Pakistan's Economic Planning History and Challenges

ECONOMIC PLANNING IN PAKISTAN
Dr Vaqar Ahmed
Sustainable Development
Policy Institute (SDPI)
December 29, 2020

OUTLINE
Planning Frameworks & History of Planning in Pakistan
Planning Agencies in Pakistan
Critical Appraisal of Institutional Strengths & Weaknesses of Planning Structure
Various Phases of Planning Process
International Best Practices
VAQAR AHMED | WWW.SDPI.ORG | WWW.SDPI.TV 2

IS ‘PLANNING’ FUNCTION STILL NEEDED?
Yes, if public sector is capable to drive structural change in the
economy
 Moving surplus labour from declining sector to rising sectors
 To increase pace of capital formation
Reduction in income inequalities
Inclusive growth (& addressing regional disparities)
Stable prices are desirable
Addressing high levels of unemployment
Managing negative impacts of business cycles

IS ‘PLANNING’ FUNCTION STILL NEEDED?
To formulate development financing & administration plans
To allocate foreign assistance in a just manner

HISTORY OF ECONOMIC PLANNING
Planning Periods
 Economic coordination (1947-53)
 Planning Board (1953-58)
 Centralized planning (1958-68)
 Disruptions in planning process (1968-80)
 Revival of planning process (1981-88)
 Structural adjustment programs (1988-99)
 Medium-term Perspective Plans (2003-10) & Poverty Reduction Strategy Papers I & II
 Framework for Economic Growth (2011-13)
 Vision 2025 (2013-2018) & CPEC Long Term Plan
 Draft 12th Five Year Plan (2018-23) & Provincial Development Strategies

TERMS OF REFERENCE (FOR
PLANNERS)
oTo prepare a national plan at periodic intervals for the
economic and social development of the country;
oTo make assessments from time to time of the human
and material resources of the country; and
oTo prepare the development plan/budget within the
framework of the national plan and on determination
of priorities, to propose the allocation of resources.

PUBLIC INVESTMENT PLANNING &
PROJECTS MANAGEMENT
Approval of Development Projects
Monitoring of Major Projects
Evaluation of on-going and completed projects
Association with EAD/Donors in matters of Foreign
Assistance

FIRST FIVE YEAR PLAN (1955-60)
Sectoral focus: food-grain production
Village Agricultural & Industrial Development (V-AID) areas
Improve irrigation facilities
Increase industrial output in available industries including cotton
cloth, sugar, cement, fertilizers etc.
Infrastructure: Increase installed power capacity; rehabilitate railway
track and rolling stock; provide for self-build houses
Social sectors: Putting 1 million additional children to school; increase
annual number of doctors by 100 and add 9000 hospital beds
Increase rate of development in East Pakistan to reduce regional
disparity.

EVALUATION OF FIRST PLAN
Succeeded to some extent in adding to available
infrastructure and industrial growth however much
progress was not seen in agriculture, education and
housing as originally envisaged.

SECOND FIVE YEAR PLAN (1960-65)
Increase farm acreage through improved irrigation
Develop new residential facilities
A focus on import substitution and establishing heavy industries
Infrastructure: increase installed power capacity by 508 MW; install
45700 new telephone connections; setting up 1300 new post offices
Continue expansion of education, health and social welfare facilities
Focus on higher investment rate for East Pakistan to reduce regional
disparities.

EVALUATION OF SECOND PLAN
Growth in industrial base is observed
However, due to no sunset rule, protectionist policies and tax breaks
gave rise to industrial inefficiencies
Policies to address growing income inequalities proved weak
Prices of consumer goods increased leading to discontentment
among masses.

THIRD FIVE YEAR PLAN (1965-70)
Approved in 1965 and revised again in 1966 due to war
Reduce the degree of growing disparity between East & West Pakistan
Industries to focus on producer goods
Strong farm incentives to increase yields
Arrest growth in population and adopt population control measures
Focus on housing, education, and health facilities for lower income
group.

EVALUATION OF THIRD PLAN
Growth in heavy industry, mining, transport and finance sectors
Substantial reduction in aid due to war
Budget allocations for social sectors faced cuts
Income inequalities widened due to lack of progressive taxation on
growing sectors. Continued tax concessions allowed concentration of
wealth in few hands.

FOURTH FIVE YEAR PLAN (1970-75)
Focus on a social justice, reduce disparity in per capita income between
regions
Undertake flood control program in East Pakistan; improve communication
facilities between two wings of the country; launch urban works program,
promote low cost housing
Water & power sector received highest public investment; Self-reliance in
defense-oriented industries, industrial machinery, transport equipment,
intermediate products
Increasing per capita food consumption; Increased focus on exports and
reduce dependence on foreign assistance
Increase television coverage and start education programs and farmer
orientation
Expand family planning programs, curative health facilities, address malaria &
smallpox VAQAR AHMED | WWW.SDPI.ORG | WWW.SDPI.TV 14

NON-PLAN PERIOD (1970-78)
Due to political and economic uncertainty five year plan exercise was
abandoned. The government decided to manage development
administration through annual plans.

