In the four decades
since Nigerian Independence in 1960, the pursuit of economic development has
been
crystallized by the
almost universal acceptance of development planning as the surest and most
direct route
to economic progress.
Until recently only few would have questioned the advisability or desirability
of
formulating and
implementing a national development plan.
Planning has become a way of life in
the
government ministries
of Nigeria and every five years or so the latest development plan is paraded
with
the greatest of
fanfare.
But why, until
recently, has there been such an aura and mystique about development planning
and such
universal faith in
its obvious utility? Basically, because centralized national planning was
widely believed to
offer the essential
and perhaps the only institutional and organizational mechanism for overcoming
all obstacles
to development and
for ensuring a sustained high rate of economic growth. In some cases, central
economic planning
even became regarded as a kind of “Open Sesame” which allows Nigerians to pass
rapidly through the
barrier dividing their pitiably low standards of living from the prospect of
their former
rulers. But in order
to catch up, Nigerians were persuaded and became convinced that they required a
comprehensive
national plan. The planning record, unfortunately has not lived up to its
advance billing and
sceptism is now
growing about the planning mystique.
In this unit, we
shall treat the economics of planning, we are not going to deal with any
specific country’s
plan as such but
occasional reference will be made to the different West African countries.
Having grasped
this approach and
idea, the reader is placed in a position to make comments on any of the West
African
Government’s
Economics Plans.
Meaning of Development Planning
Development plan can
be defined as a country’s collection of strategies mapped out by the government
of the
country to achieve a
rapid economic growth and development. It contains broad outlines of line of
action
which the government
or its agents in the country will follow within the specified period of time to
achieve the
goals which the
country wants to achieve.
Development or Economic
planning may be described as the conscious governmental effort to influence,
direct and in some
cases even control changes in the principal economics variables – (Consumption,
Investment,
Savings, Exports,
Imports, etc.) of a certain country or region over the course of time in order
to
achieve a
predetermined set of objectives. The essence of economic planning is summed up
in these notions
of governmental
influence, direction and control.
Similarly, we can
describe a development plan as a specific set of quantitative economic targets
to be
reached in a given
period of time.
In one of its first
publications dealing with developing countries in 1951, the limited Nations
department of
economic affairs
distinguished four types of planning, each of which has been used in one form
or another by
most LDCs.
- First, planning
refers only to the making of a programme of public expenditure, existing over
from one
to say ten years.
- Second, it refers
sometimes to the setting of production targets, whether for private or for
public enterprises,
in terms of the input
of manpower of capital or of other scarce resources or use in terms of
output.
- Thirdly, the word
may be used to describe a statement which sets targets for the economy as a
whole,
purporting to
allocate all scarce resources among the various branches of the economy.
- And fourthly, the
word is sometimes used to describe the means which the government uses to try
to
enforce upon private
enterprise the target which have been previously determined.
There is no agreement
among economists with regard to the meaning of the term development or economic
planning. The term
has been used loosely in economic literature. It is often confused with
communism,
socialism and
economic development. Any type of state intervention in economic affairs has
also been
treated as planning.
But the state can intervene even without making any plan. What then is
planning?
Planning is a
technique, a means to an end being the realization of certain predetermined and
well-defined
aims and objectives
laid down by a central planning authority. The end may be to achieve economics,
social,
political or military
objectives (L. Ribbons, 1958).
Professor Lewis
(1954) has referred to six different senses in which the term planning is used
in economic
literature.
- Firstly, there is
an enormous literature in which it refers only to the geographical zoning of
factors,
residential
buildings, cinemas and the like. Sometimes, this is called town and country
planning and
sometimes just
planning.
- Secondly,
“planning” means only deciding what money the government will spend in future,
if it has
money to spend.
- Thirdly, a “planned
economy” is one in which each production unit (or firm) uses only the resources
of
men, materials and
equipment allocated to it by quota and disposes of its product exclusively to
persons
or firm indicated to
it by central order”.
- Fourthly,
“planning” sometimes means any setting of production targets by the government,
whether for
private or public
enterprise. Most governments practice this type of planning if only
sporadically, and if
only for one or two
industries or services to which they attach special importance.
