Planning and Budgeting in Developing Countries Essay Example

in developing countries, most of which do not have comprehensive Metes, exchanges for collective decision-making through cabinet, or comprehensive spending reviews in place. Nor do these countries have sufficient capacity to undertake this kind of analysis.

It is likely to take many years for such an evolution to occur. In the meantime, how should developing countries be advised to move forward? I would argue that there are two key Issues on the planning/budgeting relationship which need to be clearly distinguished. First, how prominent a role should planning play In a developing country, especially one with substantial reserves of natural resources? Second, what steps should a country take to integrate institutional arrangements (for example, unified planning and finance, or separate agencies)?

On the first topic, consider a country such as Mongolia, where I recently visited. Mongolia faces huge development challenges in the medium-term as enormous deposits of coal, copper and other minerals in the South Gobi region are exploited. These resources, if managed well, could increase Mongolia's GAP by a factor of three or four over the next decade. Will Mongolia become the Chile of South- East Asia, or be trapped by the resource curse? Both outcomes are possible, as Mongolia's institutions have not yet been tested with such a huge inflow of resources.

In order to take advantage of the opportunities ahead, Mongolia needs to develop its institutions of planning and finance. With the support of the Bank and Fund, new laws on budgeting and planning have been drafted. New ideas, such as establishing a publicly-owned national development bank, are on the table but, as suggested by the mixed experience of other countries in establishing

such banks, will only be successful if politics are kept out of the banks decision-making process. At the same mime, the current economic development agency is small, and inadequately equipped to deal with the challenges ahead.

Its relations with line ministries and other development partners need to be strengthened. The country needs to have a strong planning ministry, possibly under the prime minister's office, with the resources and political authority to undertake the necessary analysis of alternative planning scenarios and strategies, prepare legislation, and bring together the center of government, line ministries, the private sector, and the international community into an effective development partnership.

Relations with the exceptionally powerful parliament need to be carefully managed. These tasks go way beyond the mandate or skills of the finance ministry with which, however, the planning ministry needs to work effectively to coordinate all financial aspects of development planning. The finance ministry needs to work on developing an effective METE, and strengthening its capacity for analyzing expenditure proposals.

A PIP can play a useful role in identifying investment projects of key strategic importance, and analyzing those that can be financed through the budget, or by alternative financing sources such as overseas development assistance, public-private partnerships, or the proposed development bank, all of which require an appropriate financing and governance framework. The finance ministry needs to be fully engaged in the design of these new institutions.

In relation to Mongolia, however, I do not believe that better coordination of the planning and budgeting processes requires the amalgamation of the planning and finance ministries into a single administrative entity, though this may make sense in the longer term. In relation

to the second topic, I would argue hat, in some developing countries, the time may have come to move down the path of evolution suggested by developed countries - "shrinking the P" in the interface between budgeting and planning. A country such as Rwanda, which I also visited recently, could be a candidate.

Rwanda has some of the smallest, and in some senses most efficient, government agencies in the world. The core functions of central government are carried out by some 500 staff, of which only 120 work in the finance ministry. The planning and budgeting functions in Rwanda are both located in the finance ministry, under separate departments. However, even though the functions planning instruments and procedures have been developed, which are complex to administer, and are not well integrated with the budget process.

In contrast, the METE has little practical influence on resource allocation, while the budget itself is essentially prepared on an annual basis. There is a strong case for refocusing and streamlining the planning process on the evaluation of high-level strategic issues, with a medium- to long-term time horizon, and monitoring progress in achieving the millennium development goals (Meds) and other government priorities.

At the same time, the METE could be developed as the core instrument of medium-term policy- making, and in setting priorities for economic development and resource allocation. The budget and planning departments of the finance ministry could be merged, to ensure that planning and budgeting are seen as two sides of the same coin rather than as competing policy frameworks.

