But the neo-classical & modern theory of  ‘development planning’ envisages the term development something more than that of economic growth. A few statements would make it understandable to us. Development is fundamentally a process of change that involves the whole society, its economic, social, political & physical structure as well as the value system & way of life of the people (Weilz, 1971). Porter (1995) defines development as a complex of three important criteria: – (i) Economically sharp and sustained increase in national product, (ii) Socially redistribution of national income on an egalitarian basis, and incorporation of the marginalized masses into the economy, (iii) Culturally, emergence of a new national self image. Development has been defined as the process by which powerless people every where are free from all forms of dependency social, cultural and political, so that create a personal sense of history for themselves and thereby express their full potential as human being (Kim, 1973). Development encompasses wide ranging changes in techniques of producing, and distributing goods, in the sale and organization of production and in types of outputs and inputs (Richard, 1968). It embraces major shifts in industrial, occupational and spatial distribution of productive resources and in the degree of exchange basis and monitization of the economy. On the social and demographic side, it involves significant alterations in fertility, mortality, migration of residence, family size, structure, educational system, and in provision of public health. Its influence extends into the areas of income distribution, class structure, government organization and political structure.

According to Schumpeter, “Development is a discontinuous and spontaneous change in stationary state which for ever alters and displaces the Equilibrium State previously existing”. Professor Bone says, “Development requires and involves some sort of direction, regulation and guidance to generate the forces of expression and maintain them.”  Development may be conceived as a multi-dimensional process involving changes in social structures, popular attitudes and national institutions as well as the acceleration of economic growth, the reduction of inequality and the eradication of absolute poverty ( Todaro,    ).  Thus, development means growth plus change viz. – improved performance of the factors of production, techniques of production, man’s growing control over nature, development of institutions and changes in values and attitudes, where distribution of income is more equitable, minimum level of consumption, calorie intake, housing, sanitation are ensured, composition of the consumption is desirable and balanced and minimum level of unemployment (Meier,     ).

Ursula Hicks and Schumpeter has opined that development planning refers to the problems of developing and ‘less developing countries’ (LDCs). That the problems of these countries are concerned with the development of unused resources, even though their uses are well known. With development and increase in per capita GDP, the structure of demand for goods and services changes. Though both agricultural and non agricultural sector develops, the higher demand for manufactured goods and services leads to the development of tertiary sector, migration of population from rural to urban and expansion of marketing activities take place.

According to Albert Waterson, “Development requires social and cultural change as well as growth; that is, qualitative transformation must occur concurrently with quantitative increases. There is , in fact, a reciprocal relationship between the two; and neither process is likely to continue for a long or go very far without the other. Hence, development means change plus growth.

The quest for development planning throughout the developing and ‘less developing countries’ has been predicted largely upon the formulation and implementation of development plan. The core idea of development planning is that the political process in a society is used in an intelligent way to allocate scarce resources to achieve certain goals and objectives. Waterson considers a country engaged in development planning if its government makes a deliberate and continuing attempt to accelerate the rate of economic and social progress and to alter institutional arrangements that block the attainment of such goals.

According to W. Arthur Lewis, development planning may contain any or all of these elements:

Development plans in the developing and ‘Less Developing Countries’ basically seek to achieve the objectives:

#  Rapid economic growth measured in terms of GDP;
#  Expansion of employment opportunities for the unemployed  & underemployed by a suitable combination of projects and programs;
#  Distribute justice through effective fiscal and pricing policies and by opening economic opportunities for lower income groups;
# Order into planning and execution of government expenditure, especially in capital sector;
# promoting an increase in savings both public and private;
# Provision of adequate infrastructure( water, power, transfort, communication);
# Provision for specialized training facilities as well as adequate general education thereby ensuring necessary skills.

Mainly examining what is proposed under each of these heads (objectives/ policies) should test the quality of a development plan. The recent trends towards putting more figures into development plans have unfortunately tendered to obscure the fact that what matters in planning are not mainly figures but mainly policies. These objectives encourage the governments to seek to influence the activities of the private sector through Investment Schedule. The core of planning for the higher productivity in private sector lies in a set of policies, which induce private persons to employ their time and resources more productively. The quality of a plan depends on the quality of its policies rather than on quality or quantity of its arithmetic.

Michael P. Todaro observed differential role of planning, that is, the concept of planning may be limited to the formulation of a few related capital projects or it may encompass the use of all resources, public and private, human and physical. In mixed economies, governments generally set target figures for output to each sectoral activity in different time frames. The development plans show macro economic projections and output targets and also indicate how government proposes to raise money and recruit people to carryout the objectives.

The process of planning may be ‘top down’ to the extent that investment are planned and controlled by a single central planning organization. It also may be a bottom up planning process whereby participation of masses in the development activity is sought and devolution of planning functions to regional local governments. While the ‘top down’ approach has been widely practiced even in Bangladesh. But ‘bottom up’ approach is yet to be tried in a market economy. Tanzania is said to have been trying this for limited purpose.

Development plans are conducted in different time frames: (a) Perspective plan (10 – 20 years); (b) Medium term plan (5 – 7 years); and (c) Short term plan (1 – 2 years). The perspective plan outlines the hopes and aspirations of the society on long time frame for social and economic development with predictions about mobilization of resources for attainment of these goals. The long-term goals are broken into phases through medium term plans, mostly five-year plan, on operational basis. Usually a medium term plan will proposes to take measures for three basic goals – life sustenance, self – esteem and freedom from servitude. These are again broken to a number of specific objectives. Usually, a medium term plan is annexed with a list of projects, which are expected to translate the plan objectives into realities. A short-term one-year plan is called Annual Development Plan (ADP). It is an operational plan of the medium term plan and typically integrated into the Annual Budget. ADP may also include economic policies, controls and directives that may extend beyond the budget. In ADP, specific allocations are made for economic development projects of public sector for the fiscal year concerned. In  private sector activities, investment programs are outlined in ‘ Investment Schedule’.

Every long term and medium term plan would have built in strategy for achieving the stated objectives. I . G. Patel says, ‘strategy implies essentially a deliberate choice – a choice of the point and timing and manner of attack on the problem at hand.’ For example, the ‘First Five Year Plan’ of Bangladesh has been designed to generate a rate of growth, which would have a minimum consumption standard, expanded employment and socially desirable income distribution. The basic strategy was to concentrate on increasing output in those sectors of the economy which would use large number of labor and labor intensive techniques of production.Within the general strategy, it envisages to reduce dependence on imports of food grains and export promotion. The objectives of the development plan and the strategy adopted for attaining those objectives may not work as planned. The act of making priority choice in project selection and resource allocation may also cause failure in achieving plan objectives. Regional imbalance in development may lead to allocation of resources to less productive sectors. Social structure may also lead to injudicious resource allocation in a small elite group controlled society. Again, the governments may have their own political imperatives depending on their nature and character. Such imperatives are usually results of interest articulation. Too much donor dependency leads to their interruption in internal policy formulation.

The ‘Medium Term’ five-year plan and its operational ‘Annual Plans’ are assemblages of development projects. According to Gittinger, a development project is a specific activity with a specific ending point intended to accomplish specific objectives. In a short, a project is a planned hypothesis with a starting time, a finishing time, a cost and a geographical location for achievement of purpose. The relationship between projects and development plans has been dramatized by Little and Mirrless by presenting the twin propositions that ‘plan require projects and project require plans’. The best economic appraisal of projects cannot, however, be made without a plan.

Macro – economic planning in terms of figures aggregated for the whole economy, can be gradually improved in light of improvements in micro-planning, that is, planning at the sectoral level and project levels and vice versa. Professor Nurual Islam says, “ The plan, however, provides for adquate flexibility so as, to be able to incorporate, in terms of projects and programs, the results of subsequent analysis and additional statistical information, as soon as they are available. The annual plans are expected to provide necessary mechanism of adjustment and flexibility. It is said that projects are the building blocks of development plan. Project has three stages of cycle:

Plan evaluation works necessarily fall on the ‘Central Planning Agency’. The Planning Commission has to undertake the preliminary evaluation as to whether a project is technically and economically feasible and viable. It also collects information on the progress of a particular plan during the course of its implementation and uses this information as a feedback for the preparation of the next short-term plan. Usually, such evaluation results find place in the ‘macro- chapters’ as well as in the ‘sectoral – chapters’. In Bangladesh, no one medium/ short term plan was evaluated although a mid term review of the Third Five Year Plan and Fifth Five Year Plan was done by the central planning agency. This has created a communication gap between the planners and the people at large about, what is happening as a result of ‘development planning’.
1.2 STATEMENT OF THE PROBLEM

Development Planning as a practice in Bangladesh has its roots in the pre- liberation days, when a Provincial Planning Board, constituted in the Mid- Fifties, was busy in pushing projects prepared by Parastatals or Ministries for securing larger share of available public resources in pursuit of parity in allocation. Because, lack of experience and political overtone, many projects were not properly formulated and analyzed. The proforma used for preparation, formulation, appraisal, monitoring and completion had bias towards budgeting the resources. The ‘macro consistency model’, which was used for the Second Five Year Plan of Pakistan, was basically for broad sectoral allocation. During Pakistan regime, planning strategy was for industrialization with the aspiration of ‘trickle down effect’ to the toiling mass. After the independence of Bangladesh, the Planning Commission was established by the ‘Presidential Order’ in January 1972.

The development planning process has been started in Bangladesh through the initiation of the First Five Year Plan (1973 – 78). During the period of 1973 – 2003, Bangladesh has implemented five medium term (five year) plans and a short term (Two year) plan & also witnessed a two year ‘plan holidays’. The central planning agency carried out the mid-term review of the TFYP and FFYP. But it did not  carry out evaluation of any of the medium term or short term plan.

Despite the country’s efforts at planned development for more than three decades, the economic scenario that obtains dismal one. Although there has been some modest growth in over all productivity since the initial disastrous years following the liberation war, the average standard of living in Bangladesh still remains pitifully low. There has been worsening of the distribution of income. The increase in impoverishment and pauperization is a part of the dynamic process linked to the pace and pattern of economic development in the country.
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Historical evidence shows that during the 20 th century development decades, in a wold bank study on ‘redistribution with growth’, H. B. Chenery has made the following statements. ‘In the development decade of rapid growth, under developed countries has of little or no benefits to perhaps a third of their population. Although the average per capita income has increased 50% since 1960, this growth has been very unequally distributed among countries and socio- economic groups. Thus the very idea of growth has increasingly being questions.’ International Labor Office reports on Columbia shows that growth took place but distribution is unequal, unemployment increased and number of persons below absolute poverty line also increased. The experience of development planning during 1950s and 1960s has made W. Arthur Lewis skeptic about efforts of governments of LDCs in planning for development. According to Lewis, ‘development in these countries was undertaken – to show that government is doing something, to obtain foreign aid and to distribute patronage to its elite clientele.

In Bangladesh, though the growth rate is about 5% for the last three decades but poverty situation & also the socio-economic indicators did not improve as expected by the development planners.
The number of households in the rural areas below the minimum calorie need increased from 53 per cent in 1962-64 to 59 per cent in 1975/76 and further to 76 per cent in 1981/82. The trend was undoubtedly on the increase despite that food grain import more than compensated the loss of crop. The per capita availability of food grain increased by 6 per cent over 1980/81, from 15 oz. a day to 15.9 oz.  Against this increase in per capita availability of food, the increase in the proportion of households below the prescribed calorie intake the working of a complex set of socio-economic forces which have come to deny adequate food to an ever increasing proportion of households. Access to income and employment is undoubtedly necessary for access to food. Though, it itself is not adequate for probably three times as much man-days of employment was created in 1981/82 than in 1975/76 through the Food For Works Program which has come to constitute the fulcrum of rural employment since the 1974 famine. In Bangladesh, although growth takes place but income distribution was skewed.

The deteriorating poverty situation against planned efforts in LDCs, likely to strengthen the heresy about planned growth. In fact growing poverty in the Third World led to reawakening of planners in 1970s and new ideas like equitable growth and basic needs flourished. There are some Pharisees who profess growth first, distribution later [Haq, Mahbubul, 1963]. In South Korea, where continued high growth rate, raised the real wages and standard of living of the common man. But the experiences of Sri Lanka in the last three decades show that the high growth is not only the way of reducing poverty. During this period the index of ‘ Physical Quality of Life ’ increased from 65 to 80 ( Roemer, M & Stern, J.U , 1981), though GDP growth rate was around 4.5% a year between 1980 – 1982, about half of that of South Korea. This is possible because of the institutional developments beyond market mechanism. In Bangladesh, where poverty has remained a continued theme of development and growth has been considered as a necessary condition for poverty alleviation.

1.3 PURPOSE AND OBJECTIVES OF THE STUDY

The major purpose of the study is to investigate the ‘development planning process’ followed in Bangladesh during the period of 1973 – 2003. The specific objectives of the study are as follows:

The need for ‘development planning’ for attaining growth plus qualitative change in developing and ‘less developing countries’ is a leading issue. In case of Bangladesh, emerging out of protest against economic exploitation and political & social decrepit, independence did not imply a stage of fully equipped onslaught on poverty and ill development of the national economy with a long term social philosophy for society – building with planning techniques. After the initial steps of dealing with ‘ enemy property’ and ‘alien industry/ business’, the new independent regime found the whole arena a clean state except the colouring of heritage of Pakistan ideas of development planning based on encouragement of capitalism. In that situation, the new constitution framed in 1972 provided for the establishment of ‘an exploitation – free society’ with five basic changes in the approach to a new identity of ideological choice within the broad frame-work of the 4 ‘State principles’: Democracy, Nationalism, Secularism and Socialism. These are:

(i) Conditions are to be created to emancipate the toiling masses from all forces of exploitation;

The Government of the People’s Republic of Bangladesh has implemented five ‘Medium term’ and a ‘Two Year plan’ & also a two- year ‘plan holidays’ during 1973- 2003. Except the mid-term review on Third FiveYear Plan and Fifth Five Year Plan, the Planning Commission did no other evaluation. An indept critical analysis of the plans already implemented is necessary to identify the bottlenecks in plan formulation, implementation and their achievements during different political regimes to develop an appropriate perspective/ strategy for the future. The study focuses the intrinsic aspects of the future development planing in Bangladesh, which would be helpful for the policy makers.

1.5 HYPOTHESIS

(I)        Policy Planning, i. e., determination of goals and objectives, priorities and strategies & policy measures for development plans;
(ii)        Selectoral Planning, i. e., identification of the role that the various sectors of the economy are required to play in the context of the goals and objectives set out under element (i);
(iii)          Program Planning, i .e., formulation of detailed sectoral programs to realize the sectoral plans identified under element (ii);

Need for appropriate organizational arrangements for development planning.

2.1.1 The Bangladesh Planning Commission

Bangladesh Planning Commission assumed the characteristics of ‘Central Planning Agency’ since 1972 , under a unitary structure of government administration. The Commission was conceived to be a professional body at a very high level. The Deputy Chairman of the Commission was given the Cabinet rank and the Members were given the rank of State Minister. However, in recognition of the fact that planning is a political process the Minister of Finance was given in charge of the Ministry of Planning (Planning Commission). Subsequently, The Prime Minister became the Minister for Planning and later the Vice President took over the portfolio of planning. There was no separate Planning Division & one of the wings of Planning Commission looked after its administration as well as external resources mobilization. To start with the functions of Planning Commission also included monitoring of development projects. But subsequently, in order to accelarate implementation of projects the government felt the need for a separate agency for this purpose. Project Implementation Bureau (PIB) was established in 1975 as a Division under the Ministry of Planning. PIB later on upgraded as a Division and renamed as Implementation, Monitoring & Evaluation Division under the Ministry of Finance.

The high status given to the Planning Commission created some peculiar problems in as much as it eroded the authority of the Ministers even though the country did not opt for complete Central Planning. A change was, therefore, brought about in 1975. The Planning Commission became a professional body once again, but its status was reduced by down grading the rank of the Deputy Chairman and making Members equivalent to Secretary to the government. A little later the function of external resource mobilization was entrusted to a separate Division & was placed under the Ministry of Finance. This Division was named as External Resources Division now days renamed as Economic Relations Division. Simultaneously, the Planning Division was created to look after the administration and executive aspects of the Planning functions thereby relegating the Planning Commission to a kind of advisory body. In actual operation, however, the unitary structure of the government led Planning Commission to perform advisories as well as an executive body & authentication of the executive orders. Under the new structural transformation of the Planning Commission, it became necessary to strengthen the technical capability of Ministries/ Divsions in order to enable them to discharge their enhanced responsibility of planning functions. With this purpose in view, Planning Cells were created in the Ministries/ Divisions and some of the ‘Autonomous Bodies’ in 1975.

At the policy level the Commission consists of a Deputy Chairman and five Members. Below the Commission, there are six Divisions that are further sub-divided into thirty wings. Two of the Divisions deal with the general macro issues of the economy. These are (i) General Economics & Evaluation Division and (ii) Programming, Evaluation and Appraisal Division. The other four Divisions deal with the planning & policy issues of different sectors of the economy. The specific functions of the two macro Divisions and the four sectors Divisions are stated below:

General Economics Division.  Functions.
(i)         Evaluation of plans and policies.
(ii)        Review of macro economic situation covering national income, international economic relations, saving, investment, fiscal & monitory situation, employment & other macro economic aspects of the economy.

Sector Division.                       Function

(i)         Formulation of sectoral plans consistent with the macro planning objectives.

