National development planning continues to be a dominant policy instrument in many low-income and emerging market economies. Similarly, public investment plans (PIPs), which were in vogue in the 1970s, then fell from grace as theories of economic development based on capital accumulation lost influence, are now fashionable once more. What explains these developments? Why is planning deemed useful and relevant for developing countries, but has become outmoded in more advanced countries
In addition, wide-ranging discussions of government policies, with varying degrees of openness, take place either before general elections (in countries with single party governments) or immediately after elections (as part of the process of forming a coalition government). Comprehensive reviews of expenditure policies, including systematic analysis of their impact and performance, are also carried out at regular intervals in Australia, Canada, the Netherlands, New Zealand, the United Kingdom and other advanced countries. A few countries (for example, New Zealand, Norway and the U.K.) have developed sophisticated tools for managing capital assets. These approaches are deemed more flexible and effective than traditional five-year development plans.
Such elaborate approaches to policy-making are not yet possible in developing countries, most of which do not have comprehensive MTEFs, mechanisms 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?
It would be argued that there are two key issues on the planning/budgeting relationship which need to be clearly distinguished. First, how prominent a role should