10 Approaches to Industrialization in a Developing Economy

sources, whether human or material , involve economic loss if they are not
being used to their full economic potential . In using them in any produc
tive way , the economy gains. Whether there is a net gain to the economy

all
factors are considered depends

on
when the other costs and benefits
resulting from the project

.
Major Errors Industrialization
in

be
Maximum economic benefits from industrialization can only obtained
the individual projects undertaken are economically sound This appears
if

.
be

of
the obvious but

of
statement critical examination industrial
to

,
a

a
projects most developing countries reveals many that could not pass
in

the most basic economic test Many the unsound projects representing

, of

,
.
capital skills
of

waste desperately scarce and time are begun without

,
a

the thorough appraisal which could have revealed their shortcomings

.
These are often government pet projects which have arisen through the

all
inspiration political leader usually good faith that they were
of of

in
a

are
sound and high priority Some economically unsound projects
.

primarily
started for political reasons the dozen cement mills country
;

are
planned each parliamentary
an
one district are example Others
in
,

.
misguided symbols national pride
of

the uneconomic steel mills

as

such
,

which have been built the manufacturing plant

or

several countries
in

whose buildings were

as

as
that they cost three times much
so

elaborate

the expensive machines they housed Governments can avoid these errors
.
by

by

refraining industry establishing the

or

from direct investment

in

,
be

principle project will unless thorough investigation

no

that financed
by

and analysis qualified and impartial people show economically

be
to

,
it

technically and financially sound

,

Economically unsound trends industrialization may also develop

in

in

the private sector This happens less often for his personal investment
,
.

provides businessman with strong motivation for thorough project

a

investigation
to

minimize risks When there unsound private industrial

is
.

development usually due largely serious errors government

in
to
,
is
it

policy having tariff structure which gives excessive protection

as

such
,

certain industries thus making projects which are unsound for the
to

economy profitable private investor For one country

to

example
in
,
a

a
.

nylon plant would have

of

tariff 100 per cent created situation where

a

far
its

been profitable even though production costs would have been

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