Planning Procedures in Pakistan
*Fred C. Shorter*
Because economic plans are made by ministers, civil servants, and engineers, as well as by economists, it would be arrogant to expect planning procedures to conform strictly to the rules of economic analysis. Nevertheless, as professional men, we would like to know how much use is made of the economist's techniques and, where none are used, to consider what techniques could be recommended to the planners. A paper concerning this problem was recently prepared in the Institute of Development Economics by Professors Fei and Ranis1. The first part of this paper is a comment on their work.
The accumulation of knowledge requires criticism, but it also requires fresh hypotheses. In the second part, I have outlined the Pakistan Planning Commission's planning procedure as I have been able to infer it from Commission documents and conversations with individuals who participated in the preparation of the Second Plan. This report is preliminary, because I have not studied all the documents that could be made available, nor have I gone deeply into details of the procedure. My reasons for publishing such an analysis at this time are to draw attention to certain procedural problems whose treatment has important effects on the end result of the planning process and to offer my encouragement to anyone who would 'undertake the further study which this planning experience deserves.
I. The Fei-Ranis Methodology
The authors say that they found "scant explicit evidence. . . .of a clearly defined planning procedure" in the published documents of the Commission2. Their statement refers only to published material (apparently the Second Plan Outline alone), and they have not looked further into the experience of the Commission to discover whatever procedure might have existed. Fei and Ranis approach the problem from a theoretical point of view. They suggest that certain problems necessarily arise in the formula-
*The author is Assistant Professor of Economics at Princeton University.
1.John C.H. Fei and Gustav Ranis, A Study of Planning Methodology with Special Reference to Pakistan's Second Five-Year Plan. Monographs in the Economics of Development, No. 1, June, 1960. Briefly noted in Economic Digest, III (3) Autumn, I960, p. 9-10.
2.Ibid., p. 1.
Balance of Payments Problems of Pakistan
Parvez Hasan*
Introduction
This study seeks to analyse developments in Pakistan's balance of payments during the period 1948-60. The first section attempts to give a definition of the payments problem and briefly discusses the various causes of balance of payments disequilibrium in the light of the accepted theory. Against the theoretical background thus provided, Sections II to VII review the major phases in Pakistan's balance of payments and highlight developments. The final section summarises the main conclusion emerging from the study.
I
Nature and Causes of Payments Difficulties
The nature and causes of balance of payments difficulties show enormous diversity. There are first the problems caused by wide fluctuations of export prices and earnings particularly in countries like Pakistan which are heavily dependent on the export of a few primary products, markets for which show a great deal of instability. In the same group are difficulties resulting from major harvest failures. Then there are balance of payments difficulties which stem from more permanent causes and denote, in terms of the terminology used by the International Monetary Fund, a "fundamental disequilibrium" in the payments position. Finally, developing economies appear to be faced with problems which arise essentially from need for finding sufficient foreign exchange resources for their development programmes.
In discussing the balance of payments problems of Pakistan in this paper, we would focus mainly on the payments problems which arise from a basic disequilibrium in receipts and payments. The difficulties posed by fluctuating earnings and harvest failures are largely self-correcting and
*The author is Deputy Director of Research, State Bank of Pakistan. The views expressed in this paper are, however, the personal views of the author and do not represent official views of the State Bank of Pakistan. Acknowledgement is due to Dr. Henry J. Bruton, Joint Director, Institute of Development Economics and Mr. Nazir Ahmed Chaudhary, Deputy Director of Statistics, State Bank of Pakistan for useful comments on an earlier draft. Mr. B. Alam and Mr. Riazuddin helped with the statistical data.
A Measure of Economic Growth in East and in West Pakistan1
S. U. Khan*
It is sometimes said that "national planning will simply have no meaning if it completely ignores the economic disparities between the two wings and fails to evolve a sensible pattern of regional planning"2. The lack of much essential data on a regional basis, however, renders any precise estimate of the relative growth rates almost impossible. Data either are not available or are inadequate on such important variables as production, income, consumption and trade, so that even a correct evaluation of past development efforts is not possible. The implications of such a situation for future planning are not difficult to understand.
