Pakistan Institute of Development Economics

PDR

THE PAKISTAN DEVELOPMENT REVIEW 

East and West Pakistan: A Problem in the Political Economy of Regional Planning by Md. Anisur Rahman. Occasional Papers in International Affairs, Number 20. Harvard University Center for International Affairs, July 1968. pp.38.

In this short essay Professor Rahman attempts two things. One, he surveys the various facets of the regional disparity existing between East and West Pakistan and traces the genesis of some of them. In doing so, he improves upon the analysis of others writing on the issue, yet essentially the information and the treatment are not new. Two, he suggests “an approach to a policy for dealing with the problem of regional disparity in the country, one which would impose the least sacrifice to the national objective”. Here he applies his model for “Regional Allocation of Investment” which was published in the February 1963 issue of the Quarterly Journal of Economics. This review will mainly deal with this second part of the essay. The principal argument of Professor Rahman’s model runs as follows: In a short-term plan, investment should be concentrated in the region where productivity of capital, as depicted by a lower marginal capital-output ratio (MCOR), is higher. But in a long-term plan, one should also consider the marginal reinvestment coefficient (MRC) which is the product of marginal rate of saving (MRS) and the reciprocal of MCOR. This is because a region with a higher MCOR may yet have a higher MRC due to a sufficiently higher MRS. In such a case, earlier investment allocation should be concentrated in the region with higher MRC, since the immediate loss of output will be more than offset by the future growth in output from higher reinvestment. But as the terminal date of the plan horizon draws nearer investment has to be shifted towards the region with higher productivity, i.e., lower MCOR, because, after a break-even point, there will not be enough time left for the higher MRC to recover the loss due to lower productivity. Other side conditions of the programming model, such as employment objectives, removal of regional disparity, may prevent full exploitation of the advantage of higher MRC of a region.

A. H. M. Nuruddin Chowdhury

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