‘All five-year plans of Pakistan were failures’
January 30, 2011
ISLAMABAD: Almost all five-year plans prepared during political or military regimes were shelved in the country’s history after regime change and none of them succeeded in getting the desired results, so there is a need to look at strategies of other regional economies that are also facing challenges such as security and governance difficulties, says the New Growth Framework of the Planning Commission (PC).
The newly-devised growth framework, a copy of which is available with The News, states in the new framework, private sector should be the growth-driver in the open market environment that rewards efficiency, innovation and entrepreneurship, while the government is facilitator that protects public interests and rights, provides public goods, enforces laws, punishes exploitative practices, and operates with transparency and accountability.
In the past, it states that the Planning Commission has been involved in the formulation of perspective, medium-term and annual plans based on savings-driven approach, where growth rates are arbitrarily set and incremental capital (investment) to output ratios are used to generate investment requirements in key sectors of the economy.
The public investment across sectors is allocated according to the planner’s priority and it is assumed that the Public Sector Development Programme (PSDP) will crowd in private investment. However, we now know that the Rostovian linear model and Harrod-Domar framework, where growth is a function of savings did not succeed for Pakistan because:
“ Markets were not well-developed which implied that savings were not channelled into most productive uses.
“Take-off does not materialise into sustained growth due to poor quality of investments
“Due to poor resource mobilisation, there is continuous reliance on foreign resources
“Existing framework does not indigenise elements such as innovation, creativity and learning.
While several development plans during Pakistan’s history were shelved due to regime changes, but the first five-year plan (1955-60) laid emphasis mainly on achieving high national income.
The development expenditures were regarded as the foundation for rapid progress in the future and plans explicitly affirmed that some sectors of the economy must be expanded much more rapidly than others in order to secure maximum gains.
The Second five-year plan (1960-65) was largely a continuation of the first plan with more focus on the less developed areas. Specific agriculture and industrial sub-sectors were given priorities. Investment in technical and vocational education, and provision of housing also featured in this plan.
The third five-year plan (1965-70) came around at a time when Pakistan faced reduced foreign assistance and domestic savings needed to be increased. Export promotion and import substitution were proposed. Relatively more emphasis was placed on heavy industry and on creating infrastructure. A substantial increase was projected in the inputs for the agricultural sector, especially the availability of water, fertiliser and credit.
The sixth five-year plan (1983-88) focused on the pro-poor growth concept. The plan, therefore, provided for small farms and facilitation to small-scale industry. The plan envisaged significant deregulation of economic controls. The efficient uses of fertiliser, water and farm technology were envisioned. Rapid development of steel-based engineering goods and modernisation of textile industry was encouraged.
The seventh five-year plan (1988-93) also focused on the renewed role of the government to provide public services and manpower training. The promotion of private sector activity through further deregulation was planned. The eighth five-year plan (1993-98) recognised the role of government as a catalyst and manager rather than the main vehicle of economic growth. The overall focus had been on strengthening individual initiative and private enterprise.
The plan also focused on a social action programme and augmenting energy and physical infrastructure.
The Medium Term Development Framework (2005-10) relied on upgrading physical infrastructure for accelerating output growth. Specific spheres were identified where support to private sector could be extended and finally social sector policies were envisaged for timely achievement of millennium development goals. It further states that never has there been a more pressing need in Pakistan’s history to search for a new model; however, at the outset it should be said that if there has to be a common vision on growth, it should by all means take account of the damages caused by security and governance issues currently facing the country.
There is also a need to look at the economic strategies of regional economies, many of which also face issues such as security and governance difficulties. Indonesia’s National Medium Term Development Plan 2010-14 which takes guidance from National Long Term Development Plan 2005-25 clubs national priorities into soft, social and physical infrastructure combined with creatively development.
Thailand’s Tenth Plan 2007-11 pursues a green and happiness society where foremost objective is to provide opportunities for learning, increase potential of communities by linking them in networks and ensure fair competition in trade and investment. Malaysia’s New Economic Model launched in 2010 aims towards a coherent ‘big push’ to boost transformation and growth through developing quality workforce, competitive domestic economy and transparent markets.
China’s Eleventh Five Year Plan 2006-10 focuses on promotion of independent innovation, improve institutional mechanism, and enhance social harmony. India’s Eleventh Five Year Plan (2007-12) reinforces focus on basic services such as education and urban development. The draft Perspective Plan for Bangladesh 2010-11 provides for effective governance, promoting innovative people for a digital Bangladesh, creating a caring society and enhancing regional cooperation.