In this article an attempt is made to estimate the absorption of specified commodities in East and West Pakistan separately3. This will indicate the pattern of consumption and also give a rough idea about the growth rate of the two wings. With this purpose in view, quantity indices of absorption are prepared for each wing separately, taking data on availability of goods and prices from the Institute's monograph on Inflation. The quantity indices, however, are not of course strictly comparable with national income estimates because of the difference in coverage of the two series. National income data include government, services, trade, etc., while the quantity indices cover only specified goods available for each regicn.
The indices are calculated by Laspeyre's formula * and cover a period of nine years, from 1951-52 (July-June) to 1959-60 with 1951-52 as the
*The author is Staff Economist in the Institute of Development Economics. He is grateful to Dr. Richard C. Porter, Research Adviser, for his comments and suggestions on an earlier draft.
1.This article is based on the data collected for a recent monograph on A Measure of Inflation in Pakistan: 1951-60, published by the Institute of Development Economics. The quantity indices are computed from Tables C-1 and C-2 (Appendix C) of that monograph.
2.Report of the Panel of Economists on the Second Five- Year Plan, Government of Pakistan, Karachi, 1959. p. 13.
3.The terms 'absorption', 'availability' and 'consumption' used in this article are synonymous and mean final domestic consumption of goods including investment goods. It is equal to:
Production + Imports (from abroad and from the other wing)^ Change in stocks—Exports (abroad and to the other wing). 3 Q» Po
4.100. —----where Q« is the quantity in current year,
^■Qo PoQo is the quantity in base year and
Po is the price in base year.
Pakistan's Terms of Trade, 1955-60
A. I. Aminul Islam*
The importance of the terms of trade in economic development arises from the fact that they affect a country's import capacity as well as the balance of payments position. The position of most of the underdeveloped countries with respect to their export proceeds and terms of trade is precarious and vulnerable. Though the ratio of exports to national income may not be higher in these countries than in the advanced countries, most of these countries depend excessively on a few export commodities for the bulk of their export earnings. Consequently, export disturbances are a source of serious problems for these countries.
The traditional pattern of Pakistan's foreign trade is similar to that cf many other underdeveloped countries. The characteristic feature is a heavy dependence on a small number of export items: Jute and cotton (raw, yarn and manufactures) account for about 80 per cent of Pakistan's total export earnings; while raw wool, tea, hides and skins add another 5 per cent1. Though imports are more varied, particular items like machinery and mill work, metals and ores, mineral oils, etc., account for a major share of imports. Lately, with increased home production cf consumer goods, a new trend has become evident. Imports of consumer goods have been considerably reduced, and greater emphasis is now being placed on the import of industrial machinery. But the deficit in the balance of trade and the need to service the foreign debt still limits Pakistan's capacity to import the capital equipment necessary for its industrial development.
In view of the fact that Pakistan is a developing economy and that in the initial years she has to depend heavily on foreign savings, changes in the terms of trade of the country are of vital importance. To understand the importance of the terms of trade in this connection, it is necessary to examine several kinds of terms of trade, in particular the commodity and income terms of trade. While commodity terms of trade measure the relative purchasing power of a unit of exports, the income terms of trade measure the total purchasing power of total exports. In addition to the prices of exports and imports (which are considered in the commodity terms of trade),
*The author is Staff Economist in the Institute of Development Economics. He is grateful to Dr. Henry J. Bruton, Dr. Irving Brecher, Dr. Richard C. Porter and Mr. S.R. Bose, all of the Institute of Development Economics, for commenting on an earlier draft and suggesting improvements.
!. State Bank of Pakistan, Report on Currency and Finance, 1958-59, pp. 189 and 191.
