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ECONOMIC PLANNINGOF PAKISTAN´Having no plan is like sailing the seven seas without a compass, digging aditch without a shovel, or hunting for pirate's treasure without an 'x'marks the spot.µ ------Peter J. Patsula



ECONO MIC PLANN ING OF PAKISTAN

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TABLE OF CONTENTS:

What is planning? ____________________________________________________________ 3

Why is planning so important? __________________________________________________ 3 Importance of planning: . ______________________________________________________ 3 Economic Planning: __________________________________________________________ 3 Importance of Economic Planning _______________________________________________ 4 Economic planning in Pakistan: _________________________________________________ 5 Planning Machinery in Pakistan ________________________________________________ 5

National Economic Council (NEC): ___________________________________________________ 5

Executive Committee of NEC (ECNEC): ________________________________________________ 5

Annual Plan Coordination Committee (APCC): ___________________________________________ 6

Central Development Working Party (CDWP): ___________________________________________ 6

Plan Preparation and Implementation Cycle: ______________________________________ 6 5 YEAR PLANS: _____________________________________________________________ 7

FIRST FIVE YEAR PLAN _________________________________________________________ 7

SECOND FIVE YEAR PLAN (1960-1965) ______________________________________________________ 7

THIRD FIVE YEAR PLAN (1965-1970) _______________________________________________________ 8

FOURTH FIVE YEAR PLAN (1970-1975) ______________________________________________________ 8

FIFTH FIVE YEAR PLAN (1978-1983) _______________________________________________________ 8

SIXTH FIVE YEAR PLAN (1983-88) _________________________________________________________ 9

SEVENTH FIVE YEAR PLAN (1988-1993) _____________________________________________________ 9

Medium Term Development Framework (MTDF) 2005-10 __________________________ 10

Factors hindering Effective Planning in Pakistan __________________________________ 13

Pakistan¶s economy hit by flood,terrorism,energy crisis _____________________________ 15




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What is pl ann ing?

Planning is preparing a sequence of action steps to achieve some specific goal . Planning is also crucial for meeting your needs during each action step with your time, money, or other

resources . With careful planning you often can see if at some point you are likely to face a problem . It ismuch easier to adjust your plan to avoid or smoothen a coming crisis, rather than to deal with the crisiswhen it comes unexpected .

Why is pl ann ing so impor tant?

Noted author M ark Twain hit it on the head when he said,

"The Secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable ones then starting on the first one . "If you don't know where you are going, it is very difficult to get there . It is this simple statement whichexplains why planning is so important when working for a nation .

Importance of planning:

Planning is leveraged time . Planning provides the framework for informed decision making . Planning reduces crisis management . Planning allows focus and personal energy direction . Planning allows you to set priorities and focus on what is important .

Eco n omic Pl ann ing :

There is no precise definition of economic planning which is acceptable to all economists and politicalthinkers . The idea under-lying planning is a conscious and deliberate use of resources of a communitywith a view to achieve certain targets of production for the overall development of the economy . As thetargets of production and development are different in different economies, so the definition of economic planning is different for all economists .

Prof . H.D. D ickinson defines economic planning as

The making of major economic decisions, what and how mush is to be produced and to whom it is tobe allocated by the conscious decision of a determinate authority, on the basis of a comprehensive

survey of the economic system as a whole.




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I mpor tan ce of Eco n omic Pl ann ing

In developing countries, planning is considered an essential mean of guiding and accelerating their

development . The need for planning arises because the market mechanism does not function well andefficiently in underdeveloped nations . However, Pakistan is an under developed country and economicplanning is necessary to boosts its resources . This economic planning should be long-term because annual economic development plans cannot offersatisfactory results . That s the period of development plans are usually kept five years . All developmentsplans of Pakistan are of five years . The importance of economic planning can be looked from theseperspectives .

1. Decisions of the Planning Authority are Superior The planning authority has a better insight into the economic problems of the country . It can mobilizeand utilize the available resources in the best interest of its citizens .

2 . Coordinated Programme In a country there are millions of persons who are engaged in economic activities for earning profit . Thedecisions taken by some of most of them may be short sighted, irrational, self frustrating and sociallydisastrous . If machinery is created to coordinate the working of the businessmen, the economy can beset on the right lines and the country can progress at the maximum possible rate of growth .

