Module 1

Thematic area: Fundamentals of Public

Administration and Development Management

Collage of Business and Economics

Department Of Public Administration and Development
Management

Prepared by:
Fetiya Ahmed
Yigedu Ahenafi
 Table of Content
Content Page
1. Introduction to Public Administration
1.1 Course Content
1.2 Chapter one
1.3 Chapter two
1.4 Chapter three
1.5 Chapter Four
1.6 Chapter Five
1.7 Chapter six
References
2. Introduction to Development Management
2.1 Course Content
2.2 Chapter one
2.3 Chapter two
2.4 Chapter Three
2.5 Chapter Four
2.6 Chapter Five
References
3. Project Planning and Management
3.1 chapter one
3.2 chapter two
3.3 chapter three
3.4 chapter four
References
4. Theories and Politics of Development
4.1 4.1 chapter one
4.2 chapter two
4.3 chapter three
4.4 chapter four
4.5 chapter five
4.6 chapter six
References
 Summary
This model is the first model with the first thematic area of Fundamentals of Public
Administration and Development Management which prepared for PADM students.it provide
some general knowledge about the four major course namely Introduction to public
administration, Introduction to Development Management, Project Planning and Management
and Theories and Politics of Development. The objective is to prepare students to tackle learning
guide and support the students for national exit exam.
Course: Introduction to public administration
Code: PADM 2011
Course Credit: 3

Introduction

The course outline is designed to familiarize fresh students with the role of public administration
in the modern society and their administrative systems in the world. As a student of public
administration, you are expected to understand the place of public administration among the
social sciences and its role in the daily life as a citizen, customer, administrator, policy maker,
and any another role being played by us in the society. To analyze and understand the
mechanisms and modus operandi we are facing in this modern world.

The aim is to familiarize students in the discipline of public administration and introduce various
concepts, growth and related challenges in the different societies from different parts of the
world. These concepts, principles, and theory with practical examples from African society help
students to clearly understand the nature, scope and importance of public administration in the
first semester of the program. This understanding of the discipline will help and enable the
student to interpret the rules, procedures, programs, projects and any type of development work
in the world. Hence, this foundation course for the students expected to achieve better
understanding for now and later use them in the specialized courses in the undergraduate
program for the next three years.

Learning Objectives

By the end of the course students should:

 Highlight major historical developments in the theory and practice of public

administration;
 Describe the meaning, nature, and scope (dimensions) of the subject;
  Explain the essences of different theories, concepts, and approaches (thoughts) and
 Identify the fundamental principles, processes, functions and areas or components of
public administration.

CHAPTER ONE: NATURE OF PUBLIC ADMINISTRATION

CHAPTER TWO: EVOLUTION OF PUBLIC ADMINISTRATION: ADMINISTRATIVE
THOUGHTS AND APPROACHES
CHAPTER 3: FUNCTIONS OF PUBLIC ADMINISTRATION
CHAPTER 4: MAJOR AREAS OF PUBLIC ADMINISTRATION
CHAPTER 5: COMPARATIVE PUBLIC ADMINISTRATION
CHAPTER 6: PUBLIC ADMINISTRATION SYSTEM IN ETHIOPIA, BRITAIN, INDIA,
AND FRANCE: COMPARATIVE PERSPECTIVE
 CHAPTER ONE
1. THE NATURE OF PUBLIC ADMINISTRATION
1.1 INTRODUCTION

Every system of public administration is the product of many influences. Its form and content
reflect its historical origin; existing patterns are a composite of practices and procedures of both
ancient and contemporary. As White (1955:13) noted, no administrative system can be well
understood without some knowledge of what it has been, and how it came to be what it is
now. Therefore, when we study public administration, it would be indispensable to look at it
from a historical perspective

The study of Public Administration is strictly related with the very existence and changing
functions of the government. Therefore, public administration must always be seen in the context
of the problems confronting the government.

What were the fundamental causes or factors behind the changes in the functions of the
government? A complex of combination of factors led to the expansion of the role of the state,
and thus of public administration, namely;

(a) Industrialization: the development of industry and the associated growth of towns
(urbanization) led to various socioeconomic problems such as those related to housing,
health, unemployment and so on. These problems were not satisfactorily resolved
through the market system, and thus political demands eventually led to state action.
(b) Social cost: as the scale of commercialization increased, it became apparent that the
activities of one organization or individual could impose extra costs upon the society in
general; for example environmental damage from pollution. Thus, pressure upon the
state both to regulate and to take certain responsibilities upon it became necessary.
(c) Market inadequacies: certain basic facilities that would bring successful economic
growth were not being effectively provided by the private sector. Hence, the state, for
example, took an interest in communications: roads, posts, etc quite on early stage.
(d) Political demands: as a result of many factors like those mentioned above, various
groups organized themselves in order to present their views politically. Those groups
requested an integral and active intervention of the state in their interest and affairs.
Gerald Caiden (1971) has listed the following crucial roles as assumed by public administration
in contemporary societies:
(i) Preservation of the polity
(ii) Maintenance of stability and order
(iii) Institutionalization of socio-economic changes (not haphazardly)
(iv) Management of large-scale commercial services
 (v) Ensuring growth and economic development
(vi) Protection of the weaker section of the society
(vii) Formation of public opinion (working towards public interest)
(viii) Influencing public policies and political trends.

The fact that people need public administration to operate well with the aforementioned and
more other functions enables it to become a key power constituent (element) both in developed
and developing societies alike.

1.2. THE MEANING, SCOPE AND IMPORTANCE OF PUBLIC ADMINISTRATION

Public administration is the management of governmental affairs or issues at all levels or tiers,
national, regional (state), and local. It is the branch of the wider field of administration. There
are slight differences between "administration" and "public administration".
 For Marx (1964:4),"Administration is a determined action taken in pursuit of a
conscious purpose. It is a systematic ordering of affairs and the calculated use of
resources aimed at making those things happen which one wants to happen".
 Pfiffner (1960:3) also defined administrationas "…the organization and direction of
human and material resources to achieve desired ends…getting the work of government
done by coordinating the efforts of the people so that they can work together to
accomplish their set (predetermined) tasks".
 L. D. White (1955:1) explained, "Administration is a process common to all group
effort, public or private, civil or military, large-scale or small scale...
 "
The important elements of administration, according to these definitions, are cooperative effort,
systematic application, and purposefulness.

 "Public administration consists of all those operations with the purpose of the fulfillment
or enforcement of policy", L.D White (1955).
 "Public administration is detailed and systematic application of law", Wilson.
 "Public administration is the fulfillment or enforcement of policy as declared by the
competent authorities…it is law in action, it is the executive side of the government",
Dimock (1937).

