Q.1 Give a brief account on history of Economic Planning in Pakistan.
History of Economic Planning in Pakistan
National economic planning is a technical job and requires trained personnel to carry it out. The various types of decisions involved in planning are partly political but mainly they are technical. A plan when it is prepared requires a section or an authority to implement it as a legally enforceable document. On the other hand, it requires administrative machinery for implementation, supervision and evaluation of its results. The function of planning is usually entrusted to a specialized body like planning board or a planning committee or a planning commission. It is usually attached 10 one of the national ministry, or it may have a separate ministry of its own.
After independence in 1947, the economy of Pakistan was very poor. The neighbour country India did not want Pakistan to be economically stable and strong. But the Government of Pakistan took up the job of establishing the institution of planning in the country. A development board was set up in 1948 to coordinate the growth and development among different run by the government. Meanwhile, a planning advisory board was established. The purpose of setting up this board was to advise and assist the development board in the process of planning.
Pakistan’s economic development planning began in 1948. The development board and planning advisory board jointly started the process of planning in Pakistan. A six year development plan (1951-57) was prepared on the recommendations of Colombo Consultation Committee. The plan envisaged a total expenditure of Rs. 2600 million. But the initial effort was unsystematic, partly because of inadequate staffing. In 1953, the government replaced the development board with a new autonomous body called the planning board. The first five year plan (1955-60) was prepared by this board and was released in 1957. It was the beginning of systematic planning in Pakistan. In practice, this plan was not implemented, however, mainly because political instability led to a neglect of economic policy, but in 1958 the government renewed its commitment to planning by establishing the Planning Commission.
The Second Five Year Plan (1960-65) surpassed its major goals when all sectors showed substantial growth. The plan encouraged private entrepreneurs to participate in those activities in which a great deal of profit could be made, while the government acted in those sectors of the economy where private business was reluctant to operate. This mix of private enterprise and social responsibility was hailed as a model that other developing countries could follow.
Pakistan’s success, however, partially depended on generous infusions of foreign aid, particularly from the United States. After the 1965 Indo-Pakistani War over Kashmir, the level of foreign assistance declined. More resources than had been intended also were diverted to defense. As a result, the Third Five-Year Plan (1965-70), designed along the lines of its immediate predecessor, produced only modest growth.
When the government of Zulfiqar Ali Bhutto came to power in 1971, planning was virtually bypassed. The Fourth Five-Year Plan (1970-75) was abandoned as East Pakistan became independent Bangladesh. Under Bhutto, only annual plans were prepared, and they were largely ignored.
The Zia government accorded more importance to planning. The fifth Five-Year Plan (1978-83) was an attempt to stabilize the economy and improve the standard of living of the poorest segment of the population. Increased defence expenditures and a flood of refugees to Pakistan after the Soviet invasion of Afghanistan in December 1979, as well as the sharp increase in International oil prices in 1979-80, drew resources away from planned investments. Never the less, some of the plan’s goals were attained. Many of the controls on industry were liberalized or abolished, the balance of payments deficit was kept under control, and Pakistan became self-sufficient in all basic foodstuffs with the exception of edible oils. Yet the plan failed to stimulate substantial private industrial investment and to raise significantly the expenditure on rural infrastructure development.
The Sixth Five-Year Plan (1983-88) represented a significant shift toward the private sector. It was designed to tackle some of the major problems of the economy; low investment and savings ratios; low agricultural productivity; heavy reliance on imported energy; and low spending on health and education. The economy grew at the targeted average of 6.5 percent during the plan period and would have exceeded the target if it had not been for severe droughts in 1986 and 1987.
The Seventh Five-Year Plan (1988-93) provided for total public-sector spending of Rs. 350 billion. Of this total, 38 percent was designated for energy, 18 percent for transportation and communications, 9 percent for water, 8 percent for physical infrastructure and housing, 7 percent for education, 5 percent industry and minerals, 4 percent for health, and 11 percent for other sectors. The plan gave much greater emphasis than before to private investment in all sector of the economy. Total planned private investment was Rs. 292 billion, and the private to public ratio of investment was expected to rise from 42:58 in fiscal year 1988 to 48:52 in fiscal year 1993. It was also intended that public-sector corporations finance most of their own investment programs through profits and borrowing.
In August 1991, the government established a working group on private investment for the Eight Five-Year Plan (1993-98). This group, which included leading industrialists, Presidents of chambers of commerce and senior civil servants, submitted its report in late 1992. However, in early 1994, the eighth plan had not yet been announced, mainly because the successive changes of government in 1993 forced ministers to focus on short terms issues. Instead, economic policy for fiscal year 1994 was being guided by an annual plan.
