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An obsolete agency

Do we need a Planning Commission (PC) in today’s world? In fact, do we really need a plan? Why should we plan and what?

In today’s world, serious questions arise about the usefulness of planning notions and plan size. It is interesting that none of the six best things that have happened to Pakistan were planned: the green revolution, private tube wells of farmers, small-scale industry, overseas migration and the resulting remittances, the Afghan war and 9/11 which attracted a lot of aid on concessional terms. (We can ignore for the moment the war’s and 9/11’s adverse outcome in the form of militancy and terrorism).

Until the 1980s, a key Planning Commission function, which it performed with reasonable success, was soliciting financial assistance on soft terms from bilateral and multilateral aid agencies to fund development activity. Since then, even this role has been substantially whittled down by donor agencies venturing aggressively into social sector projects, leading them to interact directly with the provincial governments with no involvement of the Commission.

The Commission’s position in guiding investment and growth and formulating plans has been downgraded. This has followed the transfer of several functions to provincial governments under the 18th Amendment; privatisation of some state-owned enterprises, gradual increase of the private-sector footprint in the economy; massive-sized budget deficits constraining expansion in the scale of government operations; and greater involvement of the World Bank and IMF in the formulation of government policies as a result of the frequent recourse to the Fund since the 1990s.

In fact, the Commission has never performed any meaningful role in the formulation of the stabilisation and structural adjustment reforms demanded by the World Bank and the IMF.

With the widening of the private sector’s operational scope, the deregulation and liberalisation of the economy and the narrowing base of activities over which the state sector has a monopoly, market forces are playing an increasingly influential part in the formulation of investment decisions.

The process of globalisation is further weakening the role of the Commission under which the planning process will trail behind market and external forces to a greater extent, rendering planning even more of an empty box than has been the case so far. Owing to its reduced influence and the loss of competent Pakistani economists to greener pastures abroad, the poor performance record of the Commission has become glaring. Moreover, ministries and public sector agencies are developing their own policy packages and designing and implementing their own projects with limited inputs from the Planning Commission.

Resultantly, its inputs are not sought, if not completely ignored, in framing policies or development programmes. The diversion of scarce development funds for MNA/senator programmes has further marginalised its role in guiding investments into areas and assets which would generate the highest economic returns, inhibiting its role even as a coordinating agency.

Consequently, there is little link between planning and actual economic growth. What can the Commission plan in such a changed environment?

The difficulty has been compounded by the fiscal crisis. The commitments for defence and debt servicing administrative functions will ensure that the government will not have adequate resources thus narrowing the choices available to planners.

As all major policy initiation and resource mobilisation efforts are under the control of the finance ministry, the Commission’s role has been further diminished. Thus, it will simply limp along and its traditional role will become titular and insignificant. It will, at best, be able to conduct a broad examination of the inter-sectoral consistency of physical programmes and targets, many of which are likely to be provincial and local government subjects.

Therefore, the inescapable conclusion following the massive change in the domestic and international economic environment is that the Planning Commission has become a moribund agency, its condition worsened by its current anaemic capacity to develop anything that even remotely looks like a plan.

The Commission can, therefore, no longer be expected to have more than nominal influence in setting the agenda for growth and the public sector development programme, attaching priorities to the PSDP’s components, formulating policies for achieving these objectives and designing the associated implementation instruments and institutional arrangements.

This has become all the more apparent after the 18th Amendment. It has resulted in the combined provincial development programmes being more than that of the federal government (despite the latter implementing many projects falling in the domain of provincial or local governments), with growing pressure for greater decentralisation of political, administrative and financial autonomy.

The Planning Commission is, however, still stuck in a time warp. Its organisational and functional structure is out of sync with the times and the changed environment and realities. It continues to have members and associated positions for sectors now fully mandated to the provinces.

In the light of such developments, the Commission may have to restrict itself to establishing priorities and guiding and influencing investments by designing appropriate incentive structures. Unfortunately, as presently organised and manned, it cannot perform such a role when it comes to, say, energy, and developing the country’s economic vision, taking the lead in establishing priorities and conceptualising and formulating related policies and programmes.

To this end, therefore, the incumbent deputy chairman’s desire to convert it into a ‘think tank’ is a step in the right direction. This would require not just a restructuring of the Commission and staffing it with a different and a higher quality skill set (human capital, contrary to general belief, is in scarce supply in the country). It would also have to be empowered differently to attract the quality of skills for such a role.

This in turn will require not only a dramatic change in the rules of business but also in the importance of its position in the federal government. And this will be resisted by the bureaucracy (in whose scheme of things the role of the Commission is peripheral and modest) as well as by the politically more powerful individuals occupying ministerial positions, all of whom will jealously protect their turfs.

The writer is a former governor of the State Bank of Pakistan.

Shahid Kardar, "An obsolete agency," Dawn. 2013-10-01.
Keywords: Economics , Economic planing , War-Afghanistan , Economic growth , Foreign investment , Policy making , World Bank , Budget deficit , 18th amendment , Fiscal crisis , Terrorism , Afghanistan , Pakistan , IMF , 9/11