In all countries, whatever the institutional arrangements for planning/budgeting may be, it is important that an effective mechanism

for coordinating the budget process and the planning process be plopped. The METE can create a useful bridge between planning and budgeting, as it has done in effect in most COED countries, but needs to evolve from a simple macro-fiscal framework into a comprehensive process that, in effect, replaces the annual budget. Most developing countries have not yet achieved such a state of the art.

In conclusion, I believe that: (I) every developing country needs to develop its own, unique framework for planning and budgeting that matches its circumstances and political environment; national development plans (often designated as poverty reduction strategies), PIPS and separate planning ministries or agencies make sense in environments where the development challenges are exceptionally large, but not to the exclusion of Metes and other modern techniques of budgeting, which need to be developed in parallel; and (iii) over time, "shrinking the P" makes sense and, indeed, is a natural development, but the pace at which this happens will vary enormously from country to country. Development Policymaking...

Key Concepts I This chapter presents a great deal of information about development planning and the role played by the state versus the market. Major topics include:  The role and limitations of planning as practiced by less developed countries, including a discussion of different types of planning models.  The problems of economic transition to competitive free market economies. A discussion of what the government can do best, in terms of correcting market failures, and what the market can do best. Economic planning is defined as a governmental attempt to coordinate economic decision making and influence economic outcomes. An economic plan is defined as a set

of quantitative economic targets to be reached by a certain date using a stated strategy. Most developing countries have adopted some degree of economic planning with the aim of spurring development. The Justification for developing a market plan includes the following points:  The need to correct for market failures. Manpower resources. * The value of a plan in overcoming sectional and traditional attitudes.  An increase in the ability to qualify for foreign aid.

Planning in stages is emphasized in terms of employing aggregate, sector, and project planning as components of the entire economic plan. The three types of planning models described are:  Applied macroeconomic growth models based on Arians of the Harrow-Dammar model, with reference to the two-gap model introduced in Chapter 15.  Input-output models.  Project appraisal, with reference to including relevant objectives, shadow prices, social discount rates, and decision criteria. The text aims to provide a feel for the planning process and demonstrate how the three different types of models can be interrelated. The crisis in planning is discussed, whereby development planning in practice has often not realized its objectives.

The fact that plan designs are often overambitious while vague on specific policies, that data are often insufficient or unreliable, that unanticipated shocks can wreak havoc on a development plan, that the planning agency is often weak and ineffective, and that countries lack the political will to carry out otherwise sound plans are all implicated in this crisis. Four examples are used to demonstrate how government policy often increases the divergence between private and social valuation:  Factor prices, choice of technique, and employment creation.  Rural-urban imbalance and migration.  Demand for education and the employment

problem.  Structure of the economy. Market liberalizing has gained in importance relative to administrative planning nice the early sass.

Many Olds have attempted to reduce the role of the public sector, eliminate distortions in interest rates, wages, and prices, and encourage growth in the private sector. Development problems have been increasingly viewed (especially by aid agencies) as being exacerbated by OLD planning policies, rather than helped by them. The importance of government failure as well as market failure is stressed, and Table 16. 1 presents a list of problems with government intervention in Olds. At the same time, the text points out that it is hard to make across the board judgments about the relative merit of public versus private economic activity because, for example, some public companies are highly efficient and some are not.

In the context of converting to a more market based economy, the text presents a broad range of institutional and cultural requirements for the operation of effective private markets (14 requirements) and for market-facilitating legal and economic practices (1 1 requirements). Evidence presented suggests that liberalizing has helped but has run into limitations in many Olds because of market failures, or areas where the market is lacking: There tends to be a lack of information and/or considerable uncertainty, both of which hamper effective decision making. Effective competition is lacking.  Externalities exist.  Capital formation is a problem, as well as a great need.  Income distribution is often not helped by the market.  Structural change is required and the government may need to intervene in key sectors.

The "Washington Consensus" was in vogue for the sass and much of the time the

"Santiago Consensus" has become more influential. This view has a larger role for the government, but retains many of the Washington Consensus' market- eased approach. The next section presents a discussion of the emerging field of development political economy. These theories generally begin with the assumption that people are ultimately self-interested, and so it may be instructive to consider who gains and who loses when a given reform is undertaken. This literature also includes the concept of path dependency, whereby past actions and conditions affect future situations.

