10 Causes of low absorptive capacity in developing countries

1. Inadequate domestic financial    resources. Developing   countries have   limited   capital   to supplement the foreign resources given to them.  This limits the expansion of  investment opportunities in the economy hence low absorptive capacity.
2. Use of poor technology.  There is use of simple technology especially by the local private investors. This leads to the production of low output and of poor quality hence low levels of absorptive capacity.
3. Poor government planning.    Governments    of developing    countries   lack well-coordinated    and clearly designed plans. This makes it difficult   to effectively   utilize the foreign resources   hence low absorptive capacity.
4. Economic instabilities.  For example   inflation,   exchange   rate fluctuations   etc.  Inflation   leads to loss of value  of money.  This makes it difficult to implement   the designed programs    in form of budgets.
5. Poor and inadequate infrastructural facilities.  This is reflected   inform   poor transport   network, limited power supply and limited financial institutions.   This makes it difficult   to put the foreign resources given to developing   countries to productive   use hence low absorptive   capacity.
6. Limited entrepreneurship skills. This is due to limited skilled manpower   required   to  effectively and efficiently  allocate  the resources  given  in productive   ventures  hence  low absorptive    capacity.
7. High levels of corruption and embezzlement of funds.  Resources   meant for  productive   ventures to benefit  all the people  are used  by a few individuals   for personal   gains.  This makes it difficult to meet the targeted objectives
8. Limited domestic and foreign markets for the products.  This  is due  to low  aggregate   demand resulting-from high  levels  of poverty  and low elasticity  of demand  for the .primary  products   from developing   countries  in the world  market.
9. Political instabilities in developing countries. These discourage   investments   due to fear  of losing life and property  hence  low absorptive   capacity

10.          Over dependence on foreign countries in terms of raw materials   and economic   decisions.   This makes  it difficult  to effectively  plan  and implement   the designed  programs   hence  low  absorptive capacity.