2.1.4 Linkage of the planning Commission with other government offices

The Commission is invariably required to maintain close liaison with all other Ministries/Divisions and Agencies of the government. At first, in the field of policy planning, the Commission needs data support & advice on policy issues connected with sectoral plans. Secondly, in the preparation of the annual development programs it depends entirely on the allocation proposals of the Ministries/Divisions & other Agencies. Thirdly, its project-processing role starts after the preparation of those by the Ministries/ Divisions.
A part from these, the Commission has to depend for planning inputs on some specialized agencies of the government. It depends on, Economic Relations Division for quality & quantity of foreign aid & also for micro level project financing through project aid and authorization. Finance Division & Internal Resource Division advice the Commission in matters of resource availability and formulation of fiscal & monitory policies. The day to day involvement of Finance Division in project authorization is essential for the Commission’s work. The allocation of funds to individual projects in the ADP is guided by the progress reports of IMED. The field experience of IMED is also utilized in the project processing work of the Commission. The Bureau of Statistics meets the comprehensive data requirement of the Commission.
2.1.5 M. A. H. Khandkar (1988) in an article entitled “ Institutional structure for development planning in Bangladesh” stated the elements of ‘development planning’ in a more elaborate way. In the introduction he mentioned the form of Bangladesh government, degree of devolution of administration. Bangladesh posses a mixed economy with a unitary form of government. Although at the time of emergence as a free nation it had probably had some commitment for a socialist economy which, however, did not come into being & even lost its ideological mooring within a short period of time. During the 1980s, through a limited devolution of planning responsibility to the local governments, called Upazilas, a shade of federalism has been cast in the character of development administration. However, the degree of devolution is not high enough to style the country as yet a federation. The Upazilas have been given the responsibility of planning & implementation only of local level projects and programs, which in all probability will get dovetailed with the central plans. Thus, Bangladesh still retain the character of unitary form of government. Under a unitary form, the entire responsibility of administration falls on the central government. The central government, however, executes its administrative responsibilities through the creation of a number of institutions/agencies with specified tasks. The development planning function is also discharged in the same way. This is how planning function is performed in Bangladesh. It remains to be seen as to which element of the planning function is done by which institution/agency.  He then agrees with the elements of ‘development planning’ as stated in the handbook of Planning Commission. In the following paragraphs, he narrated each of the elements of ‘development planning.’

In the ‘Hand book’ stated the procedure for processing of development projects in the public sector. It includes the time frame for processing by executing agency, concerned Ministry/ Division, Planning Commission, ECNEC &NEC; category of projects in terms of investment costs (APPENDIX-I). Project proforma is also stated in the Handbook (APPENDIX-II). The project proforma (PP) is the basic document, which is prepared for approval of project details by the competent authority. Four types of project proforma are used (1982) for processing of various types of project proposals for sanction. They are:

The bottlenecks that may arise in the implementation of a project should be solved by regular reviews of progress of projects. This reviewing function is known as monitoring of projects. The higher tier of the project implementation authority does the most immediate level of monitoring. This type of monitoring is called internal monitoring (mostly the task of coordination). This comes first before the external monitoring. This level of monitoring is done by the administrative Ministries/Divisions. Higher level of monitoring at the national level i. e. at the NEC level is also regularly done to keep a strict watch over the state of affairs in the implementation of a particular plan. Since the NEC is not a permanent institutional agency, it has set up a permanent staff organization to prepare monitoring reviews of development projects. This is at present known as Implementation Monitoring and Evaluation Division (IMED) headed by a Secretary under the Ministry of Planning. The NEC and ECNEC periodically examine reviews prepared by the IMED. At these review meetings manifold problems in the way of project implementation are solved.

Plan evaluation work necessarily falls on the central planning agency i. e.  Planning commission. The planning commission collects information on the progress of a particular plan during the course of its implementation and uses this information as feed back for the preparation of the next short plan. Such evaluation results find place in the plan documents as a review of past planned development both in the macro chapters as well in the sectoral chapters. Annual review of progress of implementation of a plan are also published by the planning commission, though not as timely and as regularly as desirable. These reviews have been found mostly to be of statistical in nature, absolutely lacking of analytical materials explaining the background factors behind the statistics. The most disappointing vacuum that still exists in the field of evaluation is the evaluation of a complete plan. Absence of such evaluation has created a communication gap between the planners and the people at large about what is happening as a result of development plan.

ERD should not under take negotiation for aid with any donor unless the project or program has been scrutinized carefully by the concerned agencies of the government & also by the planning commission. It has also been laid down that no definite indication of use of aid for a particular project/program to a donor should be given by ERD without getting the aid proposal examined by an inter ministerial committee including the representative of planning commission & aid user agency. For this purpose, first a project profile in which the broad objective of the project for which aid is being considered is to be prepared and then the same is to be cleared by the said committee.

After preliminary negotiation, an appraisal mission may be invited from the donor for a detailed feasibility study of the project/program. The donor agency is expected to conduct the feasibility study in collaboration with concerned department/agencies of the government. There should be a broader consensus among the donor and the government department concerned about the details of the project. It is only after the approval of the project by the competent authority, or at least cleared up by the Project Evaluation Committee that the aid lining up is to be finalized. In order to shorten the time for aid negotiation, the lists of aid worthy projects should be finalized through inter–ministerial committee meeting instead of planning commission alone. This at one stroke will give lists of projects which ERD or donor agency can consult for sponsoring aid negotiation for particular project. The lists for this purpose will besides the name of projects, contain information about the objectives of each of the projects. It may also include any other broad details that would be useful for understanding the nature and purpose of the individual project. In fact,  a proforma has been devised for this purpose. With these measures of coordination, it is expected that the utilization of foreign aid for development will be rationalized and it would be utilized for the best needs of development.

2.1.6   Dr. A. H. Shahadatullah, in the summary of his article entitled “ economic development and planning in Bangladesh” states the need for economic development and rational development planning. The need for economic development in Bangladesh necessities comprehension of the overall situation existing in order to identify the future objectives and for preparation of policies & programs to implement such objectives. Though development planning in Bangladesh in the post independence period succeeded to eliminate certain biases inherent to the planning objectives and process; it also inherited certain conflicts and dilemmas in the formulation and implementation of a development plan, which are consistent with the set of basic/key objectives. Issues taken as priority objectives centered on the need for accelerated economic development and elimination of social disparity. With this in view, the First Five Year Plan was formulated within a socialist frame work by establishing public sector dominance over the administration of assets and resources management for fulfillment of the basic objective of equitable and appropriate distribution of gains from economic development.

Failure to fulfil plan objectives since then has become a rule rather than an exception. The reason behind such repeated short fall of plan targets and poor performance in plan implementation involve problems originating from factors associated with the political body, domestic and international economic situation. Administration, management and evaluation of programs and policies designed to execute the plan. There is a lack of comprehensive awareness of the secondary effects at project level. The analytical framework used for selection and formulation of projects lacks the mechanism to quantify and accommodate for the socio -economic impact on the target population resulting evolving from the primary effects in through its implementation and consequences.

The need for rational development planning calls for formulation of programs and projects based on eliminating poverty, administrative decentralization, rural based development programs, employment generation programs, etc. But the decentralization of the economy proceeded without accounting for similar changes in management of assets and resources, which can bring about an accelerated economic development through elimination of poverty. The absence of labor as a determinant in the master plan results in bringing about the inevitable consequences of weak and inconsistent formulation of both national and project planning process.
2.1.7 Mohammad Sirajuddin in his article, entitled “ Rural Development: the Bangladesh Experience.” In planning process paragraph stated the procedure of processing of projects:

The Planning Process

The socio – economic development projects, both investment and technical assistance, are initiated by the executive agencies (Departments, Corporations, Boards etc) and appraised the primary stage by the Sector Ministries/Divisions of the government of Bangladesh. The projects are then processed with Planning Commission, the central planning organization of the country. The Commission relates the project proposal with objectives of the Five Year Plan, the Sectoral Program, and the national allocation of resources.

When the answer to the three references found positive, then the Commission makes final appraisal of the project and processes with the Executive Committee of the National Economic Council (ECNEC) for approval.

The project has two types of documents, namely, Project Concept Paper (PCP) and Project Proforma (PP). The ECNEC approves the PCP, whereas an Inter – Ministerial Committee approves the PP. With regard to technical assistance projects, the Planning Commission (Illustration 1-4) approves the document, Technical Assistance Project Proforma (TAPP). The PP incorporates an Implementation Plan or work plan, narrating the set of activities to be, undertaken with starting time and finishing time, for the whole of project duration. The executive agency, the sector Ministry, the Planning Commission and the IMED monitor the implementation status of projects and evaluate the performance. The donors are also involved in both monitoring and evaluation.

2.1.8  Professor Muzaffer Ahmad in an article entitled, “ Planning and Economic Development in Bangladesh” stated the planning process, implementation status including the socio-political milieu of plan formulation.

However, the scene started to change soon after the multiparty parliamentary system replaced by one-party system and later by military regimes that weakened the democratic political system & institution. That was vital for a participative egalitarian system. The issue of national identity thought to have been settled with the creation of Bangladesh was raised again to make consensus on national issues difficult. Secularism was omitted and has been put to naught by declaring Islam as the state religion. Socialism required containment of private ownership of means of production and removal of capitalist system of income distribution & of pre capitalist forms of production relation. Before the stage could be set for a socialist transformation, the turn around started. It was set for a capitalist growth process instead and under the supervision & guidance of international aid agencies and donor countries. However, none of the plans prompted the ruling social coalition to open a debate on hard policy choices. Planning has generally been viewed a technical -administrative device rather than an socio-economic document, which required political commitment for its successful implementation. Thus planning in Bangladesh has deteriorated as a policy & programming device to such a state by the military – bureaucratic alliance was quite significant. The violation of planning process and non-observance of plan discipline from the highest seat of power to the bottom layer of governance was a reality. The donor’s conditionality rather than development planning in the country have influenced the nature and direction of economic development in Bangladesh.

In the absence of a meaningful participative politics in national policy making and a political framework to arrive at a national consensus, planning has never been an expression of a basic unity of purpose in Bangladesh. The dominance of donors along with the vested interested groups linked with them guided the development expenditure rather than a strategy realizing clearly defined set of rational objectives.

But the reality of a deepening poverty is a fact that is hard to ignore. The necessity to create jobs forever expanding labor force just to maintain a minimum law and order situtation can hardly be kept aside. The migration of labor from rural to urban slums with increasing landlessness can not remain unnoticed. The deepening pressure on land of an increasing population has to be faced. And so on. Thus even in the absence of effective planning, the demise of a disciplined plan process and increasing centralization of decision making with growth of out of plan expenditure. One can not but judge the so-called development expenditure in the light of the basic socio-economic issues.

Planning Process and Planning Machinery

The planning process in Bangladesh, despite many changes, carries the bureaucratic legacy of the then Pakistan’s unscientific resource allocation for development purpose. It need to be mentioned here that multi- sectoral input – output model was used in preparation of the First and Second Plan. But it made technology, sources of supply and composition of final demand external to the planning model. The Third Plan used an ‘Applied General Equilibrium Model’, where social accounting has been used and final demand has been made endogenous. Despite, such technical improvement no impact on the effectiveness of planning is visible. Since late 1975, change in ‘State Principles’ and also the government liberalize the Bangladesh economy. The Planning Commission has lost its planning capability in respect of plan formulation, monitoring implementation and even evaluation due to increase in donor intervention in this respect. On the other hand, relief and rehabilitation measures have been similarly misused. The machinery for public accountability has been ineffective due to rise of local overlords of muscleman.

Thus, the basic perfunctory function of the central planning authority has become to prepare a macro economic models whose level of disaggregation and sophistication have increased over time. However, with the increase of involvement of outside consultants, the iterative character of plan preparation has become dormant. The function of the sectoral Division has become basically processing project proposals, often in a hurry, and the format has been simplified to make any scientific appraisal impossible. The monitoring function, having been separated, made the sector Divisions, largely ignorant of progress. The committee mechanisms for coordination seem to have functioned less effectively in recent years (1989), as decisions from above have become more prevalent.

The Planning Commission has not prepared any meaningful ‘Perspective plan’ beyond certain projection of key variables. It has so far produced three (till 1989) five year plans and a two year plan. Each of it produces an annual development plan as part of the budgetary process. Before the formulation of five year or annual plan many inter and intra- ministerial meetings are held  and  a plethora of committees and sub-committees are assigned certain task. The planning commission and even donor agencies conduct many surveys and investigation. Since the macro planning is a donor dominated external functions and projects are donor promoted due to paucity of mobilized local resources, the entire exercise seem to be more of a game than a serious matter.

2.1.8a A recent ( 1989) evaluation of planning process reached the following conclusions:

Planning experience

“The First Five Year Plan (1973 – 78) was launched in July 1973 in the background of a considerable domestic strains on the war ravaged economy. The plan was designed to generate a rate and pattern of income growth, which would not only meet a minimum consumption standard but also expand employment opportunities and ensure a socially desirable pattern of income distribution. Within this general strategy, the overwhelming need to reduce dependence on imports by import-substitution and export promotion were the major factors in determining the pattern of growth envisaged in the plan.

Because of the growing resource gap, the first plan ended with a huge number of unfinished projects. Against this overhang of the First Plan, the outlook of world aid situation made it abundantly clear that a Second Five Year Plan would have little flexibility in making investment decisions. So it was decided to a Two Year Plan (1978 – 80) with emphasis on finishing as many of the on-going project as were feasible within the limitation of resources. The strategies of the Two Year Plan were formulated in order to realize the potential existing in the economy and to achieve the objectives and targets set forth in the plan. Investment was determined on the basis of an analysis of the realizable production possibilities in various sectors. In line with the government policy, the Two-Year Plan gave emphasis of total mobilization of local resources, human and material and participation of local people in the development process.

The draft Second Five Year Plan (1980 – 1985) was prepared in the light of development experience in the recent past and in response to socio-economic imperatives of the country. Major objectives of the plan were reducing poverty bringing about significant improvement in the quality of life in the rural areas and effecting a more balanced distribution of income, resources and employment opportunities through equitable growth. The implementation of the plan through the Annual Development Program during 1980/81 and 1981/82, however, suffered from shortage of inevitable resources compounded by unfavorable international trade and aid estimate.
In the backdrop of above situation, the Second Plan was revised. In revising the plan, efforts were made to protect the sectoral priorities envisaged in the Draft Plan. The revised plan aimed at an annual growth of GDP at the rate of 5.4% as against 7.2% in the original plan.

Third Five Year Plan was launched in July 1985. The major emphasis of the plan was to develop infrastructure particularly energy and induce private investment in both agriculture and industry. It envisaged an average annual growth rate of 5.4% in GDP during the plan period against which a growth rate of 3.9% has been achieved. There was considerable fluctuation in yearly growth performance, especially in 1986/87 and 1987/88 due to severe floods and other natural calamities. However, there was significant improvement in growth performance in the terminal year with a GDP growth rate of 5.8%, mainly because of record harvest of Aman crop.

The Fourth Five Year Plan (1990 – 85) has been prepared within the broad framework of the perspective plan (1990 – 2010). The plan’s main objectives are accelerating economic growth, reducing poverty and development of human resources. Specifically, the plan aims at an annual average growth rate of GDP of 5%, creation of employment opportunities per 50.5 lakh man-years, so as to bring about a substantial reduction in unemployment, reducing the dependence on foreign assistance and curbing the population growth. The Fourth plan aims at the initiation of the process of long-term transformation with emphasis on the following major elements:

As the planning process involves decision making at various levels requiring flows of information, including the development of institutional framework, procedures, guidelines, etc. The study has attempted to evolve a framework for effecting improvements in the planning process in relation to the activities involved in the process. The systems and procedures of the framework pertain to the methods of carrying out the processess involved in different phases. The objective bases for a plan having been defined through review and evaluation as a feedback measure, the plan formulation procedures of the framework relate to securing consistency in planning and bringing out relationship between the objectives and targets for growth, private and public savings, exports and imports. The area also concerned with the process involved in the estimation of resources, identification of policy measures to achieve objectives and targets.

The realization of the objectives of the plan depends upon sound project planning including appraisal of projects; an integrated approach for development project planning and implementation has been defined. It consists of inter related phases of (i) project identification, (ii) project formulation, (iii) project appraisal, (iv) project approval, (v) project implementation, (vi) project monitoring, reporting and feedback and (vii) evaluation. Such an approach can help decision making process by enabling the planning authorities to explore and weigh courses of action in turning out well conceived and well prepared projects for their implementation through ADP.

 Resource Mobilization and Management

The dependence on foreign aid should be reduced to mobilize domestic resources and efforts should be made to use resources. Since the main constraint on the development of the economy is the scarcity of resources, particularly domestic resources. Resource use should be pursued in both public and private sectors. Private sector measures should count of fiscal and monetary incentives and in the public sector the measures should cover subsidy reduction, price adjustments and fiscal measures. As the economy has become more market oriented than before. Investment decision has to depend on market conditions. For promotion of public and private savings both the fiscal and monetary instruments will have to be directed to broaden the domestic base through encouragement of household saving and to channel to financial market. In order to strengthen the domestic resources mobilization efforts should look into the following:

(i)         Projection of likely receipts from existing taxes and other sources in the public sector after taking into account past behavior of various sources of revenue and likely changes;

There has been significant change in the official policy towards private sector, particularly in the field of industries and trade where private sector will have greater role to play. This has called for greater emphasis on policy planning and use of indirect methods rather than direct control on investment and production program. Besides, government has taken many other fiscal and monetary measures in order to mobilize domestic resources, which affect the relative role of the public and private sectors and the relative share of public and private goods and income.

The public sector maintaining a direct and close link between the plan objectives and their implementation. The private sector has to be stimulated through the provision of overhead facilities and infrastructures and by modifying the system of incentives and control. The fundamental task of planning the private sector is to remove the obstacles in the way of legitimate private initiative and by increasing the knowledge of resources and their potential utilization of economic activity (Lewis, 1966). This gives use to the need for a coordinate public and private sector planning and implementation, i. e., the private sector should be integrated with the public sector program through arrangements for planning and policy making. The problem of coordination includes the following main consideration: –

(i)         Assigning relative roles to the public and private sectors and the ways of keeping these consistent with one another;

Project implementation process

The project implementation process should provide for programming of projects and their effective monitoring and supervision. A detailed time- schedule is important because it serves as a pacing device for the project administrators and it can provide the basis for taking corrective action in time. Lags in implementation and the consequent prolongation of the gestation period are due to unsatisfactory phasing, either at the programming stage or during implementation. Work scheduling should be undertaken, by the implementing agencies by dividing the projects under implementation into component activities. Not only the activities of the projects should be divided into parts, but along with them the specific time schedules and cost estimates should be set maintaining consistency with the procurement of the materials. Such scheduling of activities would serve the purposes of progress reporting and identifying the specific reason regarding the progress of projects. Critical path analysis should be applied to development projects towards separating them into basic components for facilitating both control and reporting functions. Such improved techniques for work scheduling and monitoring the progress of the projects would make it possible to tackle the projects during their life- cycle and supply data for comparing the expected results with sectional performance.

