PSDP: mission, purpose and participation
Because of scarcity of funds development projects have to take their lead according to utility
and viability; therefore, implementation and the procedural aspect becomes equally crucial
By Dr. Noor Fatima

Do we have a fundamental reason to pursue economic growth as a primary objective of policy, or to consider it as the key indicator of economic performance without the development? Will it make people’s lives any better? The essence for Public Sector Development Programmes (PSDP) embraces the view that a sense of mission, purpose and a strong spirit of development are required to accomplish improvements in the public sector. The belief also reinforces the government’s commitment to the programmes that will sustain the principles of developmental state, whilst improving the public sector performance. Principally, government’s developmental policy is driven by a philosophy that makes the interest of the people in public policy as a dominant concern. PSDP is perceived as a compelling mandate of government for advancing the process of creating a just society by home-grown, participatory and tailor-made project to meet local needs and investment. The question is, if that is the case then why is the PSDP most arguable component of any budget in Pakistan?

Notwithstanding deteriorating economic scenario, country’s economy grew at 2 per cent during outgoing fiscal 2008-09, the overall size of PSDP for 2008-09 stands at Rs 646 billion. Further keeping the consideration of international economic meltdown and the fragile regional economic conditions, allocation of 20 percent enhanced PSDP funds seems to be courageous initiative, depending upon disbursement of pledged aid. Taking the allocation at face value, one believes that this will turn around the developmental sector but there is a reality check before we get in to any illusions. First of all there is a need to establish whether there is link established between the PSDP allocation and economic growth of current financial year. The size of the funding should also reflect the macroeconomic balance between the two. What Economic Survey for 2008-2009 shows that only Agriculture sector performed better at 4.7 percent compared with 1.1 percent during 2007-08. Overall manufacturing growth declined to 3.3 percent against the target of 6.1 percent, similarly large scale manufacturing declined to 7.7 during ongoing fiscal year. The survey is not to show an account of economic activity in numerical figures but it meant to indicate what should be priority of allocation for next financial year. As a matter of fact the economic survey should be published 6 monthly so that that gap can bridge between the previous year performance and future economic planning. For instance allocation for power sector is half of the previous year. There is also insufficient allocation for the education and research and development which is supposed to get proposed to spend more on this sector. The analysis of the first eight Plans shows that emphasis was on a growing public sector with massive investments in basic industry and heavy industries, but in present scenario, market economy is the biggest factor for changing role of government to embrace the careful selection of options in the areas of policy making and facilitating development initiatives to face the economic challenges. The allocation of PSDP needs more attention towards diversity of trade to reduce trade deficit by brining private sector in.  The focus on increasing productivity in agriculture and value addition is significant but at the same time since we are not able to attract foreign investment in manufacture and infrastructure, public investment is mandatory for social development.  

The priority of allocation is only one aspect of the development planning as a determinant of the future economic policy and the formulation of this component is a crucial task for budget preparation. Since there is scarcity of funds and development project has to take its lead according to utility and viability therefore, implementation and procedural aspect also becomes equally crucial. Governments all over the world have accepted that the development of clear Strategic Plans and Policies is one of the most important success factors in achieving for macro-economic stability. Just looking back to the history would know that how much on account of priority of policy we lost. Economic development planning began in 1948 and a six year plan was given in 1950 mainly focus of government was on infrastructure development and could not be implemented. The second five year plan gave boost to growth and attracted the private investors but since government chose to expand the economic activity in which the private sector could not show much interest, therefore we end up reliance on heavy foreign loans. The development planning of 1970 to 1975 was also unable to produce result on developmental plans due to political unrest between East and West Pakistan. The next planning of 1978-1983 showed the overall improved macro-economic indicator but oil prices increase in 70s as well as Afghan War disrupted the development planning for investment as a back support for macro-economic stability. From sixth Five year plan to onward private sector was encouraged in public private partnership and investment and infrastructure, nevertheless due to heavy reliance on foreign aid, development planning could not focus on crucial project for future self reliant economy. Resultantly we turn up as debt ridden country and had to go for structural adjustment in 1990s which also hindered and shifted the priority of development planning for fiscal balance and social spending was the least priority of IFIs during adjustment era. Notwithstanding that whatever financial space we had for developmental planning it was marred by poor governance & cumbersome procedures of the implementation and execution of the projects. Execution and monitoring of PSDP is a vital component for efficient use of funds. Delays in the projects not only caused economic cost due to over-runs time but hindered the other related projects. Ghazi Brotha Hydro Power Project, Neelum Jhelum Complex and Thar Coal Power Project are the illustrations of delayed projects, not only could be a source of power supply but could support industrial sector which is facing huge trouble due to power shortage currently. In current PSDP Rs10 billion is again earmarked for the construction of new small and large dams at various locations of the country. Rs8.5 billion have been earmarked for the Kachi Canal (phase-I), Rs3 billion for the Rainee Canal (phase-I), Rs1.8 billion for the raising of the Mangla Dam, Rs2 billion for the Gomal Zam Dam, Rs2.5 billion for the lower Indus right bank irrigation and drainage Sindh, Rs1.2 billion for the Balochistan effluent disposal into RBOD (RBOD-III), Rs1.5 million for the Greater Thal Canal phase-I and Rs500 million for the Kurram Tangi Dam have been allocated. Again the funding has been allocated to the on going projects because they were not completed in the previous planned allocated time and resources, for instance the Neelum Jehlum hydropower project has been allocated Rs7.5 billion, Bhasha Diamer Dam Project Rs417 million, Golan Gol Hydro power project, Chitral Rs700 million, Khan-kwarhydro power project, NWFP Rs1.175 billion, Allai Khawar hydro power project, NWFP Rs2.53 billion, Dubir Khawar hydro power project NWFP Rs3.5 billion.  Now where does it leave us?