FIFTH FIVE YEAR PLAN (1978-83)
Introduction of modern inputs in agriculture
Liberalizing some industrial controls; completion of Karachi Steel Mill,
fertilizer and cement factories
Rural development program focused on farm sector, rural roads,
small scale industry, water, housing, education & health; village
electrification was expanded
Extending social safety nets through zakat system
Focus on less developed regions e.g. Balochistan province
Focus on schooling, health, and drinking water in rural areas

EVALUATION OF FIFTH FIVE YEAR
PLAN
A modest food surplus was achieved
Economic growth picked up and prices remained stable
Lower income groups gained from expanded social safety nets and
remittances
Total investment as a percentage of GNP was declining; weak long
term investment in physical infrastructure leading to shortages in
energy, telephones, water supplies etc.

SIXTH FIVE YEAR PLAN (1983-88)
Increasing agriculture production through better seeds, fertilizer and
modern technology; address waterlogging & salinity; new roads from
villages to cities
Focus on achieving self sufficiency in oil supplies
Develop steel based emerging goods, modernization of textiles,
expand agro-based industries; expand vocational training
Focus on improvements to rate of literacy; providing drinking and
drain water facilities
Dedicated funding for tribal and Balochistan areas

EVALUATION OF SIXTH PLAN
Most targets were achieved. Economic growth targets were missed as
envisaged domestic and foreign savings rates could not materialize.
Shortfall in remittances was also observed. Crop sector could also not
help achieve the overall growth target of 6.5% per annum.

SEVENTH FIVE YEAR PLAN (1988-
93)
Bringing macroeconomic stabilization – focus on fiscal &
current account deficits
A focus on agriculture and industrial development remained
Aimed at addressing gaps in past plans:
 Explicit focus on women development
 Addressing inequalities in access to education and health
A focus on opening up of markets, privatization, deregulation,
and liberalization
Social Action Program and Tameer-e-Watan program launched

EVALUATION OF SEVENTH PLAN
Overall performance was satisfactory; average economic growth was
5%
Self reliance envisaged in wheat, edible oils, iron-ore, crude oil didn’t
show much improvements
Plan targets were disturbed due to delay in settlement of Afghan war
issues, political uncertainties, civil disturbances 1989-90, floods of
1988-89 and 1992-93.

EIGHTH FIVE YEAR PLAN (1993-98)
Achieve growth in a framework of equity and sustainability
Process of deregulation and privatization from previous plan to be
consolidated; retirement of debt through privatization; strengthen
capital markets
Introduce legislative controls on budget
Focus on good governance (public private partnership, devolution and
decentralization etc.)
Documentation, improved tax compliance, lower tariffs
Expansion of motorways network, power sector expansion
Improve immunization, engage village health workers

NINTH, TENTH & ELEVENTH FIVE
YEAR PLAN (1998-2018)
Not officially announced

10 YEAR PERSPECTIVE DEVELOPMENT
PLAN (2001-11)
To be operationalized by ‘Three Year Medium-Term Program (2001-
04)
Poverty Reduction Strategy Papers I & II
Unemployment reduction strategy
Financial sector reform
Micro finance institutions
Fiscal Responsibility Law
Big push in higher education, information technology
Investments in telecom/cellular technologies

FRAMEWORK FOR ECONOMIC
GROWTH (2010-2013)
Aftermath of global financial crisis
This period faced unprecedented power and gas shortages
Closure of several thousand formal and informal MSMEs
Growth strategy therefore proposed that government role be limited
to policy and regulation while production and management of
resources should be left to private sector.

Short Term:
potential 5-6%
Long Term: 7% +
Sustained
How
Utilization of Existing
Capacity
Macroeconomic Stability
Removing Major Constraints
- Energy
Economic Discipline
• Responsible macro Policies
• Reforming public sector enterprises
• Effective PSDP
Improving productivity
1. New role of government
2. Improving Governance & Institutions
3. Market Reforms
4. Urban Management
5. Connectivity
6. Youth & Community
Framework for Economic Growth 2011

VISION 2025 (2014-2018)
Sustainable Development Goals (SDGs) become the overarching
framework
The vision was operationalized through annual plans, China
Pakistan Long Term Plan, and sectoral policies including auto
sector policy, textile policy etc.
Focus on water, energy, food nexus
SDG prioritization exercise
Focus on knowledge economy, regional connectivity,
institutional reform
Engineering Development Board was shut down (reopened
again after 2018) VAQAR AHMED | WWW.SDPI.ORG | WWW.SDPI.TV 27

GUIDING DOCUMENT AFTER 2018
12th Five Year Plan under formulation
Strategic Trade Policy Framework under formulation
National SME Policy under formulation
IMF Staff Report (April 2020) provides some direction