Monitoring is concerned with progressing of project i. e. the supervision of implementation to assure that progress is on schedule. Its importance lies in fact that it provides timely information of predictive nature to managerial action which prevent bottlenecks from disrupting and delaying the whole projects. The reporting system in terms of quarterly, annual and periodical progress reports and fact-finding inspections. These would provide for follow up of development projects through the review of their progress, ensuring continuous assessment of performance and bringing out the current weakness and /or anticipated problems which require actions at different levels. It would institute an information system within the individual implementing agencies for meaningful assessment of performance, establishing a linkage within the budgetary process and helping in defining policy measures. Which facilitates decision-making directed at increased effectiveness through evaluation of the performance of projects.

Ex-post evaluation of development projects is the most neglected area in Bangladesh. Neither the executing agencies nor the planning commission seems to have paid any attention to this vital aspect of plan implementation. A system of ex-post evaluation is not only lacking, even the concerned agencies do not maintain records of the completed projects. In such a situation, very little is known to us as to how far the completed projects have come up to the expectations in terms of producing output and creating employment. Appropriate measures should be taken to strengthen the ‘Planning Cell’ of the executing Ministries/Divisions, sector Division and IMED in order to have an evaluation system. A system of ex-post evaluation becomes critically important as the size and content of development program is vastly expanding in all sectors of the economy. Ex-post evaluation system, besides monitoring help to overcome the problems involved in project implementation. Introducing modern management techniques such as CPM, and programming evaluation and review technique (PERT) in project implementation is expected to enhance effectiveness of planning process.
In the formulation and implementation of the plan, coordination from Ministerial level to Agency level should be achieved together with inter ministerial coordination in matters of major issues of development, such as, (a) money and prices, (b) public finance etc. High level machinery for coordination should be set up. The committee should include representatives from the principal policy making agencies, Planning Commission, Ministry of Finance and from the Central Bank. To facilitate the work of the coordination committee, it should be assisted by the planning cells located in the development Ministries/ Divisions/Agencies.

The planning efforts in Bangladesh have focused on socio-economic development goals of the country through complementary and balanced expansion of the public and private sectors. Both in long term and Medium term plan should address pertinent issues as policy planning, operational technical framework, macro and sector planning, and implementation, monitoring and evaluation of projects. A comprehensive approach to planning should be ensured through integrating macro and micro planning in term’s resources, investment.
The statistical information and progress reporting system should be strengthened to ensure a rapid flow of required up to date information on which decisions are based. The quality, quantity and timeliness of the statistical data through flows of information and establishment of dialogue between the Planning Commission and Statistical Division. It would be necessary to build up a system of collection, analysis, interpretation and dissemination of data and information within the operating Ministries/Divisions and Agencies for incorporation in project proforma, plan preparation, monitoring and evaluation.

Integration of macro and micro planning  should be done. Implementation process through instituting the links between the Five Year Plan, ADP, and ad hoc decision pertaining to capital expenditure should be strengthened. Integration of national and local level planning:

Multi- level planning involving national, regional and local levels may be adopted in Bangladesh with necessary linkages with the politico- administrative structure of the country. The planning inputs from the local level would form the preparation of regional and national plans. Regional plans will highlight and coordinate regional needs and regional priorities. At the local level, local bodies will be responsible for project formulation and implementation. Implementation of development activities of local nature within the national framework and guide line. Coordination and linkages among various levels are important and essential. Institutional mechanisms such as Councils/Committees etc. may be established at different planning levels for multi level planning coordination by taking representation from the people and government officials.

But after 5 years of pragmatism (1976 – 1980), continuation of drifting has invited intensification of the social contradictions and running the race of opposite character away from building the steps in logical sequence of one well-conceived perspective. The more government efforts are being made for pushing the considerations of the logic of a social perspective out of sight, the more potentially dangerous the social contradictions do appear. First, the wide gap between political decision making and the technical work of planning has been making the documents hollow and credibility in all levels of national life. The aiming of establishment of an exploitation free society with the mobilization of the people hang in the air in absence of technical preparation, appropriate legal action and national political approval. Second, the  philosophy of Bangladeshi nationalism is no substitute for a perspective . To be meaningful, this emphasis on nationalism should counteract neo-colonialism in all directions (including economic development and cultural development). In reality, the opposite trends are being encouraged by it. Identification of exogenous and endogenous factors and support of endogenous ones for promoting development are being discouraged. Third, the vicious effects of overall contradictions have been producing other dependent contradictions in the form of (I) corruption and inefficiency in development administration; and of (ii) dangerous deterioration in law and order, cultural debasement, violence and unprecedented crimes and indecencies, especially among the youth, the future leaders of the nation. This trend is appearing more and more appalling  in face of the pronounced Revolution in education and also in administrative structure. Fourth, planning methods and procedures are tending to produce forces of indiscipline rather than discipline that the planning process needs for its success. Resource-relevance is disregarded because of the charms of foreign aid and foreign technology in project planning; this discourages development in indigenous technology. The planning  of production and distribution systems permit the people to be addicted to resource-irrelevant consumption and is pushing savings  potential and resource-generation down to near-absurdity  levels. The tax system is also supporting this anti-savings trend. And Rural Development, treated as the core of the Second Plan, has not been made productivity-based with the organization of allocation of physical and capital resources to the land less and marginal farmers, including distribution of surplus land beyond an approval ceiling.

It necessary to develop an appropriate perspective for our future plan. The very nature of normal planning process demands it, as is implied in the following word: “ Planning is a multidimensional activity and ought to be integrative, embracing social, economic, political, psychological and technological factors. The universe within which we structure the tasks of integrative planning comprises man, society, nature and technology. ” (9) Edgar A. Rose, “ Philosophy and Purpose of Planning ” in Michael J. Burton edited, The Spirit and Purpose of Planning, Hutchinson, London, 1974, p.26

2.1.11 MD. MAHMUD KHAN (1981) in his article, “Socio-economic Constraints to Development- Bangladesh Case” tried to identify the structural constraints to long-run growth in Bangladesh. He said that the development of an economy must always be associated with the increased supply of material wealth. The long-run growth or creation of structure appropriates for long-run growth is only indicators of development.  Economists often complicate the definition of development, predominantly on short-run distribution considerations. It is argued that these definitions are basically concerned with the preservation of present social structure and thus lacks development perspective. The theories of political economy start from material production and ends with material production. Material production and the productive forces in operation explain the whole history of human society.

Prospect and the process of growth of an economy is very intimately related with social classes and interest groups within the country that they’re economic behavior and foreign relations as well as the interclass conflict and alliance. This is not contrary to our earlier contention of primary importance of growth. Relations may not be conducive to growth at a particular point in time is a well-known result of the theory of political economy. These obsolete relations (relations inhibiting growth of an economy) points to the historical necessity of replacing the relations by new ones as any economy must grow for its long-run existence. Therefore, historical necessity of structural change, primary contradiction within the economy must be identified by looking into the process of material production, This paper attempts to identify the contradictions as well as the classes which must be resolved or replaced from the point of view of future growth of the economy.
The landlords do not represent the most important contradiction of national economy. The major classes (or class) working against long-run growth of the economy are (is) not located in rural areas. However, There are some obvious contradictions between the surplus farmers and below self-sufficient farmers, which can be resolved for attaining limited growth and political stability.

To satisfy the urban vocal groups another step adopted is the urban industrialization program. Urban industries are usually of high technology and therefore little articulated with other sectors. A close connection with outside world must continue for the industries spare parts, raw materials etc. This connection brings a few foreign trips and some illegal commission for some urban privileged persons. This group strongly opposes the development of local industries, which offer them no benefit and tend to reduce foreign connections. The commodities, which are not, produced by these modern industries seldom gets a protected market even of small-scale local production of the commodities is quite widespread. Therefore, the state structure we inherited created a vicious circle, the urban educated class seek economic benefit for each and every move and whether a commodity will receive protection or not depends upon the relative bribing strength of the two opposing groups. As Bangladesh have no strong national capitalist group, govt. policies are directed against them, which in turn destroys other national capitalists. Indian capitalist group, because of their relatively more strength effectively barred penetration of certain commodities.

In the conclusion he also mentioned that the major classes against long-run growth of the economy are the urban classes. Most of the educated urban groups can be identified as constituting the growth-inhibiting group. The only way of long-run growth is a close articulation of farmer-artisan group and mutual enrichment in the process. Only such a process can create employment opportunities large enough to reduce dependency on land, large effective demand of both agricultural and non-agricultural commodities and better income distribution. This requires control of imports; aid and technology transfer who the then politically vocal classes of urban areas will be least interested to pursue.

Development Economics and Development Philosophy

The world outlook for development of the LDCs, since the development Decades were started by the UN and Partnership in Development between foreign aid givers and receivers. That was suggested has tended to deteriorate in a pronounced manner with increasingly marked class of professional skilled workers have been dealing with the development diseases of the third world of developing countries in the wake of the increased handicaps and setbacks imposed by the inequitable external environment.

Because of the predominance of foreign aid arrangements of the environment the western brand of development economists have been tinkering with ideas concepts tools techniques and gadgets towards their practitioner service to these countries in course of their grappling with the massive problems of poverty and unemployment which in fact, were created by the donor countries as colon powers in preceding peri8ods Naturally conditions of dependency have been firmly established so that independent approaches by the newly emerged peoples were and had to be rendered almost impossible in terms of knowledge of appropriate philosophies and methods . Of the distinguished development economists drawing lessons from the experience of planning in the developing countries, have frankly acknowledged little insight and wanted more and more research about the new theories, concepts and techniques for testing application of the cases. This has also tended to perpetuate dependency as a double-edged weapon-dependency on financial assistance and dependency on planning knowledge. The latter’s on planning knowledge has deprived the planners of the concerned countries of the consciousness about;

Western development economists are aware and concerned about current trends of serious distortions and misallocation policies on resources due to narrow nationalism and militarism as manifest of the developed economies, especially due to protectionism to industry and excessive unproductive planning of nuclear and other armament race between the superpowers, USA and USSR

They take these new factors for granted and provide technical assistance advisory services to the developing countries on policies and measures or economic policy reform with adjustments and innovations as an offset to the negative effects due to external factors of distortion fluctuation and inflation in 1968.  Jan Timbered could use ‘only such a world policy, or, as a second best a stronger international policy can prevent us from sliding into a complete failure of development policy. All the political consequences of such a failure at the moment, the development policies of the various national governments are much less co-ordinate than that is desirable from the point of view of all concerned both poor and rich countries’.

But who or which agency will coordinate without the establishment of that kind of mechanism, even to ensure the performance of the ‘second best’ responsibility?

The developed nations themselves assume that responsibility and use the role only for their own political and economic interest forcing the dependent poor developing countries to depart from the station of seeking the second best optimum. The fragmented economies had to rely on ad hoc piecemeal approach to development resulting in distorted policy framework, which is third or fourth, or the best.

It is also acknowledged by development economists that development planning techniques can not be adequately effective unless socio-cultural and other noneconomic variables are also taken into account, we are saddled with the compulsions of economic planning and have to strive so hard to develop the art of economic planning with all the ornamentation of mathematical econometric models and sophisticated tools and techniques as policy of development.

We all know that leaving out functional relationships among economic and non economic factors, and their quantitative significance as well as interaction between economic and non economic variables are of utmost importance for using the forces of change towards desirable development which is not GNP growth along. To seek knowledge about development of an underdeveloped economy and society the planner has to equip himself with all the analysis and understanding of the none economic variables with a view to designing objectives, strategies and programs to develop all the potentialities of man, society and economy and to do that statistics, economics and ad hoc approaches to apply gadgets and techniques on trial and error basis are not only poor guides but dangerous deviators from the path of correct planning. To study man and his attitudes society and social institutions culture and cultural change value and value systems political institutions and political change, welfare for man and for society welfare for short life and long life in the present world and life in the here after the planner must enter philosophy use correct rationale for choices of goals and evaluate objectives and programmers of development not simply on the basis of cost benefit analysis in terms of economic opportunity costs and     economic monetary or shadow priced benefits. In ability to take care of no passport for freedom of entry into a narrow economic lane along while man and society need comprehensive multi –dimensional development for their peace, progress and happiness?

Dangers and fallacies of narrow economic planning

This appears to be a mixed system idea rather than ideal; and most of the developing countries including Bangladesh, in South east Asia and south Asia are trying this approach with variations; and the crux of the problem is; Does this involve any development philosophy?

In the case of Bangladesh, it certainly does not involve any philosophy, simply because ad hocism or pragmatism does not need any. The philosophical sophistication needed for a system can be understood with in the framework of a ‘system analysis in which a master system controls other necessary included subsystems for a consistent integrated operation for coordinated results Have we thought of integrating a network of systems to take care of the essential economic and non- economic segments as systems under a controlling master system to meet the requirements of The people of Bangladesh? Our pragmatism-propelled mixed system is in fact a No system containing id bits of things here and there and very often of odd things the evidence of this nature can be examined and assessed in the following directions.

_        The approach to socialistic planning started in 1973, had government commitment and support and yet could not be implemented and the radically new system of socio-economic and political change;

_         The predominance of the public sector continued to exist as a surface value to the lost ideal but without the official or popular willingness to use the public sector for restoring the lost image;

_        The public sector corporations were used as sheltered institutions for neglecting efficiency in management and indifference to discipline resulting in many cases to heavy losses to government; utility services;

_        Utility services under the government (e.g. water, electricity, gas and telephone) were subjected to malpractice of illegal supply with illegal gains for employees, often with undue harassment of genuine law-abiding customers:

_        Proposals of disinvestment of Government capital to private hands in pursuance of encouragement of efficiency and private investment have been resisted by employee unions/ associations on grounds of fear of retrenchment of workers;

_        Manipulation by private businessmen to create scarcity problems for abnormal pricing to earn abnormal  profits;

_        Widespread corruption in distribution, procurement and provision of supplies of services, farm inputs, credits etc. is reported by the press about the operations relevant agencies and institutions;

_        Widespread erosion of human value and social value, demonstrated in increased crimes of daylight robbery, armed attack and extortion, snatching of valuables, oppression and murder for dowry on women, acid throwing, abduction and killing of class fellows etc. has also received public attention and civil resistance by women has been organized;

_        Public expenditure budgets annually prepared in any case, as finally approved, led to a situation of (i) emphasis on urban facilities, and (ii) support of heavy programs of unproductive expenditure, and hence led to continuing annually increasing inflation exceeding 10 p.c., setting in a continuing process of monetary and economic instability.

_        Despite the blessings of large foreign exchange earnings remitted under WES and substantial increase in non-traditional export earnings, balance of payments deficits have been increasing, largely for deficiencies in import budgeting in a sound manner; import budgeting supports increasing consumption;

_        Foreign aid dependency oriented development process has been reflecting only economic planning based on Western approaches, such planning has neglected and need of self-reliance in food and also in general;

_        Important non-economic factors, say socio-cultural ones, have not been receiving any tangible attention towards contributing to self-reliance in terms of consumption habits and permission of luxuries for production and import;
_        Public sector lost the significance and respect of any socialistic contribution, either ideologically or popularly. Private sector, now enlarged with prospects of further enlargement, reflects attitudes of greed-oriented profit-grabbing; working of the public and private sectors together do not represent a synthesis of any ideological blend not even of sound elements of capitalism;
_        Resemblance of capitalism is discernible with the absence of countervailing capitalism-supported security and unemployment insurance programs;
_        Objective strategies and programs are usually lacking the necessary linkage with any logical follow-through for reduction of dependence on foreign aid and increased generation domestic resources through consumption planning and cultural rationalization;
_        Political weakness has continued to influence the overall situation of planning and implementation of planned programs for quite a number of years.

Observations

Within the constraints of the situation in the transition period before restoration of democracy through election, the difficulties of systematic planning or of applying the systems analysis approach need of course be understood in right spirit. Yet speaking it should be recognized that our planning experience has been marked by (a) ad hocism which has no relationship with any philosophy or ideology (b) resources-irrelevant consumption-promoting planning, and (c) lack of commitment to any ideological aim as a long-range goal for the nation, partly because of political weaknesses of a prolonged transition. Can we prolong the transition so long if this is a transition at all. No positive announcements are forthcoming yet about the significance of the current transition if the stage is intended to serve the purpose of providing an opportunity to develop a consensus on the national choice of an appropriate ideological choice in relation to which the philosophy, objectives, strategies and the main directions of development planning in this country can be contemplated and constitutionally provided for. Our current practices of development planning are not lacking the necessary anchor of national fundamental assumptions about the hopes and aspirations of the people, but are marked by dangers, of fallacies and contradictions. If such trends are permitted to continue the present generation is likely to be blamed for deliberate waste of time for inviting manmade disasters.
The people themselves cannot articulate the concrete means and methods of reflection their hopes and aspirations. That is why, the kind of consensus needed on the choice of ideology and the relevant philosophy, objectives, strategies and main directions cannot be a matter for a decision by general election or referendum. The realities before the people are: (a) the warmly-acclaimed ideology of socialism has proved itself inapplicable for many reasons; (b) both capitalism and socialism hold an image of materialism-based ideals and capitalism with its worse than western version of it is very much tarnished; (c) Islamic ideology has been holding a strong plea for acceptance on plausible grounds of comprehensiveness (materialism- non-materialism synthesis) and moral support of 90% of the people for whom the choice is to be considered. Suggest a recommendation to the government for an immediate appointment of a National Commission with  a well-designed terms of reference, to study in depth the relevant fields with professional assistance where needed and to formulate the action program in the whole area for enabling the Government and the Planning Commission to work towards self-reliance with national decision in this regard.

2.1.16 Md. Muinuddin Khan authored an article on “Implementation of Development Projects in Bangladesh: Existing Challenges and Future Strategies”. He mentioned that in a developing country like Bangladesh, where resources are scarce and where the private sector is still in its infantry, efficacy in managing the projects is proportionately and directly conjoined to her growth and well being. Delayed implementation of projects, which is a regular phenomenon in our country, distorts the very objectives of the projects and diminishes the benefits of the projects. As such effective implementation of projects in time and within the budget is vital. In this context the author makes an attempt to identify the problems of project implementation in Bangladesh and recommended measures for improvement.

In view of the problems of implementation on development projects in Bangladesh especially the problems of costs and time overruns, some strategies have been suggested. In Bangladesh we seek to mobilize scarce resources for obtaining the desired rate of growth through formulating national development plans. Allocating available scarce resources to their most productive use, which is of obvious importance and requires estimation of social costs inputs that they are deployed to produce. The estimation of social value of output produced. Serious distortions in factor and product markets in Bangladesh make market prices quite inadequate indicators of actual scarcities. Therefore, the social opportunity costs of investment should be based on the overall return of capital. That is why, the exercises of economic appraisal of development projects have become a real tough job. At the same time the selection of appropriate technology in low wage countries like Bangladesh also requires a serious thought. The question of choice of technology is of much more importance when the issues like cost and time overrun are considered. In our environment mistakes are costly. In order to avoid mistakes, planning must be very effective. There are always uncertainties as to what lies ahead and because of these uncertainties, some mathematical modeling may be resorted to.