There have been also attempt to define public administration with respect to its internal and
external dimensions:
 Internal administration is defined to mean the management of an organization or agency
that involves systems, processes and methods through which needed resources of
personnel, material and technology are used to perform certain prescribed functions.
 External administration on the other hand refers to activities and processes of
administration, which are needed to establish and to activate relationships with agencies
and groups outside the administrative control of an organization to achieve its objectives.

"Public administration is decision-making, planning the work to be done,

formulating objectives and goals, working with the legislative and citizen
organizations to gain public support for government programs, establishing and
revisiting organizations, directing and supervising employees, providing leadership,
providing and receiving communications, determining work methods and
 procedures, appraising performance, exercising controls and other functions
performed by government executives and supervisors.

The immediate objective of the art of public administration is the most efficient and effective
utilization of resources at the disposal of officials and employees.

The role of public administration in various aspects is noted below:

o Basis of the Government: A Government can exist without a legislature or an independent
judiciary. But no Government can exist without administration.
o An instrument for providing services: Public administration is mainly concerned with the
performance of various activities performed by government in the public interest. Felix A.
Nigro aptly remarks, “The real core of administration is the basic service which is performed
for the public”.
o An instrument for implementing policies:Public administration helps workers in
government to effectively implement and monitor government policies. It’s a measure of
effective policy implementation and provides a political dichotomy between
the elected officials and public servants.
o A stabilizing force in society: Public administration is a major force for bringing stability in
society. It has been observed that though government often changes, but violent change is
seldom experienced by administration.
o An instrument of social change and economic development: Public administration’s role
as a change agent is particularly crucial in developing nations. It is expected of the state at
present to work for accelerating socio-economic change and not to be a passive agency to
maintain the status quo.
o Technical Character: The present day government is expected to provide various services
to its population.

1.3 THE ART AND SCIENCE EXPOSITIONS OF PUBLIC

ADMINISTRATION

Public Administration holds two meanings; firstly it stands for the activity of administering
governmental affairs, secondly it is also an academic discipline. The first is definitely an art.
What needs analytical explanation is the science aspect of public administration; i.e. is it, as a
subject of study of governmental affairs, a science?

1.4 PUBLIC ADMINISTRATION vs. PRIVATE ADMINISTRATION

(a) The Political environment: public administration is concerned with the

implementation of decisions made within the political system. In a democratic
system, the policies of the government duly approved by the legislature should
represent the political will of the people, or at least the resultant of the activities of
the various competing political interests in the society. In consequence:
(i) The government creates individual rights and imposes constraints on
individual and group behavior
(ii) The administrator is in frequent contact with his/her clients and his major
concern is with equity and impartiality
(iii) Administrative procedures are built around strict compliance with the law. On
the other hand, private industry is essentially guided by the principles of profit
maximization and doesn't act as an arbiter between conflicting social interests.
 (b) Social costs: public administration decision-making varies from that of private
business in that where private business is primarily concerned with questions of
financial cost and benefit, public administration is intimately concerned with the
concepts of social costs and benefits in addition to those of a mere financial nature.

(c) Public interest: Public administration is often evaluated by the ability to operate in a
manner so as to maximize and integrate the public interest, whereas private business
is evaluated on the basis of profit maximization.

(d) Instability: As a result of operating in a political environment, public administrators

are faced with a much greater turnover of political leadership and consequent
changes in policy than is encountered in private business.
(e) Allocation of responsibilities: the method of allocation of functions in the public
sector is often based more on political considerations than pure test of efficiency, as
it would be done in the private sector.

(f) Functions: Public administration is faced with a much wider variety of functions
than those operating in private business, and also deals with matters, which are the
exclusive jurisdictions of central administration such as defense, and law and order.

(g) Decision criteria: Decision-making in public administration is unlike that of a

private organization whose customers are free to take or leave the organization's
products or services.

1.5 APPROACHES TO THE STUDY OF PUBLIC ADMINISTRATION

There have been different approaches to the study of public administration since 1887, since the
subject was born as a separate academic discipline. Concise reviews of the different approaches
are presented as follows:
1.5.1 HISTORICAL APPROCH
The historical approach is essentially based on the belief that knowledge of history is absolutely
important for an in-depth study of the subject. For a proper understanding of the subject, the
study of public administration of the past particular periods is necessary to link-up with the
present administrative system.
1.5.2 LEGAL APPROCH
Exponents of this approach would like to study public administration as part of law and
concentrate on the formal legal structure and organization of public bodies. Its chief concern has
been with power-its structure and functions. Its main sources are constitutions, codes of laws,
office manuals of rules and regulations, and judicial decisions.
1.5 .3 ISTITUTIONAL APPROACH
This approach tried to establish linkages between the study of public administration and
government institutions. It approached the study of administration through the study of structure,
and functioning of separate institutions of the state such as the executive, legislature,
departments, boards and commissions.

