rabi s sainju nasc : approach to development planning 11 august 2015 approaches to developments and...

Rabi S Sainju NASC : Approach to Development Planning 11 August 2015

Approaches to Developments and its influences Nepalese Development

Plans

Approaches to Developments and its influences Nepalese Development

Plans

Rabi S. SainjuNational Planning Commission Secretariat


Presentation OutlinePresentation Outline

The quest for development

Economic System

Development Plan and its necessity

Approaches to development

Growth Situation in Nepal

Conclusion


The quest for developmentThe quest for development

Economic development is the process that transforms a country’s capacity to provide for the material well-being of its people. associated with economic growth; which needs to be sustained over

time for successful development success of process usually judged also by distributional effects

Concern for development was an outgrowth of the determination post-WWII to avoid a recurrence of the 1930s

Initial focus on recovery of war-ravaged economies; from mid-1950s, emphasis shifted to growth prospects of poorer countries


Economic SystemEconomic System

• Political ideology and economic system are connected• In countries where individual goals are emphasized free market

economies are likely• There are three types of economic systems:

• Capitalist or market economies• Socialist or command economies• Mixed or welfare economies


Capitalist EconomyCapitalist Economy

• In a capitalist economy all productive activities are privately owned.• Price systems are used in the market, which means price

determines everything.• Production is determined by the interaction of supply and demand • The motivating force of Capitalism is self interest.• The role of government is to encourage free and fair competition

between private producers• The distribution of goods in a capitalistic society is to each

according to his/her quantity and value of contribution to society.• This distribution scheme causes an unequal spread of income and

wealth.


Socialist EconomySocialist Economy• In a socialist or command economy, the government plans the goods and

services that a country produces, the quantity that is produced, and the prices as which they are sold

• All businesses are state-owned, and governments allocate resources for “the good of society”

• However, because there is little incentive to control costs and be efficient, command economies tend to stagnate

• It is a planned economy in which resources are allocated by need.• The spread of wealth and income is more equal in a socialistic society, however

the individuals tend to lose motivation because the pay off is vastly less. • This distribution scheme is a humane, but mostly an inefficient one.


Mixed EconomyMixed Economy

• Welfare Capitalism is a prime example of a mixed economy.• The principles of capitalism are followed, but with government

involvement.• Certain sectors of the economy are left to private ownership and free

market mechanisms while other sectors have significant state ownership and government planning

• Governments tend to own firms that are considered important to national security

• The government will step in to take care of citizens and help to maintain a minimum standard of living.


Development Plan Development Plan Development Plan Development Plan • A key tool which influences decisions about priorities and resource

allocation, and aims to influence the direction, and pace of development

• Often involves linkages between different sectors of development and levels of government

• An opportunity to ensure micro-macro links

• An opportunity to integrate actions of different government and non-government agencies

• A major point where integration and the Sustainable Livelihoods principles of holism and partnerships can be fostered

• A set of actions to achieve a certain goal8

Rabi S Sainju NASC : Approach to Development Planning 11 August 2015 9

Necessity of National Planning Necessity of National Planning

• Depends on a country’s stage of development– the political or administrative structure are also relevant

• Few high-developed countries have national planning systems– Korea terminated its planning ministry a few years ago.

• Fragile countries generally have ineffective planning systems– Their plans promise more than the government can deliver

• Developing countries have the most potential for national planning– Their plans can prepare the way for investments and policy

initiatives that stimulate development• Current circumstances appear highly favorable

– The fact that many developing countries has indicated they can make effective use of formal planning systems 9

9


Approaches to Economic Development

Approaches to Economic Development

Literature on economic development is dominated by the following four strands of thought:

Linear-stages-of-growth model: 1950s and 1960s

Theories and patterns of structural change: 1970s

Neo-classical, free-market counterrevolution or market fundamentalism: 1980s and 1990s

New Approached to Development :Right based Approach/ Inclusive Development

• Four major and often competing development theories, all trying to explain how and why development does or does not occur.

• Newer models often draw on various aspects of these classical theories.10


Linear-Stages-of-Growth ModelsLinear-Stages-of-Growth Models

• Assumed that the developing countries could learn a lot from the historical growth experience of the now developed countries.

• Representative Models are: • Rostow’s Stages of Growth• Harrod-Domar’s Growth Model

• Emphasis was on: Central planning Industrialization Import substitution

• Emphasized the role of: accelerated capital accumulation; augmented savings/investment; and adequate supplies of foreign exchange (for imports of capital goods).

• Strong bias towards western model of modernization which tries to fit economic progress into a linear system .