On the other hand, the effects of inflation on projects have not been easily identifiable with any degree of accuracy. Therefore, this problem has also frustrated the planners and managers in our country. Effective project implementation would improve aid utilization and results in an increase in long term economic growth. It is expected that the findings of the study would create awareness in the minds of the policy planners & the personnel involved in formulation and implementation of development projects. This helps them to take appropriate measures so those projects are successfully implemented in future. The following measures may be suggested in order to overcome the problems of implementation as identified by the author:

Local – level plan can provide the continuing basis for participatory development and will be ideal type, if it is prepared, considered and implemented by the local bodies managed by elected representatives of the people. If the local bodies are not truly representative of the different interest groups, particularly the poor, one of the objectives of the local plan may be devise an institutional mechanism to bring the disadvantaged groups into the main stream of development activities. Local level planning in Bangladesh is a relatively new concept in the field of development planning. Operationally, it is still in the formative stage and characterized by certain degree of experimentation. But its surging popularity has already made it a cause celebrant it is being credited with the potential for providing corrective to the sins of conventional planning, particularly its esoteric top-down approach.

2.1.18 Masuda Yasmeen had an important article, “ Estimating Shadow Prices in Developing Countries: Comment on the Little – Mirrless Model”. Her observation indicates that in developing countries, because of the imperfect operation or absence of many markets (in particular factor and risks market) and the nature of the government involvement in the economy, market prices of commodities may not reflect their true social value to the economy. When evaluating government policies and investment decisions, it is necessary to take account of this divergence between social  & market prices. It is often argued that in developing countries, use of economy wide ‘shadow prices’ can correct these distortions. The author aimed to assess the intellectual contributions of the economic profession to the economic analysis of the calculation of ‘ shadow prices’ in developing countries. Although the rate of absorption and dissemination of advances made in the profession in areas of techniques for social cost-benefits improved over time, these techniques were fully applied in a systematic manner. It seemed to have been allocated low priority – a situation, which is hard to justify especially for developing countries. Inspire of the substantial increase in public sector investment in LDCs from the Mid – 1970s, the economic evaluation of these were inadequate. Indeed many attribute a substantial part of the slow growth of LDCs of the 1970s and the inability to react quickly to the oil crisis to the deficiency. The purpose of the paper was to provide a framework for the analysis of these questions for developing countries. They should provide the practitioner with a structured and productive way of thinking about the problems of how market distortions influenced proposals for reform. To identity the empirical questions which should be checked and the judgements which need to be made before settling definitely on a particular line of policy.

The calculation of set ‘ shadow prices’ will require considerable knowledge of the economy. In order to make sensible judgements as to how it will react to extra unit of public supply, particularly in regard to whether or not goods are properly deemed to be traded and to the degree to which an extra demand for non-traded goods implies extra output. But just as careful monitoring of the macro economic system can be built on the study of national accounts information, so can be same information provide a basis, with experienced knowledge of the economic system, for a broad set of shadow prices. This is not something that could be constructed in a brief mission but could be created, maintained at the desk of an international organization or in M/O Planning. If used critically, it could provide valuable checks on, or inputs to the recommendations of missions in terms of price and tax reform, their implication for the value of expanding output in different sectors and so on. While we think such calculations of ‘shadow prices’ are likely to be helpful. We would not press them as being necessarily the main contribution of theory. We would rather stress its importance as providing a set of guiding principles and questions for thinking about the real policy problems. Although the rate of absorption and dissemination of advances made in the profession in the area of techniques for social cost –benefit analysis improved over time, these techniques were never fully applied in a systematic manner and appear to have been allocated low priority. Given the focus in the developing countries on project financing and evaluation, the recent importance attached to pricing; this is particularly unfortunate and hard to justify. It is therefore in the area that the performance has been most disappointing, especially given the range of benefits associated with the systematic application of these techniques. It also took a long time for the World Bank to recognize the implications, which the myriad of government induced distortions and the imperfect operation of factor markets had for the inefficient allocations of resources in developing countries. These had been identified by the professionals in the late 1960s and through out the 1970s. But were only incorporated into ‘structural adjustment’ packages in the late 1970s and the 1980s.

However, it is possible to provide counter examples to the most of the propositions. This does not mean that nothing can be said, that anything goes, that there are no rules and that we can cast systematic analysis aside. We have tried to show in this paper how structured argument can define social values, provide rules for their calculation, integrate cost-benefit analysis and the theory of policy and finally guide the thinking and judgement on immediate policy problems.

CHAPTER  –  II
Theoretical and Conceptual Framework of the Study

3.1.1 Development economics is about the big issues: how economies and society grow and change. They are issues that were at the heart of the work of Classical Economists – in particular, Adam Smith, David Recardo, and Carl Max. The pioneers of development economics writing soon after the World War II, were firmly aware of these intellectual connections and roots. They initially recognized the heritage of classical growth economics. The pioneers are also directly concerned with the role of changing behavior and institutions in the process of development, issues that those working in development economics have emphasizing strongly in recent years (Nicholas Stern, Chief Economists, World Bank, in foreword of the book Frontiers of development,  2002).

3.1.2 W. Arthur Lewis, in preface of his book, ‘ Development Planning’ made the following statement, “ The economics of development is not very complicated; the secret of successful planning lies more sensible politics and good public administration”. This can be seen in case of South Korea, Singapore, and Malaysia and also in India.

The implication of this statement is that the major problems of development planning center upon implementation – that the secret of successful planning lies essentially in political stability i. e. political leadership and competent & effective public administration policy instruments by which the goals of development can be reached.  Before, placing so much emphasis on the implementation, we should ask the logical question: whether economists really know what is wrong and how to put it right.

3.1.3 A major difficulty with development planning has been the economists’ inadequate understanding of development process. That, the secret of successful planning is not only – nor even mainly – a matter of implementation. Three areas need fundamental understanding. If we may refer to a characteristic style of development planning, three types of bias have been prominent:

3.1.4  G. M. Meier (in his book, Leading Issues in Development,) mentioned four important strategies that the developing countries may take into consideration in their development planning :

More immediately, some major revisions of development planning can be suggested to remove the biases and secure more benefits from planning in future. These revisions amount, on the one side, to making greater use of the market mechanism as an instrument of development policy within the domestic economy, while encouraging multinational planning in the international economy.

3.1.4 According to Albert Waterson, “ Accelerated economic growth and structural change are the two main expressed or implicit aims of development planning. But the emphasis given to the second aim varies from country to country. In a few countries with mixed economies, institutional change also takes precedence over economic progress i. e. as in Indonesia. But in most of the mixed economies, the degree of  structural change is generally less prominent and more gradual.”

3.1.5 Mahbub UL Haq (1986), [in his book, “ The strategy of economic planning”] stated the rational of planning decision.

Decisions on capital allocation

In view of the paucity of capital, efficiency in allocation of resources is usually given a central place in most plans. If the planner only cares to define his objectives in the form of maximization of certain outputs and minimization of certain inputs, economists will rush to his help with the liberal supply of ‘Linear programming models’. This is very encouraging but there still are many problems. Problems related to social sector projects where outputs can not be measured quantitatively. Here economic theory is uncomfortably silent. To illustrate, about 66% of the public sector investment and 60% of the total investment in Pakistan’s First Five Year Plan was earmarked for such sectors i. e. water and power development, transport and communication, housing & settlements, education and health. It was also 60% in the Second Five Year Plan in Pakistan. These economic and social overheads confronted the planners with the problem of immeasurable outputs that the theory usually ignores. The picture is not very different in other LDC’s development plan. In the above situation, whether the economists should rely on ‘ Act of faith’.

Secondly, growth philosophy demands that the expenditure on provisions of social services should be given less emphasis. This applies to housing, health, and social welfare services. Education is in a more privileged position.

Thirdly, more attention should be paid to projects, which yield ‘genuine’ external economies. Development of suitable technology and ambitious labor training schemes will yield higher external economies than the indiscriminate inclusion of so many expenditures under this head.

Finally, it needs to be reorganized that, even when different overhead facilities are believed to yield external economies, it is wise to concentrate expenditure on a few fields where visible results can be obtained quickly and where there is a possibility of a snowballing effect. Historically, growth has never been balanced. The allocation of capital to industry and agriculture is concerned; the planners can count on more help from economic theory.

3.1.5b Economists have been developed various criterion, ranging from the ‘Rate of Turnover Criterion’ of J. J. Polak, to ‘Social Marginal Productivity Criterion’ of A. E. Kahn, to the ‘Reinvestment Criterion’ of Galenson and Leibenstein for efficient allocation of resources. There is a general agreement that capital- output ratios offer a good test of social profitability. Various projects in countries having ‘surplus labor’ with the proviso those planners should not lose sight of reinvestment possibilities of alternative outputs and techniques. There is also an agreement that ‘Shadow Prices’ of factors of productions should be taken into account.

Generally, the long run objectives are to maximize output and employment and to get rid of the dependence on foreign aid, and to achieve these objectives, ‘shadow prices’ should be used in planning exercises for capital, foreign exchange and unskilled labor.

Economic control and policies
Economic controls are inherent in national planning; the aim of which is to change market preference infavour of a higher rate of growth than the free market would otherwise provide. It was also used in guiding private sector investment in Pakistan’s plan. In doing so they must make it clear:

1. Goals of Development:

3.1.7 Development economists have throughout the last 50 years, been strongly involved with issues of policy. This implies that the role of the state must be at center stage. On this stage, there has been a fundamental change in development thinking. In the early years, following World War II, there was broadly speaking, mistrust of markets, including world markets, influenced in large part by the experience of ‘Great Depression.’ There was also confidence in the ability of government to take effective and productive role in directing investment. The experiences of the 1950s and 1960s did not support this confidence and those of 1970s & 1980s saw strong move to liberalize and privatize. Again, the experiences at the end of 1990s show that market reforms can be, and on the whole have been, an engine of growth. But if sound institution and good governance do not support them, they can stall or fail. The centrality of policy to development economics also requires specificity on goals. Here the subject has broadened its perspectives. More broadly, still development is increasingly seen as expanding freedom of choice and action. More broader perspective on goals of development and the return of interests.

3.1.8 The relevant theories of economics of development are:

3.1.10 W. W. Rostow attempted to generalize the sweep of modern economic history in a set of stages of growth: (I) Traditional society; (II) The Pre-condition for Take-Off; (III) The Take-Off; (IV) The Drive to Maturity and (V) The Age of Super-mass Consumption.

Rostow identified certain ‘leading sectors’; the growth of which is thought to be instrumental in propelling the economy forward. A sequence of optimum patterns of development can postulated from a set of optimum sectoral paths determined by the level of income, population, by technology, by the quality of entrepreneurship, and by the empirical fact that duration is the normal optimum path of each sector. The actual course of investment , however, generally differs from the optima in as much as they are influenced not only by private as they are influenced not only private choices, but also by the policies of government and the impact of Wars.

The ‘Take – Off’ is meant to be the central notion in Rostow’s schema, and it has received the most critical attention. The ‘ take – Off’ is interpreted as, “ a decisive transition in a society’s history’ – a period – “ which scale the scale of productive economic activity reaches a critical level and produces changes, which lead to a massive and progressive structural transformation in economies and societies of which they are part, better viewed as changes in kind than merely in degree”.
The Take –Off is defined “as requiring all three of the followings:

3.1.11  A Big Push or ‘Critical Minimum Effort’ was believed necessary to breakout of “ low level of equilibrium trap”. An increase in the proportion on national income invested above 10% was advocated for a take-off with industry as a leading sector. ‘Balanced Growth’ – the synchronized application of capital to wide range of industries, was advocated by Ragner Nurkse. Hirschmen, Advocated ‘Unbalanced Growth’ in order to maximize induced decision-making and to take advantage of forward and backward linkages in the production process [Albert O Hirschmen, The Strategy of economic Development, 1958]. During the late 1960s and 1970s came a second phase of development, which focussed more directly on poverty and inequality i. e. Development equals growth plus change. The most substantial change in the content of development economics came during 1970s and 1980s – decade marked by resurgence of neoclassical economics [I. M. D. Little, Economic Development, 1982, chapter-9].

There was increasing criticism of policy -inducted distortions and the non-market failures associated with the implementation of public policies. This led to a criticism of comprehensive and detailed administrative controls. Beyond the removal of price distortions, neo-classical economics advocated getting all policies right. Markets, prices and incentives become central. Inward looking strategies of development were to give way to liberalization of foreign trade regime and export promotion. Inflation was to submit to stabilization programs. State owned enterprises were to be privatized. A poor country was now considered because of inappropriate policies, and good economics, that is, neoclassical economics was good for the developing country. Analysis moved from highly aggrgative growth models to disaggregtive micro models. More emphasis was placed on applied research that was country – specific, based on empirical data and on the application of neoclassical principles to policy issues. In an increasing number of countries, these changes in development thought produced an improvement in agricultural policies, a liberalization of the foreign trade regime, and a professionalism in project appraisal [G. M. Meier, “ on getting policies right” in Frontiers of Development, 2002].

3.1.12 Nations are poor because their citizens do not have access to the ideas that are used in industrialized nations to generate economic value (Roemer 1993). Meier distinguishes between Neo-Classical Analyses of development and a more comprehensive approach that looks to operation at large, innovative changes and to political economy issues in development policy making. All these are applied graded economics or whether there is a need for special development theory to supplement general economic theory.

3.1.16  On the new goals of development: beyond simply increasing the rate of economic growth – are applied by moving toward ‘ Human Development’ or ‘ Comprehensive Development’. But can these larger social and political goals be given more precise meaning, let alone be subjected to measurement and some operational metric for purposes of evaluation. This question receives prime attention [G. M. Meier, in preface of ‘Frontiers of Development’ 2002].

 According to him, the tasks of New Generation are:

(1) Beyond income, growth: Patterns of growth and income distribution.

Collier (1998) characterizes, ‘Social Capital’ to the sources of growth. It is as the internal social and cultural coherence of society; the norms and values that govern interactions among people, and the institutions in which they are embedded. ‘Social Capital’ has an economic payoff when its social interaction that yields externalities and facilities collective action for mutual benefits outside the market. Trust, reciprocity, interpersonal networks, cooperation and coordination can be viewed as “ Civil Social Capital” that conditions the interactions of agents and yields externalities. Government ‘Social Capital’ can incorporate the benefits of law and order, property rights, education, health, and ‘good government’. To the extent social capital reduces transaction costs and information costs, and makes physical capital and human capital more productive. It could be interpreted as a source of ‘Total factor productivity’ (the Solow residual).

 These are:
# The evolution of financial institutions (banks, insurance. Stock market, etc.
#          The implications of globalization.
#          Complimentarity of government and market.
#          Policy making and economic advice.

No one has identified the goals of economic development, as well as Amartya Sen, perhaps the leading thinker on the meaning of development.

3.1.20 Sen’s  ‘ Capability approach’

Amartya Sen, the 1998, Nobel Laureate in economics, argues that the ‘ Capability to function is what really matters for status as a poor or non poor person’. As Sen put it, “ Economic Growth can not be sensibly treated as an end itself. Development has to be more concerned with enhancing the lives we lead and freedom we enjoy.” Infect, Sen argues that poverty can not be properly measured by income or even utility as conventionally understood. What matters is not the things a person has or the feelings these provide but what a person is or can be, and or can do.  What matters for wellbeing are not just the characteristics of commodities consumed, as in the utility approach, but what use the consumer can and does make commodities. For example, a book is of little value to an illiterate person. The point is that to make any sense of the concept of human wellbeing in general and poverty in particular, we need to think beyond, the availability of commodities and with the commodities of given characteristics that they came to possess or control (or can do with them). Freedom of choice or control one’s own life, is itself a central aspect of most understandings of wellbeing.

Sen identified 5 sources of disparities between measured real incomes and actual advantages:

(1) Personal heterogeneity’s, such as those connected with disability, illness, age or gender etc.;
(2) Environmental diversities, such as heating and clothing requirements in the cold, infectious diseases in the topics or impact of pollution;
(3) Variations in social climate, such as, the prevalence of crime and violence;
(4) Social Capital: differences in relational perspectives meaning that the commodity requirements of established patterns of behavior may vary between communities, depending on conventions and customs;
(5) Distribution within the family: Economic statistics measure incomes received in a family, because it is the basic unit shared consumption, but family resources may be distributed unevenly i. e., girls get less medical or education attention than the boys in LDCs.

Thus looking at even real (purchasing power parity adjusted) income levels or even the levels of consumption of specific commodities cannot suffice as a measure of wellbeing. One may have a lot of commodities, but these are of little value if they are not what consumer desire.

Sen defines ‘ capabilities’ as “ the freedom that a person has in terms of choice of functioning, given his personal features (conversion of characteristics into functioning) and his command over commodities ……”.

3.1.2.1  Policy making and economic advice

Although, the new generation may focus mainly on these policy issues, their efforts will be of little avail that the governments do not heed their normative conclusions. The government can do to facilitate and accelerate development

The government action will ideally include maintaining favorable institutions, providing appropriate education, opening channels of information, countering the biases of the market, and complementing it by government operation of enterprises. All of these actions will have important purposes other than promotion of economic development. With respect to economic development, firstly, there will be aimed mainly though not solely at maximizing the rate of innovation, and the last two at achieving the optimum magnitude and allocation of resource use. The term ‘development planning’ is usually used to include not only the planning but also the execution of relevant measures. The full use of resources is the assumption and their allocation is the problem. The essential elements of good development policy are:

The preparation of the medium term plan is generally undertaken two years before it is finally launched for implementation. The process starts with the formulation of guidelines by the planning commission. The planning commission within the framework of NEC decisions prepares the guidelines. The targets suggested by the NEC are important and may be programmed in parts such that the planning commission may be able to chose on priority basis if the resource constraints or material balancing is so require. In preparation of guideline, commission formulates a set of objectives based upon the past performance of the economy. The set of objectives is placed before the NEC for approval. The NEC approved objectives are then circulated by the commission stating tentative targets in overall terms for national income, consumption, savings, investment, tax, exports, broad policies and strategies and undertakes the preparation of a macro-framework. The Ministries and Agencies participate indirectly in the technical works carried out by the planning commission as a source of information.