1.5.4 BEHAVIORAL APPROACH

This approach is mainly concerned with the scientific study of human behavior in diverse social
environments. It started as a protest against the traditional, historical, normative and largely
descriptive approaches in the social sciences. In public administration, behavioral study started in
the 1930s with the "Human Relations Movement". For this approach "administrative behavior" is
part of the behavioral sciences and the study of public administration should involve the study of
individual and collective human behavior in administrative situations or settings.
1.5.5 SYSTEMS APPROACH
One of the most significant landmarks in the evolution of organization theory is the development
of general systems concept for organizational analysis. The term "system" has been defined as a
complex whole, a set of connected things or parts. According to this approach in organizational
analysis, an organization can be considered as a social system to be studied in its totality. In
other words, a system is a collection of interrelated parts, which receives inputs and produces
certain results.
1.5.6 STRUCTURAL/FUNCTIONAL APPROACH
The two basic concepts to this approach are structure and function. All social structures exist to
perform certain functions. While functions concern the consequences of patterns of action,
structure refers to the patterns of actions and the resultant institutions of the systems themselves.
1.5.7 ECOLOGICAL APPROACH
Various scholars and administrators have often referred to the need to relate public
administration to the environment in which it functions. The ecological perspective in the study
of PA included such factors as people, institution, scientific technology, social technology,
wishes and ideas, catastrophe and personality.
 Chapter Two
2. Evolution of Public Administration: Administrative Thoughts and Approaches
2.1. Public Administration as a Practice
Public Administration generally means service to the people rendered by a government agency.
It is the result of evolutionary process which can be viewed from two distinct perspectives as an
activity and as a subject of study or intellectual discipline.
2.2ADMINISTRATIVE THOUGHTS (ORGANIZATIONAL THEORIES)
Organization theory has developed rapidly since 1920s, which have much relevance to public
administration. The primary purpose of organization theory as an academic study is to
understand and explain:
(a) Organizational problems as they relate to the structure of public departments, their
interrelationships, coordination, and internal functioning.
(b) How people in organizations behave and how organizations function.
The relevance is particularly apparent to those public sector organizations that are concerned
with the provision of goods and services. However, two important points should be noted in
considering these theories:
(1) Organization theory doesn't exist as a coherent and universally accepted set of concepts.
(2) Organization theory is not traditionally concerned with public administration. It is thus
necessary when applying such theory for public administration to bear in mind that
whilst organizational features may be similar, public administration operates in a much
different institutional setting.
Three broad schools of thoughts to organization or administrative theory may be discerned
namely, "classical" or equally known as "scientific administration", "human relations" or
"behavioral", and "systems" theories.
2.2.1 THE CLASSICAL THEORY
The classical theory of organization is also known as the structural theory or the scientific
administration theory and its foremost proponents were Frederick W. Taylor, Henry Fayol,
Luther Gulick, James Mooney, to mention a few. The most important concern of the classical
theory is the formation of certain universal principles of organization. However, in the most
acceptable presentation, scientific management theory could be fairly seen under the general
category of the classical approach or school.
The following are brief statements of the main features of the classical school or approach to
organization.
Determining objectives: the basic purpose of determining organizational objectives is seen as
being to:
 Establish management priorities
 Indicate key departments and activities
 Provide consistency of human and materials organization with the objectives
Specialization and groupings: the classical theory treats specialization as the basis of
efficiency, and consequently places emphasis on the most effective management groupings of
specialist functions.
Grouping: the approach identifies four relevant factors in grouping:
  Span of control: the classicists consider that one manager is only capable of controlling a
limited number of subordinates.
 Economies of scale: grouping should be made to produce or achieve economies of scale
both from the technical and resources aspects, and from the management aspects.
 Coordination: grouping may be justified and should be operated to achieve coordination
or integration of individual effort
 Unity: key activities that have long-term nature may be grouped under higher management
for direct supervision, to place highly interdependent units under a unified head.
Delegation: the approach believes that delegation defined as "the institutionalized right to make
decisions or give orders on behalf of an organization" should be to the point closest to that of
operation or job to be done and identifies factors relevant to delegation:
Divisionalisation and decentralization: divisionalisation refers to dividing the organization into
units based on such factors as product type, geographical operation,
Specifying responsibility: responsibility is a corollary of authority, the natural consequence of
exercising power.
Line and staff relations: the classical theory emphasized the need for the establishment of line
and staff relationships
Luther Gulick who has been considered as another notable thinker of the classical school,
defined major managerial techniques by an acronym known as "BOSDCORB", each letter
standing for planning, organizing, staffing, directing, coordinating, reporting, and budgeting.
There are, however, certain criticisms made by different commentators as the classical theory has
its own defects. These include:
 Underlying assumptions: the basic classical assumptions have been challenged in that
they oversimplify, and fail to take account of the development of small informal groups
and sub-groups, which may be at odds with the overall organizational goals.
 Problem definition: the classical approach presumes both the importance and the ease
of defining objectives and fails to recognize that in public administration the definition
of such objectives is interwoven with broad political process.
 Means not ends: the approach concentrates on the means whereby objectives may be
achieved, but gives little or no guide to the relevant elements of establishing ends.
2.2.2 THE HUMAN RELATIONS (BEHAVIORAL) THEORY
This theory involves the study of motives and behavior and the development of criteria to help
design an organization that stimulates members to cooperate in achieving organizational aims.
The behavioral approach generally belongs to the neo-classical school of thought, focusing on
the behavioral, humanistic or human relation aspects of administration for which Elton Mayo is
known as the major contributor of the thought.
In practice, the neo-classical (behavioral) approach is concerned with the following:
(a) Needs and wants: the approach involves the study of an individual's wants and needs,
stimulating factors that help to satisfy needs and achieve organizational
Incentives may be defined as "the appeals an organization makes to the personal
values of employees to induce them to accept organizational values
 (b) Supervisory behavior: this is treated as a vital factor in influencing work group
behavior, as
2.2.3 THE SYSTEMS THEORY
In some literatures, we may find systems theory as being one of the theories that are within the
category of the "Modernization School of Thought" along the Contingency Theory and
Management Process Theory, while in some others systems theory is recognized as an
independent school of thought
The systems approach treats organization as an example of a "system", i.e. a set of
interdependent parts forming a whole with the objective of fulfilling some definable function.
All schools of thoughts on organization have developed mainly to explain aspects of
performance and behavior that can be observed. From the point of view of the practicing
administrators, each school is likely to offer useful perspectives and be helpful in revealing past
weaknesses and enabling the establishment of better structure.
2.2.4 THE BUREAUCRACY THEORY
The term "bureaucracy" is a combination of two words; i.e. "bureau" and "cracy". "Bureau"
means an office or organization established to perform certain activities, or it may mean a
government department, while "cracy" denotes a form of governmental rule. In this
consideration, bureaucracy simply means a form of rule or activity exercised/practiced by
governmental offices.
In its literal meaning, "bureaucracy is a system of official rules and ways of doing things that a
government or an organization has, which are complex in nature; or a system of government in
which there are a large number of state officials who are not elected".
The bureaucracy is a circle from which no one can escape. Its hierarchy is a
hierarchy of knowledge. The top entrusts the understanding of detail to the lower
levels, whilst lower levels credit the top with understanding of the general and so all
are mutually deceived".
(a) Institutional meaning: the term "bureaucracy" may refer to government by appointed or
recruited officials as opposed to government by elected representatives. Alternatively, it
may be used to indicate that, although representative government exists, the dominant
role is held by officials.
(b) Activity of officials: in contrast, a definition may be attempted from the aspect of what
officials do or how they behave. In this regard the following interpretations exist;
(I) Derogatory: the synonymous use of "bureaucracy" and "red tape", resulting from
the real and supposed difficulties of dealing with the official environment. This
is however an extremely offensive yet subjective meaning of bureaucracy.
(ii) Regulated system: a regulated administrative system operating through complex
interrelated organs,
(iii) Methodological: a study of methods based on either the first (i) or the second
(ii) points above

2.2.5 THE WEBERIAN MODEL OF BUREAUCRACY

Bureaucracy as an organizational model was first developed systematically by Max Weber, a
distinguished German sociologist in the 19 Th century. According to him, every organization can
be defined as "a structure of activities (means) directed towards the achievement of certain
objectives (ends)". Every organization develops a system of specialization (division of tasks) and
a set of systematic rules and procedures to maximize efficiency.