First Release from the Second Population Census of Pakistan, 1961
Karol J. Krotki*
The field enumeration for the purposes of the Second Population Census of Pakistan was completed at dawn of February 1, 1961. The first Bulletin with provisional results is dated 27 days later1. The less than five weeks in the case of Pakistan compare with about four weeks in the case of the latest Census of India 2, and just over six weeks in the case of United Kingdom3. Such figures are seldom directly comparable, but the least that can be said is that Pakistan is in the first league. With such standards of performance as to speed already reached, the need now is to concentrate on increasing the extent of information provided, ensuring greater comparability, providing some preliminary analysis and elucidation and finally eliminating clerical mistakes through more checking. The swift results in Pakistan in the prevailing communication and literacy circumstances suggest that the work was well planned and must have been carried out by an exceedingly efficient organisation.
The Bulletin under review covers following subjects:
statistical information on the total population,
sex,
area,
literacy,
unoccupied structures,
occupied residential houses, and
households
The items listed above are presented for the following areas:
Pakistan as a whole,
the then three component parts—East Pakistan, West Pakistan and the Federal Territory of Karachi,
*The author is Research Adviser in the Institute of Development Economics.
1.Census of Pakistan, 1961. Provisional tables of population. Census Bulletin
No. 1. Preliminary release. Karachi: Population Census Commission, Ministry of
Home Affairs, Government of Pakistan, 1961. 24 pages and 15 tables.
2.The New York Times, March 28, 1961, p. 7. India's 438,000,000. Time, the weekly news magazine, April 7,1961, p. 17- India. Head count.
3.The Economist, June 10, p. 1134. Snapshot of the British.
Problems of Jute Marketing in East Pakistan
Azizur Rahman Khan*
I
Jute constitutes the largest item in the export market of Pakistan. At present Pakistan is facing a number of difficulties with respect to jute trade due mainly to the emergence of substitutes and powerful competitors in the world market. While these are the factors affecting long term demand for Pakistani jute, there also exist other important problems associated with jute. The most urgent among them is the marketing of jute.
Jute marketing problems arise from economic and physical conditions that are primarily external to individual producers. But the problem of reducing the spread between producers' and consumers' prices is as important as that of reducing production costs. The world demand for raw jute is based on the fact that this fibre is the cheapest packing material in the world. To sell the huge amount of jute that the country produces, the supply price will have to be kept sufficiently low. To keep the supply price low both production costs and marketing costs will have to be kept low.
The price of jute is subject to tremendous fluctuation. Jute growers are mostly small subsistence farmers who suffer greatly if there is any reduction in their share of the price paid by the consumers.
Jute marketing has also been an important field for governmental action. Provincial Directorate of Jute and Central Government Jute Board were set up to supervise the internal trade and export of jute respectively. The government improved the port facilities by developing Chittagong and Chalna ports. One of the reasons for establishing the National Bank of Pakistan in 1949 was to finance jute trade. Co-operative jute marketing societies were set up to improve the growers' ability to bargain for fair prices. A price support scheme was introduced in 1950 though abandoned shortly afterwards. The East Pakistan Jute Marketing Corporation was created to act as the monopoly buyer of jute in border areas to prevent smuggling.
It, therefore, appears that marketing of the nation's 'golden fibre' is a big and complicated job. Its problems can best be appraised by seeing first what the present marketing structure is, and how well or poorly it is
"The author is Staff Economist in the Institute of Development Economics.
Notes and Documents
Government of Pakistan Budget, 1961-62
Budget Estimates for 1961-62
On the basis of existing taxation, Revenue Receipts for 1961-62 are placed at Rs. 215.53 crores. With Revenue Expenditure at Rs. 191.90 crores, the surplus amounts to Rs. 23.63 crores.
The Revenue Receipts for 1961-62 show an increase of Rs. 18.79 crores over the Revised Revenue Estimates for 1960-61. With respect to Revenue Expenditure there was also an increase of Rs. 17.69 crores. The surplus on Revenue Budget for 1961-62 is expected to be higher by Rs. 1.10 crores than for 1960-61.
The estimates of Capital Expenditure for 1961-62 total to Rs. 229.94 crores which reflects a rise of Rs. 26.08 crores over 1960-61 (Revised Estimates).
