Introduction: New Mandates

In September 2015, as part of the 2030 Agenda for Sustainable Development, the Member States of the United Nations embraced seventeen ‘sustainable development goals’ (SDGs) and pledged to attain 169 distinct targets embodied in those goals.Footnote 1 Two months earlier, a range of domestic and international policy actions that would help countries develop sustainably and attain the goals were agreed in the 134 paragraphs of the Addis Ababa Action Agenda of the Third International Conference on Financing for Development.Footnote 2 Additional obligations were agreed in December in the Paris Agreement on Climate Change.Footnote 3 As a result, the scope, complexity and interrelatedness of the policy actions that governments were expected to undertake became staggering.

The guidance that the UN Member States gave themselves on how to go about simultaneously implementing the Addis, Paris and 2030 Agendas was very general: they should adopt a ‘holistic’ approach to policymaking for sustainable development and ‘leave no one behind’. The Addis Agenda gave voice to the holistic approach by calling on governments to adopt ‘sustainable development strategies’ and ‘integrated national financing frameworks’.Footnote 4 Neither term was defined in these political declarations.Footnote 5

The national policymaker was thus challenged to think about the economy as a whole and its social, economic and environmental aspects, but also think about its moving, interacting parts and its external interactions, about its prospects over time and its impact on various population groups. In addition, the three agreements raised expectations about a favourable international economic context that UN Member States pledged to deliver. While multiple aspects of that international context were identified, how, exactly, to deliver them was not specified. National planners thus needed to take account of their uncertain delivery. In all, responding to the challenge required some sort of economy-wide assessment and policy planning.

Rediscovering Integrated National Planning in a More Challenging Context

The traditional advice to governments promoting their countries’ development has been to elaborate a set of priority targets and means to achieve them through a politically endorsed development plan. The effort has traditionally involved medium-term ‘indicative’ planning (e.g. 5-year development plans), which should inform medium-term fiscal strategies and annual government budgets, as well as shape policies to influence activity in the non-state sector of the economy. Data limitations may perforce limit the scope of application of development planning tools, especially in the lowest income countries, but they still can be credible bases for policy formulation and debate within governments and among stakeholders.Footnote 6

That advice is still germane today. Governments should have always asked the questions posed by the factors to be included in sustainable development strategies and plans, but the comprehensiveness of the three agendas makes the questions especially salient today. While the Millennium Development Goals had targeted activities that were primarily seen as government responsibilities (hunger, poverty, education, gender equality, etc.), the new agenda targets these plus additional activities that will mainly be delivered by actions in the private sector, including investment related to climate change, to sustainable patterns of consumption and production, and to providing productive employment and decent work.

Not all governments will take up the sustainable development challenge. But the governments that do will need to better take account of the mutual interaction of economic, social and environmental developments and policies that impact their societies; that is, they will need holistic development planning.

A Historical Sketch of Development Planning

The search for coherent and effective policymaking for development has been going on for more than half a century, albeit originally within a narrower concept of ‘economic development’. In the early decades after the Second World War, as developing countries and their developed country partners planned activities to boost development, their plans and policies focused on structural economic transformation and growth with a view to increasing output and income per capita, modernizing agriculture, raising the industrial share of economic activity, and meeting the growing demand for essential public services and investment (United Nations 1965). Development economists who were assisting policymakers built quantitative models to trace the interlinkages of economic sectors, the sourcing of inputs to produce the outputs, the opportunities and challenges in international trade, and the sustainability of fiscal and external payments imbalances. Domestic financial systems were rudimentary in many countries and there was little international private finance for development, and thus most large-scale investment—uniformly so for infrastructure—was heavily underwritten by developing country governments in cooperation with official partners. Development economists deepened the methodology for how to best make these investment decisions.Footnote 7

The early development plans and the economic models on which they were based thus focused on changing the ‘real’ economy of industry, farms, the services sector and the government itself. The government was responsible for efficiently mobilizing its own fiscal resources and deploying them effectively, but this by itself was insufficient as the goal of accelerating economic growth required a higher rate of investment which in turn required more savings than were available from the public sector even under reasonable fiscal policies. As international financial markets were at an early stage of development, filling the gap required official financial assistance, on both concessional and non-concessional terms. This, then, became the global model for accelerating development (United Nations 1966).