Weber specified the following structural and behavioral characteristics or conditions that an
organization must possess before properly being called or distinguished as a bureaucracy:
(1) Division of labor: This involves a specified sphere of competence, which has
been marked off as part of a systematic division of labor in the organization,
and job placement is based qualifications and/or special training. The regular
activities required for the purpose of the structure are distributed in fixed ways
as official duties,
(2) Hierarchy: It is the feature of any bureaucratic form of organization. The
organization of offices follows the principles of hierarchy, with a clear
separation between superior and subordinate offices; i.e. each lower office is
under the control and supervision of a higher one. Being a bureaucratic
official constitutes a career, and there is a system of promotion and career
advancement on the basis of seniority or merit, or both,
(3) Rules: Bureaucracy operates in accordance with a consistent system of
abstract rules laid down regarding the performance of official jobs. There is
consistency in the application of the rules to specific cases to avoid personal
favoritism, arbitrariness, or nepotism that would otherwise hinder the function
of an organization,
(4) Rationality: Weber's ideas on efficiency and rationality are closely related to
his ideal (typical) model of bureaucracy. For Weber, bureaucracy is the most
rational known means of achieving imperative control over human beings. For
example, candidates are selected on the basis of technical qualifications,
which will be tested, in the most rational cases, by examinations, or
guaranteed by diplomas certifying technical competence, etc.
Personal whims of the leaders are no longer effective in such a system; there is a clear
d emarcation between personal and official affairs. Rationality is also reflected by
the relatively easier means of calculability of results in the organization,
(5) Impersonality: the bureaucratic form has no place for personal whims,
fancies, or irrational sentiments. Officials are subject to authority only with
respect to their impersonal official obligations,
(6) Rule orientation: rationality and impersonality are mainly achieved through
the formulation of rules and procedures that clearly define official spheres of
authority and conduct, which the employees are supposed to maintain in
discharging their duties. This is to mean that the official is subject to strict and
systematic discipline and control in the conduct of his/her office,
 (7) Neutrality: Bureaucracy is supposed to be apolitical and neutral in its
orientation. It is also value-neutral committed only to the work it is meant to
perform.
The following are among the critics that turned against the advantages of bureaucracy:
(a) People in bureaucracy fulfill merely segmental roles over which they have no control
(b) In consequence, they have little or no opportunity to exercise individual judgment, with
the result that employees feel separated from their work
(c) In order to be effective, bureaucratic personnel must behave consistently and follow
regulations strictly. This automatically limits a bureaucrat's capacity to adapt to
changing circumstances not envisaged by those who drew up the rules
(d) The general rules, which may make for overall efficiency could produce inefficiency
and injustice in individual cases
(e) The impersonal treatment of clients envisaged by Weber is not always operable in
practice as many researches disprove such principles of impartiality.
(f) Weber's view that bureaucrats should not become closely involved in personal relations
with colleagues has undesirable practical effects
(g) The key limit on the efficiency of bureaucratic administration lies on the difficulty of
coping with uncertainty and change, thus bureaucracy rests upon tasks being
convertible into routine.
The Weberian model of bureaucracy is a product of an alien or unfamiliar culture, which is fairly
inadequate for imposition in the developing societies where rapid change is required to bring
about socioeconomic transformation. Hence, the concept of bureaucracy has been also criticized
by writers of the modern time like Riggs as being "the product of a specific historical and
political milieu (setting)". To overcome these shortcomings of the bureaucratic model, Riggs
developed his ecological model of public administration relevant to developing societies.
First of all, it is important not to confuse defects in bureaucracy with defects in public
administration (public administration considered as "large-scale organization"). Defects in
coordination and organization inherent in large-scale organization may apply whether the
organization is bureaucratic or not. In addition, criticism of complexity of organization, the
subordination of individual, and the stifling (suppression) of initiatives must be accepted as
applicable to most large-scale organizations and not merely as characteristic of bureaucracy.

2.3. Public Administration as Academic Discipline

Public Administration as an independent and separate subject of study began in 1887 and the
credit for this goes to Woodrow Wilson. professional publication on public administration dates
from the famous essay of Woodrow Wilson (1887) in title "the study of public administration".
Modern public administration was first taught as part of a training course of public officials. The
subject was largely compiled and taught by generalists, or known as "cameralists", in a
descriptive manner. Initially, civil service recruits had to study law, and gradually public service
training schools started offering courses on administrative law in America and all over Europe.
(i) The development of modern science and technology made an impact on the lives of
the people and the functioning of the government. This is to mean that rapid
 technological development created large-scale social dislocations that made state
intervention imperative and desirable. Hence, scholars came to pay increasing time and
attention to the problems.
(ii) The scientific management movement founded by F.W. Taylor, which began in the
USA towards the end of the 19th century, gave great motivation to the study of public
administration throughout the world. The message of his thesis was that all work
processes are separable into units; the efficiency of each unit can be tested and
improved; the techniques can be extended upwards in every organization, making
efficient and rational.
(iii) The gradual evolution of the concept of welfare state, which decisively shifted the
philosophy of state functions everywhere from the traditional laissez-faire to that of
social welfare. The welfare movement has tremendously enlarged the scope of
governmental functions and administration since public administration has become the
chief instrument of social welfare.
(iv)The movement of government and administrative reform which took place in the
early years of the 19th century in USA to look for remedies of the then problems
envisaged or encountering the civil service. The impact of the reform movement in the
US government permeated American Universities to popularize the study of public
administration.
2.3.1 Paradigm 1: Politics-Administration Dichotomy (1887-1926)
This is the beginning of evolution of public administration as a discipline. The basic theme
during this stage was the advocacy for the separation of politics from administration, popularly
known as the ‘politics-administration dichotomy’. This stage began with the publication of
Woodrow Wilson’s work"The Study of Administration" in 1887, can be called "the era of
politics-administration dichotomy
Another notable event of the period (first paradigm) was the publication of Goodnow's in title
"politics and administration" in 1900, which supported the Wilsonian idea further by
conceptually distinguishing the two functions. According to him, "politics has to do with
policies or expressions of the state will" whereas "administration has to do with the execution
of these policies". Like Wilson, Goodnow also argued for the promotion of public
administration as an independent and separate discipline. He came to be regarded as Father of
American Public Administration’.
With an increasing recognition of the study of public administration in American universities,
Leonard D White (1926) wrote a book known as "Introduction to the Study of Public
Administration", which was recognized as the first textbook on the subject. With its publication,
the subject picked up academic legitimacy, that is, the American universities began to offer
courses of instruction in public administration.This book highlights the politics-administration
dichotomy more clearly.
2.3.2 Paradigm 2: Principles of Administration (1927-1937)
The second period in the history of public administration has as its central theme the Principle of
Administration. The central belief of this period was that there is certain ‘principle’ of
administration, and it is the task of the scholars to discover them and to promote their
application. "Principles of Public Administration" by Willoughby (1927),
 "Principles of Organization" by Mooney and Reiley
  "Creative Experience" by Mary P Follett
 "Industrial and General Management" by Fayol
 "Papers on the Science of Public Administration" by Gulick and Urwick, eds (1937),

