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WEEKLY NEWSLETTER
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Pakistan
Index
Pakistan's economic development planning began in 1948.
By
1950 a six-year plan had been drafted to guide government
investment in developing the infrastructure. But the
initial
effort was unsystematic, partly because of inadequate
staffing.
More formal planning--incorporating overall targets,
assessing
resource availability, and assigning priorities--started
in 1953
with the drafting of the First Five-Year Plan (1955-60).
In
practice, this plan was not implemented, however, mainly
because
political instability led to a neglect of economic policy,
but in
1958 the government renewed its commitment to planning by
establishing the Planning Commission.
The Second Five-Year Plan (1960-65) surpassed its major
goals
when all sectors showed substantial growth. The plan
encouraged
private entrepreneurs to participate in those activities
in which
a great deal of profit could be made, while the government
acted
in those sectors of the economy where private business was
reluctant to operate. This mix of private enterprise and
social
responsibility was hailed as a model that other developing
countries could follow. Pakistan's success, however,
partially
depended on generous infusions of foreign aid,
particularly from
the United States. After the 1965 Indo-Pakistani War over
Kashmir, the level of foreign assistance declined. More
resources
than had been intended also were diverted to defense. As a
result, the Third Five-Year Plan (1965-70), designed along
the
lines of its immediate predecessor, produced only modest
growth.
When the government of Zulfiqar Ali Bhutto came to
power in
1971, planning was virtually bypassed. The Fourth
Five-Year Plan
(1970-75) was abandoned as East Pakistan became
independent
Bangladesh. Under Bhutto, only annual plans were prepared,
and
they were largely ignored.
The Zia government accorded more importance to
planning. The
Fifth Five-Year Plan (1978-83) was an attempt to stabilize
the
economy and improve the standard of living of the poorest
segment
of the population. Increased defense expenditures and a
flood of
refugees to Pakistan after the Soviet invasion of
Afghanistan in
December 1979, as well as the sharp increase in
international oil
prices in 1979-80, drew resources away from planned
investments
(see Pakistan Becomes a Frontline State
, ch. 5).
Nevertheless,
some of the plan's goals were attained. Many of the
controls on
industry were liberalized or abolished, the balance of
payments
deficit was kept under control, and Pakistan became
self-sufficient in all basic foodstuffs with the exception
of
edible oils. Yet the plan failed to stimulate substantial
private
industrial investment and to raise significantly the
expenditure
on rural infrastructure development.
The Sixth Five-Year Plan (1983-88) represented a
significant
shift toward the private sector. It was designed to tackle
some
of the major problems of the economy: low investment and
savings
ratios; low agricultural productivity; heavy reliance on
imported
energy; and low spending on health and education. The
economy
grew at the targeted average of 6.5 percent during the
plan
period and would have exceeded the target if it had not
been for
severe droughts in 1986 and 1987.
The Seventh Five-Year Plan (1988-93) provided for total
public-sector spending of Rs350 billion. Of this total, 38
percent was designated for energy, 18 percent for
transportation
and communications, 9 percent for water, 8 percent for
physical
infrastructure and housing, 7 percent for education, 5
percent
for industry and minerals, 4 percent for health, and 11
percent
for other sectors. The plan gave much greater emphasis
than
before to private investment in all sectors of the
economy. Total
planned private investment was Rs292 billion, and the
private-to-
public ratio of investment was expected to rise from 42:58
in FY
1988 to 48:52 in FY 1993. It was also intended that
public-sector
corporations finance most of their own investment programs
through profits and borrowing.
In August 1991, the government established a working
group on
private investment for the Eighth Five-Year Plan
(1993-98). This
group, which included leading industrialists, presidents
of
chambers of commerce, and senior civil servants, submitted
its
report in late 1992. However, in early 1994, the eighth
plan had
not yet been announced, mainly because the successive
changes of
government in 1993 forced ministers to focus on short-term
issues. Instead, economic policy for FY 1994 was being
guided by
an annual plan.
Data as of April 1994
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