- Fifthly, here
targets are set for the economy as a whole, purporting to allocate all the
country’s labor,
foreign exchange, raw
materials and other resources between the various branches of the economy.
- And finally, the
word “planning” is sometimes used to describe the means which the government
uses
to try to enforce
upon private and public enterprises the targets which have been previously
determined.
But Ferdyn and Zweing
maintains that “Planning” is planning of the economy not within the economy. It
is
not a mere planning
of towns, public works or separate section of the national economy but of the
economy
as a whole. Thus
planning does not mean piecemeal planning but overall planning of the economy.
According to Dr.
Dalton, “Economic Planning” in the widest sense is the deliberate direction by
persons in
charge of large
resources of economic activity towards chosen ends.
Lewis Lordwin defined
economic planning as “a scheme of economic organization in which individual and
separate plants,
enterprises, and industries are treated as co-ordinate units of one single
system for the
purpose of utilising
available resources to achieve the maximum satisfaction of the people’s needs
within a
given time”.
In the words of
Zweig, “Economic planning consists in the extension of the functions of public
authorities
to organization and utilization
of economic resources. Planning implies and leads to centralization of the
national economy”.
One of the most
popular definitions is by Dickinson who defines planning as the making of major
economic
decisions what and
how much is to be produced, how, and when and where it is to be produced, to
whom it
is to be allocated,
by the conscious decision of a determinate authority, on the basis of
comprehensive survey
of the economic
system as a whole.
Even though there is
no unanimity of opinion on the subject, yet economic planning as understood by
the
majority of
economists implies deliberate control and direction of the economy by a central
authority for the
purpose of achieving
definite targets and objectives within a specified period of time.
Distinction between Budget and Development Planning
There are important
differences between a budget and a development plan. A budget, as already
implied in
one of the previous units,
is a short-time plan depicting the way and manner government intends to
undertake the
expenditure and generate the revenue for a given year.
A development plan on
the other hand is a long term programme designed to achieve some permanent
structural changes in
an economy. It involves a deliberate attempt by the government to speed up the
process
of social and
economic development.
- Firstly, while a
budget is usually planned for a year, a development plan may cover a period for
a year,
a development plan
may cover a period ranging from two to twenty-five years.
- Secondly,
difference is in terms of coverage. While a budget may not cover the whole
system of the
economy and may in
fact be designed to correct an inflationary situation, a perceived imbalance in
income distribution
or resolve a balance of payments disequilibrium, a development plan on the
other
hand covers the entire
structure to the economy. It seeks to find permanent solution to the problems
of
the economy like
changing the structural base from agriculture to industrialisation.
- Thirdly, a budget
is concerned with current problems such as debt servicing meeting of pressing
social
needs like schools,
road maintenance, or the financing of planned capital projects.
A development plan,
however, may attempt to change the distribution system from a capitalist
oriented
one to a socialist
system or vice versa. It may also attempt to shift the ownership and control of
the
commanding heights of
the economy from foreigners to citizens.
- Finally, a budget
relies heavily on internal direct and indirect taxes and the flow of revenue is
relatively
more stable.
- A development plan,
on the other hand, at least in the context of West African Countries, depends
heavily on foreign
exchange earnings and heavy capital inflow from abroad for implementation and
achievement of growth
targets.
Objectives/Usefulness/Advantages of Development Planning
Most of the
development plans formulated by West African countries have tended to establish
some form of
mixed economy in
which the state plays a more significant role. Almost all plans are based on
the recognition
that if economic
development is left solely to the market forces engendered by private firms
seeking profits,
an adequate measure
of economic growth will not be attained from any stand point. The stated
objectives of
most of the plans can
be briefly summarized.
(i) To create conditions
for self-sustained economic growth and development. However, it should be realized
that the basic
objective of most plans is not merely to accelerate the rate of economic
development
and the rate at which
the level of living of the population can be raised. It is also to give West
African
Governments and the
masses an increasing measure of control over their own destiny.
The objective not
only focus on the achievement of growth but also the sustenance of the growth
to
ensure steady
improvement in the standard of living of the people. This can only be achieved
when
selfness and right
thinking people are placed is authority.