In the Revenue Budget, the anticipated increase from Rs. 196.74 crores in 1960-61 to Rs. 215.53 crores in 1961-62 was expected to emerge chiefly from Customs, Central Excise Duties, and Interest Receipts. Collections under Customs Duties are expected to increase by Rs. 6.95 crores from Rs. 53.45 crores to Rs. 60.40 crores, under Central Excise Duties, by Rs. 1.36 crores from Rs. 32.33 crores to Rs. 34.07 crores and under Interest Receipts, by Rs. 4.05 crcres from Rs. 8.89 crores to Rs. 12.94 crores. On the Expenditure side, the increase from Rs. 174.21 crores to Rs. 191.90 crores is largely accounted for by Non-Development Expenditure on Debt Service and Frontier Regions. A small increase of Rs. 1.76 crores is also estimated in the field of Agriculture under Development Expenditure.
In the Capital Budget, the increase in total expenditure by Rs. 26.08 crores from Rs. 203.86 crores to Rs. 229.94 crores is despite the fall of Rs. 12.88 crores on the Non-Development side. There has been an increase under Development Expenditure of Rs. 49.46 crores. Of this, Rs. 29.22 crores is additionally set aside for Direct Capital outlay by the Central Government and at the same time assistance to Provinces is also marked up by Rs. 20.26 crores. Capital Outlay under Railways will increase by Rs. 14.23 crores; under Indus Basin Replacement Works, by Rs. 6.95 crores; under New Federal Capital, by Rs. 2 crores; under Food Storage Construction, by Rs. 2.32 crores and under Agricultural Improvement and Research, by Rs. 1.44 crores.
The Capital Receipts for the year 1961-62 are estimated Rs. 59.58 crores higher at Rs. 239.62 crores. Internal Resources are placed higher by Rs. 5.60 crores at Rs. 92.64 crores with enlarged Accretions to Reserve Funds, Recoveries of Loans and Advance etc. Meanwhile External Resources are also expected to go up by Rs. 53.98 crores to Rs. 146.98 crores. While Foreign Loans are expected to increase by Rs. 31.06 crores,
Review of Developments in the Pakistan Economy
A. M. G. FOOD AND AGRICULTURE
During the period under review, April 1961 to June 1961, prices of food-grains recorded divergent trends in West Pakistan and East Pakistan. While prices of wheat showed some net decline at Lyallpur (West Pakistan), prices of rice increased markedly at Dacca (East Pakistan). (See Table below).
At Lyallpur, the prices of fair average quality wheat increased frcm Rs. 16.00-17.00 per maund in March 1961 to Rs. 16.75-18.00 in April but this increase was short-lived. The arrival of the new wheat cop in the market which steadily increased towards the end of May led to a sharp decline in prices to touch a low of Rs. 13.50-15.00 per maund. Amidst narrow fluctuations, prices rose somewhat in June following enlarged demand and at the end of the month, the quotations ruled steady at Rs. 14.50-16.00. There was, however, a net decline in prices to the tune of Rs. 1.50 per maund over the period, April-June, 1961. Meanwhile, the second estimate of wheat crop for all-Pakistan for the year 1960-61 places the total area under cultivation at 11,179,000 acres or 11.7 per cent lower than that of 1959-60. Consequently, production is also placed lower by 7.2 per cent at 3,615,000 tons. The declines in acreage and output are attributable to shortage of water in irrigation canals and adverse weather conditions.
At Dacca, prices of medium quality rice ruled steady at Rs. 27.60 per maund during April and May 1961. However, there was a steady increase in prices in other centres owing largely to dislocation caused to the transport system by heavy rains and hailstorms. Thus, the provincial average ^ price for all the marketing centres rose to Rs. 25.42 in May as against Rs. 25.24 in March. In the month of June, the provincial average price rose further to Rs. 26.46 owing to bad weather conditions coupled with the J dislocation inflicted by cyclones over the coastal districts of the province. Prices of medium quality rice at Dacca were also marked up from Rs. 27.60 to Rs. 30.00 per maund. The food situation in the province is expected to improve in coming months as a result of higher output of rice in the 1960-61 season. The third estimate of rice crop for all-Pakistan for 1960-61 places area and output higher by 2.5 per cent and 9.7 per cent at 23,758,000 acres and 10,295,000 tons respoctively as compared with the previous years.