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National Development Plan: Formality or Unbiased Need for National Development?

05/12/2019 Drukāt šo rakstu

Valērijs Stūris, Head of Policy Planning Projects and Analytical Processes of the State Audit Office of Latvia

In his recent public comment[1], “Prudentia” Partner Ģirts Rungainis, whose opinion not only economic experts listen to, has described the National Development Plan (hereinafter referred to as NDP) as a technical document, which only maintains the hygiene for Latvia as an open and small economy in the context of the challenges identified by the European Union.

Perhaps some of the criticism is justified because the presence of major “river reversing and canal digging” projects in such documents really makes one smile. However, one definitely cannot agree with underestimating or reducing the value of NDP. Perhaps one has made mistakes in the design process by applying an overly broad approach to inclusive planning, which means accepting suggestions from partners without evaluating them critically. However, it is essential even for a small economy to take care of the efficiency of the investments over a particular period. For example, when investing resources in the projects related to the development of rail infrastructure, it would not be useful and justified to change the investment vector rapidly in the next phase by, let us say, developing road transport infrastructure. Therefore, a certain amount of self-discipline and “diet” is of great importance, because otherwise we can get too broad infrastructure, whose maintenance in “good shape” will require a lot of investment into applying “fitness”. At the same time, one requires highlighting some aspects that could enhance its quality given the upcoming completion of the NDP drafting and its consideration by the Cabinet of Ministers.

The National Development Plan is a shared vision and conceptualisation of the development of the community, experts, and governmental institutions that shows where we are going and how we plan to achieve the goals set. Therefore, one requires ensuring meaningful involvement of all three interest groups, while maintaining a certain guiding principle for the common vision. The plan must be linked to state budget funding, but its monitoring mechanism should ensure succession of government work. It should serve as a guide for politicians and the Cabinet of Ministers in making decisions that affect entire population of Latvia and influence the future of our country every day. These and other aspects are not fiction but statutory provisions that should be strictly adhered to in the next stages of plan implementation as well. The Development Planning System Law defines the NDP as the key document that the Cabinet of Ministers elaborates and the Saeima adopts. It is the top medium-term development-planning document hierarchically. The plan determines and affects:

  • National development goals;
  • Priorities (including territorial development priorities);
  • Deliverables (including at macro level) and policy outcomes;
  • Lines of action for each priority;
  • Responsible institutions;
  • The content to be included in the development planning documents regulating the European Union policy instruments and foreign financial assistance;
  • The coherence of policy guidance documents (for example, Declaration on the Intended Activities of the Cabinet of Ministers) with the National Development Plan or proposals to revise it.

Why does Latvia need planning? At the scale of our economy and total population, one might replace planning by some kind of monitoring and rapid response process to keep up with the challenges of the global economy. Undeniably, there are areas where over-planning could be an obstacle, for instance, information technology evolves much faster than the best plans for the future. Yet, there are several reasons why market economies cannot abandon planning completely and rely on “quickness of the hand”. When implementing their planning process, countries seek to prevent market economy-caused failures that affect the fair and equitable redistribution of resources among social groups. The issue of fair distribution of the common good is one of the most pressing issues in contemporary society of Latvia. One cannot ignore and replace it with “rapid response units” because social processes and their vector changes have a high degree of inertia. At the same time, one needs planning to ensure the continued investment of public resources by preventing their inefficient and uneconomic use. As I have already mentioned, one manages to introduce changes in certain areas during one budget year very rarely. Reforms require years of targeted and cumulative change, including investment. In such cases, high-quality planning is the only tool that will enable efficient use of the investment in the long run.

The institutions responsible for planning and the government can benefit from both options of the planning process if they observe the following order in the process of drafting the NDP:

  • A fair and comprehensive assessment of the development of the country as a whole to date by evaluating both internal and external factors and the results achieved. The State Audit Office has established in the audit[2] that one transfers only a part of indicators to hierarchically lower planning documents. The State Audit Office of Latvia acknowledged that, at any stage of budget formation, one does not evaluate the information and provide it to the Saeima whether and to what extent one plans to achieve the goals set in development planning documents (for example, National Development Plan) with the annual and medium-term budget.
  • Investment and responsibility planning should be tailored to economic developments and development challenges. Unfortunately, during the audit, the State Audit Office of Latvia has found that the budgeting process and documents do not provide confidence that the budget is being prepared for the achievement of long-term and medium-term national development goals.
  • Identify clear, specific, and understandable policies and capacities to implement what has been stipulated, following the outcomes and changes in the country.

As already mentioned, the nature of NDP elaboration can also have an impact on its quality, credibility, validity, vision, and its effect on the practical actions of government institutions. There are two models for developing NDPs, inclusive planning or directive planning. Usually, there are no “pure” models, as process managers combine both approaches in the working process to achieve the best possible result. Exaggerations in the use of either model can affect the credibility of the plan. One must stress simultaneously that the uncritical use of the inclusive planning approach is currently the biggest threat, which can reduce the clarity and unambiguity of policy choices significantly by creating a situation where any new initiative can always be based on what has already been defined in the NDP.

If one does not assess the national development as a whole fairly, one does not plan investment according to challenges, responsibilities and the deliverables are unclear, and one has not defined policy choices clearly, the credibility of the NDP can be called into question easily. On the other hand, exaggerated use of any practical planning method can transform the NDP into a document that satisfies everyone but does not solve anything. At the same time, one should also note that planning should not turn from passion into obsession.

[1] http://www.la.lv/par-prioritatem-un-elastigumu

[2] http://www.lrvk.gov.lv/uploads/reviziju-zinojumi/2016/2.4.1-7_2016/Revizijas%20zinojums%20ievieto%C5%A1anai%20VK%20m%C4%81jaslap%C4%81_17%2001%202018.pdf

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