Round Table with Asad Umar and other economists Role of planning in the economic development
11 March 2020
WELCOME REMARKS BY THE DIRECTOR GENERAL
A warm welcome to everyone.
Second event of a series of public conversations on the economy of Pakistan. First one was on macro economy with Dr Ishrat Hussain. Today, we will talk about role of planning in the economic development. Later, we hope to cover micro economy or trade, and other dimensions of the economy of the country.
Asad Umar wears many hats. He headed a successful business enterprise. Has been active in politics. And good grasp on financial issues.
Many of us in this hall are not economists. However, we all do understand the critical role that economy of our country plays in the quality of life we live in. And in this context, the role of planning is considered to be critical for sound economic development.
In our own country, we saw how the five-year plans helped us achieve high growth rates in the fifties and sixties. Many countries in East Asia too benefitted from such development plans.
In the past three decades, the dominant trend, however, was away from these long term plans led by the states. The world went for economic liberalization, marketization and deregulation. Unfortunately, it is my view that the so-called Washington Consensus of the nineties created economic inequality and amplified economic shocks such as the financial crisis of 2008.
The trend of national development planning seems to be coming back.
The number of countries with a national development plan has more than doubled, from about 62 in 2006 to 134 in 2019.
More than 80 per cent of the global population now lives in a country with a national development plan of one form or another. This is a stunning recovery of a practice that had been discredited in the 1980s and 1990s as a relic of directed economies and state-led development.
I believe a case can be made for long term plans. In the absence of long term vision, we have seen that the governments, incumbent as well as incoming, have rolled back sensible policy decisions either to placate critics or to gain popularity. This leads to uncertainty and unpredictability among investors. That in turn leads to slowdown in investment.
Pakistan since its independence in 1947 has had 11 five-year plans, last one being from (2013-18), before moving on to Annual plan 2019-20 announced by the present government.
A long term approach can help us address some of the perennial issues, like external imbalances, losses of state-owned enterprises (SOEs), leakages and inefficiencies in energy and water sectors, all of which tend to reduce the country’s capacity to invest, forcing large amounts of external and domestic borrowing.
For long term and sustainable economic development, countries have to start from somewhere. Thus, there is a distinction between short term planning and long-term goalsetting. However, countries like Pakistan have mostly fallen into the trap of economic plans that focus on year to year goals setting or in other words macroeconomic stabilisation and usually fail to link policies with long term plans.
Currently, it appears to us that Pakistan’s government is focusing on short-term projects to deal with current economic challenges. One is not sure if this option would be in favour of long-term and sustainable growth. We must remember, our financial constraints are not just fiscal and current account imbalances. Our economy is facing various other issues i.e. poverty, slow economic growth, unemployment, energy crisis, inflation, illiteracy, foreign debt burden and strict policies of IMF and other donors.
Can we fix such mighty economic challenges through a better planning process? Can planned economic development help achieve a rate of growth which is politically acceptable.
Ministry of Planning Development & Special Initiatives can provide a comprehensive roadmap for the economy, set the policy direction, and identifying strategies, programs, and projects. We will be happy to listen to Asad Umar and other economists around the table on what role the planning process can play in economic development.
Apart from that, let me raise a few related questions for which we are seeking answers, and I wonder if our planning processes can provide answers to these questions:
One, the austerity driven model and high interest rates are slowing down our economic growth. Will this shrinking of the size of the economy not lead to further unemployment and hence difficulties for the people and the government?
Two, Should the government not follow an expansionary fiscal policy so that we don’t end up in a recession?
Three, our debt is growing. The currency has depreciated. Where do you see our debt profile taking us in the coming years? And how would we avoid a debt trap?
Four, we are into sixteenth program with IMF. How would this program be different from previous programs? Will the burden of adjustment in terms of utility costs not fall on consumers? How would the government control the prices, especially of food and fuel?
Five, Will the growing cost of utilities not increase the cost of manufacturing? How will we keep our exports competitive?
Six, Reducing imports also means less revenue and constraint on export oriented industries. How do we find the right balance?
The present government has rightly accorded top priority to broadening the tax base. It is sad that retailers and many other segments of the society resist this effort.
Stabilizing economy and pulling it out of such mammoth challenges is not easy. There is no short cut either. However, we do want to understand from Asad Umar and other economists as to how in their view our economy can be stabilized in the shortest possible time and also benefit from the longer term planning.
Thank you once again for coming to this round table, and we look forward to benefiting from your valuable views.