(ii) To ensure a
steady rate of economic growth. It is realized that much can be achieved
through steady
growth as compared
with intermittent development. In the absence of plans which attempt to
allocate
resources in the best
way possible, the countries cannot avoid unbalanced growth. There is use or
necessity for the
overall balance in the economy.
(iii) To expand and
improve the productive machinery of the countries in question, diversification
of the
economy is necessary.
It is thus realized that the level of living of the people depends very much on
the
productivity of the
people. It, therefore, become inevitable that a substantial amount of the West
African
resources available
should be used for increasing productivity rather than for immediate
consumption,
measures to mobilize
domestic resources both through the government and through private business
must have high
priority.
It allows for
diversification of economics base. A good development plan will create a
proportional
sectorial development
because each sector is planned to develop according to a rate that fits it into
the
entire development of
the economy.
Diversification may
lead to the development of many industries which will help to reduce our import
bills.
Diversification will not only lead to the production of many products for
domestic uses and exports
but will improve the
country’s foreign exchange position.
(iv) To organize a
proper allocation of resources in order to achieve the objectives of the plans.
It is with the
recognition of this
objective that greatest emphasis has been placed upon the expansion of
agriculture,
both for exports and
for domestic use through crop diversification and modernisation of techniques,
emphasis is also laid
on a shift of manpower from agriculture to industry, expansion of industrial
establishments,
encouragement of more
exports of manufactures and processed goods. If all these could be
done, it is hoped
that it would lead to a loosening of trade and financial links with ex-colonial
masters and
more economic
co-operation among African States.
Good development
plans will make it possible for resources both human and material to be fully
harnessed and utilized
for economic growth and development. Here again proper allocation of scarce
resources is not only
necessary for the success of the plan but also for the sustenance of the growth
in
the economy.
(v) To increase
employment opportunities. With proper allocation of resources to those projects
and to
those sectors of the
economy which promotes a high rate of growth, it is contended that more
employment
opportunities would
be provided for the growing population in West African countries. The
successful
implementation of
various objectives contained in the plan will definitely generate employment
opportunity for
greater number of people.
The increase in
employment opportunities will only be achieved through proper allocation of
resources
to those sectors of
the economy as well as projects that promise high rate of growth.
(vi) To increase the
inflow of capital on terms suitable for sustained economic growth and to mobilize
domestic resources
and to effectively utilize external assistance. It is realized that external
capital is a
necessity in order to
implement the plans.
Development planning
is a tool for stimulating foreign and indigenous investment. A good development
plan by setting
targets for key sectors of the economy provides opportunities for interested
foreign
investors to bring in
capital to invest in sector which are attractive to them.
Development plan is a
base for seeking foreign loans. A realistic development plan when presented to
foreign international
financial organization , may win tier support and encourage soft loans to
implement
some of the projects
to be embarked upon in the plan.
(vii) To stimulate
the vigorous growth of the private sector, in particular the development of
manufacturing
production. Since the
private sectors in many West African economics are substantial and the
governments
generally recognize this, any plan that fails to co-ordinate the
activities of this sector could not
easily achieve its
objectives.
(viii) It is argued
that development plan allow for cohesion of the various sectors and the
development of
linkages for the
entire economy. A project is not looked at from its viability alone as an
independent
project but rather in
terms of how it is dependent on other projects as well as other projects depending
on it. A textile
industry can be set up upon the background of a planned cotton industry.
(ix) Development of
Infrastructure: The social capital of the developing country need to be fully
developed.
The social capitals
include good network or roads, railways, waterways, telecommunications,
education
and hospitals to
ensure good health facilities. The presence of well-developed infrastructure of
the
economy will enhance
productivity.
(x) To achieve even
distribution of income: It has been noted that in developing countries, there
is always
inequitable
distribution of income.
In Nigerian for example, about five per cent
of the population is
owning fifty per cent
of the total wealth of the country. With the implementation of the objectives
of
development plan,
income will be more equitably distributed.
From our foregoing
discussion one can say without any fear of contradiction that the basic aim of
most of the
development plans of
West African governments is to give a sense of direction to the economy, a
sense of
priorities and
urgency and to enlist the support and co-operation of all sections of the community
to work for
a better future. It
is aimed to attract popular enthusiasm which is both the lubricating oil of
planning and the
petrol of economic development
- a dynamic force that almost makes all things possible.