National economic planning is a technical job and requires trained personnel to carry it out. The various types of decisions involved in planning are partly political but mainly they are technical. A plan when it is prepared requires a section or an authority to implement it as a legally enforceable document. On the other hand, it requires administrative machinery for implementation, supervision and evaluation of its results. The function of planning is usually entrusted to a specialized body like planning board or a planning committee or a planning commission. It is usually attached 10 one of the national ministry, or it may have a separate ministry of its own.
After independence in 1947, the economy of Pakistan was very poor. The neighbour country India did not want Pakistan to be economically stable and strong. But the Government of Pakistan took up the job of establishing the institution of planning in the country. A development board was set up in 1948 to coordinate the growth and development among different run by the government. Meanwhile, a planning advisory board was established. The purpose of setting up this board was to advise and assist the development board in the process of planning.
Pakistan’s economic development planning began in 1948. The development board and planning advisory board jointly started the process of planning in Pakistan. A six year development plan (1951-57) was prepared on the recommendations of Colombo Consultation Committee. The plan envisaged a total expenditure of Rs. 2600 million. But the initial effort was unsystematic, partly because of inadequate staffing. In 1953, the government replaced the development board with a new autonomous body called the planning board. The first five year plan (1955-60) was prepared by this board and was released in 1957. It was the beginning of systematic planning in Pakistan. In practice, this plan was not implemented, however, mainly because political instability led to a neglect of economic policy, but in 1958 the government renewed its commitment to planning by establishing the Planning Commission.
The Second Five Year Plan (1960-65) surpassed its major goals when all sectors showed substantial growth. The plan encouraged private entrepreneurs to participate in those activities in which a great deal of profit could be made, while the government acted in those sectors of the economy where private business was reluctant to operate. This mix of private enterprise and social responsibility was hailed as a model that other developing countries could follow.
Pakistan’s success, however, partially depended on generous infusions of foreign aid, particularly from the United States. After the 1965 Indo-Pakistani War over Kashmir, the level of foreign assistance declined. More resources than had been intended also were diverted to defense. As a result, the Third Five-Year Plan (1965-70), designed along the lines of its immediate predecessor, produced only modest growth.
When the government of Zulfiqar Ali Bhutto came to power in 1971, planning was virtually bypassed. The Fourth Five-Year Plan (1970-75) was abandoned as East Pakistan became independent Bangladesh. Under Bhutto, only annual plans were prepared, and they were largely ignored.
The Zia government accorded more importance to planning. The fifth Five-Year Plan (1978-83) was an attempt to stabilize the economy and improve the standard of living of the poorest segment of the population. Increased defence expenditures and a flood of refugees to Pakistan after the Soviet invasion of Afghanistan in December 1979, as well as the sharp increase in International oil prices in 1979-80, drew resources away from planned investments. Never the less, some of the plan’s goals were attained. Many of the controls on industry were liberalized or abolished, the balance of payments deficit was kept under control, and Pakistan became self-sufficient in all basic foodstuffs with the exception of edible oils. Yet the plan failed to stimulate substantial private industrial investment and to raise significantly the expenditure on rural infrastructure development.
The Sixth Five-Year Plan (1983-88) represented a significant shift toward the private sector. It was designed to tackle some of the major problems of the economy; low investment and savings ratios; low agricultural productivity; heavy reliance on imported energy; and low spending on health and education. The economy grew at the targeted average of 6.5 percent during the plan period and would have exceeded the target if it had not been for severe droughts in 1986 and 1987.
The Seventh Five-Year Plan (1988-93) provided for total public-sector spending of Rs. 350 billion. Of this total, 38 percent was designated for energy, 18 percent for transportation and communications, 9 percent for water, 8 percent for physical infrastructure and housing, 7 percent for education, 5 percent industry and minerals, 4 percent for health, and 11 percent for other sectors. The plan gave much greater emphasis than before to private investment in all sector of the economy. Total planned private investment was Rs. 292 billion, and the private to public ratio of investment was expected to rise from 42:58 in fiscal year 1988 to 48:52 in fiscal year 1993. It was also intended that public-sector corporations finance most of their own investment programs through profits and borrowing.
In August 1991, the government established a working group on private investment for the Eight Five-Year Plan (1993-98). This group, which included leading industrialists, Presidents of chambers of commerce and senior civil servants, submitted its report in late 1992. However, in early 1994, the eighth plan had not yet been announced, mainly because the successive changes of government in 1993 forced ministers to focus on short terms issues. Instead, economic policy for fiscal year 1994 was being guided by an annual plan.
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