11


Influence of Linear Growth Model in NepalInfluence of Linear Growth Model in Nepal

• Periodic Plans:First Plan: 1956-61Second Plan: 1962-65Third Plan : 1965-71

• Started its initial plans under the complete absence of data and information and any infrastructure to begin with.

• Plans focused mainly on growth led strategies giving priority to the expansion of infrastructures to develop industrial Sector.

• Plans emphasized the role of capital formation and increase investment in the modern industrial sector.

• Import substitution policy adopted failed to sustain economic development. In fact, reliance on external market increased due to growing needs of capital goods and intermediate inputs

12


Structural-Change Models Structural-Change Models In the 1970s• Representative examples of this strand of thought are

The Lewis theory of development Chenery’s patterns of development

• These models tend to emphasize the transformation of domestic economic structures from traditional subsistence agriculture economies to more modern, urbanized and industrially diverse manufacturing and service economies.

Shift in emphasis: basic needs and poverty reduction – McNamara, Nairobi 1973 integrated area development investment in social sectors – human capital• Concerns for the distributional consequences of growth; sharing benefits

of development more equally

13


Periodic Plans Fourth Plan : 1971-76 Fifth Plan : 1976-81 Sixth Plan 1981-86

• During early 1970s, it had become clear that the modernization strategies of the initial plans could not induce industrial investment.

• Adopted regional approach in development planning • Adopted distributive approach in development strategies • Nepal adopted the ideology of Basic Needs and Integrated Rural

Development in this era.

Influence of Structural-Change Model in Nepal

Influence of Structural-Change Model in Nepal

14


The Neoclassical Counterrevolution: Market Fundamentalism

The Neoclassical Counterrevolution: Market Fundamentalism

• The debt build-up from the 1970s became burdensome as the developed countries took steps to eliminate inflation. Interest rates rose sharply, trade growth slowed, and further oil price increases.

• Neoclassical counterrevolution in 1980s called for freer markets, dismantling of public ownership, and government regulations

• Neo-classicist also obtained controlling power of the world’s two most influential international financial agencies –WB & IMF

• Argued that underdevelopment is the result of poor resource allocation due to incorrect pricing policies and too much state intervention.

• Four component approaches : • The Free Market Approach: markets alone are efficient and effective • Public-choice theory: Government can do nothing right• Market-friendly Approach: government need to facilitate the markets• New institutionalism: success or failure depend on fundamental institutions

15


• Plan Period Seventh Plan : 1986-1991 Eight Plan : 1993-1998 Ninth Plan : 1998 – 2002

• The failure of previous development strategies had created macroeconomic imbalance.

• Accepted IMF Stabilization package and WB's Structural Adjustment Programme and shifted towards the ideology of liberalization and open market policies.

• The main objectives of these plan were attainment of sustainable economic growth, poverty alleviation.

• Efforts made to adopt the market based economy by promoting private sector participation and investment and by reducing the role of the state.

Influence of The Neoclassical Counterrevolution in Nepalese Plan

Influence of The Neoclassical Counterrevolution in Nepalese Plan

16


Since 2000:

• Much attention in this decade also to other “solutions” to under-development, including:

establishment of appropriate institutions (“more important than policy”) promotion of better governance: anti-corruption democracy bureaucratic competence corporate oversight

• And more proposed remedies that have something of the “silver bullet” about them: micro-credit; social entrepreneurship

• Finally, renewed emphasis on human capital – partly a result of the focus on knowledge; distributional issues; and growing concern about environmental impacts of growth.

New Approaches to development

New Approaches to development

17


Influence of New Approaches in Nepalese Plan

Influence of New Approaches in Nepalese Plan

Plan Period Tenth Plan 2002-2007 Eleventh Plan 2007 – 10 Twelfth Plan : 2010 – 13 Thirteenth Plan 2013-16

• These plans focused more on poverty alleviation, reconstruction, rehabilitations and peace mitigations.

• Realized that that governments do fail, but so do markets; a balance is needed

• Attentions to institutional and political realities• Focused on inclusiveness in planning

18


Economic Growth Situation in Nepal

Economic Growth Situation in Nepal

Plan Period ICOR Economic Growth at base price (%)

