Question

Describe the role of ‘private sector’ in the economic development of the country.

Hint:

Build the answer on production of goods and services, employment, investment and efficiency through competition, and exports. Close by noting what the private sector will not do because it is not profitable.

Answer 1

Concept:

• The contribution of the private sector is best seen by following what a private firm does from the moment it is set up.
• Each step it takes for its own profit also produces a gain for the wider economy.

Step 1: The firm invests its own capital.
A private company puts its money into land, machinery and buildings. That investment adds to the productive capacity of the country without the government having to spend from its budget.

Step 2: The firm hires workers.
To run the plant it employs managers, technicians, workers and support staff. Employment in private industry and services now accounts for a very large share of the jobs outside farming, and it draws people away from the overcrowded agricultural sector.

Step 3: The firm competes, and so it improves.
Since survival depends on selling, the firm has to keep prices competitive and quality good. This pushes it to adopt new technology and better methods of work, and the buyer gains from lower prices and wider choice.

Step 4: The firm sells beyond the country.
Private companies in software, textiles, pharmaceuticals and engineering export to other countries. The foreign exchange they bring in pays for imports of crude oil, machinery and technology.

Step 5: Where the firm stops, the government must step in.
No private firm will build a road to a remote village or run a school for children who cannot pay, because there is no profit in it. Those activities the government has to take up, which is why both sectors are needed together.

Final Answer: A private firm invests, employs, competes and exports, and each of those actions adds to national output, jobs, efficiency and foreign exchange. The private sector therefore drives much of the growth of the country, while the government supplies what profit alone will never provide.