Indicative planning in developing countries

Indicative planning which involves the establishment of sectoral targets which are not compulsory for the private sector and are embedded in macroeconomic projections that pertain to a period of several years. Indicative planning has been widely practiced in developing countries during the post war period. At the same time, the review of the experience of those countries indicates that it failedd to have favourable economic effects while utilizing scarce administrative resources. That lack of success of planning, together with the growing understanding of the importance of incentives and markets, have contributed to the decline of planning in the 1980s. THe question remains, then, what should the role of the public sector in developing countries be? Available evidence indicates the superiority of private enterprises over public enterprises. Nevertheless there is evidence that infrastructural investments favourably affect private investment. At the same time, such investments should be subject to rigorous project evaluation so that appropriate choices may be made among alternative investments. Thus the usefullness of planning re-emerges in the confines of public sector investment in infrastructure.