The planning for
development is indispensable for removing the poverty of nations. For raising
national and
per capita income,
for reducing, inequalities in income and wealth, for increasing employment
opportunities, for
all round rapid development and for maintaining their newly won national
independence,
planning is the only
path open to under-developed countries. There is no greater truth than this
that the idea
of planning took a
practical shape in an under-developed countries of the world.
To sum up in the
words of Professor Gadgil, “Planning for economic development is undertaken
presumably
because the pace of
direction of development taking place in the absence of external intervention
is not
considered to be
satisfactory and because it is further held that appropriate external
intervention will result in
increasing
considerably the pace of development and directing it properly. Planners seek
to bring about a
nationalization, and
if possible and necessary some reduction of consumption to evolve and adopt a
long-term
plan of appropriate
investment of capital resources with progressively improved techniques, a
programme of
training and
education through which the competence of labor to make use of capital
resources is increased,
and a better
distribution of the national product so as to attain social security and peace.
Planning, therefore,
means in a sense, no
more than better organization , consistent and far-seeing organization and comprehensive
all-sided organization
. Direction, regulations, controls on private activity and increasing the
sphere of
public activity, are
all parts of organizational effort.
Sources of Finance for Development Plans
Development planning
calls for a feasibility study of the plan to see that the projects envisaged
are economically
viable and to make
sure that the aggregate amount of resources required to carry out the plan does
not
exceed the aggregate
amount of resources available. This point emphasizes that deficit financing and
inflation
are to be avoided and
this is to check at the sectorial level by making such that the projected rate
of
expansion in the
output of commodities by a certain critical margin. Furthermore, it is
necessary to check the
consistency of the
plan, to make sure that demand and supply for particular commodities and
services are
equated to each other
and that there is an equilibrium relationship between the different parts of
the economy.
If the plan is found
to be both feasible and consistent, the next stage is how to finance it.
Finance for
development plans had been obtained from various sources by West African
governments.
Let us look briefly
at the financing methods which West African governments use in procuring
necessary
funds for
implementing development plans.
The key sources of
finance for development plan includes both domestic and foreign sources:
(i) Domestic sources
includes export proceeds and buoyant funds realized from the sale of export
commodities
like cash crops, minerals,
crude oil, etc. but as from 1960s there was great dependence on
external sources i.e.
export earnings to finance development plans.
(ii) Other sources of
domestic finance include:
(a)
Fiscal Measures: The governments have introduced various fiscal measures to provide
funds for
developmental
purposes. They use the well-known method of budget surplus whereby there is an
excess fiscal revenue
over expenditure. New tax reforms are also introduced to provide funds for
development e. g.
Taxes, especially indirect taxes as tariffs. However, indirect taxes in
particular
custom duties provide
a lot of funds for governments. It must be realized that the decline in export
proceeds has affected
receipts from export duties. In addition, the drive for substitution of imports
by local production,
a common feature of all development plans of West Africa tends to reduce
the receipts from
import duties.
(b)
Revenues from Publicly owned Enterprises: Full cost pricing for
the services of public enterprises
and utilities can add
very much to the financial resources available for public investments.
This means that the
people would have to pay full cost for public services and utilities such as
water, electricity,
transport, etc.
In most of the
development plans and especially, those of Nigeria, Ghana and Senegal there is
the provision for
abolishing most subsidies to public services. This will bring about substantial
saving on government
account.
In Nigeria for
instance, the Statutory Corporations are expected to participate in the
government
capital programme and
they are expected to make profits. The business organization s also
contribute from their
profits and reserves to the financing of development plans, etc., - Education
Tax Fund.
(c)
Internal Borrowing: Government now device various ways to encourage savings. In their
plans,
several governments
envisaged to obtain substantial amounts to finance public investment by
borrowing from the
private sector.
To promote and mobilize
effectively personal savings for development, governments expects to
establish a variety
of new financial institutions and broaden existing ones. These institutions are
expected to offer the
potential investor a variety of inducements to invest his savings in the public
sector, either
directly by purchasing government securities or indirectly by saving through
such
government
institutions such as post office savings bank, insurance companies and pension
funds.