2.3.3 Paradigm 3: Period of Challenges (1938-1970)

A. Era of challenges (1938-1948)
The advocates of the principles of administration began soon to be challenged, and the period
from 1938 to 1947 was, indeed, one of continuous and mounding challenge and questioning. In
1938, Chester I. Barnard’s ‘The Function of the Executive’ was published. The book discusses
the broader issues of administration such as formal and informal functions, functional overlay,
organizational environment, equilibrium among organizational units and inducement
contributions.
In this phase of the evolution of public administration, basically, the theoretical concept of public
administration is challenged from two perspectives.
First, a new generation of theorists thought that the dividing line between politics and public
administration was never possible.
Second, the administrative theories that have been published since 1940 criticize administrative
principles. The question arises as to whether there is a universal and ultimate principle in the
administration.
This approach also drew attention to the effect of informal organization in the formal setup, the
phenomenon of leadership and influence, and impact of conflict and cooperation among groups
in the organizational environment.
B. Crisis of Identity (1948 – 1970)
The discipline was in quandary and suffered from the crisis of identity due to the abandonment
of politics-administration dichotomy and the principles of public administration. So the scholars
of public administration reacted to this crisis by reestablishing the linkages of Public
Administration first with Political Science and then with the Management. Due to their second-
class status in the discipline of Political Science, some scholars of Public Administration began
to search for an alternative and they found the same in management which sometimes is called
administrative science. They argued that organization theory was, or should be, the overarching
focus of public administration.‘
As a paradigm, Management provided a focus and not a locus. It offered techniques, often
highly sophisticated techniques, that require expertise and specialization, but in what institutional
setting that expertise should be applied is undefined. Regarding the relative impact of political
science and management on Public Administration, Nicholas Henry has observed that ‗if
political science was profoundly influenced on the evolution and underlying values of public
administration, management was less so. But, in many ways, the impact of management on
public administration was also more positive.
‘Paradigm 4: Public Administration as Public Administration-Independent Discipline
(1970 Onwards)
Couple of factors, complimentary to each other, contributed in this process. The first was the
development of interdisciplinary programs focusing upon policy science. In this regard three
distinct inter theoretical linkages – a) politics-administration union, b) Economics-administration
confluence, and c) organization theory-administration intermixing can be identified. The second
was the emergence of New Public Administration (NPA) an outcome of first Minnowbrook
Conference held in 1968 sponsored by Dwight Waldo which put more emphasis on values
replacing the traditional goals of efficiency and effectiveness.

CHAPTER THREE
THE FUNCTIONS OF PUBLIC ADMINISTRATION

3.1. POSDCORB
Gulick developed a comprehensive, generic theory of organization that emphasized the scientific
method, efficiency, professionalism, structural reform, and executive control. Gulick
summarized the duties of administrators with an acronym; POSDCORB, which stands for
planning, organizing, staffing, directing, coordinating, reporting, and budgeting. POSDCORB
generally fits into the Classical Management movement, being classified as an element of
scientific management. In 1937, social scientists Luther Gulick and L. Urwick (Papers on the
Science of Administration) describe seven “major Activities and duties of any higher authority of
organization”. Since then, the acronym POSDCORB is used to describe the 7 functions of
managers. POSDCORB activities are common to all organizations. POSDCORB gives unity,
certainty, and definiteness and makes the organization more systematic

A. Planning- Planning is preparing today for tomorrow; it is the activity that allows managers
to determine what they want and how to get it. Working out the board outline in which things
need to be done & the methods for doing them to accomplish the purpose that is set for the
organization. Planning is a fundamental property of intelligent behaviour which answer What,
When, Where, Who, How, How much questions.

THE IMPORTANCE OF PLANNING

 It provides purposeful and orderly activities

 It points out the need for future change/ preparing for change
 It answers “what-if” questions
 It provides basis for controlling
 If forces managers see the organization as a system
 It provides the opportunity for obtaining the required resources as well as for a greater
utilization of the available organizational resources
 It provides the base for teamwork/ coordinating efforts
 Developing managers
B. Organizing- The establishment of the formal structure of authority through w/c work
subdivisions are arranged, defined & coordinated for the defined objective of the organization. It
is the act of rearranging elements sequential. It also defined as to place d/t objectives in logical
arrangements for better searching. Anything is commonly considered as organized when it looks
like everything has a correct order or placement.
C. Staffing- The whole personnel function of bringing in & training the staff & maintaining
favourable conditions of work. Staffing is the process of acquiring/recruiting,
deploying/allocating, & retaining a workforce of sufficient quantity & quality to create positive
impacts on the organization’s effectiveness. It includes HR planning to identify the
organizational requirement in terms of numbers of employees & their attributes (knowledge,
skills, experience & abilities) to effectively meet the job requirements.

D. Directing- a process of giving instruction, guiding, counselling, motivating and leading the
staff in an organization in doing work to achieve organizational goals. It is a key managerial
function to be performed by the manager along/beside with planning, organizing, staffing &
controlling. It is a continuous process initiated at top level & flows to the bottom through
organizational hierarchy. From top executive to superior perform the function of directing & it
takes place accordingly wherever superior-subordinate relations exist

E. Coordination- it is the process of interrelating the various entities & processes of the work.
Unifying & harmonizing activities & efforts. Coordination is the synchronization/harmonization
& integration of activities, responsibilities & command control & structures to ensure that the
resources of an organization are used most efficiently in pursuit of specific objectives.

F Reporting- keeping those to whom the executive is responsible as well as subordinates

informed through records, research & inspections/assessments. It is a brief guide to enterprise
reporting. It’s a process of informing the superior about the on-going activities or the outcomes
of the organizational tasks

G. Budgeting- it is the process of creating a plan to spend your money. Creating this spending
plan allows you to determine in advance whether you will have enough money to do the things
you need to do or would like to do and simply balancing your expenses with your income. If
they don’t balance & you spend more than you make, you will have a problem (i.e. budget
deficit). Many people do not realize that they spend more than they earn & slowly sink deeper in
to debt/liability every year. If no enough money, it’s advisable to use this planning process to
prioritize spending & focus on the things that are most important credit.

Generally, POSDCORB view overlooks the fact that d/t agencies are faced with d/t
administrative problems w/c are peculiar/odd to the nature of the services they render & the
functions of they performed. It also takes in to consideration only the common technique (areas)
of the administration within w/c the agency is concerned.

