How well-planned is the Planning Commission?

New development paradigm must to move ahead

Ali Salman October 25, 2015
New development paradigm must to move ahead. PHOTO: FILE

ISLAMABAD: Montek Singh Ahluwalia, currently a visiting professor at the Stern School of Business New York University, served as the deputy chairman of the Planning Commission of India from July 2004 till May 2014. He had held several positions in the government and was a key figure in India’s economic reforms from the mid-1980s onwards. He was also the last deputy chairman of the Planning Commission, which was abolished by the Modi government last year.

It would be instructive to see what the last head wrote about the new role of the body, particularly in the backdrop of the recently spurred debate in government circles over existence of the Planning Commission in Pakistan.

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To begin with, Ahluwalia believes that planning is still relevant, but not the kind of planning “we practised in the past which derived its rationale from the belief that centralised control on resource allocation, with extensive intervention in private sector decision making, was necessary to achieve rapid growth”.

The Planning Commission was established in 1952 when Pakistan was severely lacking in infrastructure development in all sectors of the economy. The beginning of the sixties marked the onslaught of centralised planning which also shaped the planning process in Pakistan and the state became the centre stage of economic planning, reflected through the five-year plans and annual development plans.

The state-centric development hinged upon a licence Raj where instead of an open competition, specific families enjoyed the state patronage to establish industrial empires.

While this process was not entirely harmful for economic development, the political reaction in Pakistan was long lasting. East Pakistan seceded and West Pakistan finally succumbed to nationalisation. In a matter of years, the state took over everything, from large banks and insurance companies to small textile and flour mills.

Since 1991, the process of nationalisation began to reverse with a wave of economic liberalisation, deregulation and privatisation, which has continued to this date. Now, 80% of Pakistan’s economy is in the hands of the private sector.

The other important positive changes to have taken place at the national level include establishment of regulating agencies, the 18th Amendment and the National Finance Award of 2010.

These sweeping changes should have pushed policymakers at the Planning Commission to think afresh and recast a new role for the body.

Despite a history of economic reforms, nothing has substantially changed within the Planning Commission. It still engages in national economic planning, though its role as a project management agency has been more prominent. Some people believed that during discussions on national economic planning, it may have been sidelined already. For example, the post of ‘chief economist’ lied vacant from 2008 to 2014.

Indicative planning

In 2011, a paper issued by the ‘International Growth Centre’, authored by Khalid Ikram, noted that globalisation and privatisation, decentralisation to the provinces, quality of staff and erosion of its remit posed serious challenges to the Planning Commission.

Ahluwalia now advocates indicative planning. By indicative planning, he means “defining broad national goals and objectives, and presenting an internally consistent picture of the evolution of the economy in a manner which achieves these national goals over a defined time horizon”.

Indicative planning can draw attention to critical areas and identify difficult policy choices for overall goals to be achieved, but it does not necessarily have to specify precise targets and instruments for achieving these goals.

Often its role is to draw attention to the problems, indicate a broad direction for the solution and stimulate debate and discussion overcoming these problems, a debate in which numerous stakeholders get involved before workable policies are implemented.

In this context, the ‘Vision 2025’, presented by Minister for Planning, Development and Reforms Ahsan Iqbal, can be taken as Pakistan’s response to new contours of planning. However, significant spadework is needed to re-align the organisation of the Planning Commission to make it a champion of the Vision 2025.

The Planning Commission has been primarily functioning as a project management agency though its project management capacity (design, execution and evaluation) has been often questioned due to significant delays and cost overruns of trillions of rupees, which cannot be afforded in a fiscally-constrained macro-economic environment. A new development paradigm needs to be developed based on modern framework of project management.

The task of addressing regional disparities that the Planning Commission undertakes by projects should now be left to the provinces.

The fundamental economic principles of scarcity pricing and opportunity costs suggest that all infrastructure projects should be carefully examined in terms of their alternatives.

Sans restructuring, fundamental questions over the existence of Planning Commission will continue to prop up. The Minister for Planning, Development and Reforms must now walk his talk.

The writer is founder and Executive Director of PRIME Institute, an independent think tank based in Islamabad

Published in The Express Tribune, October 26th, 2015.

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