countries have little
incomes to save. As a result level of investment will decline leading in the vicious
circle of poverty as shown below
Low savings---low investments---low capital formation---low income---poverty
h) Under-utilization of natural resources
Lack of adequate capital, personnel and appropriate technology makes resources in
under-developed countries remain under-utilized. This will greatly hinder
development
i) High population growth rate
The rate at which population grows in under-developed countries is very high. This is
due to the fact that such countries still embrace outdated cultural practices which
emphasizes on a large family. Such large population contributes to high poverty level
j) Unemployment
The rate of unemployment is relatively higher in under-developed countries. This
may be as a result of under-utilization of resources and low levels of investment.
k) Dominance of the subsistence sector in the economy
Many people in under-developed countries produce goods and services for personal
consumption and not for sale. This reduces the level of incomes resulting in poverty.
GOALS OF DEVELOPMENT
Goals of development are the reasons for economic development. Such goals
include:
To eliminate or reduce poverty
Reduce level of unemployment
Reduce disparities in income distribution
Provide basic needs such as food, shelter, health and protection
Improve the standard of living
Provide employment and advancement opportunities
Increase productivity
Improve efficiency of socio-economic institutions such as education and health
Provide a conducive environment for technological advancement
Reduce economic dependence
Improve efficiency in production
Provide a variety of goods and services to consumers
Promote international cooperation
FACTORS HINDERING DEVELOPMENT
a) Low natural resource endowment
Lack of adequate natural resources such as land, favorable climate, raw materials
etc. may be a barrier to development.
b) Poor technology
Poor technology leads to lower productivity resulting in under-development
c) Inadequate capital
Capital refers to finances and tools used in production. When capital is inadequate,
resources will be under-exploited leading to lower productivity resulting in under-
development
d) Poor human resource endowment
Human resource refers to the country’s workforce. When this workforce is lacking
specialized skills, productivity will be extremely low which results in under-
development.
e) Unfavorable environment
Environment is influenced by political, social and economic factors. These factors
are discussed below:
Political factors: refers to factors which are brought about by a country’s
political institutions. Where the government is corrupt, corrupt or authoritarian,
investors may be scared
Social factors: these are made up of a country’s cultural values and attitudes
which are not conducive for development. Development may be hindered if
the society is resists change or has a negative attitude towards work. Extend
families may also hinder savings leading to low investment levels
Economic factors: economic factors refer to markets which include
commodity markets, labour markets and financial markets. In a market where
free market factors don’t operate smoothly, entrepreneurship may be
negatively affected.
DEVELOPMENT PLANNING
Planning is a process through which one focuses on the future. Development
planning therefore is a deliberate government effort aimed at influencing and
improving the economy of a nation.
Qualities of a good development plan
a) It must be all inclusive i.e. all stakeholders must be involved in planning
b) It should address current issues affecting the country
c) Its objectives should be explicitly stated in simple and clear terms
d) It should be realistic and achievable
e) It must be broad in strategy i.e. contains other strategies that will be used to
achieve set goals
Stages of development planning
a) Establishing objectives to be achieved e.g.
Improving literacy levels
Improving health standards
Raise standard of living
Reduce foreign dominance etc.
b) Identifying the resources required to achieve the objectives
c) Establishing methods of achieving such objectives
Reasons for development planning
a) Appropriate allocation of resources
Through planning, a country is able to allocate its resources in a productive way so
as to ensure optimum utilization
b) Evaluation of implemented projects
Planning enables the government to determine whether projects are in line with
expected outcomes. Deviations are identified and corrected immediately.
c) Stimulation of efforts
The government can use planning to direct the efforts of its people towards
achieving laid down objectives
d) Influencing donors
A good plan may be used by the government in soliciting for donor funding. The plan
enables donors to be able to see the policies the government has put in place in
order to meet certain objectives
e) Facilitating long-term decision making
A development plan will enable the government make effective decisions on how to
achieve certain objectives
f) Promoting balanced regional development
Through planning, the government is able to distribute industries in every part of the
country in order to ensure equitable regional development
g) Avoiding duplication of industries
A plan will enable the government to avoid a situation where there are industries
manufacturing the same product so as to ensure that citizens have access to a
variety of products.
Problems encountered in development planning
Development planning involves two major stages, namely:
Plan formulation stage
Plan implementation stage
Problems at plan formulation stage
a) Lack of accurate and well detailed data
When statistical data which aids in planning is either unavailable or inaccurate, the
quality of the plan is negatively affected
b) Existence of large subsistence sector
Existence of a large subsistence sector makes planning unrealistic
c) Lack of qualified personnel
Due to lack of locally qualified personnel, many less developed countries rely on
foreign experts. Many of these foreign experts may not be familiar with the local
plans
d) Existence of the private sector
Private sector enterprises may be pursuing different objectives from the
government’s objectives. This makes achievement of plans impossible.
e) Transfer of inappropriate development plans
Plans copied from developed countries may fail to work in developing countries
thereby making planning impossible
Problems at plan implementation stage
a) Over-reliance on donor funding
Developing countries in many cases depend on developed countries to fund their
plans . if this aid is not released, implementing plans becomes a problem.
b) Natural calamities
Natural calamities such as diseases drought or floods, makes the government to
direct money meant for plan implementation to countering these calamities thereby
affecting plan implementation negatively.
c) Lack of required resources
Lack of resources such as skilled personnel, finance and equipment, may hinder
implementation of plans
d) Non-involvement of the local people
In most cases local people are used by the government to implement its plans,
failure to involve the local people therefore makes implementation difficult
e) Lack of political will
Without political willingness and commitment, plan implementation becomes difficult
f) Setting over-ambitious plans
Some plans cannot be implemented since they are unachievable especially if they
are meant to impress donors
g) Inflation
Inflation increases the cost of acquiring resources required to implement plans. This
negatively affects plan implementation
h) Lack of co-operation among parties involved
Without co-operation amongst parties executing the plan, implementation is made
difficult.