To assist developing country governments in these endeavours, the United Nations established the Committee for Development Planning (CDP) in 1965 as a technical body under the Economic and Social Council (ECOSOC) to help develop and promote national development planning tools. Chaired first by Jan Tinbergen, who shared the first Nobel Memorial Prize in Economics, the CDP also advised the UN Secretariat, which employed large-scale computer models to produce coherent projections of the main dimensions of economic growth in groups of countries. Some of these projections were then reflected in agreed decade-long growth targets, as in the International Development Strategy for the Second United Nations Development Decade.Footnote 8 In the same era, the World Bank encouraged development of multi-sector planning models for programming public investment activities, including its own lending to developing countries.Footnote 9 And the International Monetary Fund developed its own formal model for macroeconomic monitoring to guide the support it offered countries during periods of adjustment of unsustainable balance-of-payments situations.Footnote 10

National development planning not only led to direct government investment decisions, but also to the adoption of various incentives (including subsidized credit directed to specific industries) and disincentives (including restrictive licensing) to private activity. Governments often used state-owned commercial banks and development banks to guide investment into favoured sectors and also recruited foreign direct investors to operate in priority sectors. In all, the government was the primary economic actor and as such, monitoring financial flows was largely a matter of monitoring government.

Over time, however, these planning tools were increasingly seen to be too limited, as some key dimensions of development were not being captured. Thus, the International Labour Organization early pioneered addressing employment and income distribution considerations as well as growth in ‘social accounting matrices’ and emphasized the need to satisfy a set of ‘basic needs’ of the people of developing countries.Footnote 11

At the same time, the spread of the more laissez-faire approach to development, which began in the 1980s but became mainstream by the late 1990s, drew attention away from the further improvement of economy-wide modelling and development planning tools as such. A sign of this was the decision of the UN to rename the CDP as the Committee for Development Policy in 1998.Footnote 12 But even if planning per se was deemphasized, it continued in many developing countries, as the analytical problems planning sought to address never disappeared.

It was also increasingly appreciated that the more market-oriented approach to development required a well-functioning financial sector, leading by the 1990s to an increased policy focus at the major international development institutions on strategies for financial sector development and on narrowing the role of public financial institutions.Footnote 13 Ultimately, the focus extended to how to sustainably and equitably make financial services accessible to the poor (United Nations 2006). In all, the need for a more comprehensive tracking of financial flows became evident.

Factors Bearing on Integrated National Planning Today

Achieving an integrated—as well as well-informed—sustainable development strategy or plan is a challenge. National authorities need to impose coherence on the specific interests of different ministries and the government, legislative, civil society and business stakeholders at central, regional and local levels. That is, they need to govern. A strong central authority should not only forge coherent policy, but it should do so in a way that imposes on these contending political forces the priorities that emerge from national political processes. Policy leadership of this sort requires a vision. A ‘sustainable development strategy’ can help give concrete shape to that vision, and an ‘integrated national financing framework’ can then help guide implementation of the strategy.

Because resources are always limited, formulation of such a strategy and financing framework forces the authorities to prioritize goals, including from among the SDGs. It is just not possible to pursue them all simultaneously with the same priority. Governments will then translate their priorities into public spending programmes and policies to influence private activity, including on investment. Governments will also need to think through preferred ways to finance the public actions in a sustainable and fair manner, and they will need to consider how to relieve bottlenecks and encourage development of the financial sector so that it best performs its financial intermediation function while making access to financial services more inclusive. Governments will also need to decide upon the role and content of foreign financing of the national development programme.

There is also a reason for concern in that the international economic environment of trade and investment flows seems less dynamic and more volatile than before and the increasing occurrence of extreme weather events and other natural disasters has to be taken into account. Thus, in examining possible scenarios for future growth and development, more options that are shaped by untoward events must be considered, and more prudence taken in preparing for possible economic and natural shocks.

This has implications for financial sector development as well. More attention must be paid to reducing risks borne by households and firms, which raises the importance of appropriate development of the insurance sector, which itself helps create a business constituency for risk reduction through prevention.Footnote 14 On the other hand, the private sector typically eschews insuring some risks, such as for natural catastrophes, which then may be taken on by governments.Footnote 15 The new iteration of planning and policy tools perforce needs to give more attention to mitigating and responding to a wide variety of ‘shocks’.

Development Planning and Financing Frameworks Anew

The argument of this article is that the ‘whole of society’ approach of the three international agendas brings a renewed need to focus on systematic development planning. A number of countries have begun to reflect that focus, as have international development agencies.