3.2.1.1  The preparation of a medium term plan is based on a long term ‘vision’ of a society, which the framework of a perspective plan has passed through several stages. The prepared plans thoughts on perspectives of Bangladesh for the period 1980-2000 as per directives of NEC. The booklet was published in September 1979.

 The outline contained the following objectives:

(i)         Freedom from hunger and poverty;

3.2.1.2  In 1983, the work on the preparation of another ‘Perspective Plan’ was undertaken. Poverty alleviation and equitable distribution of income were identified as the main objectives. Population control and removal of illiteracy formed part of the objectives. The preparation of a more detailed perspective plan was under preparation so that the realistic strategies can be worked out for promoting sustained growth of the economy over the perspective plan. The Fourth Plan (1990-1995), as a part of the Twenty Year Perspective Plan (1990- 2010) has been prepared with the following objectives:
(I)        Accelerating economic growth.

Prior to independence, a few multi-sectoral models of varying details were formulated in aggregate forms for the whole of Pakistan. The first of such models was prepared in 1965 to provide a consistent framework of the Third Five Year plan ( 1965-70) of Pakistan. It was a 7-sector consistency model consistency model, which made projection for the Pakistan economy in aggregate form without taking into account the regional state of affairs. The comparative static framework did not provide for inter- temporal consistency. The ‘Second Consistency Model’ was formulated in 1968 for the erstwhile Pakistan ‘Fourth Five year Plan’ (1970-75). It was also a terminal year comparative static model. The model was regional i. e. only for the erstwhile East Pakistan in so far the projection was made for two regions of  ( East and West ) Pakistan.

After the liberation of Bangladesh, the first multi-sectoral model was developed in 1973, for the First Five Year Plan. It was based on input – output model. The model distinguished 33 production sectors; in addition it identified four special programs viz. education, health, family planning and flood control. This was a terminal year comparative static model. The resources need for 33 production sectors were determined endogenously; whereas those for the four special programs were determined exogeneously. Under the technical framework of the four alternative plans were developed combining alternative set of targets and resource availability’s.

In 1976-77, a new input – output table with 47 sectors was prepared to provide technical guidelines for the Second Five Year Plan as a means of checking consistency between final demand , sectoral outputs and sectoral allocation of investment resources. Of the 47 sectors, 9 were in agriculture , 21 in industry, 8 in construction, 3 in energy and 8 in service sector. Several innovations were, however, incorporated in the model to accommodate the objectives of the Second Five Year Plan. These objectives are, provision of basic needs, rural development, increased production of agriculture, setting up agro-based and labor intensive industries and also small and cottage industries. The model was designed to ensure terminal year balance between supply and demand in each sector of the economy. It also specifies the various elements of supply ( domestic production and imports) and demand  ( intermediate consumption, investment including working capital and exports). The solution of the model determined the sectoral output expansion and investment allocation during the plan period as well as indicated the overall saving requirements and the balance of payments situation.

In general, the macro-model endogenously determined the sectoral investment allocation by linking investment demand with capacity expansion. However, in some sectors where output expansion during the plan period could be achieved partly by improving the efficiency of capacity utilization alone, Where the investment were lumpy, discontinuous and involved long term gestation period, investment could be related with output expansion and was determined exogeneously. The investment demand function of the model, however, took into account various peculiarities arising from particular situation of a sector. A distinct feature of the second plan model was the basic needs sub-model. It emphasized the provision of the basic needs bundle both consumer essential (food grains, cloths etc.) and essential social consumption (e. g.  Mass literacy, basic heath care etc.). Closely related with the basic needs approach was the plan objective of achieving maximum feasible employment growth which was incorporated into the macro-model.

The formulation of the macro model required a great deal of statistical information regarding structural and behavioral relationship in the economy and the base year levels of the variables. In order to generate basic data for the model, planning commission undertook certain studies, which served as the basis for the numerical application of the model. The model used for both First and Second Five Year Plans reveals that they were constructed using the principles of Leontief input – output model. The accounting framework of the said model as such constituted the input – output table tracing the transaction between the procedures with exogenous treatment of the final demand. However, the input-output model for the First and Second Five Year Plans had same weaknesses. The model took care of inter sectoral consistency and material balances of the economy. These models, however, did not provide any analysis on price, wage set.
In the absence of information, it is very difficult to estimate the sectoral growth rate as a result of particular investment made in the sector together with the incremental value added ratio of the sector and differences among the inter sectoral efficiency of production. In view of this, the investment planning cannot be undertaken simultaneously with the project planning. The World Bank has focused attention on this deficiency of planning through their recent ‘Public Expenditure Survey Report’.

In order to provide proper integration of macro and micro planning, an ‘Applied General Equilibrium Model’ was formulated for the Third Five-Year plan (1985-90). The model incorporated 39 commodities, 67 sectors and sub-sectors. Focusing on the two primary resources of the country, land and labor, and realizing the need for the technological and manpower development. Third plan pursued an employment led growth policy. The objectives of the policy were to ensure the poor greater opportunity for productive employment through accelerating development of the rural economy. For reduction of poverty and unemployment, the target group oriented program was expanded so as to reach of larger number of the poor directly. For this reason the whole social framework of the Third plan was elaborated into a ‘social accounting matrix’ of  10 socio-economic groups in order to evaluate the impact of the development programs and policies on income, consumption, and employment of various social groups. The groups are :

In Bangladesh that led to the target group approach during the second half of the last decade along with the emphasis on the development of rural institutions. Though it is only over a short period that the experiment is in existence to allow any serious evaluation of this approach, yet deteriorating poverty situation cannot stop a critical reflection on the approach as an instrument of development under the Third Plan. The issue that led to the formulation of the technical framework of the Third Plan:

3.2.2 Input-Output Model, used in the FFYP & SFYP of Bangladesh
The technical framework of the earlier plans was cast in the mould of the Input-Output (I-O) model. This model is based on technological relationship with autonomous decisions about growth and some essential targets; such a model will be utterly inadequate for various reasons even though it is strapped with poverty- oriented programs. First, an input-output model is basically an investment-output model. It cannot itself directly address the distribution problem except in terms of output vector. The classical case of such output-oriented development plan is the Sen.’s celebrated concept of boom-famine [Sen, A.K. 1977.]. It has been already mentioned that in spite of increase in per capita availability of food in 1981/82 proportion of rural households below the minimum standard of calorie intake increased. In a way, from the point of view of distribution the I-O model subsumes wicksellian distribution system though the case of a poor, developing country is the mirror image of J.S Mill’s Stationary State where desired distribution is institutionally achieved [Mills, J.S: Principles of Political Economy]. Secondly, because of its thrust on growth the I-O model collapses the market into the material balance equation. There are obvious reasons for exclusion of market mechanism. as an allocative process. Because of the concern of growth of real income prices have no role to play in the I-O model as incremental demand follows from incremental income and incremental output has the constant production coefficient in terms of both intermediate and primary inputs. Given such static input-output model prices remain invariant and income going to any factor will thus depend on the volume of such factor use. With surplus labor constraint of capital thus not only constraints growth but also the level labor   income. So I-O model explain declining  inequality in income distribution, except for the population growth. The model is in fact a comparative static model and assumes that the market will be in continuous equilibrium. This is a very strong assumption for a mixed economy, particularly with factor supply imbalances in the labor and capital markets. Exchange market cannot be simply subsumed in the constant technical relationship in a mixed economy.  The I-O model has no exchange market for the final demands. Finally, such a model is extremely weak from policy planning point of view. The only instrument that it has to affect distribution is the transfer mechanism through taxes. This together with its emphasis on institutions makes the I-O model rely on what may be called a transfer in substitution of an exchange market.

3.2.3 Alternative Model for the Third Plan
.           It is in the context of these limitations of the traditional I-O model that the Third Plan has adopted and alternative approach. The model used for the Third Plan belongs to the class of General Equilibrium Model. It focuses on the micro-economic principles within an economy-wide mathematical simulation model. The cornerstone of this model is therefore the concept of economic agents who express their economic preferences given their initial endowments- land, labor and capital. The behavior of an agent is looked on as the outcome of conscious considerations of alternatives to satisfy his preferences not just as statistical relationship. In planning as abstraction of reality each agent representing an socio-economic group is taken as more or less homogeneous in terms of some dominant characteristics. Since most households are  located in rural areas depending overwhelmingly on land, the rural households have been divided into 8 socio- economic groups and urban households into groups, giving altogether 10 socio-economic groups. In addition to these 10 socio-economic groups as economic agents, there is one more important actor in the economy i.e. the government. Thus there are 11 actors  in the economy who have preferences and resources. In this simplified set-up the functioning of the economy as a whole could in theory be looked at as the outcome of a complicated network of all bilateral interactions between the socio-economic groups and the government. The organizing   concept is underlying this complicated network the concept of equilibrium. Instead of specifying the network, certain laws of nature such as commodity balances are imposed on the system, thus determining the level of variables which individual actors react but cannot set on his own. This brings in the price formation process in the model. Although the model is called macro model, it has 39 commodity and service sectors describe their supply, demand and price formation. Because of the overwhelming agrarian character of the economy and the existence of growth potential, 18 of the 39 sectors are located in the agriculture, 12 in industries and rest 9 sectors consist of construction, utilities and services. The focus is over- whelmingly on food reflecting the concern for basic needs.

The main problem with such ‘General Equilibrium Model’ is that all agents and all commodities must be incorporated in some to ensure commodity and financial balances. It thus requires a comprehensive account of each agent (socio-economic group) of all income and expenditure. This system of accounts is represented in the Third Plan macro-framework as a Social Accounting Matrix (SAM) which serves as the date base to initialize the general equilibrium model. For the Third Plan, a SAM for the fiscal 1977 was initially and then updated for 1984/85. It is recognized that there is severe data limitation on developing a reliable SAM.

The ten socio-economic group are :

Demand and Price Adjustment

The macro model is a dynamic simulation model with a year time lag between supply and demand. Because of this time lag the model has two components, namely the supply and exchange component. The supply component describes how at given prices production and investment plans are made in the economy. Given these plans, at the end of gestation period production capacity is generated. The exchange component describes what happens then. Thus the supply component contains the lagged relations of the model while the exchange component describes. the economic interactions within the year. The owners of the commodities and of production capacities are the ten socio-economic groups plus the government. Each agent buys consumption and investment goods, which vary with income (or taxes), earned and prices of commodities. The excess (or deficit) of demand over supply is imported (or exported) as long as it is permitted and profitable for the trader. This is the case for imports as long as the retail price can cover the cost of import, tariff and transportation. The reverse holds in case of export. If neither export nor import is profitable an autarky is established in which a price adjustment takes place to restore the balance between demand and supply. Such price adjustment in turn affects the revenue of the socio-economic groups and the government. The exchange component leads to the final outcomes of consumer demand, nutrition, investment and government revenue and expenditure.

Supply Capacity

Supply capacity is the main determinant of long term growth. In the short run growth can be stimulated by rise in effective demand . When the Supply capacity reaches the upper bound because of lack of capacity . then the price will rise. Such a constrained short-run supply adjustment to effective demand has been specified for domestic non-agricultural commodities, which are not tradable internationally. Such commodities have been defined as input-output commodities requiring an input of internationally tradable  commodity. Thus any demand stimulus for domestic goods has its cost in terms of foreign exchange. This combination of supply constrained and demands constrained regimes into one single market makes it possible to explore the scope of macro-economic stabilization policies through effective demand management.
Government Policies
The model does not limit itself to the macro-economic stabilization policies. It also represents government operation  on commodity markets and income distribution policies. On the commodity markets, quota on international trade can be imposed and buffer stocks kept for selected commodities. These market policies are strongly related to redistribute policies, since most of these serve the purpose of effecting income distribution. Besides these and public sector investment allocation food rationing, subsidies, exchange bonus, taxes and foreign aid etc. are few important policy instrument which will be available to the government for effecting the desired changes in the income distribution.
Use of National Resources

The Plan recognizes that the growth prospect in Bangladesh is severely  constrained by the limited availability of land and water and of skilled labor. Land and labor are also the two primary resources of the country and the economic growth will crucially depend on the increased productivity of these two resources; both land and labor quality needs to be improved. This will involve increased investment in land (and water) development, education and health. As land absorbs the main labor force, an investment in land will lead to higher productivity and higher real wage, while an investment in health and education is also needed for higher labor productivity. The present level of poverty is in fact the result of low investment, inferior technology and low productivity. This trap cannot be broken unless the level of technology in both farm and non-farm sectors improved and corresponding skill is formed.

Integration of Macro and micro planning

The planning process involves evaluation of possibilities and determination of objectives, the formulation of policies, preparation of projects and program of action, and implementation of the action plan and follow up of the same to attain the plan objectives. All these activities can be categorized under the main components of planning; namely (I) resource planning (ii) investment planning and (iii) project planning. Effective development planning is a function of the effectiveness of the components resulting in integration of the macro and micro planning.

CHAPTER – IV
Critical Review of Plan Objectives, Strategies, Outlay, and Implementation

4.0. In the three decades of development since July 1973, Bangladesh has implemented 5 ‘Medium Term’ ( Five Year) Plan & a ‘Two Year’ Plan and ‘Two Year Plan Holidays’( 1996/97-1997/98). The ‘First Five Year Plan’ was launched in July 1973 and the Fifth Five Year Plan was completed in June 2002. In order to a have clear picture of implementation results, the study period extends up to June 2003. A Five Year Plan is implemented through 5 ‘Annual development Programs (ADP)’. ‘Social sector development’ and ‘Poverty Alleviation’ have been the core issues of ‘Development Planning ’ in Bangladesh. This study is a critical review of Objectives, Strategies, Outlay, Implementation and Evaluation of the plans during 1973 – 2003.

The basic approach for alleviation of poverty was generation of employment, through higher growth and using monetary & fiscal policies for equitable distribution of basic goods to make them available at reasonable prices to the poor. In order to reduce unemployment the plan strategy suggested concentration of investment in labor intensive sectors like, Agriculture, Rural Infrastructure, and Small scale Industries.

4.1.1. The plan provides for a total development outlay of taka 44550 million at 1972-73 prices. Out of which taka 39520 million was earmarked for the public sector and the remaining taka 5030 million for the private sector. Over and above this, an investment of taka 5850 million was expected in the non-magnetized sector particularly to achieve through mobilization of surplus labor. It includes such items as subsidy and distribution costs of fertilizer, pesticides and seeds, cost of land acquisition, wages, salaries and interest and payments during the period of construction. About 89% of the total plan outlay are in the public sector and 11% in the private sector. External capital as percent of total development outlay was 62.2% in 1973-74. It was expected to decline from 62% to 27% in 1977-78.

Table – 1
Development outlay of the FFYP (1973-78) in million taka

Strategy of the Plan

The plan designed to generate a rate and pattern of income growth, which not only meet a minimum consumption standard but also expand employment opportunities and ensure a socially desirable pattern of income distribution. With this end in view, the basic strategy in the plan is to concentrate on increasing output in those sectors of the economy, which use large amounts of labor and to use labor intensive methods of production. Within this general strategy the overwhelming need to reduce on imports of food grains. To improve the balance of payments by import substitution and export promotion have been the major factors in determining the pattern of growth envisaged in the plan.

The Plan was implemented during 1973-78 in two different political regimes. After the change in government, in August 1975, a hardcore public sector Program was fixed at Taka 37000 million at 1975-76 prices, though it was taka 39520 million at 1972-73 prices. But the development expenditure during 1975-76 and 1976-77 was estimated taka 18560 million. The implementation of the program of taka 12030 million in 1977-78 together with expenditure during the preceding two years (1973-75) will add up to a total of taka 30590 million during the hard core period. This is 76% of the  plan outlay but 83% of the hardcore allocation.  The State Principle secularism was replaced by religion Islam; similarly Socialism replaced to an exploitation free society. Break-up of Sectoral allocations in the FFYP and the Hardcore Program is shown in Table -2

TABLE – 2
Sectoral Allocation of the FFYP at 1973-74 prices and the Hardcore Program at 1975-76 prices in Bangladesh.

4.1.2. Actual GDP growth rate, Per capita income growth rate, Population growth rate consequently fell below the targets:

Table – 3
Actual and Achieved Targets in FFYP (1973-78)

The process of economic development in Bangladesh since independence can be viewed as consisting of two distinct phases. The first phase lasting for nearly three and a half years up to mid-1975 was mainly concerned with rehabilitation and recovery of the economy after the war of independence. The Second phase following it was characterized by a number of economic stabilization measures leading to the consolidation of the economic foundation of the country and creating conditions for economic progress. A comparative performance of the economy under the two phases with respect to the growth of GDP and other major economic indicators are shown in table –4:

TABLE- 4
Comparative Growth Scenario under the Two Phases of the FFYP (1973-78)

The Gross Domestic Savings as a Percentage of GDP increased 2.58% in 1973-74 to 3.49% in 1977-78. This was against the assumption of the Plan of an increase of 4.3% in 1973-74 to 14.2% in 1977-78. That is Domestic resources could not be mobilized to finance 31% of the Plan expenditure. It was only 22% and the external capital inflow, instead of declining, increased about 78%.

A study by the ‘Project Implementation Bureau (PIB)’ Now Implementation Monitoring and Evaluation Division (in PIB Staff Paper, 1979 ) enlisted the following problems relating to resource mobilization and resource use:

#  Allocation of fund short of investment scheduled in the project proforma and /or in accordance with project work plan;
#  Shortage of local currency/Counterpart fund, and lack of contingency fund to meet unforeseen requirements;
#  Short release , non-release or delayed release of fund from the government ( Ministry of Finance and Administrative Ministry) to the Executive Agency, and from the Agency to the Project (PIU);
#  Unauthorized reappropriation of fund from one project to another by the executing agency;
#  Inability to utilize and wastage and misappropriation of fund by the agency/project management;
#  High overhead and administrative expenses;
#  Centralization of Financial powers, especially in respect of purchase at home and abroad and in tender formalities; and
#  Delay in lining up/allocation and reimbursement of project aid/ foreign exchange.

4.1.3. Implementation of Projects

The FFYP started 1973-74 with a portfolio of 1385 projects and over the years the ADPs included more and more projects until Financial Year 1977-78. At that time the ADP contained 1519 projects. The total portfolio of projects increased from 1385 in 1973-74 to 1671 in 1977-78. During 1973-78 only 286 projects could be completed out of a target of 652 projects. This is shown in Table- 5.

