10 Limitations to industrial development in developing countries
- Inadequate capital. This is due to limited access to credit facilities from financial institutions due to lack of collateral securities. This limits industrial development in form of shortage o. f of credit to purchase raw materials and other capital goods.
- Low levels of technology. A number of industries use old and outdated machines which need frequent maintenance and spare parts. This increases the cost of production in form of of capital consumption allowance.
- Unfavorable government policies on industrialization. Such policies are in form of high taxes, low tariffs on imported manufactured goods and the general lack of clear policy guidelines concerning industrialization in developing countries. This makes it difficult to set up and operate an industry due to high costs of operation with limited government support.
- Economic instabilities. For example high levels of inflation, exchange rate fluctuations, fluctuations in the supply of raw materials etc. Such instabilities limit the growth of the industrial sector in developing countries.
- Stiff competition from the imported manufactured products. The imported goods are cheap and of high quality while the locally produced goods are expensive and are of poor quality. Therefore, they out compete the locally produced goods by the industrial sector.
- Poor and inadequate social and economic infrastructural facilities. This is reflected in form of poor transport network, poor storage facilities, shortage of power supply and limited financial institutions. This makes it difficult to produce and distribute the manufactured goods by the industrial sector.
- Limited entrepreneurship skills. This is due to limited skilled manpower required for industrial management and expansion. This leads to low profit margins and in many cases closure of industries in developing countries.
- Limited markets for the locally manufactured products. This is due to the production of poor quality goods and low aggregate demand resulting from high levels of poverty in developing countries. Limited domestic and foreign markets cannot sustain large scale production.
- Poor investment climate in form of rampant political instabilities. This discourages potential investors from setting up large scale industries due to fear of losing life and property.
- Over dependence on imported capital and other raw materials. Most of the raw materials and capital goods are imported from other countries. This increases the costs of production hence limiting the growth of the industrial sector in developing countries.
CATEGORIES Economics
TAGS Dr. Bbosa Science