Actions Governments Are Taking

As part of the intergovernmental monitoring of implementation of the 2030 Sustainable Development Agenda, ECOSOC’s annual High-Level Political Forum invites ‘voluntary national reviews’ (VNRs) from Member States. The 2017 meeting heard 43 VNRs (46 VNRs were presented in 2018). While they do not constitute a proper statistical sampling of countries and while countries may choose to report only the developments on which they take pride, it seemed the VNRs could be informative. The UN Secretariat produced a synthesis report on the 2017 VNRs (United Nations 2017a) and a separate compilation of the main messages from each individual country presentation (United Nations 2017b); it has also posted each individual report online.Footnote 16

A dozen developed country governments submitted VNRs describing efforts to align their national economic, social and environmental strategies with the SDGs. However, as Denmark reported, actions to align national policy goals with the SDGs at home can be taken separately from actions to align external cooperation with the SDGs. To the extent this is a general phenomenon, it will inevitably present challenges as external policy measures that are part of national SDG strategies may not fully cohere with the separate external cooperation strategies. A combined donor SDG strategy for both domestic implementation and external support of the SDGs seems warranted. Thirty-one VNRs were presented by developing countries. Many countries discussed their mechanism for central oversight and coordination of the actions of their ministries and for engagement with legislatures, sub-national governments, civil society and other stakeholders. The governments had mostly already created these mechanisms and were thus now incorporating the SDGs into their national development policy frameworks.Footnote 17 Some countries have gone the next step and linked the new priorities to their budgets. For example, ‘In Belize, the Growth and Sustainable Development Strategy (GSDS), which is the main instrument for achieving the SDGs, has incorporated programme budgeting as a key mechanism to inform the national allocation of resources. Line ministries will align budgets to the GSDS, which contains the national SDG priorities’ (United Nations 2017a: 36).

Systemic Country Diagnostic

One innovation of note by the World Bank Group (WBG) offers a method of inquiry that can help countries shape their development strategies. It was designed for internal Bank use, but might be a valuable addition to national development planning toolboxes. This is the ‘Systemic Country Diagnostic’ (SCD).

The WBG bases the SCD on staff research, the work of partners, and consultations in the client country.Footnote 18 It is meant to inform the drafting of a ‘Country Partnership Framework’ (CPF) to guide the Bank Group’s country assistance programme (World Bank 2014). However, the methodology itself is general. Staff seek to identify ‘critical factors’ affecting the country’s economic growth, the inclusiveness of that growth, and the country’s environmental, social and fiscal sustainability (World Bank 2016). Staff members are encouraged to ‘benchmark’ the country’s performance on multiple dimensions against those of appropriately chosen comparator countries. This would point the staff towards identifying indicators on which the country was advanced or lagging relative to the comparators. That, in turn, would help identify the key constraints and opportunities for accelerating the country towards the goals.Footnote 19

Some attention is given to the methodology of Haussmann et al. (2008a). Although not required, ‘HRV’ is compelling, as it presents a set of questions—indeed, a ‘decision tree’—by which the staff can identify what seem to be the key impediments to the three highlighted dimensions of the country’s development: its economic growth, inclusiveness and sustainability.Footnote 20 The general methodology of sequencing questions based on an understanding of the economic (or political) processes thought to be impeding progress towards the stated goals seems a promising one. And while HRV is built on a neoclassical economic model, it seems amenable as well to one based on behavioural and political economy considerations.

There is nothing inherent in the SCD to keep it within the walls of the World Bank. It could just as well be developed in a country by its own planning ministry or—even better—by independent scholars as at a university in consultation with civil society advocates, organized labour and the business sector, while also in cooperation with the national planning authorities. Such a public SCD could inform national debate on the best paths to sustainable development. By highlighting what lack of coherence costs, such an SCD can also help break down policymaking ‘silos’. By asking what is holding back accelerated sustainable development, it can encourage digging down into more and more detailed levels of analysis.

Development Finance Assessment

Another approach is being taken by the UN Development Programme (UNDP). It is developing a planning tool called the ‘Development Finance Assessment’ (DFA), which would map a country’s ‘financing landscape’ for development.Footnote 21 As the DFA methodology is strengthened, it should aim to track the financial flows to the government, primarily taxation and net borrowing, as well as the financial operations of state-owned enterprises and funds and the so-called quasi-fiscal financial activities of the central bank. It should also map the formal financial system that intermediates private savings into short- and long-term investments so as to identify bottlenecks. It should reflect on the role and size of the insurance sector, both as manager of risk and as a source of ‘patient’ capital for investment. It should include the informal financial system on which the lower-income population often relies.

