Introduction
¬ despite many
changes there is a general agreement that planning with or without a formal
plan document can be very useful in conducting economic affairs of a country,
provided certain conditions are met
¬ many
advanced free-enterprise economies prove that for planning, heavy government
and bureaucratic intervention isn’t always necessary
¬ governments
play a minimal role in economic management and do regularly formulate plans to
guide the conduct of their economic policies
¬ the
alternative to planned development is total reliance on the market to allocate
resources
¬ most policy
analysts would recommend an approach that avoids both extremes of tight state
control and too much reliance on the market
¬ this module
aims to introduce the reader to the basic concepts and methods of development
planning, which is a specialised subject
Development Planning- International Experience
¬ over the
past four decades developing countries in many parts of the world have prepared
several development plans, spending vast amounts of resources to do so
¬ however
initially they did not have the technical capacity to undertake such work, and
so depended heavily on expatriate expertise
¬ in Eastern
Europe, Asia and Northern Africa most socialist economies were inspired by the
apparent success of the planned development in the former USSR, and so
attempted to copy the plans
¬ Sub-Saharan
Africa and the Caribbean were often influenced by their colonial rulers and
were managed largely by expatriates; along with this external aid agencies also
influenced the plans
¬ many of
these type of plans however remained mere “show pieces” as they lacked domestic
political support; this was also common in Latin America
¬ however the
process of plan preparation has brought considerable “side benefits”, despite
the lack of implementation, including understanding development problems,
improved statistical data collection systems and a core of trained public
officials
¬ some
countries are motivated to create development plans to attract aid, and often
meet these objectives even if the plans themselves are not fully implemented
¬ many
countries in East Asia (Japan, the Republic of Korea, Taiwan and Singapore)
developed a different, more pragmatic approach
to planned development; managing national resources so the focus is on
comprehensiveness as well as having developed a unique partnership between the
public and private sector
¬ other East
Asian economies-Malaysia, Thailand and Indonesia followed a broadly similar
approach
¬ since 1960
the eight “high performing Asian economies” (HPAE) listed, have achieved growth
rates twice as high as the rest of East Asia and three times that of South Asia
and Latin America
¬ they were
also successful in spreading the fruits of growth among their population and so
while the average income levels increased rapidly, the number of people living
in poverty dramatically declined, as such the human development indicators
increased
¬ thus it
would appear that development planning appeared to work well in the East Asian
area
Development Planning in Sri Lanka: A Chronology of
Important Events
¬ Sri Lanka’s
experience in development planning generally conforms to the pattern of the
majority of developing countries, with no periodic plan actually being
implemented as originally intended
¬ this however
hasn’t been a wasteful exercise because during the process of plan preparation
several side benefits have been brought
¬ over the
last fifty years there have been planning experiments at the national level as
well as plans being prepared and implemented at other levels such as sectoral
plans and strategies/programmes and various regional plans
¬ the earliest
sectoral/regional plans were perhaps those related to the various irrigation
and colonisation schemes such as Minneriya and Gal Oya (1930s and 1940s)
¬ while a
considerable amount of planning has occurred over the last five decades, their
continuity had been adversely affected by frequent changes in institutional
arrangements
Arguments For and Against Planning
¬ “resource allocation” concerns all
decisions taken by numerous economic agents that affect not only the size but
also the internal composition of the variables (investment, private
consumption, government consumption, imports, and exports)
¬ there is a
relationship between investment and growth of the economy that is fundamental
to planning at the macro level- the level of investment undertaken during the
current period determines the future growth of the economy
¬ the
arguments for and against planning may be summarised as follows;
- market
based allocation decisions may not address such broader and long- term
social objectives and may lead to unfair distribution of incomes across
income groups and geographical regions
- however,
in practice governments have neither the necessary information and
foresight nor the institutional capacity to formulate plans and implement
them successfully
- therefore,
planned development managed by the Government may lead to excessive
controls and price distortions that retard economic growth. The end
result may be worse than what would have occurred had there been no
intervention
- given
this reality, a developing country is best advised to work out an optimal
balance between an ‘incomplete market’ and an ‘incomplete government’ to
build a system appropriate to its own circumstances
- planning
can, in principle lead to better allocation of resources that meet the
long-term and broader social and economic objectives of a society
Development Plan- Components and Main Features
¬ a
development plan is a way of setting out:
·
the development goals
and objectives of the nation as identified by the Government in office and
·
a strategy for
achieving these development goals and objectives
¬ in addition, a development plan can include several non-critical or
peripheral features such as a situation analysis, priorities, plan targets and
a monitoring and implementation scheme
¬ below are the objectives of an actual plan:
¬ despite many changes in our thinking on development issues since its
publication, the methodology of the TYP and many of its findings remain
generally valid even at present
Classification and Terminology of
Development Plans
¬ a plan document is the outcome
of a plan-preparation exercise
¬ there is an important difference between planning and plan-preparation; planning is a process of intervention in
