Development Planning Role of Government National government have played an important role in the successful development experiences of many developing countries. But in many developing countries the govt. appears to have been more of a hindrance to development rater than facilitating its role. Positive or negative role of government?

Nature of development planning Economic Plan (EP) >An economic plan is simply a set of quantitative economic targets to be reached in a given period of time, with a stated strategy for achieving those targets. > EP may be either “partial” or “comprehensive”

Arguments Behind Development Planning First argument Market Failure Markets in LDCs are imperfect by its structure and operation >non monetized sector >product, factor, capital and money markets are not organized. >distorted price >failure of markets to price factor of production correctly

Types of Market failure Public good Externalities Market power (monopoly, oligopoly etc.) Politics Government failure also occur in many cases in which politicians and bureaucrats put their priority on their own private interest rather than the public interest.

Arguments Behind Development Planning # Second argument : Resource allocation and mobilization  Developing countries cannot afford to waste their limited financial and skill human resources on unproductive ventures  Investment project must be chosen on the basis of partial productivity analysis.

 It should not solely depend on the basis of individual industrial capital output ratio but also in the context of an overall development programs that accounts of external economies and long-term objectives.  Skilled workers should be employed in that place where their contribution will be greatest.

Third argument Attitudinal or psychological impact  Detailed statement of national economic and social objectives in the form of specific development plan can have an important attitudinal and psychological impact on a diverse and often fragmented population.  It is state’s duty to create social and economic overhead in a planned way.

Fourth argument Foreign aid The formation of a detailed development plan has often been a necessary condition for the receipt of bilateral and multilateral foreign aid.

Towards an understanding of “Project” and “Project Analysis” in a developing country scenario # Project defined  An activity on which we will spend money in expectation of returns and which logically seems to lend itself to planning, financing and implementation as a unit.  It is a specific activity with a specific starting point intended to accomplish a specific objective. # The Project investment decision Many factors other than economic consideration

Categories of projects Sectoral: agriculture, health, education etc. Geographic scale: international, national, provincial, regional, local etc. Size: mega, major, medium, mini Technology: high tech, low tech etc. Phase: new, rehabilitation etc. Professional division: R&D, product development, construction, organization, marketing etc.

Place of Financial and Economic analysis in project evaluation FA and EA provides a framework with which all aspect of proposed project can be evaluated Points out unrealistic or questionable assumptions Indicate ways in which a project can be modified/improved Improved chance of being implemented