Table – 5
Project Completion during 1973-78

During 1873-78 institutional arrangements for economic planning and policy making for program/projects implementation was not adequate. The PIB study (1979) grouped problems relating to policy planning and project management as follows:

The inefficiency in the nationalized sector, development management, and inefficient use of foreign aid prevented the achievement of ‘full employment’ during the First Five Year Plan period.

4.3.1. The major objectives of the Two Year Plan was attaining a 5.6% annual growth of GDP allowing a average per capita income increase at 2.8% per year. To have a greater self-reliance through mobilization of domestic resources for financing development program ( 26% of the plan outlay). To move towards self- sufficiency in food grains by producing 144 lakh ton and import target of 13 lakh tons in 1979-80. Reducing population growth, improving provision of basic needs such as food, clothing, and drinking water and to create of 23 lakh new employment opportunities during 1978-80.

An important feature of the TYP was the increasing orientation of industrial policy towards private investment. The Private Investment ceiling was raised from taka 3 crore to taka 10 crore and a ‘Concurrent lists’ was created to allowing private investment in ‘Joint Ventures’ with the public sector. Industrial credit was made available in increasing quantity, while ‘Abandoned Enterprise’ was disinvested. As a result, private investment picked up. The disbursement of loans by the financial institutions to the private sector rose from taka 124 crore in 1977-78 to taka 516 crore in 1979-80 in the terminal year of the TYP. During the FFYP, the manufacturing industries were striving for recovering its 1969-70 level of output, which was reached in early 1976-77. The recovery was lower than planned. During the TYP period, industrial output in value added terms increased an average rate of 2.3% only, The financial position of the Public Corporations with the exception of ‘ Jute and Textile’ showed improvement as a result of  upward change in output prices to compensate for increased cost but there was still idle capacity in most sectors. Project implementation position is shown below:
Table- 7
Project Completion during TYP (1978-80)

As an interim Plan, about 83% of plan allocation were against the incomplete projects of the FFYP. There has been considerable shortfall in the realization of targets of the TYP. The GDP rose by 4.0% in 1978-79 and by 2.9% in 1979-80. Average growth rate was 3.5% compared with the planned growth rate of 5.6%. The total food grain production during 1978-79 was 130.29 lakh tons, a little less than that of 1977-78. In 1979-80, the food grain production went up to 133.5 lakh tons. During this two year period economic growth was affected by unfavorable weather condition, besides the world oil price shock of 1979. The GDP growth rate of 3.5% had a little impact on poverty alleviation.

Structure of the Economy over the period of 1973-80

There have not been any major changes in the structure of the economy of Bangladesh over the period of 1973-80. Though during the period GDP has risen and the shares of the agriculture, manufacturing and other sectors in GDP have somewhat changed, agriculture still remained the dominant sector of the economy. Share of agriculture sector declined from 57.6% in 1973-74 to 54.9% in 1979-80 over the period. As a growing economy, the share of manufacturing did not increase with the fall of agriculture. During the period agriculture got 30.08% and industry got 15.24% of investment. The remaining investment got by other sectors, which grew faster than the combined growth rate of agriculture and industries. The growth of industries were slowed down , due to diminishing scope for utilization of idle capacity and delay in completion of on going projects. The faster growth (35.70% of the incremental output) of the trade and other sectors can be explained by the fact that there was massive increase in the external trade, particularly import trade. It rose taka 740crore in 1973-74 to taka 3951 crore in 1979-80 at current prices. Another sector that gained in share is construction sector.

There has been a considerable increase in gross investment over 7 times as high in 1979-80 as that of 1973-74.Investment as a  % of GDP increased to 16.51% in 1979-80 compared with 9.32% in 1975-76. A major part of it was financed by the foreign aid. The total net foreign assistance received to taka 7867 crore against the investment of 10,774 crore in the economy. The net capital inflow is estimated to have increased from 6.17% of the GDP in 1973-74 to 12.17% in 1979-80. Domestic saving has thus financed only a small fraction of the total investment. Though the saving ratio raised from 0% in 1973 to merge 4.34% in 1979-80. The recovery of the manufacturing sector was very slow. The index of the manufacturing production ( 1969-70=100) which stood 81 in 1973-74 , reached the pre-independence level in 1976-77 and rose to 112 in 1979-80. The increase in labor force was estimated at 0.39 crore man-years as against the planned 0.54 crore man-years. According to the 1974 population census, unemployment figure was o.54 million in a population of 76.4 million. The figure was 0.08 million against population of 50.8 million. Though the employment target in the TYP period was 18 lakh man-years to alleviate existing underemployment and unemployment situation, indications are there that unemployment situation worsened and in the rural areas the number of landless people to appear to have gone up. Given the internationally accepted minimum nutritional requirements, the monthly-required income at 1963-64 prices was estimated at taka 37 per head to ensure minimum nutritional intake. The 1974 household expenditure survey showed a significant deterioration in the poverty level. The 1975-76 Nutritional survey of rural areas arrived at an extreme poverty level is 35% of households, while the absolute poverty level [at 90% of nutritional requirements] was estimated 46% of the households.

4.3. The Second Five Year Plan (1980-85)

The Second Five Year Plan (SFYP) was prepared within a broad framework of Twenty Year ‘Perspective Plan’ taking into consideration of objective realities obtaining within the country & outside and the development experience of the recent past. At the beginning of the plan, even after 7 years of effort, the country was beset in abject poverty, chronic unemployment and social inequality. Only an intense desire and determined efforts to overcome them in a planned way could make things change. The SFYP ( 1980-85) was formulated with a total outlay of taka 172000 million ( at 1979-80 prices) – taka 111000 million in the public sector and taka 61000 million for the private sector. The Plan envisaged an annual growth of 5.4% compared to 6.1% in the FFYP and 3.5% in TYP. The SFYP’s objectives were determined by the socio-economic imperatives on endemic poverty, unemployment, and malnutrition, alarming growth of population, illiteracy and above all dependence on foreign aid. The objectives of the SFYP were as follows:

SFYP  Strategies
The strategies followed in the SFYP were as follows:

The sectoral allocation of the SFYP outlay of taka 172000million is stated in Table – 8:
Table – 8
Sectoral Allocation of SFYP( 1980-85) at 1979-80 prices.

The planned outlay was taka 172000 million at constant prices or taka 250600 million at current prices. It is estimated that the actual utilization through revised ADP taka 139290 at current prices against taka 160600 million envisaged in the plan. ADP revised allocation was taka 152930 million, 95% of the planned outlay. The actual utilization was 86.7% of the planned outlay.  Of the total Plan outlay, taka 70910 million was expected to receive from ‘Foreign Aid’. Amount of foreign aid received was taka  97080 million,  out of the actual outlay of taka 152970 million. 93.1% of the public sector allocation was utilized.

Project Implementation

The development impact of public sector outlay was diluted as the limited resources were spread over a large number of projects. The number of projects in ADP in 1980-81 was 1520. Total number of schemes including aided Technical Assistance project was 1948 and the highest number of projects in execution was 1675 in 1981-82. In view of the continuing financial stringency 298 projects were dropped or deferred during the SFYP period. In all 1037 projects were completed during the plan period, while 613 projects have been carried forward to the TFYP as compared to 1054 projects inherited from the TYP. Besides, the reduction of 298 projects, ADP were divided into Core AND Non-core , so that the projects in the core category could be protected against unexpected resources shortfall. Both these changes were intended to reduce the intensity of competing claims on limited resources  and accelerated project implementation with adequate funding. As a result the number of completed projects increased from 160 in 1980-81 to 323 in 1984-85. The Financial performance of the private sector suffered more seriously than the public sector due to poor recovery of loan by the development financial institutions (DFIs) which led to the freezing of their lines of credit.

GDP increased annually by 3.8% against the target of 5.8%. Population growth rate was 2.4% as against the target of 1.9%. The terminal year ( 1984-85) was 4.2% as against the target of 7.4%. The differential rate of growth in agriculture, industry and other sectors was not substantially enough to effect any significant change in the structure of the GDP Consequently, there was limited impact on poverty alleviation. The SFYP was interrupted by the Assassination of President Ziaur Rahman and its implementation marred by political uncertainty.

Review of Planned Development during 1973- 85

The important feature of the ‘Development Planning’ is that all the three plans Bangladesh has implemented during 1973-85 remained overwhelmingly dependent on foreign aid. Share of foreign aid was 71.9% in FFYP, 76.8% in TYP, and 63’5% in SFYP. An important trend characteristic of aid inflow was its unevenness rising in the terminal year. In general, two types of external dependence i.e. on foreign aid and dependence on nature characterized the economy. The table-9 shows the development outlay and foreign assistance of the successive plans during 1973-85.

Table –9
Size of the successive plans, actual outlay and foreign aid    inflow (in million taka)

Private Investment Trend (1973-85)

The place of the private sector in the economy began to change with a greater role to play in the national development efforts since the mid 1970s. During the SFYP , under increasing strain on limited public resources and management capability, a more pronounced role was assigned to the private sector. This is reflected in larger investment allocation ( over 35%) for the private sector in the plan compared with 16% in TYP and 11% in FFYP. But in spite of this rapid growth of private investment total planned outlay ( public plus private) increased at the rate of 9.9% a year  from 1972-73 to 1984-85 at constant prices of 1972-73. Development outlay was 7.8% of GDP in 1973-74 rising to 11.3% in 1977-78 and to 17.2% in 1979-80. But in 19874-85 it declined to 15.7%.
New Industrial Policy
In continuation of the government policy for greater market orientation of the economy and greater reliance on the private sector, the major changes during the SFYP were:

Macroeconomic Changes in the Economy (1973-85)

Inspite of reduced outlays and debilitating external conditions, the economy made progress slowly. By 1976-77 the economy reached its pre-independence level of GDP though it suffered severe damages and dislocation during the war of liberation. The ‘Macro Economic Changes in the Economy’ is shown in table-10:
Table- 10
Macroeconomic Changes in the Economy

Growth and Sectoral  Contribution to  GDP (1973-85)

During the 1973-85 most significant achievement was in food sector, where output has increased from 10.0 million tons in 1972-73 (11.9 million tons in 1969-70) to 15.8 million tons in 1984-85. This gives an annual growth of 3.9%. In general, agricultural sector achieved a significant progress due to rural development strategy. On the other hand, industries sector contribution to GDP was 6.2% during 1973-85. It rose to 7.3% in 1972-73 to 8.6% in 1984-85 at 1972-73 factor cost. The rest of the economy grew at 5.8% per year. Its increasing share in GDP from 32,6% in 1972-73 to 37.1% in 1984-85. The following table gives the growth and changes in the structure of GDP in a simplified way, from 1972-73 to 1984-85.
Table –11
Growth and structure of GDP (sectoral contribution) at 1972-73 factor cost
(In million taka)

4.4.2. The Strategies of the TFYP

The plan will also vigorously pursue macro-economic policies to realize the ‘New Industrial Policy’ in making the private sector a dynamic partner in development.

4.4.3 Plan Size

The total outlay of the TFYP was taka 386000 million. Public Sector Allocation was taka 250000 million  ( 64.8 % of the total outlay) and the Private sector Outlay was taka 136000 million ( 35.2% of the total outlay). Out of the Public sector outlay taka 77970 million was foreign aid (—% of actual  outlay). ‘Uazila Block Allocation’ was  15306.3 million. Out of that taka 4970 million was the expenditure as against the total ‘Development Grant’ of  taka 7800 million.
Table –12
Development expenditure in the Public sector in TFYP

4.4.4 Project Implementation and ADP
Inspite of substantial increase in outlay, implementation of development projects suffered from a number of problems during the TFYP period. Certain measures were initiated in order to help quick implementation of projects. These are: (a) simplification of fund release; (b) delegation of authority to project directors; (c) introduction of core programming system; (d) simplification of procedures for procurement of goods and supplies and hiring of project personnel; (e) specific provision for CDST in the development budget; ( f) strengthening of IMED and periodical review of progress by line Ministries and ECNEC regularly for overcoming implementation bottlenecks. In addition efforts were also made to rationalize the total number of projects included in the ADP. In the terminal year of the SFYP, the number of forward projects to the TFYP was 615. Implementation Performance about projects and ADP’s is stated below:

Table-12
Implementation Performance of projects and ADP’s ( at current Prices)

A Planning Commission Study showed that the end of the first three years of the TFYP only about 43.5% 0f the planned expenditure had infact taken place against the target of 60%. Such delays in project completion, according to one estimate, increased costs by roughly 35% and extended time of completion by more than 60%. In an study of 28 completed projects , Professor Salauddin Aminuzzaman showed that about 65% of the projects were delayed more than two years.
Table-16
Distribution of Time Over runs Projects and delays in implementation

4.4.5. Structural Change in the Economy (1985- 90) is shown:
Table-14
Structural Change in the economy & Sectoral Contributions

4.4.5. Major Macro – Economic Indicators (at current prices)

Although various measures have been adopted to encourage private saving and investment, the rates of these were declined over the TFYP period. Macro- Economic Indicators are stated below:

Table-16
Macro – Economic Indicators (at current prices)

4.5. Fourth Five Year Plan (1990- 95)

The Fourth Five Year Plan with a total outlay of taka 689300 million was approved by the NEC in October 1990. However, because of the change of the government in December 1990, the official communication regarding approval was delayed. The Fourth Five Year Plan had been recast in light of the progress made in investment program both in public and private sectors since 1990-91. The imperatives for reflecting the objectives of the ‘New Development Perspective ( i. e. , NDP of 1991-92 having 8 goals) of the government in power. The Revised Fourth Five Year Plan with a total outlay of taka 620000 million was approved by the NEC on March 7, 1993. The plan Placed emphasis on poverty alleviation and meeting the basic needs of the people with particular focus on human resources development, women in development and environmental sustainability. The main objectives of the plan were:

The Vision for the future Socio-political and economic development of the country leads to the formulation of” New Development Perspective (NDP)”, which accord top priority to accelerated and sustainable economic development. The main thrust the democratic government was on the human resources development, ge3neration of productive employment and alleviation of poverty. The major strategies of the NDP would be generation of productive employment particularly to meet the basic needs of the lower 50% of the population, thereby raising savings, investment and purchasing power of the community. Emphasis would be given on local level participation and Women’s participation in the process of socio- economic development of the country. Export led growth and promotion of private investment would be the main focus of the development perspective and the government will scale down its operators to play a supportive role in accelerating the process of development.

General Strategy

The total domestic resources in the revised plan outlay plan outlay amount to taka 345500 million i.e. , about 56% compared to that of projected target of 48%. As regards to the domestic sector Outlay, domestic resources were estimated to finance 34% as against the target of 26% in the original plan. The total outlay in the private sector is estimated to exceed the original outlay by taka 3000million with domestic and foreign finance remaining unchanged in the ratio 87 : 17. This is shown in table –19.
Table – 19
Financing of the fourth Five Year Plan( at 1989-90 prices)
( In Million Taka)

The revised allocation for the public sector was 56%, while that for the private sector was 44%. The share of the private sector was kept higher than that in the TFYP (35%) and the SFYP (16%) in view of the expanding market economy and public resource constraint. To meet the resource requirements, The plan aimed at raising domestic saving rate to an average of 8.60% to achieve an investment rate of 14.80% and Tax/ GDP ratio of 9.30% in the Terminal Year of the Plan.

Growth Performance
The average annual growth rate during the Fourth Five Year Plan period was 4.15% against the target of 5%. The low growth was due to almost stagnant agricultural production. The growth of the agricultural sector was only 0.98% compared with that of the plan target of 3.42%. Agricultural growth suffered due to problem of fertilizer distribution and lack of adequate public procurement of food grain at support prices. The manufacturing sector showed a modest growth rate of 7.05% against the target of 9.02%. The energy sector, however, accounted for an accelerated growth rate of 15.31%, while its target was 9.28%. The Public service sector showed some shortfall in attaining the target. The housing and other services, however, had marginally higher growth rates. This is shown in Table-20.

Table-20
Structural change in the economy & Annual Growth Rate During 1990-95

A major objective of the Fourth Five Year Plan was to improve domestic resource mobilization both in the public and private sectors. Because of strong reform measures, both Tax and Non-Tax revenues exceeded their respective plan projections. As a result, total revenue receipts during the plan period was taka 471570 million at 1989-90 prices exceeding the plan projection of taka 45790 million. However, current expenditure overshot its target by about 3.7% so that revenue surplus barely exceeded the plan expectation by 0.7%. While there was a food budget deficit, it was offset by higher net capital receipts. As a result, domestic resource generation in the public sector exceeded the planned amount by more than 33%.

The Fourth Five Year Plan provided taka 347000 million at 1989-90 prices for the Public sector development outlay. Total development expenditure in the public sector during the plan period was estimated at taka 322440 billion, realizing about 93% of the target. Sectorwise distribution of development expenditure is presented in Table-21. Sectoral performance of the Fourth Plan showed that there was under spending in some sectors. In Industry, actual development expenditure stood at taka 5030 million as against taka 16840 million earmarked for the sector. The short fall was attributed to the government policy shifts towards encouraging private sector investment in industry. Development Expenditure in Health & Family Welfare, Labor & Manpower and Public Administration sectors lagged behind the targets.  There was, however, over-spending in rural development, transport and education. This was also due to policy shift of the government towards public investment for infrastructure development and for human resource development. Public Sector Performance during the Fourth Plan Period is presented in Table-21.

Table – 21
Public sector Performance during 1990-95 (at 1989-90 prices)
( in million Taka)

Government investment during the Fourth Five Year Plan Period was 93% of the target. GDP increased at 4.15% instead of 5.0%. Comprehensive Program for structural reform was initiated, with safety net provisions for the poor. Greater emphasis, compared to the past, was put on ‘Social Sectors’ like education and health.

4.6. Review of Performance during ‘Two Year Plan Holidays’ (1995- 1997)

The government of that time could not draw up a new plan after the Fourth Five Year Plan. ADPs in the public sector in 1996-96 and 1996-97 on an  ad-hoc basis. Private investment could not be projected in a framework of facilitation package. But the Public Sector Outlays through ADP allocation during the financial year 1995-96 were taka 12100 million. Due to resource constraint it was reduced to 10447 million (i.e., 13.70% less than the original outlay). Actual expenditure was taka 10016 million. ADP in the financial year 1996-97 were taka 12500 million. The contribution of domestic resources to the financing of ADPs  of  1995-96 and 1996-97 were taka 4414 million ( 42.30%) and Taka 5926 million (47.40%) respectively.