the economy in pursuance of perceived goals and objectives, while the planning process involves centralised control of production,
distribution and prices
¬ in planning the Government exercises a high degree of control over
economic and social affairs and is often referred to as a “Command Economy”
¬ while the associated planning process is often referred to as “Dirigistic Planning”
¬ it should also be understood that planning, as described, can exist
without any formal planning document
¬ several criteria maybe used to classify development plans, following are
some types:
·
comprehensive plan:- covers all key
sectors of the economy, placing considerable emphasis on maintaining balanced
growth among the sectors
§ technical innovations were developed during the 1950s and 1960s to
support such plans
·
partial or strategic plan- is the
alternative to a comprehensive plan , it addresses selected sectors, the
emphasis being on developing certain lead
sectors which will create conditions for other sectors to develop without
too much intervention
§ Public Investment Programme is an example of a strategic plan
·
indicative plan- these provide only a
forecast of the future state of the
economy as an attempt to guide the public and private sector agencies in their
economic decisions
§ thus they are fundamentally different from comprehensive plans, and seem
to be more like dirigistic plans
¬ plans can also be classified according to time periods, and it is
possible for them to exist side by side
·
short-term plans- in general are
concerned with economic management/stabilization including the conduct of
fiscal and monetary policies (1-2 years)
·
medium-term plans- usually emphasize
economic growth, income, and employment objectives which are to be achieved
through appropriate policy reforms and investment programmes (5-6 years)
·
long-term plan (perspective plan)-
incorporate a long-term vision for society and seek to achieve selected goals
in accordance with it (10-20 years)
¬ classification can also be based on objectives, where again there are
three classifications, which can also exit side by side, and are in fact complementary
·
macroeconomic plan- provides an overall
picture of the existing economic situation as well and indicators of the
movement of the economy as a whole
§ it may also describe the strategy for achieving the plan objectives
§ these are generally short-term or medium-term plans
·
sectoral plan- sets forth objectives
for a particular sector, and the necessary to achieve such objectives
§ usually medium or long term targets are set for production, employment,
incomes, exports, savings and investment
§ preparation of sectoral plans are normally preceded by a detailed
sectoral analysis
·
project plan- projects are very
important for any development programme because they are the instruments that
finally deliver development
§ careful planning prior to the actual launching of the project is
essential to ensure maximum benefit is derived from eth resources
§ this applies to all projects equally
¬ the modern approach to project planning is often referred to as a “project
cycle”, which refers to a series of activities/stages involved in designing
and implementing a project successfully
i.
identification
ii.
preparation
iii.
appraisal
iv.
implementation
v.
evaluation
¬ decisions on selection and design of projects are based on an analysis
of costs to be incurred and benefits expected from the project
¬ planning and strategy: strategy is a part of the development plan, but not the plan itself
¬ a strategy normally involve selecting certain critical actions, making
decisions on sequencing and timing to implement them, therefore a good
development plan invariably includes all these elements
¬ therefore a development strategy
in a typical developing country may involve:
o
selecting certain
priority programmes and projects
o
making policy changes
o
determining time
schedules for implementations
o
making suitable
arrangements for coordination, monitoring and progress control
¬ planning and policy: the term policy is meaningful only when it is related to a subject
¬ it appears that the actual term “policy” refers to a way of “doing
things” representing a choice of one of several possible ways
¬ they maybe classified in two broad groups:
o
economy-wide policies
(e.g. monetary policy, fiscal policy, employment policy and wage policy)
o
sectoral policies (e.g.
agricultural subsidy policy, health policy and university admissions policy)
¬ policy regime: when all polices are taken together they forma policy regime, or a
policy environment
¬ policies have a quality dimension to them, however they can only be
judged as good or bad in relation to the
objectives they seek to achieve, not in isolation
¬ at least two common criteria exist that may be used to judge the quality
of a policy regime:
1.
al policies should
unambiguously work towards the stated objectives
2.
all policies should be
consistent
Properties of a Good Development
Plan
¬ based on the experiences of countries that have followed a planned
approach to development, we can draw some useful generalizations of desirable
properties a development planning process should have
¬ they can be summarized as;
·
consultation- giving due
consideration to the views and requirements of a wide cross section of the society in plan
preparation; often requiring qualitative judgments as analytical techniques are
insufficient; this provided a way of informing the private sector of what
government is doing
·
flexibility- adequate provision
must be made to adjust targets and reorient the strategy mid-way through
implementation, due to uncertainties in the external environment
·
selectivity- governments should be
selective in the adoption of goals and instruments for best results
·
policy coordination- there is no
prescription for institutional arrangement, though it is necessary for a
successful development plan; each country has to develop its own mode depending
on its specific socio-political circumstances
·
paying due attention to information collection and monitoring- information is crucial to any planning activity; policy makers need to
know where they want to take the economy, as well as where it currently stands, and this is only
attainable via statistical data; monitoring being necessary during implementation,
to ensure that planned activities make adequate progress towards the goals,
again reliable statistical data becomes importantDownload: eType1.com/f.php?FThoii
-Mr. S. A. Karunaratne