Transcript Approaches to Developments and its influences Nepalese

Approaches to Developments and its
influences Nepalese Development
Plans
Rabi S. Sainju
National Planning Commission Secretariat
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Presentation Outline
 The quest for development
 Economic System
 Development Plan and its necessity
 Approaches to development
 Growth Situation in Nepal
 Conclusion
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
The 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 mid1950s, emphasis shifted to growth prospects of poorer countries
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Economic 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
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Capitalist 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.
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Socialist 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.
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Mixed 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.
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
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 goal
8
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
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
9
effective use of formal planning systems
Rabi S Sainju
NASC : Professional Course on Management and Development
9
20 Nov 2014
9
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.
Rabi S Sainju
NASC : Professional Course on Management and Development
1
0
20 Nov 2014
Approaches to development
• In the 1950’s and 1960’s, linear-stages-of-growth models were
popular. They described the process of development as a series of
successive stages.
• These models were replaced in the 1970’s by Structural Change and
International Dependence models.
• Structural change models emphasized the internal process of
structural changes that a developing country must go through,
• International dependence models viewed underdevelopment in
terms of international and domestic power relationships,
institutional and structural rigidities and the resulting proliferation
of dual economies and dual societies both within and among
nations of the world.
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Approaches to development
• In the 1980’s and 1990’s the neoclassical
counterrevolution focused on the beneficial role of free
markets, open economies and the privatization of public
enterprises and suggested that the failure of some
economies to develop is a result of too much government
intervention and regulation.
• In 2000s, much attention in this decade to other
“solutions” to under-development and used various
aspect of classical approach. Development economist
are more focused on inclusive development approach
and right based approaches
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Linear-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 .
Rabi S Sainju
NASC : Professional Course on Management and Development
1
3
20 Nov 2014
Influence of Linear Growth Model in Nepal
• Periodic Plans:
First Plan: 1956-61
Second Plan: 1962-65
Third 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
Rabi S Sainju
NASC : Professional Course on Management and Development
1
4
20 Nov 2014
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
15
Rabi S Sainju
NASC : Professional Course on Management and Development
15
20 Nov 2014
Influence of Structural-Change Model in Nepal
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.
16
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
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 17
Rabi S Sainju
NASC : Professional Course on Management and Development
17
20 Nov 2014
Influence of The Neoclassical
Counterrevolution in Nepalese Plan
• 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.
18
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
New Approaches to development
Since 2000:
• Much attention in this decade also to other “solutions” to underdevelopment, 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
19
about environmental impacts of growth.
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Influence of New Approaches in Nepalese Plan
Plan Period
 Tenth Plan 2002-2007
 Eleventh Plan 2007 – 10
 Twelfth Plan : 2010 – 13
• 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
20
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Economic Growth Situation in Nepal
Plan Period
ICOR
Economic Growth
at base price (%)
Third Plan (2022-27)
2.2
Fourth Plan (2027-32)
1.8
Fifth Plan( 2032-37)
2.3
Sixth Plan (2037-42)
4.4
Seventh Plan (2042-47)
4.57
2047-48; 2048-29
Poverty line (%)
Gini
Coefficient
Remark
34 (NPC)
49
NPC
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
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
NPC
CBS/NPC
21
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Sectoral Growth Rate
Sectors
Agriculture, fishery and Forestry
7th Plan 8th Plan
4.17
2.95
9th
Plan
Construction
Retail and wholesale trading
Hotel and restaurant
Transport, storage and communication
General administration and defense
Education
Health and social work
Other community, social and individual service
12th
Plan
2.88
3.62
3.58
5.20
2.77
0.35
4.24
4.17
3.18
5.49
5.19
6.29
7.32
4.89
2.87
4.35
2.88
3.86
13.94
6.42
6.02
6.02
8.94
5.18
8.82
2.96
-0.17
4.07
4.35
2.19
5.38
5.25
4.67
6.33
4.37
5.95
1.13
0.98
3.83
5.24
8.11
7.29
5.32
7.43
5.89
13.58
4.69
4.47
4.41
5.13
2.29
5.15
7.94
9.01
3.99
7.94
7.62
4.05
4.04
7.31
Financial intermediation
Real estate, rent and business activities
11th
Plan
3.43
Non agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water 1
10th
Plan
5.24
5.73
2.98
6.61
6.18
8.67
7.45
Total value added at base price
4.57
4.84
3.70
3.58
Rabi S Sainju
NASC : Professional Course on Management and Development
11.34
6.32
4.65
3.97
20 Nov 2014
HDI trends on new component and new
methodology
Year
Life
Expected Mean
GNI per
expectancy at years of years of capita (2005
birth
schooling schooling
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
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Human Development Index Trend
Year
2014
2012
2011
2010
Nepal
2005
2000
1990
1980
Low HD
Medium HD
South Asia
2012
LDCs
World
Norway
HDI
0.540
0.463
0.460
0.456
0.429
0.401
0.314
0.234
0.466
0.640
0.558
0.449
0.694
0.955
MPI
0.197
0.217
GII
0.479
0.485
0.350*
0.498
0.627
0.649
0.578
0.457
0.568
0.566
0.463
0.065
IHDI
0.384
0.304
0.310
0.485
0.395
0.303
0.532
0.894
NI-HDI
Remark
0.526
0.524
0.523
0.486
0.445
0.371
0.224
0.487
0.661
0.577
0.475
0.690
0.977
12 Plan
* 2006 data
Rabi S Sainju
NASC : Professional Course on Management and Development
th
th
11 Plan
th
10 Plan
th
9 Plan
th
7 Plan
th
5 Plan
24
20 Nov 2014
Conclusions
• 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.
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Conclusion
• 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.
Rabi S Sainju
NASC : Professional Course on Management and Development
20 Nov 2014
Thank You All
for your kind attention
Rabi S Sainju
NASC : Professional Course on Management and Development
27
20 Nov 2014