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Development Programme 2000-2003

A 3-year crash programme with new priorities in view of the changed circumstances

From Shamim Ahmed Rizvi,
 Islamabad
Oct 30 - Nov 05, 2000

After shelving the 9th five year plan and dismal performance during the 8th plan, the government has now finalised a new "three year development programme 2000-2003" envisaging a 6 per cent GDP growth rate as against an average of 4 per cent during the 8th plan 92-98 and the subsequent 2 years supposed to be covered under the 9th plan.

The 9th five year plan which was to start in July 1998 could not be finalised due to various reasons including inter provincial differences and centre/provinces divergent views on many issues. The newly appointed minister for state and Deputy Chairman Planning Commission, Dr. Shahid Amjad Choudhry had revealed to the newsmen last month that instead of perusing the draft of 9th five rear plan, the commission was working on a 3 year crash programme with new priorities in view of the changed circumstances to cover the remaining 3 years of 9th plan. The plan has now been finalised with almost a consensus of federating units and will be submitted to the Cabinet Division in about a weeks time for approval. In the new plan special attention has been focused on three sectors namely the development of oil and gas, information technology and software development and agriculture sector.

According to the new "Three Year Development Programme 2000-2003", 43.1% increase in the gas production has been planned from 2236 MMCFD in "1999-2000 to 3200 MMCFD in 2002-2003.

Electricity generation has been planned to increase by 14% increasing the installed capacity from 16958 MW in 99-00 to 19091 MW in 02-03 an average annual increase of 4.4% reaching 74.867 Gwh bye 02-03. As a result, the electricity and gas sector will grow by 5.8%.

Services sectors as a whole are planned to grow at an average rate of 5.0% per annum. The main contributors of value addition in this sector are transport, communications and trade. The transport and communications sector accounts for 10.0% of GDP and is forecast to grew at the rate of 6.1% Value addition in this sector will come from road transport and air services, telecommunication, postal service, broadcasting and telecasting services. The growth in this sector depends on improvement in railways operational structure.

Trade

The trade sector, having a 15.8% of share in GDP, depends on the level of activity in agriculture and manufacturing sectors and import of goods. Based on the annual growth of 5.0% in agricultural sector, 6.3% in the manufacturing sector and 5.0% in imports, the trade sector is projected to grow by 5.4%.

To support output targets and other objectives, gross fixed capital formation works out to be Rs.1612.6bn at 1999-2000 prices. The total investment is estimated at Rs. 1793.2bn. Thus, the investment will increase from 15.0% of GDP in 1999-2000 to 18.0% of GDP in 2002-2003. To support higher levels of investment, the ratio of fixed investment to GDP will be raised from 13.4% in 1999-2000 to 16.2% in 2002-2003. For this purpose, the level of private and public sector investment will be raised from 8.1 and 5.3% of GDP in 02-03, respectively. Hence, public and private investment will grow on average at 14.0% and 9.1% per annum over the programme period. Total resources are protected to grow by 3.2% annually. Since total investment will grow by 7.3% annually, the consumption will grow at the rate of 2.4%.

Since the overriding concern of the economic programme in the coming years will be to move towards self reliance, as large as 97.2% investment has been envisaged to be financed from national savings, leaving only 2.8% for foreign savings. The overall savings target implies marginal rate of national savings of 43.5% over the period. This will imply reduction in dependency ratio from 27.2% during the eight Five Year Plan to 5.9% during the 3 year programme.

To improve savings, a wide ranging strategy has been suggested. Firstly, budgetary discipline should lead to revenue surplus, which will be used for partly financing the public investment. Secondly, structural and policy reforms will enable public corporations to generate savings to meet a part of their investment outlay. Thirdly, local government will generate additional resources not only for meeting current expenditure but also for the development expenditure on such items as the purchase of durable goods, major repairs and maintenance and construction works. Fourthly, the reforms and policy changes initiated by the government will encourage corporate sector to channelize a larger proportion of its savings to new investments. Fifthly, the policy of ensuring positive returns on national savings schemes, introduction of attractive investment instruments by public and private sector and lower rate of inflation will encourage the household sector to enhance its savings and channelize them for investment in the formal sector.

Investment

Private investment will rise from 8.1% of GDP to 9.8%. As such, the policy to deregulate and liberalize investment processes will be vigorously pursued. Without disturbing market friendly environment, concerns of equity will also be addressed through poverty reduction programmes. Another area of intervention will be long gestation work relating to physical and social infrastructure, where the private sector is reluctant to invest e.g. programme for balances social development (Social action programme, special education and social welfare, women development, etc) and programmes for rural infrastructure and less developed regions. These areas have to be developed at accelerated pace in order to cope with the requirements to the development of other sectors of the economy and to overcome the bottlenecks to growth. These include: (a)areas where private sector is willing to invest would be open to them on the basis of a level playing field. No special incentives will be given to public sector in these areas: (b) where private sector investment can be invoked through public participation, it should be seriously attempted. The general principle will be a residual and vacuum filling role for public investment. Public sector should concentrate on improving the enabling environment; (c) policies will be put in place to attract private foreign investment in areas yielding tangible output and having maximum backward and forward linkages, especially in export-led industries. Board of Investment (BOI) will formulate a policy package to facilitate the broadening of these areas. and (d) the rights of the consumers have to be protected adequately by appropriate regulatory framework. The process of creation of Regulatory Authorities has already started. The regulatory authorities, therefore, will be created on modern lines with adequate and appropriate expertise.

The Planning Commission in its three-year Rolling Plan, has calculated $9.36 billion exports and $10.586 billion imports during the current fiscal year with the exchange rate to reach at maximum Rs. 56 per dollar. The trade deficit will be $1.22 billion, $492 million and a surplus $657 million during 2000-01, 2001-02 ad 2001-03 respectively.

The plan also envisages exports target of $10.624 billion and $11.115 billion imports during 2001-02. The third year of the plan 2002-03 envisages exports of $12.217 billion and imports of 11.56 billion. During these two years the exchange rate is expected to reach Rs. 61.50 per dollar and Rs. 67.80 per dollar respectively.

Almost half of the period of the 9th 5 year plan implementation was washed out due to a series of postponements and so all the efforts that had gone into its preparations has ended up in an exercise of futility. About six months of 3 years plan would have already expired before it was finally approved for implementation.

And this ultimately proves irrelevance of our planning to the real need of the economy. Right from the First Plan, which had to be punctuated with a two-year Priority Plan, the entire run of planned development, with the lone exception of the Second Plan, will be seen to have run into difficulties, thus marring its effectiveness. Now that the new government's economic agenda happens to mark a bold departure from the objectives and methodology of planning, it will be in the fitness of things also to restructure the entire planning machinery, not through by "rightsizing" alone. Since the experts will undoubtedly be needed to fulfil the nation's new economic agenda, it may not be advisable to dispense with the services of the deserving and talented men already engaged in the work as assigned to them. As a matter of fact their services can best be utilised to strengthen the monitoring and evaluation wing of the Planning Commission which is now existent at the moment.

The new Deputy Chairman of the Commission should focus his attention on this aspect and improve the working of the commission.