3 . Eliminating Business Fluctuations All the market economies of the world have faced and are passing through various phases of trade cycle . The period of prosperity is followed by a period of low activity . Planning has proved to be a powerfulinstrument in eliminating business fluctuations .

4 . Reducing Economic Inequalities In the capitalist countries, the gap between the rich and the poor is widening . Planning has proved to bean effective weapon in reducing the shocking inequalities in income .

5 . Provision of Job Opportunities With the aid of planning, the resources of country are utilized to the maximum . All the able bodiedpersons are gainfully employed . There is also security of income, tenure and employment .

6 . Proper Distribution of Resources In a planned economy there will be proper distribution of resources, between the production of essential and non-essential goods .

7 . Prevents Artificial Shortages In an unplanned economy, the industrialists and businessmen withhold the supply of goods and createartificial scarcity with a view to making profits . Through planned production and proper supply of goods,the prices of the commodities are not allowed to fluctuate .




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8. Making Major Economic Changes In a free enterprise economy the market mechanism fails to create major economic changes such asindustrial revolution, rationalization movement in the country . The government measures facilitate,

stimulate, guide and control the means of production through planning .

9 . High Rate of Capital Accumulation As planning makes optimum allocation of a country s resources, it can, therefore, secure for greater rateof capital accumulation than is possible in a market economy .

Eco n omic pl ann ing in Pak is tan :

Planning Machinery in Pakistan: Following are the planning agencies in Pakistan:

N ational Economic Council ( N EC):The planning machinery in Pakistan is headed by the NEC as the supreme policy making body in theeconomic sphere . It has the President as the Chairman and all Federal Ministers, in charge of development ministries and provincial governors as members . Functions of N EC:

(a) To review the overall economic situation in the country(b) To formulate plans with respect to financial, commercial and economic policies and economicdevelopment

(c) To approve the Five-Year Plans (MT D F), the Annual D evelopment Plans (A D P), provincialdevelopment schemes in the public sector above a certain financial limit and all non-profit projects .

To ensure implementation of the decisions, the secretary of each Ministry is expected to keep a recordof all the decisions conveyed to him and to watch the progress of action until it is completed . Executive Committee of N EC (EC N EC):The body directly below the NEC is the ECNEC . It is headed by the Federal Minister for Finance, Planningand D evelopment . Its members include all Federal Ministers in charge of development ministries,provincial governors or their nominees and provincial ministers, in charge of planning and developmentdepartments .

Functions: (a) To set up development schemes (both in the public and private sectors) pending theirsubmission to the NEC . (b) To allow moderate changes in the plan and sectoral adjustments within the overall planallocation . (c) To supervise the implementation of economic policies laid down by the Cabinet and the NEC .




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Annual Plan Coordination Committee (APCC):Another body concerned with economic policy is the APCC which is a purely advisory body responsiblefor advising the Cabinet and the NEC regarding the coordination of policies . It is headed by the SecretaryGeneral, Finance, Planning and Economic Coordination . Central Development Working Party (CDWP):

Below ECNEC is the CD WP which is responsible for the scrutiny and sanction of development projects . The Secretary, Planning D ivision, is the president of C D WP. Its members include federal secretaries of the concerned departments, federal finance secretary and chairman of the provincial planning anddevelopment departments .

Pl an Prep a r at io n and I mpleme ntat io n Cycle:

The process of development appraisal and performance evaluation is an intrinsic component of planning . The success of the whole process of planning, implementation, monitoring and evaluationrests upon the very first step of identifying and specifying clearly the real objectives and targets .

The standard plan preparation and plan implementation cycle includes:

(a) Establishment of goals, objectives and targets;(b) Formulation of strategies;(c) Formulation of operating plans composed of policies and specific measures necessary to achieve

the real targets;(d) Implementation of policies and measures to the plan;(e) Monitoring and evaluation of performance (both financial and physical) against targets;




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5 YEAR PLANS:

FIRST FIVE YEAR PLA N (1955- 1960 )

First draft of this plan was developed in 1956, but due to lack of administrative and professional staff this draft could not be published . It was revised in late 1956 andpublished in May 1958 .

