Ethnic regionalism may be the most powerful force in Asia today. Yet ethnic boundaries are not plotted on maps and neither are they taken into consideration in most economic analysis. The problem is a serious one and wide. What makes ethnicity such a strong force? If it is such a strong force, it must effect national goals such as integration and "development". How are these goals affected by ethnicity? This was one line of questioning out of which this paper has emerged. There was another aimed at a different direction but ending at the same place. What is development? How do countries develop? What factors help and what factors hinder development? This paper attempts to answer all the above questions and, hence, the topic of this paper is the relationship between ethnicity and development. There are six sections to this paper. Section I attempts answers to the following questions: What is ethnicity and why is it important? Section II is a brief look at modernization theory and how it relates to "national integration" and "ethnicity". These ideas are criticized and rejected. Section III is a look at the concepts of a "cultural division of labor" and "internal colonialism". These concepts we applied to the case of Pakistan in Section IV. External forces affecting ethnicity with reference to Pakistan are examined in Section V. Section VI explores the debate of whether a country should pursue policies which aim to integrate its economy with the world economy or whether inward-looking policies aimed at self-reliance should be followed. The conclusion attempts to redefine development with reference to ethnicity.