Malaysian Development Planning

Abstract

DEVELOPMENT PLANNING has been described as deliberate governmental attempt to co-ordinate economic decision-making over the long-run and to influence, direct and, in some cases, even control the level and growth of a nation's principal economic variables (income, consumption, employment, investment, saving, exports, imports, etc.) in order to achieve a pre-determined set of development objectives.' One set of reasons for planning centres round the operation of the market system. Thus, market prices are often distorted and can result in a misallocation of scarce resources. Another set revolves round the need to have a rallying point for local and foreign interests in eliminating poverty. A development plan is seen to provide this psychological boost for the local population, while to the foreigners it is proof that the country is serious about development. There are basically three types of planning models. First, there are the macro or aggregate models which deal with the entire economy in such aggregate terms as consumption, saving, investment, exports and imports. These are either of the Harrod-Domar type or of a more econometric nature. If capital is assumed to be the crucial constraint to growth, the former can be used to estimate the saving required to achieve a certain target growth-rate for a given marginal productivity of capital. If, on the other hand, the shortage of foreign exchange is the crucial constraint, then the Harrod-Domar model can be used to highlight the role of the foreign sector. Macro econometric models consist of a number of equations with the same number of unknown variables, with the equations representing the basic underlying structural relationships of the economy. The second general type of planning model is the sectoral model, which can in turn be divided into two approaches. The first approach is to divide the entire economy into two or more main sectors with the aim of formulating an overall plan that is based on the co-ordinated activities