The DFA should also track the financial relations of the government with foreign governments and international institutions, as well as the net flow of foreign direct investment and the role of foreign players in the domestic financial markets and institutions, including in public–private partnerships. The assessment should take account of the financial relations of overseas citizens with the homeland (e.g. remittances, diaspora bonds) and the charitable activities of foreign and domestic foundations, religious institutions and private households. It should also seek to monitor programmes of corporate social responsibility, distinguishing when they reflect for-profit investment with a charitable dimension or mandatory charity, as through the Bangladesh National Corporate Responsibility Policy for Children (UNDP 2016: 56).

In practice, such comprehensive mappings will often be difficult to produce, especially as regards private financing activity. Nevertheless, private financial flows must be estimated one way or another, to one degree or another. So, too, the assessment should seek to assess policy stances towards private business, taking account without necessarily accepting the views of prominent pro-business authorities, such as the World Bank’s Ease of Doing Business Report and reports of international business entities (e.g. Global Competitiveness Report of the World Economic Forum).

Notwithstanding that it is a work in progress, it seems that DFAs can help developing countries strengthen their national development planning. They can help raise the saliency of bottlenecks in the financial sector and identify areas of inadequate information, as well as underdeveloped services, such as insurance. DFAs should also be able to assess the quality and performance of the donor push for public–private partnerships and assess whether the country is adequately benefiting from such arrangements. DFAs should also help identify risks in the financial system. International regulatory bodies have established standards for various types of financial institutions and markets, although many experts, in particular from developing countries, believe those standards still tolerate too much risk.

Updated Modelling Tools

It will often be difficult for planners to trace the interactions of economic sectors and policies other than with quantitative economic models. Over ten years ago, the United Nations Department of Economic and Social Affairs (UN/DESA), after a hiatus of several decades, returned in cooperation with World Bank, UNDP and national experts to pioneer new technical work in economy-wide modelling techniques for development planning. It has also led to publications drawing on modelling experiences in different regions (Sanchéz et al. 2010; Sanchéz and Vos 2013). Since 2016, projects to strengthen the capacity to use modelling tools have been undertaken in various countries with support from a free-standing collective of expertise, loosely organized around the so-called OPTIMUS Community (Open Tools, Integrated Modelling and Upskilling for Sustainable Development).Footnote 22 OPTIMUS is currently supporting or will start supporting programmes in 2018 in Bolivia, Costa Rica, Mexico, Nicaragua, and Paraguay in Latin America; Cameroon, Ethiopia, Ghana, Senegal and Uganda in Africa; and Mongolia and Vietnam in Asia.Footnote 23

In its current form, OPTIMUS offers three types of analytical tools.Footnote 24 One set of tools would help address how policies and economic shocks affect public budgets, the external sector, sectoral economic activity and employment, poverty and inequality. A second set of tools, called microsimulation, uses household survey and government administrative data as a base for tracing the impact of policies and shocks at the level of households and individuals, allowing conclusions to be drawn, for example, by gender or locality of residence. A third set of tools model physical, technical and economic interlinkages, so as to take account, for example, of how water, land use, food production, energy and atmospheric conditions would interact.

Quantitative planning tools such as these are best thought of as indicative of likely outcomes instead of being highly accurate. They also offer important arguments to break down competition among ministries for additional resources. They also can help understand how one policy change in one sector affects another sector that then affects a third, which feeds back to the second which now affects a fourth and so on. The model traces the net effect, which might not be obvious otherwise.

Conclusion: Development Planning Revival

This article described some promising recent developments in three classes of analytical tools that might assist governments, particularly in developing countries, to manage the complex challenges of the Addis, 2030 and Paris Agendas. The tools can help governments to effectively and fairly mobilize public resources at national level and from abroad and deploy them appropriately. They can also help governments offer appropriate incentives and disincentives to domestic and international private sources of financial resources so that they align themselves better with the goals of sustainable development.

Nevertheless, expectations must be realistic. The tools themselves will not solve the national—let alone, international—political impediments to sustainable development. Also, by their nature, the tools do not address protection of economic and social rights, although they may highlight important areas warranting attention. However, whenever the political situation is amenable, the tools can effectively and efficiently help advance the social, economic and environmental dimensions of sustainable development. When favourable political occasions arise, having appropriate tools can make a significant difference.