Poverty line (%) Gini Coefficient

Remark

Third Plan (2022-27) 2.2

Fourth Plan (2027-32) 1.8

Fifth Plan( 2032-37) 2.3 34 (NPC)Sixth Plan (2037-42) 4.4

Seventh Plan (2042-47) 4.57 49 NPC

2047-48; 2048-29 7.03; 4.66

Eighth Plan ( 2049-54) 4.3 4.84 41.76 (NLSS I) 0.34

Ninth Plan (2054-59) 4.1 3.70 38 NPC

Tenth Plan (2059-64) 4.3 3.58 30.85 (NLSS II) 0.41

TYIP (2064-67) 4.8 4.65 25.16 (NLSS III) 0.33

TYP ( 2067-70) 5.0 3.96 23.8 CBS/NPC

19


Sectoral Growth RateSectoral Growth RateSectors 7th Plan 8th Plan 9th Plan 10th

Plan11th Plan

12th Plan

Agriculture, fishery and Forestry 4.17 2.95 3.43 2.88 3.62 3.58Non agriculture 4.35 5.20 4.24Mining and quarrying 5.49 6.29 4.89 2.88 2.77 4.17Manufacturing 5.19 7.32 2.87 3.86 0.35 3.18Electricity, gas and water 1 13.94 6.02 8.94 8.82 -0.17 4.35Construction 6.42 6.02 5.18 2.96 4.07 2.19Retail and wholesale trading 0.98 5.38 4.67Hotel and restaurant 4.37 5.95 1.13 3.83 5.25 6.33Transport, storage and communication 5.24 8.11 7.29 5.32 7.43 5.89Financial intermediation 13.58 4.69 4.47Real estate, rent and business activities 5.24 5.73 2.98 4.41 5.13 2.29General administration and defense 5.15 3.99 4.05Education 7.94 7.94 4.04Health and social work 9.01 7.62 7.31Other community, social and individual service 6.61 6.18 8.67 7.45 11.34 6.32Total value added at base price 4.57 4.84 3.70 3.58 4.65 3.97


HDI trends on new component and new methodology

HDI trends on new component and new methodology

Year Life

expectancy at birth

Expected years of

schooling

Mean years of schoolin

g

GNI per capita (2005

PPP$) HDI value Remark

1980 48.2 4.5 0.6 0,566 0.234 5th Plan

1985 51.1 5.5 1.2 0,633 0.285 6th Plan

1990 54 7.4 2 0,706 0.341 7th Plan

1995 57.5 8 2.2 0,811 0.37 8th Plan

2000 61.6 8.8 2.4 0,902 0.401 9th plan

2005 65.6 8.9 2.7 0,960 0.429 10th Plan

2010 68.5 8.9 3.2 1,090 0.458 11th Plan

2012 69.1 8.9 3.2 1,137 0.463 12th Plan

2014 69.1 12.4 3.2 2194 0.540 13th Plan


Human Development Index TrendHuman Development Index TrendYear HDI MPI GII IHDI NI-HDI Remark

2014 0.540 0.197 0.479 0.3842012 0.463 0.217 0.485 0.304 0.526 12th Plan2011 0.460 0.5242010 0.456 0.498 0.523 11th Plan2005 0.429 0.350* 0.627 0.486 10th Plan2000 0.401 0.649 0.445 9th Plan1990 0.314 0.371 7th Plan1980 0.234 0.224 5th PlanLow HD 0.466 0.578 0.310 0.487Medium HD 0.640 0.457 0.485 0.661South Asia 0.558 0.568 0.395 0.577LDCs 0.449 0.566 0.303 0.475World 0.694 0.463 0.532 0.690Norway 0.955 0.065 0.894 0.977

* 2006 data

Nepal

2012

22


ConclusionsConclusions• In an environment of widespread institutional rigidities and severe

socioeconomic inequality, both markets and governments will typically fail.

• The linear-stages model emphasizes the crucial role of savings and investment.

• The Lewis two-sector model emphasizes the importance of attempting to analyze the many linkages between the traditional sector and the modern industry

• International dependence theories highlight the role of the structure and workings of the world economy and the impact of decisions made in the developed world on the growth prospects for LDCs.

• The neoclassical economic models point to the promotion of efficient production and distribution through a proper functioning price system and the damaging effect of government-induced domestic and international price distortions.


ConclusionConclusion

• There is a need to have a broad based and inclusive growth to benefit all sections of society and improve economic growth.

• It is more challenging for the country to achieve inclusive growth than getting 8 to 10 per cent growth in GDP

• There are strong social, economic and political reasons for achieving broader and inclusive growth.

• Socially, lack of inclusive growth leads to unrest among many people. • There is also an economic argument. The measures which raise equity

also promote economic growth. • Lastly, the political argument is that no government in a democracy can

afford to ignore large sections of workers and non-working population. • If it is not inclusive it can generate very severe social tensions. Thus,

politically, for having a stable and democratic society one needs to have inclusive growth.


Thank You Allfor your kind attentionThank You Allfor your kind attention

rabi s sainju nasc : approach to development planning 11 august 2015 approaches to developments and...

Documents