Economy Development of Pakistan

M.ZEESHAN MUMTAZ

The History of Economic Planning In Pakistan

The history of economic planning in Pakistan can be divided into five distinct phases:
1- The Period of Economic Coordination (1947-53):
First of all economic planning development was established in 1948, in order to act as a
clearing house and establish economic coordination, The Colombo Plan was established in
1950 and the main emphasis was given to agriculture. But this plan was not implemented
within time. No aggregate targets were mentioned for the economy as a whole.
2- The Planning Boards [later called Planning Commission] (1953-58):
The planning board faced the following serious difficulties:
Shortage of trained staff.
Non availability of accurate and reliable data.
Its uncertain position in the government.
It was regard as a rival of Ministry of Finance and The State Bank of Pakistan.
Political instability.
The annual plan was never seriously pursued at the time.
Budget decisions were also destroyed.
The first five year plan was really approved by the government. its implementation
suffered due to rapid changes in regimes and lack of political support.
3- The Planning Commission (1958-68):
In October 1958, the third phase in the evolution of the planning process began with the
assumption of power by the military government of Ayub Khan. This regime chose to make
economic development through a marked economy ands reliance of the private sector as its
primary objective. The new government set its self to achieve the following targets:

Rapid industrialization in the country.

Overcoming food shortage.
Removal of political instability.
Overcoming the problem of deficit in the Balance of Payment (BOP).

The second five year plan (1960-65) was made in this phase and it was so successful
that Pakistan set an example for other nations of the world. But unfortunately, Pakistan had to
fight a war against India in 1965 due to which development could not be sustained.
4. The Decline of the Planning Commission (1968-80):
The Decline of The Planning Commission as an important decision-making body
coincided with the fall of Ayub Khans government. The first major blow to the power and
authority of The Planning Commission come during the government of
Yahya Khan (1969-71) when serious planning was almost given up by the government. After
March 1969, the third five year plan was virtually abandoned. The publication of the fourth
five year plan in 1970, to cover the period (1970-75), was given very little credibility because
of the political conditions prevailing in the country at that time.
The government of Peoples Party, which followed the collapse of the military
government, was dismissive of the Planning Commission and, in its early years, it was almost
totally ignored. One reason for this was that the government decided to run the economy
through annual plans, rather than through a comprehensive five year plan, mainly because of
the considerable political as well as economic uncertainties in the country. In 1972, The
Planning Commission was placed directly under the control of Ministry of Finance as a
division. During the period from 1972-77, therefore, the Planning Commission exercised little
overall control over the management on the economy in the sense that it had little say in the
important economic decisions.

The Zia government, which took over in July 1977, emphasized the need for a five year
plan. Consequently, the fifth five year plan to cover the period of 1978-83 was published. But
the government never seriously pursued the plan mainly because of the difficulty in
implementing it during overall uncertain economic conditions. Little reference was, therefore,
made to the fifth five year plan in the annual plans and the overall review of the economic
performance.
5. Attempts at the Revival of the Planning Commission:
In early 1980s, the Zia government took steps to revive The Planning Commission as
an effective and authoritative economic decision making body. The sixth fiver year plan was
formulated in 1983 for the period 1983-88 and was successfully implemented. During this
period, the Planning Commission played its role effectively. In 1988, the document of the
seventh five year plan and seconds Perspective Plan for the periods 1988-93 and 1988-2003
was prepared and published. But in 1988, the Peoples Party government came to power and
the seventh five year plan was never implemented.

THE ROLE OF DEVELOPMENT PLANNING

Planning has been greater importance after the Second World War. We now try to
answer the question why do we need economic planning and what role does it play in the
process of development?
1. Rapid Economic Development:
In order to break the vicious circle of poverty in underdevelopment countries and
initiate and speed up the process of their economic development, planning is required.
Therefore, the Government should plan for accelerated economic growth.
2. The Market Failure Argument:
In the less-developed economies, market prices of the various factors of production
such as labor, capital, and foreign exchange deviate substantially from their social opportunity
costs and are, therefore, not a correct measure of the relative scarcity or abundance of the
factor in question.
Planning in developing countries is more necessary by the inadequacies of the market
as a mechanism to ensure that individual decision will optimize economic performance in
terms of the societys preferences and economic goals.
3. Mobilization and Allocation of Resources:
Development process requires huge financial resources, and especially for building up
social overhead capital. Private enterprise cannot easily mobilize sufficient financial resources
needed for development purpose.
Beside resources mobilization, the second important decision is the allocation of
resources. A third world economy cannot afford to waste its limited financial and skilled
manpower resources on unproductive ventures.
4. Need for Structural Change:
In certain conditions an economy may desire a structural change. in general, structural
change is desirable because of three factors:
1. To modernize the economy.
2. To turn the industrial sector into the foundation and backbone of the economy.
3. To increase the pace of capital accumulation in the economy.
Because of these three factors the developing countries often desire to change the
structure of their economy. In Pakistan, for example, many efforts have been made to
industrialized the economy from its traditional agrarian structure. This cant be done without
effective and comprehensive planning.
5. Harmonized Growth:
Planning is also required to ensure balanced growth among different sectors. There
must be balanced growth between agriculture and industry, consumer goods industries and
capital good industries, if undue strains are to be avoided. In a laissez-faire economy, balanced
growth cant be achieved.

6. Price Stability:
An important reason for economic planning is maintaining price stability. Stable prices
are always desirable. Often natural factors cause price instability (especially in the case of
agriculture products).
7. Avoiding Business Cycles:
Planning has also proved to be a powerful instrument for eliminating instability which
is found in a free market economy. Private enterprise, if left free, would produce trade cycles,
and unemployment. It is generally agreed that economic planning largely helps in making the
business cycle less severe. Planning is advocate even for developed and advanced economies.
Similarly, planning is also needed in LDCs for a study rise in the national income.
Otherwise it will be mark by the trade cycles that create hardships for the people.
8. Reducing High Level of Unemployment:
Unemployment is nothing but wastage of human resources. Full employment is and has
always been desired by the societies. The classical economists were of the view that full
employment is always automatically achieved. This may have been true if there would have
been perfect markets.
9. Capital Formation:
The developing countries have a low national income because a large section of their
population is poor and thus they cant save and invest sufficient money in production. Thus,
investment is low which cause production and national income to remain on the lower level.
This circle continues to repeat itself and in economic theory we call it the vicious circle of
poverty. The only way to get rid of this circle is capital information. But the poor masses of
LDCs are not capable of capital information. The only alternative is for the government to
come forward and take necessary steps to increase capital formation.
10. Foreign Aid Argument:
The Formulation of detailed development plans with specific output targets and
carefully designed investment profits has often been a necessary condition for the receipt of
bilateral and multilateral foreign aid.