Size of Plan:The size of plan was Rs .11, 500 Million which was revised toRs.10, 800 Million .

Objectives:

y To raise national income and per capita incomey Creation of employment opportunities

Targets:y Increase in national income by 15%y Increase in population by 7%

SECO N D FIVE YEAR PLA N (1960- 1965 ) :

The second plan was approved and implemented in June 1960 . Theplan was revised after only one year and the revised plan waspublished in November 1961 .

Size of the Plan:The size of the plan was Rs . 19 Billion after revision .

Objectives:y To increase national incomey To create job opportunities inside and outside the country

Priorities of the Plan:Highest priority was given to agriculture sector in order toreduce the food grain shortage and attain self sufficiency inagriculture products .




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Targets:Increase in GNP up to 24% and per capita income up to 12%Achievement of growth rate of 4 .7%

THIRD FIVE YEAR PLA N (1965- 1970 ) :

Third five year plan was approved by National Economic Council (NEC) in May, 1965 and it was revised in1966 due to war 0f 1965 with India .

SIZE OF THE PLA N :Total size of the plan was Rs .52, 000 Million out of which 30, 000 Million was allocated for public sectorand 22,000 Million was decided to be spent in private sector .

FI N AN CI NG : It was decided that 68% of total size of plan will be financed by internal sources and the remaining 32%will be financed by external sources .

FOURTH FIVE YEAR PLA N (1970- 1975 ) :

Forth five year plan was prepared within the framework of perspective plan . The period of plan wasfrom 1 st July to 30 th June .

SIZE OF PLA N :The total size of the plan was Rs .75, 000 Million out of which Rs .49, 000 Million was allocated to publicsector and 26, 000 Million to private sector .

PRIORITIES:y Water and power sector was given the highest priority by investing 31%y Transport and communication was given the second priority by investing 31%

FIFTH FIVE YEAR PLA N (197 8-19 83 ) :

Fifth five year plan was formulated in 1977 by Martial Law Government and launched on July; 1978 .Theplan was launched in very difficult economic & political condition

SIZE OF PLA N :The total size of the plan was Rs .210 .22 Million . A sum of Rs .128 . 22 was allocated to public sector andRs.62 .00 Billion to private sector . 75% of total expenditure was decided to be financed by internalsources and 25% from external sources .




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TAR G ETS:y To increase nati o nal inc om e by 7.2 % per annu m and per capita inc om e by 4.2% per

annu m y

To create e m place m ent o ppo rtunities

SIXTH FIVE YEAR PLA N (19 83- 88) :

Sixth five year plan was launched on 1 st July, 1983 . The draft of this plan was prepared and implementedby newly created Ministry of Planning .

SIZE OF PLA N :The total size of the plan was Rs . 495 Billion . This amount was allocated between public and privatesector in respective amounts of Rs .295billion and Rs . 200 Billion .

TAR G ETS:y To increase GNP by 6 . 5% per annumy To increase family income by Rs . 900 per annum

STRATE G Y:y Increased opportunities for small farmers and provision of infrastructurey Creation of 4 billion new jobs by emphasizing on small scale production in agriculture and

industry

SEVE N TH FIVE YEAR PLA N (19 88 -1993 ) :

SIZE OF PLA N :An amount of Rs .660 . 2 billion had been allocated to 7th plan to meet the financial needs andexpenditures . Rs. 322 .95 Billion was allocated to public sector and Rs . 292 .4 Billion was allocated toprivate sector .

TAR G ETS:y To attain annual growth rate of 6 .5% of GNPy Increase in per capita income to Rs . 3,562 at the end of plan s period

ACHIEVEME N TS:y GD P rate increased to 5%y Increase in per capita income to Rs . 3,562 at the end of plan s period




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Me d ium Term Developme nt Fr a mewor k (MTDF) 200 5-1 0

EI G HTH FIVE YEAR PLA N (19 88 -1993 )

SIZE OF PLA N :Size of the plan was Rs .1, 701 Billion . An amount of Rs .752 Billion was to be spent on public sector and

Rs.949 Billion on private sector

.

