Introduction to Economic Planning

KENYATTA UNIVERSITY
DIGITAL SCHOOL OF VIRTUAL AND OPEN LEARNING
EAE 405: DEVELOPMENT PLANNING
DEPARTMENT OF APPLIED ECONOMICS
SCHOOL OF ECONOMICS
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WRITTEN BY:
DR KENNEDY NYABUTO OCHARO

Introduction
II: Objective and Purpose of the Course
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Students will be required to be punctual and regularly attending classes. The score on the
30% coursework grade will be based on two written tests. The final examination contributes
a maximum of 70% to the overall grade.
The main objective of this course is to introduce learners to the knowledge of
basic concepts and techniques of development policy making and development planning
in particular. Learners will be exposed to the nature of development planning, its
rationale, planning techniques and plan failure.

TABLE OF CONTENTS
LECTURE ONE: INTRODUCTION TO DEVELOPMENT PLANNING...................................5
i. PLANNING: ITS NATURE AND RATIONALE IN GENERAL.....................................5
ii. Categories of Economic planning.........................................................................................7
iii. The need for Development Planning................................................................................8
iv. Reasons for Development Planning in Third World Countries..............................................9
LECTURE TWO: RESOURCE REQUIREMENTS FOR PLANNING......................................11
a) Relevant policy and Institutions.........................................................................................11
b) Resource Requirements......................................................................................................12
i) Human Resource Requirements......................................................................................13
ii) Non-Human Resource Requirements..............................................................................13
LECTURE THREE: PLANNING TECHNIQUES AND STRATEGIES....................................16
i) INTRODUCTION..............................................................................................................16
ii) ASPECTS OF PROJECT ANALYSIS AND SELECTION..............................................19
iii) PROJECT CYCLE..........................................................................................................22
iv) THE PLANNING TECHNIQUES.................................................................................24
1: THE INPUT – OUTPUT PLANNING MODEL...............................................................24
2: OTHER PLANNING TECHNIQUES...............................................................................33
LECTURE FOUR: TYPES OF ECONOMIC PLANNING PROCEDURES/MECHANISMS...41
1. PLANNING PROCEDURES.............................................................................................41
2. TYPES OF DEVELOPMENT PLANS..............................................................................51
LECTURE FIVE: EXPERIENCES WITH DEVELOPMENT PLANNING...............................57
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1. CENTRALIZED PLANNING IN FORMER USSR.............................................................57
2. INTEGRATED AREA PLANNING IN ISRAEL.............................................................61
3. PLANNING IN KENYA....................................................................................................63
LECTURE SIX: ISSUES IN DEVLOMENT PLANNING..........................................................67
1. CAUSES OF FAILURE OF PLANS IN DEVELOPING COUNTRIES..............................67
2. THE IMPACT OF SOCIO-ECONOMIC INTEGRATION................................................70
References......................................................................................................................................74
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LECTURE ONE: INTRODUCTION TO DEVELOPMENT PLANNING
INTRODUCTION TO DEVELOPMENT PLANNING
Topic objectives
(a) PLANNING: ITS NATURE AND RATIONALE IN GENERAL
Planning
Planning means preparation for action. Actions can range from expanding a multinational
conglomerate, managing a city department, including affairs of state to taking a career.
Key features of a plan are that it is forward looking; it involves choice, and involves
strategizing actions for attainment of specified goals.
What is a plan?
It is an action program for the future, specifying the following
 Objectives or desired outcomes to be achieved
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INTRODUCTION
By the end of the lecture learners should be able to
i) understand and explain planning , its nature and rationale
ii) Differentiate the various categories of planning
iii) Understand the need for development planning