PLANNING MECHANISMS
National Economic Council (NEC)
Executive Committee of NEC (ECNEC)
Annual Plan Coordination Committee (APCC)
Central Development Working Party (CDWP)
Provincial Development Working Party (PDWP)
Departmental Development Sub-committee (DDC)
Divisional Development Working Party (DDWP)
District Development Committee (DDC)

AUTHORITY & SANCTION POWERS
Forum Chairperson Sanction Powers
National Economic Council (NEC) Prime Minister Federation Budget
Executive Committee of NEC
(ECNEC)
PM/Finance Minister PKR 10 billion and above
Annual Plan Coordination
Committee (APCC)
Planning, Development
& SI Division Minister
Advisory body for
development budget
Central Development Working
Party (CDWP)
Deputy Chairman,
Planning Commission
Upto PKR 10 billion (& federal
DDWP can approve up to 2
billion)
Provincial Development Working
Party (PDWP)
Chairman, P&D Board PKR 200 million to PKR
10,000 million
Departmental Development Sub-
committee (DDC)
Secretary of department PKR 200 million upto PKR
400 million
Divisional Development Working
Party (DDWP)
Divisional Commissioner upto PKR 200 million
District Development Committee District Coordination upto PKR 50 million

PROJECT CYCLE: PC I, PC II, PC
III, PC IV, PC V
•Introduced in September 1952
•Forms revised from time to time
•Forms vary by sector
•Project manuals for guidance prepared by
Planning Commission and provincial
Planning & Development Departments
•Guidelines for Foreign Assistance Projects
•Delegation of Financial Power Rules

PROJECT CYCLE (PC-I)
PC-I Performa : is the basic form on which all
projects are required to be drawn up
PC-I form comprises of four components
 Project Digest (Name, Location, Sponsor, Completion)
 Project Description & Detailed Financing Plan
 Project Requirements (Human & Material Resources)
 Environmental Aspects

PC-II Performa
Feasibility studies or survey studies
PC-III: Designed to furnish information on the
programme of on-going projects on quarterly basis
Any changes in scope of design
Any revisions
Any changes in management of project
PC-IV: Project History (Physical Completion of
Project)
Accounts Closed/amount unaccounted
Employment generated by the project
Suggestions for future planning

PC-V is to be furnished on annual basis for a
period of five years by operating agency
Review of costs
Review of financial results
Arrangements for maintenance of project
Difficulties experienced in operation, marketing etc.
Repercussion of scheme
General observation of relevant department/ministry

CRITICAL APPRAISAL OF PLANNING
PROCESS
Administrative
Issues
HR
capabilities
Coordinatio
n across
fora
Inadequate or
delayed
funding
Throwforwa
rd
Cost and
time
overruns
Procuremen
t delays
Lack of pre-
requisite tasks
Feasibility
study
Sector/mark
et surveys
Weak learning
process
Accountabili
ty and
learning for
monitoring
and
evaluation
Feedback
loop

36
MAHBUB UL HAQ (1973)
7 Sins of
Planners
Numbers
Game
Excessive
Control
Investmen
t quality
Develop
ment
Fashions
Divorce
between
Planning &
Implementati
on
Growth
without
Justice
Neglect of
Human
Resources
VAQAR AHMED | WWW.SDPI.ORG | WWW.SDPI.TV

PLANNING AS A CONTINUOUS
PROCESS
Set Future Standards
(Benchmarking)
Define /
Organize Goals
Measure
Results
Implement
Empower Teams
to Act
(Resources,
processes)
Prioritize Actions
(Short/long-term)
Design Specific
Actions

DEVELOPMENT PLANNING– SOME
FUTURE CHOICES
Business-as-usual – federal and provinces continue to
plan in their own domains
Transforming Planning Commission into Secretariat of
CCI
Break-up Ministry of Planning, Development & SI and
offer capacities of all sectoral sections to line
ministries; strengthen planning cells at line ministries;
provinces could follow same VAQAR AHMED | WWW.SDPI.ORG | WWW.SDPI.TV 38

PLANNING TEMPLATES ABROAD
India – Planning Division abolished; Planning
Commission converted into NITI Ayog – policy think
tank of central government
Malaysia – Planning machinery acts as Prime Minister’s
Performance Delivery Unit at PM Office
China – National Development & Reform Commission
model with active involvement in planning and
budgeting of state resources – mini state council

WAY FORWARD
Efficient planning mechanisms are necessary; parliament needs
regular discussion on future of planning
Citizens, investors & donors demand a clear vision for medium-
term
A regular functional review of all planning departments desired;
post-18th Amendment planning & coordination should be
studied together by federal & provincial planning bodies
Role of planning machinery inevitable for laggard areas,
regional connectivity, and projects involving inter-provincial
development coordination. Responding to SDGs related
international obligations
Making PC-I – PC-V reports public to inform citizens regarding
planning dynamics. VAQAR AHMED | WWW.SDPI.ORG | WWW.SDPI.TV 40

SOME FURTHER READINGS

THANK YOU!
vaqar@sdpi.org
www.sdpi.org
www.sdpi.tv

Pakistan's Economic Planning History and Challenges

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