4.6.1. Growth Performance

During this period, the overall GDP in real terms attained modest gains. It registered a growth of 5.40% in 1995-96. The growth in agriculture was 3.70% in 1995-96 compared with a negative growth of 1.04% in 1994-95. The growth of industry declined from 8.64% in 1994-95 to 5.29% in 1995-96. The contribution to GDP was 32.24% in agriculture, 11.34% in industry, 6.25% in construction, 1.94% in power, gas and water resources and 48.21% in other services. GDP grew by 5.70% in 1996-97 over the period of 1995-96 respectively. The growth in agriculture was due to significant increase in major crop production. The decline in the growth of industry sector was due to short fall in production of both large and medium scale industries.

4.6.3. Saving and Investment

During 1995-96, the rate of domestic saving was 7.27% and that of national saving was 11.85% of GDP. Domestic and national saving rates in 1996-97 were 7.70% and 14.63% respectively. The rate of investment rose from 16.63 to GDP in 1994-95 to 17.0% in 1995-96 and to 17.37% in 1996-97. In 1996-97, public sector investment was 6.52% and the private sector was 10.85% of GDP.

The country’s Balance of Payments came under strain in 1995-96. A steep rise in imports coupled with slower aid disbursements triggered a rundown in the country’s foreign exchange reserves. By the end of the fiscal year, the reserves stood $2.04 billion, equivalent to 3.6months imports as on June 30 1996. The trade deficit widened by more than 27% to $3.00 billion after imports jumped up by 18% to $6.88 billion against as 11.80% growth of export to $3.88 billion. Several key imports like cotton, POL , rice and wheat suffered from rises in prices in the world market, significantly rising the import bill. The rise in imports came largely from a 15% increase in non-food imports led by textiles, cement, POL and capital goods and a 37% escalation in food grain import. Gain in exports in knitwear and readymade garments, mainly contributed to overall export growth during the year. But inflow of foreign remittances from overseas workers leveled off at $ 1.2 billion. As a result, the current account deficit widened to $1.6 billion. Aid disbursements also declined by around 17% to $ 1.44 billion. All these led to the draw down of the foreign exchange reserves.

The strain experienced in the external balances in 1995-96 albeit marginally, in 1996-97. Faster growth of exports, aided and strengthened by a turn- around in the flow of remittances, narrowed the account deficit to an estimated amount of $860 million ( 3.40% of GDP) compared with $1.64 billion ( 5% of GDP) in 1995-96. With the rise in food grain output in 1996-97, the import demand in food grain was estimated to decline substantially by more than 67% to $212 million. Therefore, total imports were estimated to grow at a slower rate of 1.70% and reach $ 7.0billion. On the other hand, estimated higher export earnings from garments, knitwear, frozen food, tea and raw jute led to a 13.30% rise in export earnings $4.40 billion in 1996-97.

4.7. Fifth Five Year Plan (1997-2002)

Keeping in view the changing structure of the global economy, the Fifth Plan places market at the center and also attach due importance to the appropriate role of the government, the public sector and the private sector. Further, a comprehensive policy package has been presented in the plan which is expected to attract much needed ‘Foreign Direct investment
(FDI)’. The government will promote, guide and develop markets. The greater part of the GDP during the fifth plan is expected to come from the private sector. The role of the government will be limited mainly to the establishment of the educational, technological, financial, physical, environmental and social infrastructure of the economy. The governments will also provide utility services where private sector is not forth coming. A major focus of the Fifth Plan is ‘Local Level Participatory Planning’ and ‘integration of the local level development projects/programs with those at the national level. The Fifth Plan envisages an active coalition of the government and the NGOs on the development front. It also tried to accommodate the political commitments of the party in power.

4.7.1.  Development goals and objectives of the Fifth Plan are stated below:

The Fifth Five Year Plan of Bangladesh considers alleviation as a synonymous of with development. For this purpose, development strategies were to accelerate economic growth, enforce higher investments in basic services and social sectors, restructure institutions and administrative framework, enhancement of poor’s crisis coping capacities and build up their asset base and promote target oriented approach of income and employment generation.  The Plan aims to Promote a structure of economic growth that has a high capacity to reduce poverty by strengthening the channels through which benefits of growth reach the poor and increasing the efficiency with which the sectoral linkages cater to the need and demands of the poor. The Fifth Plan aimed at a reasonably high agricultural growth rate. A high agricultural growth creates the synergy necessary for diversification of the rural economy and development of the rural non-farm sector. Such a diversification benefits the poor through greater demand for labor and greater linkages with processing transported other services. The Fifth Plan has successfully utilized the strategy of higher agricultural growth contributing to faster national growth. The average Annual Growth Rate of GDP has increased to 5.5% during the 1996-99 periods (from around 4% in the earlier periods). Similarly, the growth of agriculture accelerated to an annual 4.3% after a period near stagnation during the early 1990s. The strategies followed to achieve the above goals and objectives are shown below:

The Fifth Five Five Year Plan total outlay was taka 1959521 million. Public Sector Outlay was taka 858939 million (43.83%) and the Private sector outlay was taka 1100582 million (56.17%). Public Sector Allocation with share of individual sub-sectors are shown in Table-22:

Table-22
Public Sector Outlay for the Fifth Plan (1997-2002) at 1996-97 prices.

Along with higher allocation for social sectors, the Fifth Five Year Plan provides for increase in the benefits of the poor from such expenditure. Since human capital requirements of the poor are of the types of public goods with positive externalities, the market and the private sector are unlikely to provide them to the required extent. In the development plan, efforts are targeted to provide adequate quantity and quality of these services so that the poor do not remain victims of both market and government failures.

Expenditure for development of education can be cited as an example of integration of poverty alleviation and social sector development in the planning process of Bangladesh. Education was consistently given the highest allocation in the annual development program. Several steps had been taken to make public education expenditure more pro-poor. More than 55% of the development budget for education is devoted to primary and non-formal & mass education. About 48% is devoted to primary education alone. One study showed that poor received 48% of the benefits of public primary education spend in the rural areas compared to 26% for secondary and 15% for higher education. To ensure universal primary education and eradication of illiteracy by 2006, projects were being implemented to increase enrollment and reduce drop out areas, increasing primary education cycle completion rate, improve the quality of education and increase the literacy rate. Consequently, the gross enrollment rate has increased to 96% in 1999 from 76% in 1991 and the completion rate of primary education cycle had increased to 65% from 40% during the same period. The government in collaboration with NGOs and other Voluntary organizations was implementing the non-formal education programs. Of late, a post literacy and continuing education project had been undertaken for the new literate for sustained human resource development.

Development projects were being implemented to cope with increased demands for secondary and higher education. Infrastructure and other facilities are being expanded. Since January 1994, a female stipend program at secondary level had been taken up for ensuring secondary education to the girls. Under this program, girl’s students of grade 6-10 are provided with stipends to cover their educational expenses and enjoy free tuition. The number of beneficiaries under this program was nearly 4 million in 1999. It has created such a rush of female students those boys-girls ratio at secondary level was 54: 46 in 1999, whereas, it was 67: 33 as late as in 1994, before this secondary stipend project. For getting this stipend, a girl student must be present at least 75% of school days, must have satisfactory performance in examinations and must be unmarried.

Food for education project was an innovative effort, which was started in 1992 to boost ‘Universal Primary Education’. This project was designed to support poverty- stricken families to send their children to primary schools by giving income entitlement through food. This enables the poor families to release their children from livelihood obligations to ensure regular primary school attendance. The target groups include distressed widows, day laborers, insolvent groups and landless. It covered approximately about 28% of area of Bangladesh. The Remaining 72% was under ‘ Primary Education Stipend Project’ started in April 2002. Later on, the whole area of Bangladesh was covered under this project by dropping food for education project.
The Fifth Five Year Plan had taken up a reform based ‘Sector-wise Approach’ under Health and Population sector Program to improve the health and family welfare status of the most vulnerable groups i. e. , women, children and the poor. One study indicates that public health expenditures are considerably pro-poor; about 52% of the rural households, who are poor receive 57% of benefits of public health spending in the rural areas. In addition to health and education, the growth propelling impact of rural infrastructure is substantial in creating income and employment for the poor. Another example of the integration of poverty alleviation and social sector development in the planning process is the gradual transformation of food assistance from pure relief to linking with poverty alleviation and social sector development. Food for works program provides grain to the worker. Vulnerable group feeding development also provides food to the destitute women. The other safety net programs are targeted to the poor and old. Rural infrastructure development program is another example of integrating poverty alleviation with development. It includes development of roads, bridges and culverts, small-scale irrigation structures, development of trading facilities in rural markets and creation of trading net work by linking the hierarchy of trading centers. During 1997-99, about 110 million person days of employment were created through the construction of 3530 kilometers of rural road, 67600 bridges and culverts and development of 336 growth centers.

Table-24                                   ( in million taka)

Table-25
Share of External Resources and GDP growth rates

Table –26
Trend in Real Wage Index

He also stated that the deterioration in the living standard of the masses took place during a period when foreign capital inflow increase from year to year.
The net Commitment of net project aid up to June 1990 was $14031.4 million and the utilization was $90088.4 million. The percentage of utilization over the commitment was 64.8%. It was observed that the project aid utilization during the TFYP period was increasingly steadily, particularly in the terminal year. Although project aid utilization during the TFYP had increased gradually, the rates of project aid utilization were always much lower than those of food aid and commodity aids. This is shown in Table-27.

Table –27
Utilization of Aid over the opening pipeline( US $ in Million)

This flow of foreign aid had neither been any use in eradication of poverty nor helpful in increasing production. According to Mohammad Ali Akbar, “The rate of return on aided projects should be higher than the international service charges. The savings out of newly generated income must be sufficient to enable the economy to finance an increasing proportion of our investment requirements out of the domestic resources. The plough back of profits if high enough so that at some point domestically generated savings exceed domestic investment requirements and thus give surplus to meet service payments” (Akbar, M.A. 1985:240).

The composition of GDP during 1973-2002 is shown in Table-28

Table-28
Structural Composition GDP during 1773-2002 in percentage

Employment Situation

The Labor force had almost doubled since independence growing at a rate faster than the population. Against this, employment on man-year basis had more than doubled resulting in a reduction of unemployment rate (including underemployment) from 38.78 % in 1972-73 to 31.23 % in1994-95. During all the Five Year Plans, unemployment rate slowed a decline, faster during the FFYP than during Others. However, it suffered a setback during the TYP (1978-80), when unemployment rate increased. As the domestic employment increased at an annual rate of 3.30%, GDP grew at 3.90% a year. There was some marginal gain in the overall average productivity of labor.

Table-29
Labor Force Employment and Unemployment during 1972- 1997 ( million person-years)

Poverty Reduction, Human Development and Gender Bias

One common approach is to measure development progress in terms of performance with poverty reduction. A commonly used approach is to define poverty in terms of ‘consumption and income’ and ‘human development indicators’. These indicators of poverty are well understood as they are quantifiable, and progress over time can be measured. Tables 1a, 1b, 2 and 3 below show Bangladesh’s progress with poverty alleviation, human development and reduction in gender bias (Ahmed, Sadiq, 2001: 1-26). Poverty incidence data compiled by World Bank Staff and National Researchers show that there was a substantial deterioration in the poverty in the poverty situation in the 1970s, followed by rapid progress during 1978-86 (Table –30). There was again worsening of poverty situation in the 186-92 period (Tables 30 and 31). More recently (1992-96), there has been an improvement in the poverty reduction effort (Tables 30 & 31). Given the high concentration of the poor in the rural areas, the national poverty outcome is determined by the situation in the rural areas[ Sen, 2000 and World Bank,1999).
Table –30
Bangladesh Poverty Incidence, 1973-92

Although, the two time series poverty estimates are not comparable because of definition and other measurement differences, some broad conclusions can be made [ Sen,2000]. First, overall, Bangladesh have made an impressive reduction in poverty since independence. Both the rural poor and the urban poor have benefited from this effort. Second, the reduction in poverty seems to have considerably since the mid-1980s, due to stagnation in progress with reduction of rural poverty.

Table-31
Bangladesh progress with Poverty Reduction, 1984-96

Urban poverty reduction, however, has continued to make good progress with the incidence declining to around 35% in 1996, as compared with rural poverty incidence of over 50%. Fourth, the fluctuations of the rural poverty incidence suggest the vulnerability of the rural poor.

The picture regarding progress with human development ( Table-32) shows that, since independence, Bangladesh made rapid strides from its low base levels in improving primary school coverage, reducing the population growth rate, improving access to safe water, reducing infant mortality, and raising life expectancy. The performance in the area of population management is truly remarkable, resulting in a rapid reduction in the rate of population growth from a high of 2.8% per annum in 1970s t0 1.6% per annum in the 1990s.
Table-32
Bangladesh Progress with Human Development 1975-97

There is a remarkable Progress in Gender discrimination ( Table-33). Apart from the rapid progress made in increasing enrollment of girls in primary schools, the increase in the ratio of female to male from a pretty low level to around the same level as in advanced Western countries in an indication of the strength of the progress in reducing the anti-female bias in the country [Dreze and Sen,1995]. This is particularly notable because of the overall difficult social environment for women in South Asia.
Table-33
Bangladesh Progress with Reduction in Anti-Female Bias

Table-34
Bangladesh’s Social Indicators in the Internal Context, 1996-97

Overall, The Health Standards are poor, reflected not only in low Life expectancy, but also in high infant, child and maternal mortality rates. Nutrition is a serious problem, with over 50% of the children suffering from malnutrition (World Bank: 1999a). The adult literacy rate is still very low and secondary school enrollment is the lowest in the region. There are major concerns about the quality of basic services, including education (World Bank: 1999b).

Progress With the Enabling Environment, 1973-98

It is universally acknowledged that long-term economic growth is necessary for poverty reduction [Dollar and Kraay :2000]. Table –5 shows the progress with the enabling environment for poverty reduction. Some expiation of the choice of variables is in order. The importance of saving and investment rates for supporting rapid growth is well recognized. However, the efficiency of investment is also important. A commonly used indicator is total factor productivity (TFP). Lack of necessary data, particularly reliable estimates of the capital stock, prevents this. A proxy for efficiency is the openness of the economy, measured as the share of trade (exports and imports) to GDP. Admittedly, this measure is a considerable body of empirical evidence, which suggests that openness to trade is good for economic growth [ Dollar and kraay,2000]. A direct measure of labor intensity of production ( capital / labor ratio) is similarly not possible due to in adequate data. A proxy for this is the share of exports in GDP. This is useful proxy, given the strong weight of agricultural based exports and labor intensive garments in the export basket. Finally, inflation is a direct determinant of poverty. There is substantial international evidence that high inflation hurts the poor more because of their weaker ability to protect against the decline in real income resulting from higher inflation [ Dollar and Kraay,2000].
Table-35
Bangladesh Progress with the Enabling Environment, 1973- 98

The results of Table-35 show that Bangladesh made good overall progress in increasing per capita income based on expansion in the rate of investment and supported by greater openness to international trade. Exports grew faster than the GDP, fueled by a rapid expansion of labor intensive garment exports. Importantly, an increasing share of this expansion in investment was financed by an increase domestic and national saving rate. As against these positive developments, negative factors have been a much slower pace of expansion in agricultural value- added and an average inflation rate than that has much exceeded the international inflation rate. Additionally, the expansion in per capita income lagged significantly behind the growth of per capita income of Sri lanka ( $% per annum) and the average of East Asian economies ( 6% per annum). Not surprisingly, there has been much better progress with poverty reduction in these countries as compared with Bangladesh,

Overall, the responsiveness of poverty reduction to growth has fallen sharply since the mid-1980s. In the differential pattern of growth, whereby the participation of the poor in the growth processes has varied over time. Again, evidence suggests that there has been disturbing outcome of rising inequality in both urban and rural consumption in Bangladesh (Table-38). The incidence has been higher in urban areas than in rural areas.

Table-38
Distribution of Consumption in Bangladesh

Table-39
Money,  Growth and Inflation

The management of fiscal policy has been more problematic (Table-40). This is perhaps the Achilles Heel of Bangladesh’s macro-economic management. Problems are reflected large fiscal deficits, a low tax to GDP ratio, and poor quality of spending. The relative priority given to social spending has served Bangladesh well and maintained a good balance between military & social spending. Although Bangladesh contributed to the notable progress made in human development over the past years. Yet, the level of public spending on health and education ( 3.1% of GDP) is low by international standards and given the country’s needs. While there has been some growth rising from a very low level of 2% of GDP in 1972. The increase in public spending on health and education to levels necessary to address the remaining substantial gap in human development noted earlier has been prevented by the very low level of tax effort (only 7% of GDP – the lowest in the region).

Table-40
Indicators of Fiscal Management in Bangladesh

Tax compliance is a serious problem in Bangladesh estimated at only 6%, the lowest in the region. Large fiscal deficits in the 1990s were also a worrisome development. While the interest cost of debt is still small, this is because of past dominance of concessional foreign assistance,  the continued availability of which is by no means assured. The growth of debt to GDP ratio, rising from 6% in 1977 to 47% in 1988 is an indication of creeping effects of large external borrowings to finance the fiscal deficits. In addition to the inadequacy of the level of public spending on human development, there are some serious concerns about the quality of public spending. These relate to the efficiency of public spending as well as to the equity of such spending.  A number of World Bank Studies suggests that the efficiency of public spending can considerably improved in health, education, irrigation and water supply (World Bank, 1997 & 1999). Similarly, there is evidence that the equity of public spending can be substantially improved.
Macro Objectives of the Development Plans Implemented
The Chart-1 below provides a summary of the major macro level objectives of all development Plans implemented in Bangladesh.
CHART-1
Macro Objectives of all Development Plans

CHART – 3
PREPARATION & IMPLEMENTATION OF DEVELOPMENT PLANS UNDER DIFFERENT GOERNMENTS

CHART-4
CATEGORY OF PROJECTS, CEILING OF APPROVAL & APPROVAL AUTHORITY

CHART-5
CATEGORY OF PROJECTS INTERMS OF APPROVAL & DELEGATION OF RELEASE OF ADP FUND

CHARTER-6
DELEGATION OF FINANCIAL POWERS INFAAVOUR OF PROJECT DIRECTORS & MINISTRIES

CHAPTER-V
Development Planning Experiences of Developing Countries

5.1. Thailand’s Experiences of Development Planning.

Thailand is a South Asian Country having population of 55.8 million in Mid 1990 with an area of 513000 square kilometers (World Development Report:1992). The rapid economic growth of Thailand over the last four decades is viewed as a phenomenal success. Since 1961, when the country has experienced rapid economic growth, and has emerged as one among the very few countries which have sustained a high, long-term non-inflationary growth of GDP of an average 7-8 % per annum, and with average low inflation rate of 5% or below per year. The real economy has grown from its predominant agricultural base to one in which industry and external trade constitutes major components. Thailand is regarded as an up and coming industrializing nation, and the course has been set for her further advance as an international trading country (M. Khorshed Alam: 118-27).

