Illustration by Abro

THAT the country’s planning, implementation and monitoring mechanism for development and public investment has failed to deliver optimum results is generally viewed as a universal truth.

Delays, costs over-runs, missed benefits and waste of public money are some of the hallmarks of the development activity.

An official study being finalised, has put together facts that expose the dismal performance of ‘misdirected public investments’, resulting in huge losses with little or no positive outcomes for public good. The good thing is that it has now been identified as a challenge to be sorted out.

The downside is that people at the helm of planning have little or no real assessment of the ground realities because Pakistan, they think, does not matter much beyond Islamabad, Lahore and Karachi. Nor have they assessed what impact the paltry economic growth rates, coupled with sustained high inflation, loose security and repeated natural devastations, have caused to the living standards of common citizens. This is reinforced by the absence of Pakistan Social and Living Standards Measurement Study (PSLM) since 2006 and hushing up of a subsequent survey.

For example, the Planning Commission chief Dr Nadeem ul Haque simply brushes aside as exaggeration how carpeted roads just 50-100 kilometers away from motorways have turned into pedestrian walkways due to earthquakes and floods and subsequent digging for repair and left halfway because of expenditure cuts. It would be advisable for planning professionals to take field visits to get a feel of ground realities, instead of relying too much on teleconferencing.

Analysis of budget preparation and review of Public Sector Development Programme carried out by the Planning Commission-sponsored group of private economists comprising Dr Hafiz Pasha, Sakib Sherani, Zafar Ismail, Rizwan Sheikh, Asif Iqbal and Mohammd Imran are not only revealing but eye-openers. The timing is of importance because a lot of development responsibility now stands transferred to provincial governments in the aftermath of 18th constitutional amendment and 7th National Finance Commission award.

In conclusion, the report has recommended a complete moratorium on approval of new projects other than those that qualify to be in core PSDP. These include schemes in priority sectors, schemes partly financed by foreign grants, projects with 75 per cent or more completion, and schemes in Balochistan.

To partially oblige, the Planning Commission has included only four per cent of new schemes in the next year’s development programme to reduce the spread of 1822 projects with large throw-forward where the cost stands at Rs3.1 trillion at present. A total of 670 ongoing projects with less than 30 per cent progress have been shelved and throw forward reduced to Rs2.6 trillion.

“The average cost per scheme has risen from Rs952 million in 2006-07 to Rs1638 million in 2010-11 (72 per cent higher than estimated originally), partly as a result of inflation”, said the report. The fact that the portfolio of schemes is relatively ‘young’ is demonstrated by the high throw-forward as a percentage of the cost of ongoing schemes at almost 63 per cent.

There are many projects whose costs have overrun by more than 400 per cent. A sample of selected projects indicate that the cost of Islamabad-Lahore Motorway increased 47 per cent between 2003-04 and 2010-11. The cost of Lowari Tunnel went up 193 per cent, widening of N-5 highway 49 per cent, rehabilitation and widening of Karakoram Highway 67 per cent while National Programme for Family Planning and Primary Health increased 415 per cent. What results family planning programme delivered is a separate story.

Likewise, the cost of expanded immunisation programme increased 392 per cent, Lower Indus Right Bank Irrigation 235 per cent and the cost of Right Bank Outfall drain – from Sehwan Sharif to the Sea – also surged 109 per cent.

The PSDP as percentage of GDP has shown a declining trend from over 8.5 per cent in the early 1990s to only about three per cent currently that had in fact fallen to about 2.5 per cent in 2000 and 2001. Between 2002-2007, it recovered to 5.5 per cent of GDP but has since been on a decline.

During the last decade, the absolute PSDP size reached a peak in 2006-7 and has since dropped about 13 per cent in 2009-10. In fact, during the current fiscal year the PSDP declined further by 25 per cent and in real terms PSDP is now even below the level attained five years ago.

The PSDP decline also reflects the fall in its share in public expenditure, demonstrating that pressures of rising current expenditure has increasingly ‘crowded out’ development spending. Consequently, after 2006-07, in particular, the share of PSDP in public expenditure has been falling sharplys from a high of almost 25 per cent to a low of 12 per cent in 2010-11.

A comparison confirms that the level of public investment in Pakistan is relatively lower than in other Asian countries. For example, in 2009, central government capital expenditure as per cent of GDP was as high as 8.2 in Vietnam, 7.2 in Malaysia, 5.7 in Sri Lanka and 5.1 in India as compared to a meagre 2.2 per cent in Pakistan.

The economists have confirmed that the contraction in the size of PSDP is primarily a consequence of the efforts at controlling fiscal deficit, especially in the light of targets in the IMF Standby Arrangement in the presence of a low and stagnant tax-to-GDP ratio and rapid growth of current spending on security and subsidies etc. As a result, initially budgeted levels of PSDP – both federal and provincial – have not been realised and there have been large cutbacks in the PSDP size from 2007-8 onwards.

To discourage pressure from the president, prime minister or other top influential offices, the reports seeks “approval of projects, irrespective of their originating office or organisation, should be based on results of a rigorous appraisal process”. They have sought a separate study for risk analysis for time delays, cost variations, design modifications and political and security environment.

The group of economists has deplored the quality of approvals while reviewing projects approved by finance minister as head of Executive Committee of the National Economic Council (ECNEC). “A total of 43 projects were discussed, of which 12 (27.8 per cent) provided no details or costs and yet were approved with the caveat that costs would be provided later or were deferred to the next meeting as not only costs but other details were also missing. The value of those providing estimated costs was over Rs1.6 trillion”.

Separately, the World Bank has concluded that designed completion period for a typical project is 34 months but the actual time taken for completion is 68 months. This highlights problems in funding and implementation process, generally due to manoeuvring in land acquisition, appointments of contractors and procurement. It said almost 35 projects in the ongoing portfolio are virtually new, 15 per cent less than 25 per cent complete and only 13 per cent above 80 per cent in completion phase.

The economists concluded that planning process was in ‘visible breakdown’ and the Planning Commission has become primarily a project approval agency without enough scrutiny. Standards of project preparation and approval have slackened considerably, leading to cost overruns, misuse of scarce money and limited development impact of public investment programme.