Finally Philippine’s Medium Term Development Plan (2004-10) advocates the adoption of policies focused on making a national innovation system work through product and financial market reforms, reduction in barriers to technology entrepreneurship and support to research and development.
The newly-devised growth framework, a copy of which is available with The News, states in the new framework, private sector should be the growth-driver in the open market environment that rewards efficiency, innovation and entrepreneurship, while the government is facilitator that protects public interests and rights, provides public goods, enforces laws, punishes exploitative practices, and operates with transparency and accountability.
In the past, it states that the Planning Commission has been involved in the formulation of perspective, medium-term and annual plans based on savings-driven approach, where growth rates are arbitrarily set and incremental capital (investment) to output ratios are used to generate investment requirements in key sectors of the economy.
The public investment across sectors is allocated according to the planner’s priority and it is assumed that the Public Sector Development Programme (PSDP) will crowd in private investment. However, we now know that the Rostovian linear model and Harrod-Domar framework, where growth is a function of savings did not succeed for Pakistan because:
“ Markets were not well-developed which implied that savings were not channelled into most productive uses.
“Take-off does not materialise into sustained growth due to poor quality of investments
“Due to poor resource mobilisation, there is continuous reliance on foreign resources
“Existing framework does not indigenise elements such as innovation, creativity and learning.
While several development plans during Pakistan’s history were shelved due to regime changes, but the first five-year plan (1955-60) laid emphasis mainly on achieving high national income.
The development expenditures were regarded as the foundation for rapid progress in the future and plans explicitly affirmed that some sectors of the economy must be expanded much more rapidly than others in order to secure maximum gains.
The Second five-year plan (1960-65) was largely a continuation of the first plan with more focus on the less developed areas. Specific agriculture and industrial sub-sectors were given priorities. Investment in technical and vocational education, and provision of housing also featured in this plan.
The third five-year plan (1965-70) came around at a time when Pakistan faced reduced foreign assistance and domestic savings needed to be increased. Export promotion and import substitution were proposed. Relatively more emphasis was placed on heavy industry and on creating infrastructure. A substantial increase was projected in the inputs for the agricultural sector, especially the availability of water, fertiliser and credit.
The sixth five-year plan (1983-88) focused on the pro-poor growth concept. The plan, therefore, provided for small farms and facilitation to small-scale industry. The plan envisaged significant deregulation of economic controls. The efficient uses of fertiliser, water and farm technology were envisioned. Rapid development of steel-based engineering goods and modernisation of textile industry was encouraged.
The seventh five-year plan (1988-93) also focused on the renewed role of the government to provide public services and manpower training. The promotion of private sector activity through further deregulation was planned. The eighth five-year plan (1993-98) recognised the role of government as a catalyst and manager rather than the main vehicle of economic growth. The overall focus had been on strengthening individual initiative and private enterprise.
The plan also focused on a social action programme and augmenting energy and physical infrastructure.
The Medium Term Development Framework (2005-10) relied on upgrading physical infrastructure for accelerating output growth. Specific spheres were identified where support to private sector could be extended and finally social sector policies were envisaged for timely achievement of millennium development goals. It further states that never has there been a more pressing need in Pakistan’s history to search for a new model; however, at the outset it should be said that if there has to be a common vision on growth, it should by all means take account of the damages caused by security and governance issues currently facing the country.
There is also a need to look at the economic strategies of regional economies, many of which also face issues such as security and governance difficulties. Indonesia’s National Medium Term Development Plan 2010-14 which takes guidance from National Long Term Development Plan 2005-25 clubs national priorities into soft, social and physical infrastructure combined with creatively development.
Thailand’s Tenth Plan 2007-11 pursues a green and happiness society where foremost objective is to provide opportunities for learning, increase potential of communities by linking them in networks and ensure fair competition in trade and investment. Malaysia’s New Economic Model launched in 2010 aims towards a coherent ‘big push’ to boost transformation and growth through developing quality workforce, competitive domestic economy and transparent markets.
China’s Eleventh Five Year Plan 2006-10 focuses on promotion of independent innovation, improve institutional mechanism, and enhance social harmony. India’s Eleventh Five Year Plan (2007-12) reinforces focus on basic services such as education and urban development. The draft Perspective Plan for Bangladesh 2010-11 provides for effective governance, promoting innovative people for a digital Bangladesh, creating a caring society and enhancing regional cooperation.
Finally Philippine’s Medium Term Development Plan (2004-10) advocates the adoption of policies focused on making a national innovation system work through product and financial market reforms, reduction in barriers to technology entrepreneurship and support to research and development.