3.2. Public service provision

Public service delivery is more important because it is the major part of the government
functions. Public services- refers to the variety of services the public agencies provide to the
people- this often a vast array/collection of services sometimes very d/t in scope & nature

Delivery- refers to the transferring or giving of something whether it be a letter by a post office
or goods by a firm. Public service delivery- refers to various issues of institutional dependencies
& the complex involvement & interactions of actors & processes in rendering the public goods &
services

Types (areas) of public services

While public services can be categorized in many ways, usually they comprise:

o Protection and justice services (for example: defence, police, judiciary)

o Infrastructure and utility services (for example: roads, highways (main roads) and
waterways (channel); water supply, electricity, gas and other utilities; housing and public
buildings);
o Economic development and fiscal/monetary regulatory services (for example: banking,
finance and investment; exchange rate, interest rate and monetary supply; financial
protection for the poor) and
o Social services (for example: education, health, social insurance; protection against
unemployment; support for aging population groups, orphans, and other services for the
poor)
Various methods & procedures to PSD:

Methods & procedures- refer to the ways, processes & systems through w/c public services
are delivered include:

 Identification of individuals & groups who participate in the process

 The technology & mechanism they use to deliver services
 The systems & processes they use in assessing the effectiveness of their service
delivery
 Reviewing necessary feedback & providing accountability for the effectiveness
Principles of service delivery methods & procedures:

There are several principles that frequently guide the public service delivery. Among the most
notable one is:

1. Equality & equity- maintain equality of treatment opportunity in order to ensure that citizens
do not feel discriminated against & feel that the services are being distributed unfairly &
unequally Eg: Citizens must have equal access to police, judiciary, health, education, etc
services.

2. Efficiency & effectiveness- it is of utmost/extreme importance that gov’t avoids waste &
seeks to attain maximum efficiency in the use of public revenue for developing & delivering
public services. Not only financial, material, human & informational resources but also time
would be considered to provide effective public services

3. Transparency & accountability- public services must be delivered in an open & transparent
way in order that all citizens know what is delivered to whom & at what cost. Access to such
information is one way of ensuring the accountability of those public officials and agencies
involved in the delivery of public services.

4. Public involvement in setting priorities & financing

In most developed countries, general understanding of the need for, and the seeking of,
consensus on the priority and resources to be given to various public services is usually arrived at
through legislative deliberation/reflection. In many developing countries, debate, public
knowledge of and agreement upon the priority for and assignment of resources to public services
is minimal or almost non-existent.

Modalities of public service

There are four major patterns/modes used to render public services

1. Government sectors

2. Public- private partnership (ppp)

3. Private sectors (privatization)

4. NGOs
 1. Government

The purpose of the government is to provide services for "the people. Public services like
health, education, security/protection (internal, social, economic, financial, political,
environmental religious), roads, water, housing, fire protection, etc.

2. Public- private partnership (ppp)

Partnership- an association of two or more people/sectors as a partners, cooperation,
collaboration, or Partnership is a type of business organization in which two
more individual’s pool money, skills, and other resources, and share profit and loss in
accordance with terms of the partnership agreement. PPP refers to a government service
or private business venture which is funded and operated through a partnership of
government and one or more private sector companies. PPP involves a contract between a
public sector authority and a private party, in which the private party provides a public
service or project and assumes substantial financial, technical and operational risk in the
project

There are usually two fundamental drivers for PPPs.

 Firstly, PPPs are claimed to enable the public sector to harness/attach the capability and
efficiencies that the private sector can bring to the delivery of certain facilities and
services traditionally procured and delivered by the public sector.

 Secondly, a PPP is structured so that the public sector body seeking to make a capital
investment does not incur any borrowing. Rather, the PPP borrowing is incurred by the
private sector vehicle implementing the project

Eg of PPP: Hospital building financed & constructed by private developer & leased/rented to
the hospital authority

Objectives of PPP:

1. To reduce public sector borrowing requirement

2. To harness (attach) the expertise & efficiency that private sectors bring to the delivery of
certain facilities & services. I.e. to be cost wise effective & have experts. Think of
privates are more efficient than gov’t
Example of ppp in Ethiopia: Ethiopian Nile irrigation & Drainage project, projects of GTZ
(German agency for technical cooperation) in Ethiopia

NB: most of the time, a common problem with PPP projects is that private investors obtain a rate
of return that is higher than the government’s bond rate, even though most or all of the income
risk associated with the project is borne by the public sector

3) Deregulation of private firms providing services

The government determines the service level and pays the amount specified in the contract, but
leaves decisions about production decisions to the private firm.

Objective/purpose of Privatization:

 To improve the productivity of state enterprises which is typically two to three times
lower than private firms
 To access investment capital and improve service delivery of high cost critical
sectors that impact the economy as a whole
 To reduce the fiscal burden of loss-making firms
 Generally, Transfer of public ownership to private entities was aimed to correct
government failures and to reduce government spending

4. NGOs (non-profit orgs)

Voluntary, charity and other not-for-profit organizations are widely used for providing public
services. They work parallel to the governments, representing the third sector between the public
and the private ones.

 Characteristics of non-profit orgs:

 Institutionalized
 Independent from the government
 Non-commercial organizations, using their profits for their basic activities
 Managed by self-governing bodies and
 Partly run by volunteers
Example of NGOs: A Hope Ethiopia, African Development Aid Association (Ethiopia), Good
Neighbours Ethiopia, world vision international Ethiopia, save the children Ethiopia, plans
Ethiopia, compassion, etc

Economic Regulation

Regulation- prescribing how products/services must be designed or how they must be

produced/provided or Government intervention in the monopolistic and oligopolistic markets
The standard ‘public interest’ theory of regulation is based on two assumptions:
First, markets often fail because of the problems of monopoly or externalities.
Second, governments are capable of correcting these market failures through regulation
Regulation Vs deregulation:

 Regulation- Rules administered by a government agency to influence economic activity

 Deregulation- opposite of regulation. I.e. allowing the private sector to participate in
public service delivery. In other words, making free the private sector from government
intervention particularly on price decision
 Regulatory policy takes two general forms:

 Economic regulation- controls profits, sets prices, and determines who can participate in
a market or use a particular resource. Eg: electrical utilities, water service, transportation
services, telephone service, etc

 Social regulation- controls polluting by-products of production, sets health and safety
standards for products and workplaces, and establishes requirements to protect buyers
from fraudulent/fake, discriminatory, or incompetent behaviour by sellers

 Economic regulation limits entry into a market or sets prices, restricts quantities, and
allocates market shares among sellers Example of economic regulation that always limit
competition:- Occupational licensing

 Social regulation includes health and safety regulations, environmental regulation, and
occupational safety regulations

 Four Factors Affecting the Demand for Regulation

 Consumer surplus per buyer

  Number of buyers
 Producer surplus per firm
 Number of firms
 Importance of economic regulation:

 High quality and efficient economic infrastructure plays a vital role in supporting a
competitive and growing economy

 Competitive markets are the best way in the long run to deliver these services to
consumers and provide incentives to invest and improve efficiency and service quality

 Efficient delivery of this investment is vital to the long term interests of consumers who
will ultimately bear the costs, etc.

