Question

3. How can the government promote investment in the following? Support your analysis of each item using sound economic reasoning and examples.

Human capital

Natural resources

Technology

Physical resources

Answer 1

In these days government has a vital role to prome investment in various sector of an economy. These sector can grow and help in economic growth and development in future. In fact there are various sectors like human capital , technology , natural resources which creates the base of an economy. Now the question is how can government promote the investment in these sectors. Government thinks how to attract more and more investment in these sectors.

First of all we start with human capital, In todays world human capital is one of the important for econmic development. This human capital enrich the economy through various ways. Human capital will enrich if government promote investment in education, skill development, training, research and development etc. In case of promoting education government increases access of education and also quality of education. To increase the access of education government need to open more and more educational institution. In fact government can promote private companies and foreign companies to open the universities in the country. The private universities will come to investment in this sector because education is essential part for development of a country. So if government ease the rules and regulation to open the educational institution in the country by the private and foreign organization there can be increase the investment. Education is basic need and every people want a quality of education and if they get it the private universities will run smoothly. So government need to open up the ways for private organization to build up the educational institutions in the country. In US and UK we get the top unversities in the world are private unversities. So, if the private and foreign organization can open various institution and if they provide quality of education then autometically they can earn profit in this sector. Then the investment will also increase in this sector. Similarly it is true for skill development and training and for research and development. Sometimes government suffers from lack of capital to invest in this sector. Then private companies and organization and also private unversities come in this sector. The private organization itself get the benefit from skill development and also from research. This skill development and research helps to gain more and more for the company. If the government ease the various rules and regulation and helps the companies indirectly to come in this sector then the private organization will come. Now a days more and more companies are coming to invest in this sector.

Now we will look into the other important sector i.e natural resources. To develop and promote the natural resources is helpful for sustainable development. In many countries due to lack of man power and inability of government to invest in this sector the natural resources are remain unutilised. To promote investment in this secor government should promote foreign direct investment as well as private investors to come up in this sector. There is also other through which government can promote investment i.e to sell the share of government ownership to private companies and as well as foreign companies. If the govt allow the private and foreign companies the companies will be part of that. The companies can make profit by extracting the resources. Not only this government will also get benefit from here in terms of more and more availability of natural resources and there will increase the employment. The companies will get more and more incentives to invest in this sector.

Now we need to focus on another important aspect of technological development. Technological development is an integral part of economic development of a country. To promote investment in this sector government should allow the foreign investors and private investors. Because some times the develop countries has more better technology. Now if the domestic and foreign company comes and if they get a share of this project, they can increase their investment. If better technology are used the gain percentage of the companies will increase. So if that is allowed it will be beneficiary for government as well as for companies. The funding for technoligical improvement should open up for domestic and foreign companies. Then the companies will get benefit from here in terms of share of profit and also expansion of market of the company. Goverment should allow more and more opportunities in terms of reducing corporate tax, custom duties and also scope for more ways of technological development. These things will attract the companis to invest more and more.

Physical capital is the man made capital like buildings, machinaries etc. Physical caital is an important part for infrastructure development.Goernment can promote investment through various ways like reducing the interest rates for productive investment like machinaries and also for housing and buildings. This lowering interest rates will attract the investors. At the same time if the demand increases in physical resources then the companies will get benefit. If the companies get more and more benfit in terms of tax reductioon, lowering the interest rates and supports to promote the demand of physical resources like produced goods then more and more investment will come.