Economics Commentary

This article is about the European Union (EU), which also plays an important role in regional development, deciding to provide an aid for Pakistan. Many parts of Pakistan had been taken over by terrorists, Taliban, which resulted in some citizens to move to the northern part of the country. The EU is providing €5.5 million and more “if necessary.” It will be used for basic necessities of life, food, shelter, and clothing; medical support, sanitation, and drinking water would also be provided.

The type of which is provided by the EU is an official aid or also known as official development assistance (ODA); it is a mix of bilateral and multilateral aid. Multilateral aid is when organizations allocate funds provided by the countries and bilateral aid is when the aid is given directly to the country in need in the form of for example money support, machinery, tools, food, and medicine. In order to develop, Pakistan needs money and the EU is supplying them with the official aid through the organization of the Red Cross. This aid will result in developing not just the basic needs of the people there, which is proper sanitation and basic necessities of life, but also help strengthen the government, the “civilian government.”

In order for development to take place, a few factors need to be kept in mind: Human factors, natural factors, physical capital and technological factors, and also institutional factors. In this case, the human factors and the institutional factors are kept in mind for Pakistan’s development. Human factors are the “quality and/or quantity of human resources.”  The consequences of providing the civilians with better sanitation and food, shelter, medicine etc would be that they would have a better standard of living; lesser amount of people would fall ill and that would mean more amount of labor, which is an economic benefit. This would add to the potential output due to the increase in productivity as more people would be there to produce for the economy of Pakistan. In Graph 1 it shows the potential output of Pakistan at point B and point A represents the current output of the economy. In Graph 2, the potential output of Pakistan increased to point C due to the aid provided. These graphs show that the result of aid could increase the current output to point B because of increase in resources due to development, and potential output to point C.

The amount of labor does not jus increase by proper food and health facilities but also by education and infrastructure, which is the “internal skeletal of the economy,” for which there has to be political stability, which are the institutional factors of an economy. The EU has also included aid for improving the civilian government. The civilian government, once recovered, can help in improving infrastructure and education systems by implementing new laws, policies and goals. This could also help increase the amount of security for the people in economy and also help recover land from the areas which are taken over by terrorists. Infrastructure “provides the basis for an economy.” It includes things such as road networks, sewage system, health, education. Enhancing the infrastructure would make the people in the economy better and more advanced labor. Education would help increase the amount of skilled labor which would, again, help develop the economy by helping increase the amount of physical capital and technological factors; these are social benefits to the economy. Better health would result in longer life span, more productivity and an increase in literacy rate would provide the economy with better skilled workers, increase productivity, and awareness. Poor sanitation, sewage system, can result in many deaths, which would be a negative impact on the economy as there will be a decrease in labor.

In conclusion, the official aid given to Pakistan will help the economy towards progression. I will help by improving the economy’s human and institutional factors. By improving the “civilian government,” it would also make it a safer place for the normal citizens especially from the terrorist attacks. There will also be an impact on the law and order in the economy of Pakistan due to the aid given. The political stability can also improve. These would result in the overall development of the economy.