Approval and allocation does the automatic completion of project? No. Does spending of the allocation fund even on full capacity in stipulated time period shows the positive sign, answer is still no. Only timely completion of project is the answer. We heavily relied on aid since 1960 just because we could not implement our development projects, and it is also depends that how much is spent on development projects. It comes under the efficient governance that how the projects as per home need priority is negotiated and potentially it is presented to the donors for funding on this account. What our planners need to comprehend is that the level and commitment of private capital flows depends crucially on perceptions of risks and returns. These, in turn, depend not only on basic endowments and opportunities but also on the ability to respond to the investment climate and the institutional infrastructure which leads “market friendly” behavior from the authorities. Economic stability and social development are never achieved by critical events and conditional generosity of IFIs and also can’t be attained in the absence of institutional integrity.

PSDP investment projects becomes more relevant when we are looking forward to private sector involvement in infrastructure and starting point is a governance structure which provides clear goals, makes management responsible for performance and allows them independence to carry out their projects. This involves training of public officials for efficient execution of projects as well bringing in private sector partner on an advisory basis. If we look it in the context of trade-off with foreign aid, we would find that foreign aid fails because the structure of its incentives resembles that of central planning. Aid is not only ineffective, it is arguably counterproductive but if it is effectively used for developmental purposes.

There is need to bridge the loopholes in the principle -agent relationship on each point along with the chain of aid delivery which enhances corruption and contribute in negative growth instead of promoting development, aid extends the life of sick institutions along with comprador bourgeoisie in the society waste of resources, probably serving some objectives different to those for which the aid is meant for.

In nutshell, this is not time to blame for the failure of developmental planning on any one - institution, projects or foreign aid programmes, in fact, all factors are responsible. Since we did not develop our back bone of economy therefore, reliance on foreign aid was the solution for economic stability. What next? Private sector investment, will give fast pace to growth and what government can focus on is to attract FDI and to speed up technological change by investing research and innovation in local industry. Due to budget constraints government can only play its role to the limited public investment and as a matter of fact funding is not but right policies is important for development if there will not be investment and protection in SMEs then we can not kill the growth phobia. What makes it more likely that a country will have the right policies in the first place. Presumably growth-killing policies benefit those elements which implement and maintain them otherwise, they would not exist.

The successes and failures of developmental Programme points to a number of lessons: First, the vulnerability of Programme proposals vis-à-vis donors’ perception to be fully understood as without donors it would become difficult to implement plan in the prevailing economic recession. There is a need to ensure a more realistic programme design for more successful outcomes. Second, the complexity and cumbersome processes of execution of projects need to be address. When designing programme outputs, objectives, and development goals need to be more realistically and logically linked with policy directions. Capacity-building support has to be deeply woven into a reforms programme. It is all about to enhance capacity rather building institutions to manage and sustain such reforms in future.

The successes and failures of developmental Programme points to a number of lessons: first, the vulnerability of Programme proposals vis-à-vis donors needs to be fully understood as without donors it would become difficult to implement developmental plan in the prevailing economic recession. Second: there is a need to ensure a more realistic programme design for more effective outcomes. Third, the complex and cumbersome processes of execution of projects need to be streamlined when designing programme outputs, objectives, and development goals need to be more realistically and logically to be linked with policy directions. Capacity-building support has to be deeply woven into a reform programme. It is not all about just enhancing capacity, rather to build institutions to manage and sustain such reforms in future.