The Planning Commission is apparently in the process of preparing the Twelfth Five-Year Plan for Pakistan. This Plan will be for the period 2017-18 to 2022-23. A number of questions can be raised on the planning process at the Federal level at this time.
The first question is that any new Plan should be preceded by an ex-post evaluation of the previous Plan. Has such an evaluation of the 11th Five-Year Plan taken place? If so, it may be made public. It will be useful to learn from the failures, if any, in the achievement of targets.
Second, what is the optimal time for preparation and public engagement in a Plan? Third, what is the nature of civil society and private sector participation that has taken place in the backdrop to the preparation of the Twelfth Five-Year Plan?
The next set of questions is more technical in nature. If 2017-18 is to be the benchmark year then the year is yet to be completed. Will the base year for the Plan also rely on projections? Does the state of the economy with burgeoning current and fiscal account deficits permit any kind of straight forward projection of the medium-term prospects for the economy? Should the focus not be on short-term steps for stabilizing the economy so that it can get on subsequently to a path of orderly, sustained and higher trajectory of growth?
The final questions relate to the capacity of the Planning Commission to prepare the Plan. Apparently, the Chief Economist has resigned and a replacement has not yet been appointed. Do the various sections of the Commission have the requisite technical expertise to focus in-depth on different sectors of the economy? More importantly, what will be the credibility of the Plan with the Provincial Governments and other Federal Ministries at this time? How much commitment will be there to implement the Plan?
Five-Year Plans have had a chequered history in Pakistan. The pinnacle of success was obtained in the second Five-Year Plan (1960-65). Not only the growth strategy was fully implemented but the outcomes exceeded the targets. The Third Five-Year Plan (1965-70) was affected by the war with India and the cessation of US foreign assistance.
The Fourth Plan (1970-75) was implemented at a time when Pakistan was separated into two parts with the creation of Bangladesh. The economy of the Western part of Pakistan was compelled to make a number of serious adjustments and the Bhutto regime made a major ideological shift away from unbridled capitalism.
There was a hiatus from 1975 to 1978. The Military Government of General Ziaul Haq implemented the Fifth and Six Five-Year Plans from 1978 to 1988 with a degree of success. Thereafter, there was again a hiatus due to the rapid turnover of elected Governments. The Musharraf Government abandoned five-year planning and opted instead for a Medium Term Development Framework. The PPP prepared an Economic Growth Strategy instead of a formal Five-Year Plan.
The present PML (N) Government presented the 11th Five-Year Plan for the period, 2012-2013 to 2017- 2018, and now has apparently embarked on finalization of the 12th Five-Year Plan. Earlier, a Perspective Plan / Vision up to 2025 was presented, with pretensions of taking Pakistan to the status of a high middle income country by the terminal year. This required an increase in the per capita income in US$ of 10 percent annually over the next twelve years. This was a tall order to say the least when during the first four years of the present Government the annual growth rate in per capita income in US$ has been 4 percent.
What has been the performance of the economy during the 11th Plan period? The Plan was presented actually in early 2015-16, although the base year was 2012-13. Therefore, it was effectively a three year Plan. The average growth rate targeted for 2015-16 and 2016-17 in the Plan was 6.5 percent. The actual growth rate achieved was 5 percent.
The investment rate was expected to rise from 15 percent of the GDP in 2012-13 to almost 23 percent of the GDP by 2017-18. Instead, it did not even reach 16 percent of the GDP by 2016-17. Similarly, an ambitious target was set for the containment of the current account deficit to 1 percent of the GDP in 2016-17. Instead, it went up to 4 percent of the GDP. The fiscal deficit was projected at 4 percent of the GDP in 2016-17. Instead, the actual deficit reached 5.8 percent of the GDP.
The danger is that a Five-Year Plan can degenerate into an exercise in wishful thinking. Clearly, Plans must aim to do better than in previous years with the appropriate strategy and policies, but the objective should be to preserve the credibility of the exercise.
The timing of preparation of the 12th Five-Year Plan is also a contentious issue. The present Government has less than six months left in its tenure. Ideally, any process of preparing the Plan should be undertaken by the newly-elected Government in the second half of 2018. This Government will have five-year tenure and can plan accordingly. The Plan should ideally reflect the economic development vision of the new ruling party as contained in its election manifesto.
A recommendation to the Planning Commission is that instead of focusing on the 12th Plan make operational the CPEC Long Term Plan, which has been finalized recently. CPEC is likely anyway to be a major part of the envelope of financing and projects over the next five years. Each project within the proposed portfolio may be subject to rigorous financial and economic appraisal, especially in terms of the costs and benefits to Pakistan.
The macroeconomic consequences of the CPEC projects combined together may also be derived in terms of the impact on growth, employment, public finances and the balance of payments. The findings should be made public to remove the perception currently of a lack of transparency. The CPEC Long Term Plan as it stands today is only a statement of intent.
(The writer is Professor Emeritus and former Federal Minister)