Examples of path dependency were encountered in earlier chapters of the text: poverty traps (chapter 5) and child labor traps (chapter 9). Mixed empirical evidence is presented regarding whether democracy or autocracy leads to faster economic growth. More recent trends in governance are addressed, including corruption and reforms designed to tackle it, decentralization, and participation in the development process. In sum, the text emphasizes that the public and private sectors need to cooperate to figure out where government can best play a role, and in which areas the private market should be left to itself. The success of South Korea and Taiwan are cited as examples of proactive government industrial policy.

Low- income Olds may require more planning because they lack markets and require more structural change, while middle and upper income Olds should be moving towards more market based economic activity. The importance of project planning hat is project planning? Planning entails a series of decisions, from general and strategic decisions to specific operational ones, based on the gathering and analysis of information. The field of planning encompasses a broad range of different approaches, including strategic planning,

program planning and operational planning. Project planning is a form of operational planning, whereby the consecutive steps to implement the project activities are carefully mapped out, based on an analysis of relevant information and linked to the program in which the project takes place and to which it should contribute.

Essentially, project planning involves establishing the scope, aims and objectives of a project, the way in which the project will be performed, the roles and responsibilities of those involved, and the time and cost estimates. It answers questions such as: * what are the project objectives? * what will be done to reach the project objective? How it will be done? * who will do it? * when it will be done? The output of the project planning process is a project plan that will be used by the project manager(s) to implement the activities, monitor the progress and make decisions Why is project planning important? Project planning is essential for a project's success, and as such is often considered the most important phase in project management.

By establishing the scope, aims and objectives of a project and mapping out the procedures, tasks, roles and responsibilities, project planning helps to reduce the main pitfalls leading to project Not addressing the key determinants of the problem * Not choosing the best intervention strategy to address the problem determinants (e. G. , choosing solutions that are not supported by evidence, or reinventing the wheel) * Choosing interventions that are not sufficiently adapted to the target group or context * Poor quality of implementation * Not performing the right kind of evaluation (e. G. , wrong evaluation level

or poor evaluation methodology) * Insufficient dissemination (e. G. Poor visibility of the project, or not enough sustainability of the results).

On the other hand, establishing he scope, tasks, schedules, risks, quality and staffing needs helps project team members to understand their responsibilities and expectations. As such, the effort spent in planning can save countless hours of confusion and re-work in the subsequent phases. The time spent properly planning will result in reduced cost and duration, and increased quality over the life of the project. Who should be involved in the planning process? The involvement of internal and external stakeholders from the start of the project is critical to achieving optimal results. Stakeholders are those people who hold a stake n the project - they are people who are interested by the project's outcome. Anyone who might be affected by the project could be regarded as a stakeholder.

It is important to identify your stakeholders so that you can understand their points of view, and get an idea of the pressure they will try to exert on your project. Failure to involve stakeholders may lead to decisions being overruled, delayed, challenged, or questioned afterwards. Project planners must therefore identify the key stakeholders and consider their roles from the outset. Key stakeholders may include  the project team partners  sponsors politicians and decision makers  representatives from the target community or target group  the media, the scientific community, civil society group, etc... To identify stakeholders and manage their involvement in the project, it is useful to draw up a project organization chart.

This is a simple graphical illustration of who's involved in the project and where they fit

in the overall organizational plan. A project organization chart is created by: Writing down the names of everyone who's involved in the project.  Grouping them according to their roles-?project board members, stakeholders, and project team embers. In most cases, you will need to split the stakeholders' group further into the various stakeholder categories.  Charting the results graphically, with project board at the top, the project team in the middle, and stakeholders radiating out from them. If some of the stakeholders report to the project board members, it may be worth indicating this on the chart.

