On the road to industrialization

UB Post

September 10, 2010

Mr. JEFFRY Sachs, the famous economist divides the economic development of countries into four stages such as prior to commercialization, commercialization, industrialization and knowledge based economy. During the first stage which is the prior to commercialization stage, rural and urban people are barter goods, further developing labor division. If all rural people participate in the process of bartering of goods then the economy would be considered as a fully commercialized. Due to lack of infrastructure development, or the presence of civil war in some countries, they cannot get commercialized their economy fully.

Most of the developing countries are in the stage of industrialization. Industrialization is coherent to the social and economic development, renovation of technology, furthermore, the process of industry shall be intensified, and most of the citizens are able to live by their income from the salary.

Therefore, industrialization has drastic influence to relations of social groups by making big changes in structure of social life. Industrialization is certain, long term and historical process of development. Many of developing countries are in the middle stage of industrialization. A few countries in the transition of final stage of industrialization or knowledge based economy when developed countries are already in the stage of knowledge based economy. Generally, the level of gross domestic product per capita of a country indicates the stage of economic development of that country. If the level reaches to 5000 dollars then the economy is considered as in the early stage of industrialization, if the level reaches to 15000 dollars then the economy is considered as in the middle stage of industrializing, if the level reaches to 30000 dollars then the economy is considered as in the stage of transition but if the level is above those then the economy considered as in the stage of knowledge based economy.

For example, Mongolia /3000 dollars/ is in the beginning stage of the industrialization, Kazakhstan /10000 dollars/ is in the middle, and Chili /15000/ is near the transition of final stage of industrialization to knowledge based economy. The UN economists divide the industrialization into three sectors such as primary sector or extracting natural recourses, fishing, agriculture, and secondary sector or produce products by exploiting natural resources, and the third sector or services. All countries develop via these three sectors of industrialization, beginning from the primary sector to the next sector, by increasing their resources per capita. Countries develop their own policy and strategy on combining related sectors, accordant to their development conditions and implement it. Countries which identified and implemented policy on industrialization, accordant to their type and size of natural resources, market locations, infrastructure development, and the level of labor capacity shall have development success in a short time. The Chili, Mongolia, and Kazakhstan started to industrialize by using their mineral resources, respectively.

Mongolia is just starting the industrialization process when the Kazakhstan has started the process 10 years ago and the Chili has started the process 20 years ago. The policy on exploitation of mineral resources, its elaboration and development of combined services, furthermore the selection of priority sector of the economic development is different in countries in relation to their respective character of natural resources, locations, and other factual situations. The main basis of industrialization process is the development of infrastructure and first of all establishment of reliable network of electricity and energy, water, transportation and roads, and communication. Also, there is a need to prepare and provide specialized human resources for the market economy.

The Chili and Kazakhstan is reaching the success in the economic development due to rational investment in this direction. They invested the income extracted from the natural resources, first to the National Fund in Kazakhstan and to the Sustainable Fund in Chili and disbursed the fund under the rigid control and rules. In Mongolia, currently the Human Development fund is established but it is increasingly becoming unclear in what direction is to disburse the fund. Firstly, it is required to build all infrastructures, then to find out achievements of human being in this sector in order to work initiatively on utilizing industrialization process effectively and efficiently. The capacity of competiveness of that sector is measured by the number of produced goods and products which are sold in a foreign market and the impetus of this is the free competition of companies in the sector and market coordination. Chili has mostly used this method and the Kazakhstan is missing the possibility. The economy of the Chili is reducing the dependent of their economy from the natural resources and could assort the industrialization.

They established new sectors, widening their economy and increasing labor productivity. They build the ground of knowledge based economy by creating of industry of fish, wine, fruit, trees, and paper. Kazakhstan also has certain goals of developing other sectors then the mineral resources.

Mongolia shall have a good possibility of saving time and spending on reaching the preceding success if study from the experience of mistakes and achievements of the Chili and the Kazakhstan which made the income generated from the mineral resources as a basis of their rapid development.