Thailand’s economy has undergone a lengthy planned development process lasting over 40 years. The challenge of development was initiated in 1961 through a systematic development planning. ‘Lassies- Faire’ or Free Market approach was adopted as an economic philosophy. In this line, First Six Year Plan (1961-66), Second Five Year Plan (1967-71) and Third Five Year Plan (1972-76) were formulated to boost industrialization by adopting a policy of import substitution, encouraging production of manufactured items. The country had formerly imported from abroad and also to develop basic physical infrastructure, which formed a base for the impressive growth of the economy (ibid.). Development Plans and government policies over the last forty years have produced a bright macro-economic picture. The country’s economic growth rate has averaged 7.7% Per annum since the First Plan. Gross Domestic Product has grown roughly twenty folds and per capita income seventeen folds. Income per capita increased tremendously from 2200 Bath in 1961 to 17250 Bath in 1981 and 35000 Bath in 1990. During this period Thailand has changed from a backward agricultural country to one that is on the threshold of becoming a newly industrialized country.

5.1.2. Diversification of production

One of the leading factor is the country’s policy measures that have led to a satisfactory degree is diversification of production. Thailand has been able to diversify both its agriculture and manufacturing. Its agricultural sector recorded spectacular growth during the last four decades. The rate of growth in agriculture was 4.5% during 1961-90. The government incentive given to the farmers has been instrumental in boosting farm production. From a mono-crop country, it is now a producer of 5 major crops plus another half-dozen secondary items and an impressive list of smaller farm products. Thailand is now the largest rice exporter in the world.

In the area of manufacturing, the result of diversification has been even more dramatic, as practically all-light industrial products are now made locally.  The country has more over developed basic and heavy industries. Production Technology has risen from the stage of assembling imported parts to the fabrication of locally produced parts. It has advanced further to the stage of design improvement and creation of its own brand names. A phenomenal structural change has taken place in the Thai economy since the 1960s. The relative importance of agriculture has declined over the years. The rate of decline is much higher than any other South Asian developing countries. Agricultural share of GDP declined steadily from about 53.0% in 1965 to 24.9% in 1980 and to 22.6% in 1986, despite its respectable annual growth of 4.6%  & 4.1% respectively during 1965-80 and 1980-90. This does not imply that agricultural output failed to rise during the period. Rather it increased by about 4.5% per year. This is primarily due to the rapid expansion of other sectors of the economy. Although its relative importance has declined, agriculture would continue to be the dominant sector of the Thailand’s economy for several years to come.

On the other hand, the contribution of industry and manufacturing to GDP has increased as desired in a transitional stage of development. The manufacturing sector expanded very rapidly, increasing its shares of the national income from 11.9% in 1960 to 20.7% in 1986. Its manufacturing sector has surpassed since 1979. The share of manufacturing production in the country’s GDP in 1990 was 26.2% compared to that of agricultural of 13.1%. It indicates that a more consistence economy persists since that in Thailand.

5.1.3. Promotion of Private Sector

Thailand had succeeded in developing a strong private sector. This has been basically the result of generous incentives given to private investments since the early sixties. Government was forced to reduce its role in the economy. In the process, it pushed the private sector into the lead. Public/Private sector cooperation was also concomitantly stepped up. The strong government support was instrumental in the wide spread development of private sector. Private enterprise consequently developed and waxed strong. In this regard Industrial Estate Authority of Thailand (IEAT) is playing a vital role. Under the jurisdiction of the Ministry of Industry, IEAT was established in 1972. The main task of IEAT is to develop industrial estate all over the country to support the systematic and orderly industrial development. An industrial estate resembles an industrial city. Basically an industrial estate is divided into two zones, a general and an export-processing zone. A general industrial zone is for the location of industries manufacturing for export and domestic consumption. An export- processing zone is for the location of industries manufacturing for exports only. The main benefit for the entrepreneur to locate their industry inside an industrial estate is the ability own land, which is complete with basic infrastructure and amenities at a very reasonable price. In addition, the entrepreneurs are granted many types of privileges.

5.1.4. Development of Infrastructure

Successful development based on private initiatives was not possible without adequate and basic infrastructure. The government through the First and Second Economic Development Plan made vigorous investment to improve the country’s social overhead facilities such as irrigation, transport and communication, banking, education and other social reform. Thailand has accorded high priority of the development of its transport and communication system. The country has also developed an efficient system of land, Sea, and Air transport. The modern Airport & Sea port facilities and the vast network of roads & highways all over the country reflects the phenomenal advances the country has made in all the sectors of the economy.

5.1.5. Political Stability

Thailand changed from ‘Absolute Monarchy’ to a ‘Constitutional Monarchy’ in 1932 through a coup. Since then the country has been ruled by dictatorial military regimes, with a few years lapse of semi-democratic governments. Thailand during the period from 1958to 1973 was marked by political stability under the leadership of Field Marshal Sari Thanarat ( 1958-63) and Field Marshal Thanom Kittikachorn ( 1963-73). During this period, Thailand’s economy expanded at an unprecedented growth. In 1992 the country after a bloody upsurge has for the first time experienced a free and fair election and a democratic government. Though the government in power changed every now and then through coup d’etats, the country’s economic development policies have not been changed. The basic economic development rational remained almost unchanged over the years. It indicates the continuity of government plan and policies and secure to both local and foreign investments. Although the political turmoil, military intervention were frequent in Thailand’s politics for the last few decades, but labor force is disciplined and almost free from unrest and violence, than that of other developing countries of South Asia.

Export Growth Strategy Thailand has followed an outward looking policy since the early Seventies. Although the industrialization process initiated during the 1960 was geared toward import-substitution, it was succeeded in 1970s by a drive to produce export-oriented items. Export-growth strategy was adopted instead of import-substitution to link up the markets abroad. Governments encouraged export oriented industries. As a percentage of GDP, exports increased from 10.9% in 1970 to 30.9% in 1991. During the last four decades, total value of exports increased about 15%. There have also been some structural changes in the export structure in this period. Traditionally, Thailand has been an agrarian economy, where the agricultural sector has accounted for a significant proportion of the country’s export earnings. Agricultural export declined from 84.38% in 1960 to 34.3% in 1986. On the other hand, Manufactured exports, which constituted only 2.4% of the total value of exports in 1960 increased rapidly to 54.9% in 1986. Since 1989 the value of manufactured exports has exceeded the value of agricultural exports. In this respect Thailand has successfully emulated Japan and the Asian New Industrialized Countries (i. e., South Korea, Malaysia etc). Indeed a combination of factors has been responsible for unprecedented rapid economic development in Thailand. They include a very liberal investment policy coupled with generous investment incentives, a policy giving the private sector free play and an export promotion policy that aim diversification.

5.2. Experiences of Planning and Development in Sri Lanka
5.2.1. The Initial Efforts at Planning 1947-56
At the time Sri Lanka gained her independence, The government was already making efforts to plan the government current activities and investments within a time- frame, which mobilized resources for achieving certain development goals. The United National Party (UNP) was conservative in orientation, advocated the change within the democratic system, clearly favored private enterprise but envisaged a major role for the State in development and social welfare. They implemented a series of far- reaching welfare measures, which included free education, free public health and subsidized food. The First attempt at the preparation of an investment program for government activities was the document entitled “ Post-War development proposals for 1946.” The document assembled a number of government programs, both on – going as well as those, which could be undertaken in the future in the various sectors of the economy. It provided a large inventory of projects and programs on which the government that followed were able to draw, when formulating their investment programs.
The First Two Budgets that were presented after the independence were published as a “Six Year Plan.” The Six Year Plan identified several broad areas of action:

 5.2.2. Six Year Program of Investment (SYIP) 1954-55 to 159-60

A formal planning organization in the form of Planning Secretariat was established in 1955 and attached to the Cabinet. The SYIP was prepared by the ‘Planning Secretariat’ and published in July 1958 could not be implemented in the form in which it was contemplated, as the government changed in 1956. The preparation of SYIP, however, took the process of national planning a step further. The program also for the first time required Ministries and Departments to undertake a disciplined exercise of phasing its on-going projects and future investments over a period of six years. This compelled all government agencies to make fairly realistic estimates of the total capital resources required over a six- year period and to plan implementation of such a program. A well-formulated public sector investment program was, therefore, expected to give the lead to economic growth and facilitate the development of the private sector. But the government is still the major actor in the development scene. The broad approach and the techniques continued to influence some of the planning exercises that were to follow.

5.2.3. The New Ten Year Phase in Planning (1956-65)

A New left- oriented government was voted to power in the general election held in 1956. The SLFP could be regarded as a party of the center, with economic policies, which favored a mixed economy having State a dominant role. The government included smaller parties, which were Marxist in their approach and wanted the country to move more decisively in the direction of a socialist system. The coalition, however, short-lived. Policy differences aggravated by other personality conflicts led to the withdrawal of the Marxist group from the government in 1958. The period immediately following the change of government marked a major change of direction in national planning in Sri Lanka. The government made it clear that it was firmly committed to the formulation of a comprehensive national Plan, which was to be main instrument for guiding and directing the development of the country. A ‘National Council’ was established by an Act of Parliament with the Prime Minister as Chairman, the Finance Minister as the Deputy Chairman and Ten Members drawn from different professionals both in public as well as private sectors. It was serviced by a Planning Secretariat manned by economists and other professionals, who were for the preparation of ‘Six Year Program of Investment.’ The Head of the Planning Secretariat under the previous government continued to the head of the new secretariat.

The ‘National Planning Council’ was conceived essentially as the agency for formulation of the National Plan. The formulation and preparation of the plan took three years. The Council undertook its work as a scientific professional body, examining the problems of the economy in a manner, which would be lasting value to whatever government was in power. Planning was therefore, defined primarily as a intellectual and technical task. The process of Plan preparation itself was intensive and the methodology included most of the elements, which were absent in the earlier exercises. The ‘ Ten Year Plan’ has been internationally recognized as a professionally competent document and in many ways a pioneering for small developing economies[ Mydral, Gunnar:112]. It undertook the various steps, which are part of the conventional techniques of national planning. It started from the demand side, examining population growth, the expansion of the workforce and the future demand for productive employment. Then it examined the prospects and potentials of the economy in relation to those needs. It then went on to develop the macro-economic framework which defined the overall magnitudes of national income consumption and investment, the resource mobilization in terms of domestic resources and the government budget, as well as external resources and the balance of payments. It also apportioned the contribution expected from the public and private sectors. The plan then went on to work out in detailed disaggregated form, the sectoral composition of the investment in the public sector in terms of programs and projects and the phasing of the investment year by year for the period of 1959-68.

With the assassination of the then Prime Minister in 1959, shortly after the plan was presented in parliament. The parliament was dissolved in 1960 and after a brief tenure of power of the UNP, the SLFP returned to power in July 1960. Later on, the National Planning Council was replaced with a National Planning Department under the Prime Minister. With the establishment of planning department, the planning process became more actively associated with the choice of investments in the public sector and the approval of programs and projects for inclusion in the government budget. Government prepared a three- year implementation program for 1962-64. During this period, the country’s effort s to cope with its balance of payments crisis led to an elaborate system of exchange controls and resulted in the rationing of foreign exchange. This activity became crucial for any meaningful development planning. The Key problem of planning, however, was not adequately conceptualized in either Ten Year Plan or the Three Year program. Planning was perceived as an exercise, which had not to do principally with investment in the national economy. There was no specific effort in the plan itself, which was directed at a strategy and ‘sub-plan’ for management of this key variable.  The Three comes out tolerably well on the macro-economic indicators. The average annual growth rate for the three program years was 4.6% compared to the target of 4.8%. Imports and exports remained at levels, which had been forecast on the going trends and had not improved to reach to the program targets. The export earnings fell short of the targets and imports were lower. Total investment, however, reached the level, which had been expected, with marginal variations. The performance in relation to output targets was a mixed one.

5.3.3. Macro- Economic Management and Selected Plan 1965-70
In 1965, the UNP was voted back to power. The National planning activity both in organizational form and content under went major changes and adaptations. The head of Planning Organization during 1954-1960 was brought back as the professional head of the newly created Ministry, which took over the portfolio for National Planning and Economic Affairs. This change in the structure was a response to the changing character of the economy and the new complex problems that had emerged in the first –half of the Sixties. The main elements of the planning activity during this period comprised the mobilization of foreign aid, the management of foreign exchange budget, preparation and supervision of the government capital budget in terms of sectoral programs. To perform this function, the Ministry of Planning and Economic Affairs took control of a few key decision – making livers. The subject of foreign aid & foreign exchange budgeting was transferred from the Ministry of Finance to the Ministry of Planning and Economic Affairs. The Ministry of Planning was actively involved in obtaining as well as allocation of key resources of the economy on a continuing basis. Ministry of Planning set up a Division for ‘perspective planning.’ It attempted to prepare an input-output matrix for the economy and develop a planning model. But this remained at the experimental level and never became an instrument for application and decision making. The division and its work had little influence on the central concerns of the Ministry.
It also introduced new disciplines of project evaluation for improving the efficiency and productivity of the public sector investment programs and systems of progress control monitoring plan implementation. Some of its sectoral Programs were quite successful—particularly in agriculture. The organizational changes transformed the planning activity from the advisory functions that had been envisaged for it in the ‘National Planning Council,’ to one, which actively involved in resource mobilization as well as allocation. The 1965-70 government established a Cabinet Planning Committee, which became the apex institution for discussion and decision making in economic matters. A large part of the economy both in services and production was managed by the State enterprises, which were against the nature of a mixed economy.

5.3.4. The Alterations in Planning Process in the 1970s

In 1970s, a coalition of parties with the SLFP as the dominant partner assumed the power. The Planning Ministry continued as a separate portfolio under the Prime Minister, with all the functions it had assumed in 1965, but under the designation of the Ministry of Planning and Employment. The government prepared a Five Year Plan ( 1970-75). It mobilized the entire government machinery for the purpose through sectoral committees and working groups. Unlike in the past these groups were informal in character; the main task of preparing the sectoral programs fell on the Planning Secretariat.
By 1970, the unemployment rate had risen to nearly 15% and large proportion of the new entrants to the workforce, who were coming out of the free education system were unemployed. The plan had therefore, to give a central place to employment creation. The other central problem to the plan strategy was that of foreign exchange. For the first time export diversification became a major objective and an export promotion plan was included as major component. The Five Year Plan, therefore, was in many ways more problem oriented than previous plans. In many respects, the Five Year Plan resembles that of the Ten Year Plan. The outcome of the development effort during this period was far short of plan expectations due unsettled conditions of the world economy and the inadequacies in the plan itself. Unemployment to rise about 24% by the Mid –seventies. Growth rate was 2.4% against the target of 6.1%. It lacked a well-defined policy component for macro economic management in changed international conditions.
In 1977, the political pendulum swung to the right and the UNP returned to power. Soon after it assumed office, the government began rearranging the planning organization to bring it in line with their plans for liberalizing the economy. A series of policy measures were taken to restore the functioning the market mechanism. Exchange controls were dismantled with few exceptions, the rupees were devaluated, the dual exchange rate was replaced with a unified rate, which was allowed to float against the basket of currencies, subsidies were reduced and a whole range of administered policies were aligned to market prices. Market forces were allowed to work freely, and monopoly in number of public sector enterprises was removed. These policies of liberalization were supported by a major effort at mobilization of external resources, which significantly increased the country’s import capacity. Amount of aid receipts during the period 1978-81 averaged approximately 9% of GDP. Within this framework, the planning process itself had to undergo considerable adaptation. The tendency of the government is to decentralize decision making to enable Ministries and Agencies to assume greater responsibility. A committee of Secretaries of Development Ministries and a Committee of Cabinet Ministers became the coordinating agents within the government for evaluation and approval of development programs and policies. Within this set- up the role of planning apparatus was considerably reduced. The planning activity became part of the Ministry of Finance and planning. The Planning activity and government budget was taken under one Ministry.
The main instrument of planning prepared in the post 1977 period was the Five Year Public Investment Program, which was revised annually. Five Programs have been prepared for the period 1979-83, each for a Five Year Span, and each revising the previous plan taking it one year forward. The government was able to mobilize resources to embark on a public investment program of massive proportions and to set up the total investment in the economy to levels which rose to as much as 31% of GDP. The public investment program, therefore, had an impact on the total economy more than ever before. The public sector program concentrated to three lead projects, which absorbed the bulk of the investible resources. The implementation of the major river diversion project, Mahaweli was accelerated. A free trade zone was established and foreign investment mobilized. A large urban development and housing program was undertaken.  The rate of growth of GDP rose to an average of approximately 6.5% in 1977-81. Unemployment fell to 13% in 1980 from 24% in 1976. This performance was possible due to the massive flow of external resources combined with the liberalization of the economy and steep increase in the volume and rate of investment. This, however, was not the outcome of an elaborate planning exercise, but rather of a package of policies designed to stimulate the economy and release the market from the rigidities, which the regulatory system imposed.  But the experiences of the 1978-82, however, brought to a number of shortcomings and imbalances both in the investment program as well as in the management of the economy. These had serious macro-economic consequences in the government budget and balance of payments. Despite considerable adaptations of the planning machinery and planning process, the present system of decision making has not been able to evolve the right mechanisms, which would impose the disciplines of planned development in a mixed economy in which the market is expected to play a dynamic role. This is a recurrent problem, which faced planning both in UNP & SLFP governments.
The evolution of Planning process in the changing conditions of the Sri Lanka’s economy, as it moved from budgetary and foreign exchange surpluses in its current transactions to massive budgetary deficits and widening resource gaps in its external account. It also provides an overview of the political setting within, which the planning activity underwent modifications [ Gunatilleke, Godfrey: 1988, page27-49, BEA Journal, Vol. VIII, NO.2, 1988]. ECONOMIC INDICATIONS AND PLAN PERIODS FROM 1947-86 OF SRI  LANKA IS SHOWN IN APPENDICIES—–.

BIBLIOGRAPHY