Mr. Sajjad Hyder, Chief Economist, Planning & Development department has recently retired from his service after serving almost three decades, commencing from April 1993 to November 30, 2022. He, as Chief Economist, was responsible for leading public Investment management policies for designing and implementing various socioeconomic development projects and programs in the region.  Moreover, concoction of substantive policies for socioeconomic development in all sections was also part of his job responsibilities.

The retired officer, Mr. Sajjad Hyder, has shared the following reflection, regarding public investment management in GB, which is based on his 30 years of exposure as a development planning practitioner:  

Development Planning in Gilgit-Baltistan – Missing Link

Historical background: The development economics was born immediately after the second world war with the birth of the Breton Woods international financial system to facilitate development and eradicate poverty in the countries that were emerging out of colonialism. The Planning commission Pakistan was formally established in 1953 with the Harvard Advisory Group (HAG) officially became its coach soon after. Based on their methodology, the country introduced formal 5-year planning in 1955 which with periodic interregnums continues until today. In Gilgit-Baltistan, development planning starts with the inception of 2^nd Five Year plan by establishing a Planning Cell in 1971.

It is not out of place here to say that most of the project cycle management components in GB have fallen into misuse, while others have developed serious defects. Following are the major gaps, in my observation over last 30 years with the department:

REASONS OF INEFFICIENCY IN DEVELOPMENT PLANNING IN GILGIT-BALTISTAN:

As indicated earlier, Public Investment Management in Gilgit Baltistan starts from 2^nd five-year plan.  This system served well the needs of this region in
early stages as the planning & development department was an empowered organization headed by a development commissioner in BS 20. Over time, however, the system developed several problems due to degradation of the organization in view of successive political developments in the region. Presently, Gilgit-Baltistan’s PIM system (development planning) is mere shadow of the concept given by the Harvard Advisory Group, meaning, in capacity, influence and effectiveness.

To understand the sources of inefficiency, it is necessary to review all the stages in the public investment process to identifying gaps and weak points in the processes and procedures.

 Guidance and Screening: Identification and screening components of PIM are badly compromised due to atrophy of economic planning in Gilgit-Baltistan.  Three broad factors were mainly responsible for the waning performance of the PIM system in GB: 

1) Rigidities of the PIM system: The structure of the economy changed from a public sector led to a private sector led economy. This structural changed called for a different role of the planning system, in general, and particularly, the role of P&DD. This required different skills and competencies than what are available with the department. 2) Dominance of crisis management over economic management: As projects started to slow down due to economic policy and planning adopted in firefighting mode. Longer term planning as well as public investment became casualties of the crisis mode which has preoccupied the GB Government for the last several years.

3) A sharp decline in the capacity of the PIM system in GB: With no medium-term plan or strategy available to define the sectoral and sub-sectoral priorities of the government, the project identification process became largely ad-hoc, with identified projects reflecting more the priorities of political leadership than those established through a well thought out plan. The void left by abandonment of the planning process is largely filled by the politicians, where a large number of projects are identified by politicians, or by the line-departments on directives of the politicians.
Ironically, the Planning Commission manual, provides ample guidance for identification, appraisal, and implementation of various programs / projects but of no use in GB.

Project Preparation and Appraisal: In the beginning, the quality of project preparation and appraisal was quite satisfactory. However, over time, these functions weakened, mainly due to following reasons:

• With mounting fiscal difficulties, the line departments faced an increasing
  squeeze on their operational (recurrent) budget. Inclusion of a project into
  the ADP therefore became a mode of getting additional fiscal resources
  for the line departments, from which it can finance some of operational
  needs left unmet by inadequate recurrent budget. There was therefore a
  big enough incentive for the line departments to get as many as possible
  projects into the ADP as soon as possible. This forced them to cut
  corners on project preparation and pull all strings and levers to get project
  approved.  {Roughly, only 3 percent of development expenditure goes to create or acquire physical assets, whereas 31 percent is spent on operation expenditure}.
• Political intervention in the development process increased adversely
  affecting the quality of project preparation and the moral of
  development-related staff in the departments and P&DD. There never has been any tradition in GB of undertaking ex ante or ex-post independent reviews of the preparation and appraisal process even for important projects.
• “Games” in the project preparations and approval processes: Limited capacity of the P&DD to properly appraise projects has given rise to some “gaming” behavior within the line departments to get whatever they want from the project approving authorities by deliberately include unwanted expenditure items (e.g. a large number of vehicles) in the project design just to distract the P&DD’s appraisal team to focus on these items, leading to a less than required focus on other areas and costs of the project. {The end result is leading to implementation delays, changes in scope and design of the project, cost overruns and consequently loss in benefits from the projects}.
• Project Selection and Budgeting: Once a project is included in ADP in principle, administrative and political wheels start moving to get the project approved, irrespective of whether funds for the project are available or not, and it is technically viable or otherwise.  This leads to a number of projects making into the ADP with insufficient (at time a “token” allocation). This allocation is usually not even enough to pay for the
  salaries of the project staff. Moreover, this also leads to thin spreading
  of resources across other projects. As such, many projects get under-financed, which causes implementation delays, and a large throw-forward. A large throw-forward leaves little room for the incoming new government to implement its development agenda with full vigor. This has created a number of implementation issues undermining the efficiency of public investment.