Deliverables from the project planning process There are three major deliverables from the project planning process  The project definition describes all aspects of the project, such as the scope, objectives, and method. Once approved by the relevant stakeholders, it becomes the basis for the work to be performed.  The project work plan provides the step-by-step instructions for constructing project deliverables and reaching outcomes.  manage the project. It will include sections on how the team will manage issues, scope change, risk, quality, communication, etc. It will also make use of the project organization chart.

An important note - variety of way to manage a project: There are many views on project management, and many questions will never have one single answer (a great example is should you ever re-baseline a project plan? ). While there is broad agreement across continents on the principles of (good) project management, there will always be debate on some of what follows. Project management (PM) is not a binary science; it's a management science - qualities like experience and Judgment are of huge value in this

environment. This article describes traditional methods which are still absolutely fine in certain industries and you actually do some of what follows.

Type of project and its effect on the PM process / method There are many types of projects, e. G. Building a new bridge, computer system or an element of an internal change programmer and the type' and even size of project will often have an impact on aspects of the project management methods; sadly, there is no 'one size fits all' teeth for planning all projects; there are though, fundamentals or principles that are key to planning all projects successfully. Key terminology: In order to conduct a discussion successfully, we need a common understanding of key terms: requirements : an agreed and structured set of statements that define the functions, operations or capabilities that the project 'solution' must perform  deliverable : this is what the project leaves behind (e. G. New bridge or computer system) - often it needs to be formally accepted and always needs to be tested for robustness and compliance with requirements.

Elution : very similar to the deliverable but in truth this is the emerging 'shaping' or specification of the deliverable to meet the need or requirement behind the project, in other words the development of the optimum solution that meets the 'business' need (and requirements).  scope - (aka horoscope) the origins of this term stems from horoscope or scope of work - the original use of the term focused more on the collective activity (work) to be undertaken to deliver a project. Today many people in business use this term more broadly (some would say incorrectly), encompassing

for example the project's aims or objectives. Its original meaning was a collective term referring to the total sum of all activity required to be performed on a project.

Plan - In truth there are many interpretations of this term - to some it means a 'schedule' of tasks - to others it includes definition of the processes that will be employed to execute work streams of the project. The format can take many shapes, but we believe that, ideally, a project plan should contain: a clear definition of the project objectives, the main deliverable; a validated timeline of the key activities to et all schedule targets; the organizational responsibilities of all key parties involved in specifying, developing or reviewing all the outputs or deliverables; an analyses statement of the resources and skills required to perform all work in the plan (this will be by resource provider). It can also contain many other elements, for example, the quality plan, and risk management plan.

Top What is the main responsibility of the project management function? The term "project management function" clearly includes the project manager, and in some businesses, will also include other project staff, such as planners, and support staff s required. In short, their collective responsibility is to:  facilitate the development an achievable plan that demonstrates the activities and resources required to deliver the project within all key targets and constraints, as agreed with customers and key stakeholders  communicate and share the plan clearly and regularly with all members of the project team, and  assess status against the plan and ensure corrective actions are implemented when necessary.

Top What are the objectives during the

planning phase? They are to define the project, and then to develop and validate a plan to deliver the customer. What do we mean by validate? It is to model and validate, for example, that: all significant tasks are identified and scheduled to meet the timescales needs and targets  all major dependencies are recognized and reflected in the plan  all resources (types and required quantities) are defined and the resulting resource requirement is fully analyses and achievable (including resource provider commitment - this is absolutely key), and  risks have been identified and the associated mitigation activities are included in the plan.

Top Breaking down the planning task: define the project and then plan the project All rejects should follow a lifestyle - the major purpose of the lifestyle is to ensure that we bring discipline and in particular the correct order to project work (to avoid nugatory effort or unwanted re-work) - the lifestyle will split the project into major stages / phases. The start and / or completion of each stage should be aligned to major points of commitment within the project lifestyle, e. G. To the delivery strategy, or the solution strategy or design. The first and most important phase in every project is always the 'definition and planning' phase. To plan a project successfully we must do two major things: 1. Fine the project: need and objectives; determine and confirm the delivery strategy; and make strategic decisions regarding the solution (to the need), and then, only once we have validated these decisions with the appropriate stakeholders 2. Plan the delivery of the project in detail - using either traditional or Agile methods.