The Central Bank of
each country are expected to provide investment avenue for institutional
savers – banks,
business firms, insurance companies, etc.
In most of the West
African countries development corporations and development are created
to supply funds to
the private sectors for the development of agriculture and small-scale
industries,
the development of
which are envisaged in the plans.
(d) Deficit financing
sometimes includes resorting to the printing of currency units. However,
deficit
financing in the
accepted sense of the word can only be practised by countries that have their
own
Central Bank.
(e) Domestic
Resources of the Private Sector – Accumulated Savings. The domestic
resources
required for
financing investments in the private sector are to come mainly from private
savings of
individuals and
business enterprises reinvested profits and other internal and external
resources of
foreign and domestic
residents.
(f) Share proceeds of
government owned enterprises.
Foreign
Sources
Since capital
formation in very low in most of West African countries, there is need for
foreign savings and
foreign capital. We
should realize that foreign capital cannot be avoided by developing countries
willing to
industrialize even if
the governments decided to build and operate all the plant and equipment
themselves.
The machinery must
come from abroad and even the workers who build the factories and who construct
the
necessary
infrastructure. Foreign exchange is needed to pay for essential imports for the
investment programme,
and the demand for
foreign capital rises sharply with increasing investments such as projected in
most of the
development plans. West African countries rely heavily on foreign capital to
finance their development
plans. Most of these
foreign capital comes in different ways.
(a) External
Borrowing
(i) Long-term Credits: These consist of loans and
grants from developed countries for long duration.
It may be loan for ten or more years. Both the principal and the
interest have to be repaid.
Countries such as USA, United Kingdom, West Germany, etc., and
other International Organization s
such as the World Bank – IMF, IFC, IDA, BRD, etc., do give such
long-term loans.
(ii) Short-term Credits: Most of West African
countries make use of this method of financing. These
credits include contractor finance and export credits.
(b)
Foreign Aid and Grants from Foreign Government and Organization : These
are in form of gifts,
technical assistance,
and official donation to developing countries in order to accelerate their
economic
development.
Limitations/Problems of Implementation of Development Plans
Most of the
development plans in developing countries were not fully implemented because of
some problems
facing the plans.
Nigeria in particular and West Africa in general cannot be exceptions. Some of
these
problems include:
(i)
Political Instability
Most of the
governments in developing countries, especially in Africa and South America are
not
stable. Governments
in those countries are changed just as people change their dresses. As a result
of
this constant change,
some of the projects in the plans are dropped and new ones chosen by the new
government. Lack of
stability in the government leads to abandonment of already started projects
and
picking up others and
this causes a wastes of scarce resources.
(ii)
Priorities are not well chosen
Some of the projects
are chosen on a political grounds and not on economic grounds. As a result of
this,
some projects are not
profitable and money spent on them are wasted. This occurs more in countries
with heterogeneous
population where condiments overrides right judgment. Tribalism is one of the
banes in this country
and has just delayed development of the country.
(iii)
Shortage of Highly Skilled Manpower
In most of the
developing countries of the world there are not enough technicians to carry out
some of
the projects drawn on
the plans. However, some of the countries presently are no longer lacking
technician
in any way. In the
case of Nigeria, with the introduction and expansion of secondary schools and
the establishment of
many institutions of higher learning, priority is given to the development of
human
resources. So skilled
manpower is no longer a problem in Nigeria rather the problem is now that of
unemployment.
(iv)
Dependence on Foreign Capital
In most of the
development plans drawn, especially in very poor countries, greater proportion
of the
capital for the
implementation of the development plan is expected to come from foreign
countries. In
some cases, the
capital may not be received and the plan becomes a great failure. Government
should,
therefore, not rely
completely on foreign capital as the failure to get that paralyse the project.
(v)
Lack of Statistical
For a good
development plan to be successfully implemented, it has to spend on accurate
statistical
data. In developing
countries, where development plans are usually drawn, statistical data are not
available and where
they are eventually available, they may not be reliable. So it is not wrong to
say that
developing countries
lack reliable statistics on which plans can be based.
(vi)
Lack of Provision for Effective Implementation
In most plans, there
is no provision for effective implementation of some of the projects in the
plan.
