VII.

Nature of
Development Planning
and Related Concepts
The Planning Process
Learning Goals:
At the end of these weeks, the students should be able to:

a. identify the necessity for development planning;

b. discuss important aspects of planning
c. explain the rationale and process of planning;
d. discuss the framework of planning;
e. identify the principles in planning economic growth;
f. discuss the Philippine development process, legal basis of planning, and
planning parameters; and
g. explain each of the basic principles in Philippine development planning.
A step that newly formed governments
take to show concern for public welfare
by gathering information on what the
people expect for improving their lives.
While this process can sometimes
provide useful insights for planning, it
often mainly reveals the gap between
public aspirations and what the
government and private sector can
achieve with available resources
(Lewis, 1969).
The survey of current conditions reviews changes
since the last plan, evaluates its performance,
and informs the new plan's development
(Cairncross, 1965). It uses secondary data on
population, GNP, investment, savings,
consumption, government expenditures,
taxation, balance of payments, and economic
sector performance.
The plan objectives address identified problems, often restated over
the years. Common objectives in South America, Southeast Asia, and
Africa include:

1. reduction of poverty;
2. reduction of unemployment and underemployment;
3. provision of relevant infrastructure;
4. increased agricultural productivity;
5. equitable land distribution;
6. establishment of new industries;
7. attraction of foreign investments;
8. promotion of export industries;
9. transformation to a more industrial economy; and
10. acceleration of GNP growth.
The commitment of government funds to projects and
programs is a key aspect of development planning. A
large portion is allocated to infrastructure like roads,
bridges, ports, harbors, irrigation, public buildings, and
service facilities to support industry growth and public
services.

The plan also funds social and economic services such as

education, training, health care, peace and order,
environmental management, housing, communication,
transportation, and cultural development (Movery and
Resenberg, 1989).

Projects are implemented by national government

agencies, local governments with national support, or
attached agencies (Lewis, 1969).
Targets for the
Private Sector
In a market economy, growth depends on private individuals
and businesses investing in agriculture, industry, commerce,
and services. The government influences private sector growth
through incentives to encourage investment.

Some incentives, like tax exemptions, may fail if they reduce tax
collection without boosting growth, are too complex, or have
little impact on profitability. Subsidies can be effective but may
harm firms not eligible for them, creating unequal treatment
(Bernstein, 1975).
Development planning seeks to integrate the public and private sectors
through a macroeconomic plan. The public sector’s role is debated, with
some advocating for limited involvement to support private growth (Gill,
1965).

Plans must align across sectors to avoid confusion, though consistency

doesn’t ensure accuracy. Variables can be inaccurately forecasted due to
optimism or conservatism, and policies may be ineffective (Gray, 1975).

The plan relies on tax revenues, foreign credit, private investment, and
government actions. In less developed countries, government control
reduces risks of uneconomic activities, but excessive control is criticized.
The focus should be on executing public projects and facilitating private
business (Myrdal, 1957).
1. The rate of saving determines economic growth, as growth cannot
be planned for immediate impact. Present actions affect the future, so
the plan should focus on increasing savings over time. Higher savings
lead to more investment and capital formation, boosting the
economy's growth capacity (Wildavsky, 1974).

2. Real wage rates determine capital intensity in industry. As real

wages increase, the use of capital goods like machines rises, while
labor absorption decreases. If real wages exceed labor productivity,
capital intensity increases and labor is reduced. Large unemployment
and labor-intensive methods lead to low wages and productivity, so
planners must balance labor and capital intensity in industries.
3. Overvalued domestic currency induces unemployment by making
imports cheaper, which substitutes machines for labor and reduces
employment in domestic industries, especially in raw material
production.

4. Size of the market limits growth. The rate of output growth depends
on the domestic and foreign market size. Industrial growth planning
must account for market capacity, with a focus on expanding export
markets and deepening the domestic market (Pack, 1986).

5. Infant industries require protection, especially when other countries

have advanced and can sell cheaper finished products. Government
protection, often through tariffs, tax exemptions, or subsidies, helps
domestic industries compete. Once a lead industry is identified,
planners can plan its growth with protective measures (Chenery et al.,
1986; Bryce, 1960).
6. Economic growth rate must exceed population growth rate. Improving
quality of life requires generating high GNP through market activities and
reducing population growth through social and clinical approaches. These
actions are not immediate, as investments are needed for GNP growth, and
population control requires social acceptance. High population growth can
negate GNP growth, a 2,3% population growth can lower per capita GNP if
GNP growth is only 2%. The goal is increasing GNP growth and decreasing
population growth.

