The current growth strategy, which has a large footprint of public sector enterprises, appears increasingly incapable of delivering economic growth and inclusive social sector development through the narrow and passive narrative of PSDP-based development spending.
It was high time that the
ew growth strategy - a brain child of Dr. Nadeemul Haque, the deputy Chairman Planning Commission - be included in the development plans for the next fiscal year. The strategy treats infrastructure as only the hardware for enabling economic growth and also takes into account the software of development - management capabilities and organisation.
According to the new development framework proposed by the Commission, the private sector should be the growth-driver in an open market environment that rewards efficiency, innovation and entrepreneurship. The government only acts as a facilitator that protects public interests and rights, provides public goods, enforces laws, and operates with transparency and accountability.
The current development scene, however, is all messed up. Managing a backlog of over 1,100 projects is a cause of serious concern and it is increasingly apparent that the hangover of unfinished PSDP projects would keep holding back the Commission from introducing the new development framework in the foreseeable future.
The current overall throw forward liability of federal PSDP projects is Rs2.6 trillion, mostly due to large infrastructure projects. These include the multibillion dollar Diamer-Bhasha dam which currently requires around Rs900 billion from the federal government.
The consolidated size of PSDP approved for FY12 is Rs730 billion, out of which the federal government will spend Rs300 billion (including Rs20 billion for Erra) and the provinces Rs430 billion. It is expected that the provinces would prioritise social sector development in their annual development plans for FY12.
Around 96 percent of the federal PSDP funds for FY12 (excluding Erra) have been earmarked for the ongoing projects, hardly leaving any room for the introduction of new projects. Infrastructure projects would get Rs155 billion, mainly in the water, energy and transport sectors. Social sector spending would be Rs122 billion.
It has been decided by economic managers to give priority to those existing projects which are nearing completion, have a foreign funding component, and achieve balanced development. The government would continue to finance vertical health and population welfare programmes in FY12.
However, a better job of prioritisation could have been done via thorough cost-benefit analyses of existing projects and identification of those projects the completion of which would deliver maximum impact at low cost.
It is time to move beyond the traditional brick and mortar development framework, with a particular need to address the burgeoning backlog in infrastructure projects which is a persistent drag on new development initiatives. Habitual slashing and revisions of PSDP funds would only make matters worse.