Developing countries face numerous obstacles that are barriers to growth:
1.Some of the labor related issues are:
a. Disguised unemployment or undereployment;
b. State-owned enterprises -- which are notoriously wasteful and inefficient;
c. Difficulties related to human capital development -- lack of education and training;
d. Frequent brain drain -- the most educated tend to leave the country in search of better opportunities in the developed world.

2. Some of the capital issues are:
a. Deficiency of internal savings due to extreme poverty for most of the population;
b. Capital flight whereby the rich invest their money abroad;
c. Strings attached by wealthy countries to external financing;
d. High cost of loans (multilateral or bilateral)

3. Difficulties in financing investment:
a. Debt servicing - many countries are burdened by debt servicing;
b. Foreign aid - which happens in much smaller scale than one thinks. Most rich countries give aid for political reasons, as opposed to needs-based.

4. Obstacles based on institutional structure:
a. Reliance/or not on market mechanism;
b. Market shortages and dependency on single crops

5. Breaking the poverty barrier or how a country "graduates".
The prescription is the same for any nation is a sustained movement outward of the PPC (Productions Possibilities Curve).

Economists believe that the Production Possibilities Curve shifts outward (that is, the country experiences sustained economic growth) for the following reasons:
a. Better technology
b. More resources
c. Better resources.

A. Natural Resources: Research has shown that high quality and/or quantity of natural resources does not necessarily lead to economic development. For example, Japan is poorly endowed in natural resources, yet it is now the number two economy in the world. By contrast, many developing countries have been blessed with a wealth of natural resources and still remain poor.

B. Human Resources: Problems of overpopulation, unemployment, underemployment, brain drain.
Rapid population growth makes increases in per capita income difficult. In itself, population is not a cause of poverty (density in Japan, for example, is higher than in India).

C. Capital Accumulation: Made possible by savings and investment, which are difficult to realize in the developing world.
Obstacles are:
1. Lack of savings or savings going to religious or government monuments, or, as in most cases, abroad.

2. Poor or inadequate infrastructure

3. How well established the institution of property rights is.

D. Socio-cultural and institutional factors/reliance on market forces.
Human attitudes, political institutions, trade with the outside world.

F. Role of foreign aid.
Reasons for aid are humanitarian, security, economic.