PUBLIC SECTOR DEVELOPMENT EXPENDITURES: IN RETROSPECTION
TARIQ AHMED SAEEDI (email@example.com)
Mar 24 - 30, 2008
Pakistan emerged as a sovereign nation in August 1947 on Indian subcontinent after the untiring efforts of people aspiring for separate and independent states. At its inception, the country had to pass through teething stage and adjust cumbersomely in bequeathed resources in consonance with the assets distribution formula. Thereby, starter was favourable go-ahead neither for the socio-political and nor for the economic wheeling and dealing. The infrastructure was in precarious state, political rivalry confronted to outfox, and confusion for development programmes prevailed amid undecided fate of provincial governing systems. The battle ensued in between power-seekers furthered blockade in building process for a decade following secession. Amid the turmoil-like situation, first five year plan for 1955-60 was formulated allocating half of its public sector development expenditures on water and power and on industrialization. Not only first five year plan but all successive plans earmarked comparatively high proportion of spending on water and power or energy. The first plan envisaged to wield direct administrative control over prices and economic variables, which resulted in stability in prices of food and non food items. The plan laid Rs. 806 million for agriculture, which was 11.7 percent of cumulative public sector development expenditures of Rs. 6,907 million. The first five year plan allocated Rs. 2,095 million for water and power sector development while for industrial progress, transportation, and education it budgeted Rs. 1,184 million, Rs. 1599 million, and Rs. 533 million respectively. The least focus in public sector development expenditures was given to education, health and social services; that was 7.7 percent of the total spending and even less than the outlay of Rs. 690 million for physical planning. While the plan was not officially launched till 1957 the decade of 50s saw the establishment of large scale manufacturing sector. Despite the economy was started with a very narrow base, the growth of manufacturing sector was fairly considerable. Agriculture sector registered an annual growth of 1.6 percent during the decade while manufacturing sector exposed grossly annual growth rate of 17.3 percent, out of which 2.3 percent was the share of small scale manufacturing. Due to insignificant progress in agriculture sector and incompatible population growth the per capita income could not reflect an improvement sign.
FREE FROM ADMINISTRATIVE CONTROL
The Ayub's government in 60s raised the status of planning board to a level equal to president's secretariat. Another turnaround in the policy was the declaration of economy free from direct administrative control in order to promote private investment in the economic activities. The second five year plan sought to limit the role of public sector development expenditures to support private investments so that capital base would be expanded. The high flow of private investment started to pour in the manufacturing sector according to the statistics. For only two years, the breakdown of private investment was reasonably indicative as manufacturing sector accounted for 40 percent of the total private investment. The second five year plan allocated Rs. 13,950 million for agriculture, water, power, education and health, and social services and manpower; wherein education figured 11.9 percent of the total planned expenditures. Total private investment was to the tune of Rs. 3,661 million in 1963-64 and increased to Rs. 4,197 million in the following fiscal year. It is worth noted that the second five year plan warned of income inequality and low per capita income for encouraging investment and savings. The growth rates of agriculture and manufacturing sectors during the period were 3.8 percent and 27 percent respectively. The second five year plan was internationally recognized as a best crafted plan of less developing countries. The policy framework followed in the second five year plan was standardized in the third five year plan. The third plan coincided with the green revolution. The agriculture of the country was growing at a marvellous pace owing to sharp increase in agriculture outputs, intensified by streamlining irrigation and power projects. While the agriculture sector registered a growth rate of 6.3 percent during the five year period the manufacturing sector grew at 18 percent. During 1958-1963, Pakistan's industrial production grew by 55 percent.
This was the period when the weird disparity of wealth distribution primarily born. By 1968, 22 families owned 66 percent of industry, 97 percent of insurance, and 80 percent of banking. Public sector development expenditures in 1972-77 were an aggregate of Rs. 75,544 million including Rs. 2.3 billion fertilizer subsidy. The highest percentage of expenditure was planned for transportation and communication (20.7 percent) and lowest for population welfare (1.1 percent) while budget for education sector increased to 4.6 percent of total outlays. The growth rate during the aforesaid period of agriculture sector recorded one time high of 5.4 percent only in 73-74. The share of private sector investment was as high as 52 percent in the financial year of 71-72 as compared to 48 percent of the public sector. The size of the fifth plan was Rs. 153 billion to which the private sector contributed Rs. 73 billion. The sixth plan witnessed a remarkable increase of public sector development expenditures to Rs. 305 billion. In contrast to the projected growth of 4.8 percent for agriculture sector the actual rate was 3.8 percent during the period. Similarly, the manufacturing sector registered 7.7 percent growth as against projected 9.3 percent. To revive the role of private sector participation back to the 60s, the government in the seventh plan targeted 40 percent more private sector investment than attracted earlier. For example, even the share of private outlays in agriculture sector was substantially high (7.9 percent) than public (1.1 percent). Since the ninth and tenth five years plans were to execute within liberalized economic environ, the expenditures propelled the public private partnership to its optimal.
In spite of various challenges, Pakistan has got the top position among developing countries in terms of economic growth. From its very outset, the country unluckily could not persist on the growth trajectory; for one reason or another it got slipped from the developmental course and was subjected to restart several times. This makes the country an experimentation laboratory where every new system is successfully tested but not referred by the successors. Often, the five years plan has produced effective outcomes for the particular period it was designed for. Yet, the policy spin-over nullified the impact of the benefits for the next period to come.