TAR G ETS:y GDP gr ow th rate of 7%y 4.9% gr ow th rate in agriculture sect o r

STRATE G Y:y Encouraging participation of private enterprisesy Industrial and commercial policies to attract private and foreign investment




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Pakistan Economic Outlook ± June, 20 10 Released«. July 16, 2010

Pakistan ec o nom y exhibited signs of recov ery a m id o ngo ing w ar o n terr o r, glo bal eco nom iccrisis and pre v alent f loo d. With an ec o nom ic gr ow th pr ov isio nally esti m ated 4 .1% for 2009- 10 .

Real Sector: y Wheat cr o p of 24 m illio n

to ns in 2009-10y L ikely t o expo rt up t o f iv e

m illio n to ns of surplusw heat.

Inflation:

y T he Co nsum er price index(CPI) of 374 ite m sincreased by 12.7%

y F oo d inf latio n (14.8% ) y N o n foo d in f latio n (10.4% )

May be attributed t o the recent increasein the p ow er tari ff s during July-June

Gov ernm ent b o rr ow ing Rs1310 billi o n

Fiscal position:

(FB R ) tax c o llectio ns by May 2010show ing a decrease of 31.6%

T he tax c o llectio ns re m ained l ow dueto tax incenti v es o n sugar, the tax relie f

package ann o unced fo r Khyber-Pakhtunkh w a




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Pakistan and the current w ar o n terr o r hav e been the f acto rs deterring in v estm ents fo r the last f ew years. T he pow er sh o rtage has als o been a hurdle in the gr ow th of industry particularly s m all and

m ediu m enterprises (SMEs ).Reforms: In o rder t o giv e boo st to the industrial sect o r in Pakistan, the g ov ernm ent has appr ov edto pr ov ide incenti v es to tho se industries that ensure the use of new est techn o lo gy, gi v e highv alue additi o n, depend least o n im po rts and are en v ir o nm ent f riendly. T he gov ernm ent wo uldgiv e incenti v es to such industry at par w ith the incenti v es a v ailable t o special ec o nom ic zo nes by

declaring it a µpio

neer industry¶.

The key elements of the MTDF strategy are as under:

(a) In agriculture, n o t o nly cr o ps but li v esto ck and f isheries w ill als o be de v elo ped(b) In m anu f acturing , the pr o ductio n base wo uld be expanded thr o ugh the de v elo pm ent of engineering g oo ds, electr o nics, che m icals and o ther high techn o lo gy-based and v alue addedindustries..(c) T he so cial and physical in f rastructure wo uld be expanded by in v esting mo re in w ater, energy,educati o n and health and enc o uraging pri v ate sect o r to mov e int o these sect o rs.(e) To generate e m plo ym ent and t o reduce p ov erty, in v estm ent w ill be enc o uraged in agricultureand li v esto ck, SMEs, h o using and c o nstructi o n sect o rs.(g) To enco urage higher in v estm ent and sa v ings, e ffo rts wo uld be m ade t o pr ov ide the enablingenv ir o nm ent t o fo ster l o cal and fo reign in v estm ent and enhance b o th public and pri v ate sa v ings.

Balance of Payments:

y Def icit of $2.98 billi o ny T he po sitiv e gr ow th in exp o rts due

to increase in exp o rts of o F oo d gr o up (16 % ),o L ubricating o il (11.5% ),o Mo to r spirit (7.7% ) o T extile (3% ).

Ov erseas Pakistaniwo rkers re m ittances

Rem

itted the highest-ev

er amo

untof

nearl $9




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Fa ct ors h ind eri ng Effec t ive Pl ann ing in Pak is tan

Pakistan, like other less developed countries, is caught up in the vicious circle of poverty . Since

Partition, the Government of Pakistan is anxious to raise the standard of living of the people butit has not yet been able to come out of the boggy of poverty . The gap between the developedand the developing countries is widening instead of narrowing . The main factors which haveinhibited partially or wholly effective planning in Pakistan are as follows:

1. Lack of Basic Data In Pakistan, the date on natural, human and financial resources provided to the planningmachinery are mostly inaccurate and unreliable . If the date are obsolete or continue widemargins or error, the objectives of the plans would not be achieved and the plan ends in failure .