 The strategies for implementation, comprising the institutional and resource -
provisions required for successful action.
 A timeline showing the sequence of pertinent activities and the flow of resources
 A strategy of how progress towards the objectives will be monitored and
evaluated.
Why plan?
 Through planning we minimize uncertainties and maximize chances of success
towards the desired goals.
 Planning is therefore an aid towards success. When you fail to plan, you are
planning to fail. Examples that call for planning:
b) War and post war times
War times possess risks and uncertainties, necessitating tight management
of national efforts (resources & activities in order to win). War imposes
some physical, economic & social costs necessitating national
reconstruction in the immediate post war period.
c) Scarcity of land and space.
Spontaneous human settlements often lead to uneven population
distribution and mis-development of infrastructure. Out of this arises the
need for ‘Town and County planning’ to inject order and rationality into
the evolution of human settlements over time, with purposeful zoning of
land use, appropriate patterning of human movement networks and
suitable layout of the activities.
d) Economic fluctuation.
The free market is prone to cyclical swings in the level of performance,
with possible unfavorable consequences at times.
To inject some measure of stability into the system entails strategizing and
manipulating some key influential variables.
e) Poverty and the desire for comfort.
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Poverty is caused by a mix of many adverse factors. Since richness is
preferred to poverty, every poor community or nation wishes to find a way
of escaping from that condition – this needs to be strategized for and
pursued.
ii. Categories of Economic planning
Economic planning is the conscious effort by the government to influence, direct and
control the performance of the national economy. An economic plan therefore is an
action program setting out the nation’s economic goals and detailing the strategy for
pursuing them. It could be short-term (aimed at stabilizing performance) or long term
(charting out desired transformations).
a) Anti cyclical Planning
The market economy has a built in tendency for recurrent cycles, the ups and downs in its
performance. Anti cyclical planning aims at achieving and maintaining full use of
resources (Labour, capital, land and etc) & maintaining incomes above some set
minimum.
In modern day parlance, it is termed as ‘macroeconomic stabilization’ and it focuses on
the economy’s dynamics in the short run.
b) Development Planning
This is a category of economic planning that is concerned with the affairs of the economy
in the medium to long-term. It is divided into 4 levels:
National planning: This planning attempts to cover all sectors and aspects of the country’s
economy. It focuses on broad aggregates such as the level of national savings & investment,
GDP growth, per-capita income, national employment or unemployment, etc. It is supported by
sub-national, sect oral details & projects.
Sub-national/regional planning: This type of planning deals with a given geographical area
within the national economy. Preparations of such regional plans can cover the entire economy
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(in parts) as part of the process of preparing a national development plan. Regional plans fit
projects under the national plan to facilitate the best possible location of industry, infrastructural
development, and to reduce economic disparities between regions in the country.
Sectoral planning: This targets specific sectors, e.g. Kenya’s agricultural Development plan,
Kenya’s National Tourism Strategy 2013-2018.
Project planning. Targets specific projects, for example Kenya’s railway project and the Thika
road project. The sectoral and the project planning form part of the national development plan.
c) Multi- National Regional Planning
This covers an economic region that extends beyond the borders of two or more nations.
It also applies to the case where several countries, which are members of an international
organization, attempt to coordinate their national plans or set integrated targets for their
economies, e.g. The harvesting, conservation, and use of the waters of the Nile Basin to
facilitate equity & fairness to all stakeholder nations of East, Central and North Africa,
The LAPSSET project which covers the countries of Kenya, South Sudan and Ethiopia.
iii. The need for Development Planning
Development planning is planning for a country’s socio-economic growth. It is a complex
process whose central factor is the sustained improvement of quality of life of the people,
according to their own world view and aspirations.
It is because of this, that development planning cannot be left to be determined by the
operations of free markets. The market economy has its own inherent weakness that can
make its performance disappoint society.
Development planning is a way of injecting order, direction and urgency into the nation’s
socio-economic change process through state and community intervention and participation.
Development involves fundamental change and needs to be guided, controlled and directed
on a desired goals, it cannot be left to chance.
In the post World War II era, development planning became a national imperative, especially
in low income countries. The gap in living standards between those countries and the
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