 Principles of economic regulation:

1. Accountability- those responsible bodies must have legitimacy, expertise & capability

2. Focus- concentrate on the interest of end user or the outcome of competitive market

3. Predictability- provide objective environment to anticipate the context for the future
decision & to make long term investment decisions with confidence

4. Coherence- its framework should form a logical part of the gov’t ‘s broader policy
context, consistent with established priorities

5. Adaptability- needs to have capacity to evolve to respond to changing circumstances &

continue to be relevant effective over time

6. Efficiency- policy interventions must be proportionate and cost-effective while decision

making should be timely and robust/health.
 CHAPTER 4
MAJOR AREAS OF PUBLIC ADMINISTRATION
4.1 Public Policy
4.1.1 Definitions of Public Policy
Public policy can be described as the overall framework within which government actions are
undertaken to achieve public goals, with a good working definition of public policy, for our
purposes, being the study of government decisions and actions designed to deal with a matter of
public concern. Policies are purposive courses of action devised in response to a perceived
problem. Public policies are filtered through a specific policy process, adopted, implemented
through laws, regulatory measures, courses of government action, and funding priorities, and
enforced by a public agency.
According to Thomas Dye, defines public policy as “whatever governments choose to do or not
to do”. Dimock, stated public policy as “deciding at any time or place what objectives and
substantive measures should be chosen in order to deal with a particular problem”.
According to Chandler and Plano, who define public policy as “the strategic use of resources
to alleviate national problems or governmental concerns”.
Henry defines public policy as, “A script (cpirse pf actopm) adopted and pursued by the
government”. Anderson stated, that policy be observed as “Purposive course of action followed
by an actor or set of actors in dealing with a problem or matter of concern”. According to Sir,
Geoffrey Vickers, policies are judgments giving way, unity and steadiness to the course of act
for which the decision making body is accountable.

4.1.2 Nature of Public Policy:

To recognize public policy, it is very much needed to examine the nature. A policy may contain
with specific or general, broad or narrow, simple or complex, public or private written or
unwritten explicit or implicit, discretionary or detailed and quantitative or qualitative. Public
policy is in fact a skill because these task regularly some information about the social sciences
and in this case the stress is on the „public policy‟ which is known as „government policy‟,
selected by a government as a „direction for action‟. From the perspective of public policies,
actions of government could be put broadly into two groups and they are:
1. Definite or Specific policies and
2. General, vague and inconsistent policies.
In reality a government rarely will have a fixed of supervisory values for all its actions and in
fact the significant public policies are frequently made more clear specifically where the issue of
law, regulation or strategy is involved. The Supreme Court can give its decisions, by new
interpretations to some of the articles of the Constitution which can be develop into new policy.
These policies may be too unclear or too broad and may not be reliable to each other, in turbulent
atmospheres like the current ones government has to make regular actions without reference to
any particular policy, sometimes government announces some sort of policy for political
convenience or for some reasons, in such cases, government will not have any intention to carry
it successfully. Hence, it is likely to have a policy without action or it can have action without
policy. The public policies are embodied only in an unwritten Constitution of United Kingdom is
the best instance of this form of a public policy.
Public policy contains major segment of actions, like, development policy, economic growth,
socio-economic growth, equality, social justice, or any other such policy may be accepted by
national policy. Public policy is an area commonly defined by policy areas like health, education,
housing, economic, environment, transport and social and it is mostly set that interdisciplinary
and intergovernmental relations taking place. The public policy can be a positive or negative one,
in its positive form, it can contain some system of evident government activity to treat a specific
problem. Whereas, in the negative form, it might contain a decision by a public servant not to
take action on some sort of matter on which the government action is required. These policies
sometimes will have legally coercive so that people can adopt it legally for instance all the
people will pay the taxes in order to stay away from the fines.
 4.1.3 Types of policies
The following is a sample of several different types of policies broken down by their effect on
members of the organization.
 Distributive policies: Distributive policies extend goods and services to members of an
organization, as well as distributing the costs of the goods/services amongst the members of
the organization. Examples include government policies that impact spending for welfare,
public education, highways, and public safety, or a professional organization's benefits plan.
 Regulatory policies: Regulatory policies, or mandates, limit the discretion of individuals and
agencies, or otherwise compel certain types of behavior. An example of regulatory policies
are Environmental protection; migration policy; consumer protection.
 Redistributive policies: This Policies modifying the distribution of existing resources.
Examples include land reform; progressive taxation; welfare policy in more general terms
 Constituent policies: Constituent policies create executive power entities, or deal with laws.
Constituent policies also deal with Fiscal Policy in some circumstances.
 Miscellaneous policies: Policies are dynamic; they are not just static lists of goals or laws.
Policy blueprints have to be implemented, often with unexpected results.
4.1.4 Policy cycle
The Policy Cycle framework suggests that the policy process develops along sequential
logical stages of problem solving, in which policy decisions are made by decision makers, with
one stage informing the next. The policy cycle usually includes the following stages: 1. Agenda
setting (Problem identification) 2. Policy Formulation 3. Adoption 4. Implementation 5.
Evaluation