2. Appointment of N on-Technical Persons In the entire history of the Planning Commission, (except for ten years) of Pakistan, thePlanning Commission has been headed by a senior member of the civil service, rather than by aprofessional economist .

3. Lack of Public Co-operation Lack of co-operation and mistrust of the Government has remained an important hurdle toeffective planning in Pakistan .

4. Political Instability The rapid change over of the government set up, has led to unplanned, haphazard economicgrowth . The uncertainties of the election results have hindered, and slowed down the rate of economic development in the country and have made the plans mostly ineffective .

5. Role of F oreign Assistance So long the interest between the aid giving countries and the aid receiving countries do notconflict, the aid is given . As and when the interests of the two clashes, the aid is immediatelystopped or reduced Pakistan aid has been curtailed many a times in the past and the

achievement of the plans fell short of expectations .

6. N atural Calamities Agriculture is the backbone of our country . It now contributes 25% of G D P accounts for 45% of foreign exchange earning and engages 50% of the labor force . If in any year or years, the rain isuntimely, weather unfavorable or locust storm attacks the standing crop, the agriculturalproductions falls short of the target . Export of raw material and manufactured goods decline .




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Expenditure on the import of food-grain increases . The sectorial allocations in the plan thenhave to be revised which upsets the whole programme of planning .

7 . Dualism D ualism is another important constraint on the effective planning in Pakistan . The difference in

social customs, difference of technology and a gap in the level of per capital income betweenthe four provinces of the country, have stood in the way of effective planning in Pakistan .

8. Ambitious Plan If we look at the objectives of all the Eight Five Year Plans, we will find them too ambitious butthey are not properly fetched in time . When the objectives of plans are partially achieved , itcreate discontentment among the people and reduce the usefulness of the development plans .




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Pak is tan s eco n om y h it by floo d, t errorism , e n er gy crisis

FLOOD:

According to SakibSherani, a senior adviser to the finance ministry:

There is a whole range of growth estimates which would be revised once the actual impact of the floodsbecame clear . Zero percent is the lower bound of these estimates, zero growth estimates are based onthe economic impact of the damage caused to key crops and livestock, adding an estimated 25 percent of the cotton crop has been affected .

TERR O RISM :

Terrorism has done incalculable damage to the economy which is struggling to recover from a

D eep crisis . According to a recent survey terrorism has cost the economy a hefty sum of Rs 380

billion in 2009 alone over all terrorism has cost the country economy more than $35 billion in

lost exports, revenues, opportunity etc .

ENERGY C RISIS :

Shortages of energy and power do not let the boom entered into the industrial sector. In addition the sanction appliedby IMF on different sectors creating a hurdle. This resulted in unemployment and services sector decline.

It wo rsened the ec o nom ic co nditio ns of the c o untry by decreasing agricultural pr o ductio n as w ellas st o pping industrial pr o cess. B eing an agricultural c o untry, a huge quantity of agricultural ra w m aterial is pr o duced in Pakistan. B ut due t o energy crisis, industrial pr o cess st o pped andPakistan has t o f ace ec o nom ic setback. C o nsequently, m illio ns of the pe o ple wo rking inindustrial units ha v e been depl o yed

G DP growth

As low as zero percent

Cotton crop loss

25 percent

Inflation

Could reach 25 percent

G DP loss

4.5 %

Homeless people

4 million




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B eing an agro based economy Pakistan should focus on the development of agriculture department. Financial sector should be developed. Instead in focusing to much on macro financing, micro financing must be given a chance. Tradedeficits should be reduced. This can only be done by eradicating the trust deficit, which will boost our exports as wellas imports. It will also bring FDI¶s (Foreign Direct Investment) at home. There should be short term as well as longterm policies. As Pakistan¶s economy is dependent economy so it should be made strong enough to reject the foreignaid or loans on their conditions, which can directly or indirectly bring harm to the economy. Still the Government isunable to differentiate and reorganize the developed and non-developed budget. Solid fiscal policies should be made

to give advantage to both, demander and supplier. This would also be beneficial for the skilled workers, who fly awayfrom the land. Despite all these, there must be political, economic and social stability in the state. A proper accountability set up must be introduced to eradicate corruption as it leads to massive human deprecation. And thefinal solution of this problem is good governance.

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