The above tasks do not need to happen completely sequentially, but there are obvious relationships between them that will influence sequencing. In short, we need to do the above as effectively and efficiently as possible, without bringing major risk to the project by not conducting his activity itself in a disciplined manner or by not allowing enough time and resource to conduct these tasks and share (confirm) the results with the appropriate stakeholders.

Top An Integrated Plan It is fundamentally useful if the analysis of resource requirements is strictly aligned to or driven by the schedule of activities - in the past this was often referred to as an integrated planning process - another way of putting this is that ignoring this principle is in itself a significant risk to any project, which happens when people attempt to 'shortcut' the real planning work on projects, often for the wrong reasons ND typically with consequences that can be measured in both cost and time. Top Organization, roles and responsibilities Within the planning process, it is also fundamentally important to define the responsibilities (not Just the roles) of all key parties relative to the plan - not doing so to a level of detail that results in clarity is a major source of issues on projects. Top Responsibilities of Governance A task that relates to organization, is that of defining and communicating the Governance structure. This should define all roles and authorities in relation to governance of the project.

Key events (such as formalization of the project strategy) should be examined against the governance structure, to ensure that the right parties are responsible for and involved in

key planning decisions. This structure should also provide the natural route for escalating and managing issues - schedule. Top Major Task 1 - define what the project is intended to a) achieve and b) deliver All projects start out as an idea, opportunity or need - an idea to improve or take advantage of something (e. G. A new market) or a need, for example to replace, upgrade or introduce something (e. G. A road or a system). In short, ideas can be explored or developed, by studies etc, and subsequently confirmed (approved and committed to) by a business case or equivalent, assuming the results of studies etc are positive and feasible.

Where we have a business case it should contain much of the vital definition of the project, and may also address sufficient of the delivery strategy in order to validate the claims made in the business case relating to the financial return (or benefits) that the investment (business case) will deliver. Top Goal, Objectives and Benefits: All projects that include change or business improvement, should have explicitly dated and formalized goals, objectives and planned benefits. These should be captured, using simple business language, and shared with and validated by all appropriate stakeholders (subject to the governance structure of the project).

The sponsor and project manager should expect iteration or even conflict to occur while engaged in this task - this is the time to understand and to rationalist the project's objectives etc until an optimized set can be supported by Lethe key stakeholders. Moving forward with this area either untested or with unresolved issues will, at best, cost far more to resolve downstream

- at worst it can have a much larger impact. Key note: the objectives of the project are what the project is looking to achieve for the owning or sponsoring organization; it is not the deliverable (I. E. Produce a new system) that is simply the deliverable or the chosen solution . Moving on, the other key input to the business case from this phase are the planned benefits that the project will deliver.

This will determine whether the project is a success or otherwise, and therefore it must be formalized within the business case. From that point onwards there should be a specific work stream to optimism, plan for and manage (realize through structure and clear accountability) the target benefits associated with the project (this is a whole area in itself and needs to be an integral part of the project from start to end - in truth this is not a practice you see widely today although many organizations are trying to move in this direction). Top Key requirements: At this stage, the project team should start to also formalism the key requirements of the project.

Key requirements should be limited to those, without which, the deliverable would be useless to the users / owner. The goal must be to not include 'nice to haves' at this stage - and therefore great discipline may need to be applied to this activity. Top Major Task 2 - develop and validate the delivery plan This can comprise many elements, depending upon the project type and key project decisions, e. G. Make or buy etc. In truth, the delivery plan should only be produced once the

delivery strategy has been developed. In some environments, this should be formally approved by the appropriate authority. It must also be examined rigorously from the perspective of risk . Key strategic project decisions are the most important