A true democracy is a very hard thing to establish and takes a great deal of effort to maintain. The United States is a representative Government and not a true democracy. This form of Government offer many of the benefits and require less work on the part of citizens and officials. While it is not perfect, it is the best form of Government available on earth presently.
The development of a country is not dependent on this form of Government though. Iran has made strides forward and they are a horribly repressive society with limited freedoms.
The bottom line though is that if you would like a society to flourish to it's fullest potential, people within that society need to flourish also. The closer a government is to a free open open democracy, the faster and better it is able to flourish.
Societies that limit freedom of expression or personal freedoms do so at their own loss. Freedom is often a very under rated right.
Necessary? No, very much desired? Absolutely!