Project Implementation: Project Implementation has been a weak area in GB. For ADP projects, shortcomings in project identification, preparation, appraisal, and approval processes make implementation very difficult. In addition, projects are usually managed by staff taken form regular cadres of government, with limited project management skills.

At times project management is assigned as an “additional responsibility” along with the person’s normal work. Moreover, procedures governing project financing, procurement and contracting are overly cumbersome. Hence, implementation delays and the consequent cost escalations are a norm rather than an exception for ADP.

Public Procurements: Weak procurement practices remain one of the major reasons for inefficiencies in public expenditure, including public investments as procurement is a highly technical subject. In addition, the volume of public procurements is huge, both in size and number. There are not enough skilled procurement specialists within the GB Government to manage all these procurements. Moreover, weak accountability and defective bidding and contract documents have given rise to corrupt contracting procedures and practices which directly undermine the efficiency of public expenditure in general, and particularly public investment.

Monitoring & Evaluation: Despite being a function mandated to both the line departments and the P&DD, project monitoring requires considerable improvements. To date, most of monitoring that is undertaken relates to inputs and compliance with procedures and processes, output and impact monitoring continues to be considered as outside the purview and mandate.  

Project Completion and Service Delivery: Although procedures for completing a project and soliciting operational resources are well laid out, yet they are hardly ever followed. Project completion report (PC-IV) is filed only in cases where the project requires recurrent expenditure allocation to be operational. Following are the reasons for inadequate allocation of operational budget to a newly completed project:

i) Weak estimates of operational resources: While preparing the PC-I, the line
departments deliberately understate the recurrent expenditure implications of
the project. This is done to improve the chances of getting the project
approved and included in the development budget. The finance authority
takes these estimates very seriously when making operational allocation after
completion of the project.

ii)  Implementation delays not only lead to escalation in project cost, but also in recurrent expenditure required to make the project operational.

iii)  Inadequacy of R&M allocations lead to deterioration in quality of service
delivered by the projects, reducing value for money under projects.

Missing Links in Functioning of Planning & Development Department: P&DD GB has thus become a project approval body where most of the projects are not identified based on technical considerations or as part of a shared approach to maximizing growth and welfare. These developments adversely impacted the value for money under development.
At all stages of the project, P&DD is supposed to keep track of performance. However, this tracking is now not happening to maximize project performance. At the project initiation, the PC1 form requires a full cost-benefit and economic analysis of the project to be presented to the approving bodies, after scrutiny by the sections.
When the project is complete the sponsoring agency must send a completion report, the PC4. Seldom is this report completed and hence there is little evaluation of the work done and its proper costing. After 5 years of the completion of the project, an evaluation report, PC5, reports on the performance of the project comparing it to the stated expectations set out in the PC1. Once again, these reports are seldom if ever completed. Altogether, role of P&DD is to approve projects and maintaining expenditure management afterwards. 

Too Many Projects, Too Little Return
The technical details of policy and projects such as basis of evidence, cost-benefit,
rates of return and rigorous feasibility or sensitivity analysis have gradually been
withdrawn from senior policymaking forums.  Looking strictly at the project
development and management system, several weaknesses have crept into the system, lowering their impact and rate of return.

These are:

1) Projects are approved without due diligence. Feasibilities, cost-benefit analysis, spatial determination, and several other details are often subject to political or other considerations. Approvals are pushed through with executive fiat.

2) Projects frequently have large cost overruns. Using a selection of ADP projects overruns are frequent and quite large. This is a combination of poor project management, infrequent delays leading to cost escalation as well as poor initial preparation.

3) Excessive focus on brick and mortar. The bulk of the investment is in hard infrastructure such and link roads are the biggest components. Even in the social sectors and other sectors, departments are interested in brick and mortar and even the approval process favors that.

(To be continued by highlighting proposals for improvement)

Mr. Sajjad Hyder joined P&DD, as Research Officer (BS-17), in 1993 and worked in all the sectors of economy, undertaking research studies and region’s policy development initiatives for socioeconomic development. Main research studies include: Northern Areas Strategy for Sustainable Development, in collaboration with IUC Pakistan, Norther Ares Report on Participatory Poverty Assessment in collaboration with planning commission Pakistan, and Gilgit Baltistan Economic Report {Broadening the Transformation}, a joint venture with ADB and world bank. His contribution in major project interventions include Pakistan Social Action Program, under which significant impact was seen in primary education, primary health care and rural water supply and sanitation in this region.  Altogether, Mr. Sajjad Hyder, as young officer {that time}, had acted a leading role in SAP interventions as a catalyst.  

In the years ahead, Mr. Sajjad Hyder, was elevated to the positions of Assistant Chief (BS-18), Deputy Chief (BS -19), and Chief Economist (BS-20), having commendable contribution (s) in the socioeconomic development of Gilgit=Baltistan.