There is always need
to include in the plan the strategies for implementation. For example, a
project
may have the
monitoring team and the project may be divided into stages and expected date or
the
completion of each
stage clearly stated. This will ensure that the work will be carried out
without
unnecessary delay.
Finally, the
achievement of development plan objectives requires the efforts and support of
all the elements in
the economy without
any exception. It is only through this way that the objectives of a development
plan can
be realized.
Nigeria’s
Third National Development Plan, 1975 -1980
It is necessary to
discuss one of the national development plans and the one that will require our
attention is
the third one.
Nigeria’s third National Development plan which lasted from 1975-1980 was
estimated to cost
N445 billion. The
long-term objectives of this plan are not different from the previous ones. The
objectives
aimed at achieving
these:
(i) A united, strong and self-reliant nation
(ii) A great and dynamic economy
(iii) A just and egalitarian society
(iv) A land of bright and full opportunities for all the citizens,
and
(v) A free and democratic society.
In this third development plan, the economy was divided into four
(4) broad sectors.
(i) Economic sector which includes all types of agriculture,
mining, manufacturing commerce, transport
and communication.
(ii) The social overhead sector which comprises development and
sports.
(iii) Regional development sector which comprises town and country
planning.
(iv) Administration comprising defense, general administration,
manpower development and utilization and plan implementation and control.
Of the 45 billion
estimate, the private sector accounted for 10 billion
while the public
sector provided the rest. It has to be noted that the third National
Development plan
was a break-through
to modernity. It was infact a real and historic turning point in the history of
the
economy. The period
also represented a glorious era in the history of Nigeria as great changes in
the
economy were
witnessed.
Pre-requisites for Successful Planning in Under-Developed Countries
There are certain
conditions or pre-requisites which must be fulfilled for the successful working
of a development
plan in
under-developed countries. They are as follows:
(1)
Planning Commission
The first
pre-requisite for the success of a plan is the setting up of a planning
commission.
(2) Statistical Data
A pre-requisite for
sound planning is a thorough survey of the existing and potential resources of
a
country with its
deficiencies.
(3)
Fixation of Targets and Priorities
The next problem is
to fix targets and priorities for achieving the objectives laid down in the
plan.
Targets must be bold
and cover every aspects of the economy. They include quantitative production of
targets.
(4)
Maintaining Proper Balance
Successful working of
the plan requires the existence of proper balances in the economy to avoid
lopsided
development and
bottlenecks.
(5)
Incorrupt and Efficient Administration
A strong, efficient
and incorrupt administration is the sine que non of successful planning.
(6)
Proper Development Policy
The state should lay
down a proper development policy for the success of a development plan and to
avoid any pitfalls
that may arise in the development process.
(7)
Economy in Administration
Every effort should
be made to effect economics in administration particularly in the expansion of
ministries and some
departments.
(8)
An Education Base
For a clean and
efficient administration, a firm educational base is essential. For planning to
be
successful, it must
take care of the ethical and moral standards of the people.
(9)
A Theory of Consumption
An important
requirement of modern development planning is that it has a theory of
consumption.
Under-developed
countries should not follow the consumption pattern of the more developed
countries.
(10)
Public Corporation
Above all, public
corporation is considered to be one of the important levers for the success of
the plan
in a democratic
country. Planning requires the sustained co-operation of the people.
Conclusion
Development plan
usually involves both private and public sectors of the economy. Any
development plan is
supposed to specify
or show the investment policy of the country. This means that the volume should
be made
clear.
In any development
plan, efforts are usually made to specify the key sectors in the country’s
economy
which need priority
attention so as to make the achievement of the objectives of the plan possible.
In some
countries, emphasis
is laid on speedy industrialization as a priority for rapid economic growth and
development while in
others people feel that rapid economic growth and development can be achieved
through the development
of agriculture. We cannot say that rapid economic growth and development can
be better achieved
through industrialization or through the development of agriculture.
Summary
In this unit, we have
discovered that usually the strategies for economic growth and development are
embedded
in a development
plan. Therefore, in order to achieve rapid economic growth and development the
developing countries
usually draw up development plans.
In this unit, we
examined the goals, objectives, financing, problems and limitations of
development
planning as practiced
in Third World nations, both in its own right and in the broader framework of
national
economic policy.
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