7. Structural unemployment and underemployment arise from

mismatches in manpower and job creation. Development plans allocate
skilled manpower, but shortages can scale down projects. A lag in job
creation leads to a surplus of skilled workers. Accelerating job creation can
help reduce unemployment, while technological change may create
demand for new skills over time.
8. Wage gaps create social classes. Raising the income of lower-income groups is
interrelated with the middle-income group. When the gap widens, the quality of life in
food, clothing, shelter, health, and education varies, even with government social
amelioration (Budd, 1966).

9. Congestion creates diseconomy. Economic growth leads to population

concentration, which expands the market but causes congestion and exhausts
economies of concentration. Planning should improve infrastructure in rural areas
and provide incentives for dispersed investments and employment. This is important
in both less developed and advanced economies. Experience shows that congestion
occurs in centers with over 500,000 people.

10. Basic industries and civil order are growth enablers. Planning should prioritize
basic industries like power, water, transportation, and communication to support
investment and production. The private sector depends on these to function. If
enterprises must provide these, it can discourage investment (Hagen, 1986).
The Philippine Development Planning Process
The country’s development plan for
1992 to 1998 was placed on the road
through Memorandum Circular No. 2
issued by President Fidel V. Ramos on
July 17, 1992. This issuance directed the
formulation of the Medium-Term
Philippine Development Plan (MTPDP)
and the Medium-Term Public
Investment Program (MTPIP) for 1993-
1998. The highlights of this issuance
were as follows:
 The Philippine Development Planning Process

1. The NEDA shall coordinate the preparation

of the plan;

2. The plan shall be jointly formulated by

the executive and legislative branches;

3. The plan shall be based on the medium-

term plans and programs of all
government instrumentalities, including
local government units (LGUs)’
 The Philippine Development Planning Process
4. The plan format shall cover goals/objectives, strategy/policy
framework, the key measurable targets, and a descriptive list of
priority list of priority development programs and projects;

5. The investment plan should go with the main plan and the
priority subsector activities (PSAs) shall be stated;

6. There shall be regional development plans which will be

integrated into the national plan; and

7. The private sectors shall be consulted in the planning

process.
 The Legal Basis of Planning
The master policy and mandate for the
formulation of the national development plan is
Section 9 of the Philippine Constitution of 1987
which provides the independent economic
planning body headed by the President which
Congress will establish shall “recommend to
Congress, and implement continuing, integrated
and coordinated programs and policies for the
national government”. The same provision
provides for consultations with the private sectors
and local governments. It also provides that “until
the Congress provides otherwise, the NEDA shall
function as the independent planning agency of
the government”.
 Planning Parameter
1. Pursuit of objectives of growth with equity - Focuses on
increasing production and investments while ensuring wealth
distribution, prioritizing the less economically capable.

2. Integration of policies, plans, programs, and projects of all

sectors of society - Promotes a holistic approach by aligning plans
across all societal sectors.

3. Participation by and consultation with concerned private sectors,

community organizations, beneficiaries and local government
units - Encourages input from private sectors, communities,
beneficiaries, and LGUs to prioritize programs based on assessed
needs.
 Planning Parameter
4. Inclusion of perceived needs of the localities in the formulation of
regional and national targets and in the framework of national
strategies - Ensures inclusivity by addressing local needs in
regional and national targets.
6. Linkage between development planning, programming and
budgeting - Incorporates time and fiscal considerations for
effective implementation.

5. Coordination and consistency of the priorities, policies, plans,

programs and projects of the national, regional and local levels of
government. - Aligns priorities and actions at national, regional,
and local levels to avoid inefficiencies.
 Basic Principles in Philippines Development Planning

1. Bottom-up and Participatory Planning – Aligns planning and

programming with local autonomy principles.

2. Synchronized Planning and Budgeting – Links plans with

investment programs and budgets for effective implementation.

3. Private Sector Participation – Enhances plan acceptability by

involving private sectors in proposing policies and projects, with
tailored incentives included.

4. Integration of Special Planning Bodies – Incorporates plans from

regional bodies like ARMM, CAR, and MMDA into the national plan.
 Planning Vision
1. Poverty alleviation. This is a common plan objective of poor
countries whose level of development has not brought about
the eradication of poverty.

2. Reduction of inequality. This objective gives strength to

agrarian reform which is the biggest single scheme for bringing
about social justice.

3. Generation of productive employment opportunities. This is

an objective that bears on the infusion of government funds
and of private sector investment to job creating enterprises.
 Planning Vision
4. Comprehensive human development. This objective is on the
improvement of education and training, complemented by
health care.

5. Attainment of sustainable growth. This refers to the

establishment of projects and programs that will widen the
base for growth in the future especially with respect to the
preservation of the ecology and of the resource base in nature.
 ty for
listening mi
mwa!
ror!
grr!
thank you so m-