Figure 4.1 Policy cycle

1. Agenda setting (Problem identification)
The first stage in policy making refers to the identification of a public problem, which requires
the state to intervene. In fact, there a many problems, but only a small number will be given
official attention by legislators and executives. Those public problems that are chosen by the
decisions makers constitute the policy agenda. Setting the agenda is an important source of
power as is it is policy consequential, i.e. legislative institutions grant an advantage to the first
movers as compared to the second movers (Shepsle and Weingast 1987). The factors
determining whether an issue reaches the agenda may be cultural, political, social, economic or
ideological.
In most cases, the policy agenda is set by four types of actors: (1) public officials, (2) the
bureaucracy, (3) the mass media, and (4) the interest groups (Gerston 2004). Elected public
officials, e.g. the president, the parliament, the ministries and courts, are the most obvious
agenda builders since their position enables them not only to make policies, but also to place
certain issues on the agenda. However, actual agenda-setting is related to the larger political
game in terms of power and the intensity of ideological conflict both within and between the
(coalition) government and parliament. In this context, it must be highlighted that there is a high
degree of variation of rules and practices of agenda building in Western European parliaments
(Döring 1995: 224; 2001).
2. Policy formulation
The second stage in the policy cycle – policy formulation – involves the definition, discussion,
acceptation or rejection of feasible courses of action for coping with policy problems. Generally,
policy formulation is strongly related to policy adoption – the subsequent stage here – and in fact
a clear-cut distinction between them is often impossible. However, we decided to present them
separately since they still refer to different stages. Policy formulation deals with the elaboration
of alternatives of action, whereas policy adoption refers to the formal adoption to take on a
policy. Hence, policy formulation implies the definition of policy objectives and the selection of
the most appropriate policy instruments as well as their settings (Hall 1993). It takes place within
the broader context of technical and political constraints of state action. The political constraints
can be either substantive or procedural. Substantive constraints refer to the nature of the problem,
while procedural constraints are about procedures involved in adopting a policy adoption. These
procedural constraints are related to both institutional and tactical constraints (Howlett and
Ramesh 2003).
2. Policy adoption
Policy adoption is defined in the public policy process that comes after policy formulation.
Policy adoption becomes part of the decision to choose policy alternatives. Policy adoption is the
third phase of the policy process in which policies are adopted by government bodies for future
implementation. Policy is legitimized as a result of the public statements or actions of
government officials; both elected and appointed-the president, Congress, state legislators,
agency officials, and the courts (PALAO 2013).
Gary Brewer & Peter De Leon, Policy adoption refers to the choice among policy alternatives
that have been generated and their likely effects on the problem estimated. It is the most overtly
political stage in so far as the many potential solutions to a given problem must somehow be
winnowed down and but one or a select few picked and realized for use.
Alan Gitelson, Robert Dudley and Melvin. Dubnick, It is the next step after policy formulation
which includes the efforts to obtain enough support to enable a proposal to become the stated
policy of a government. At this point, most policy proposals go through a process of bargaining
and compromise and emerge significantly changed.
The adoption of a policy option is determined by a number of factors. Of these, two sets of
factors are of major relevance. First of all, the set of feasible policies can be reduced by the
necessity to build majorities for the approval of a policy option, which implies considerations
about values, party affiliation, constituency interests, public opinion, deference, and decision
rules (Anderson 2003: 126).
Another important decision criterion is given by the expected costs and benefits of a policy
proposal for the constituency. In this context, Weingast et al. (1981) show in the case of
distributive politics, a strong reliance on a re-election constituency may imply larger projects and
programs than are economically efficient. Generally, a member of parliament is expected to
adopt a policy option, if the benefits for the constituency prevail. Further, considerations about
the public opinion also affect policy choices as well as decision rules, values and perception of
deference. Generally, however, policy adoption should be dominated by bargaining and
compromise, and, therefore, the most plausible decision-making theory appears to be
instrumentalism rather than rational models (Hayes 2001).
The second set of factors refers to the allocation of competencies between the actors involved in
policy making. Cross-national research concludes that the type of state organization, whether
federal or unitary, affects the success, speed and nature of governmental policy-making.
4. Implementation
Implementation represents the conversion of new laws and programs into practice. Without
proper implementation, policy has neither substance nor significance. Thus, policy success
depends on how well bureaucratic structures implement government decisions.
5. Evaluation
After a policy is passed by the legislature and implemented by the bureaucracy, it becomes a
subject of evaluation. The main question at this stage is whether the output of the decision
making process – a given public policy – has attained the intended goals. Evaluation is often a
formal component of policy making and is generally carried out by experts who have some
knowledge about the processes and objectives pertaining to the issue undergoing review (Gerston
2004). In more general terms, policies should be evaluated for their efficiency (using the least
resources to the maximum effect) and effectiveness (achievement of the intended goals). Policy
evaluation provides a feedback loop, which enables decision makers to draw lessons from each
particular policy in operation. This feedback loop identifies new problems and sets in motion the
policy making process once again, creating an endless policy cycle (Sanderson 2002).
Importance of Public Policy:
It is evident that the public policy is the significant factor in the democratic government and it
emphasizes on the public and its problems, in fact it is a discipline which is branded as public.
The concept of public policy assumes that there is an area of life which is totally individual but
said in public. Likewise, public policies have a significant purposes to work in the society where
the democracy is prevails. The important role of the public policy is to make the society to lead a
better life and to maintain the delivery of the goods and services are significant, it is regarded as
the mechanism for developing economic-social system, a procedure for determining the future
and so on.
4.2 Public Personnel Administration
4.2.1 Definitions of Personnel Administration
Personnel administration has been variously defined. It simply means the management of people
in work situation. The term is used to refer to a set of programmes, functions and activities
designed to maximize both personnel and organizational goals. That is, activities are so designed
to accomplish individual and organizational goals (Carell, Elbert, and Hatfield (1995). According
to Armstrong (1980), personnel administration can be viewed in terms of obtaining, organizing
and motivating the human resources required by the enterprise, developing organizational
climate and management style which will promote effective effort, cooperation and trust between
all the people working in an organization, and helping the enterprise to meet its legal obligations
and social responsibilities toward its employees, with regard to the conditions of work and
quality of life provided for them.
Personnel administration involves designing and implementing policies and all the practices that
can assist in promoting efficient utilization of human resources. Flippo (1986) argues that
personnel administration involves planning, organizing, directing and controlling of the
procurement, development, compensation, integration, maintenance and separation of human
resources to the end that individuals, organizational and societal objectives are accomplished.
Flippo’s definition reveals that personnel administration has two basic functions. These are the
managerial and operative functions. Thus a personnel administrator performs the managerial and
operative functions of personnel administration.
The above definitions have almost one central theme - that personnel administration is mostly
concerned with the recruitment, development and maintenance of a highly motivated and
functioning workforce. It is a crucial organizational function because effective personnel
administration and successful implementation of personnel policies and activities are essential
ingredients for improved organizational performance. It is very critical to the survival of an
organization as it facilities the effective implementation of management processes as well as
enables organizations maintain an effective workforce. In the public sector, which is the main
concern of this course, personnel administration concerns itself with providing qualified and
capable personnel to run the affairs of the tiers of government and parastatals. It extends to cover
the following broad activities:
 human resource planning and employment;
 salary and wage administration, including related reward systems;
 organizational design and patterns of work;
 education, training and development;
 employee relations and;
 Employee services, welfare, health and safety (Mullins, 2002).
4.2.2 Objectives of Personnel Administration
The overriding objective of personnel administration is to obtain, develop and maintain a level of
morale and human relationship which will ensure willing and full cooperation of all persons in
the organization in order to attain optimum operational performance (Mullins, 2000). Others
include:

 To support programmes for improving organizational effectiveness by developing policies in

such areas that will facilitate such effectiveness.
 To enhance motivation, job engagement and commitment by introducing policies and
processes that ensure that people are valued and rewarded for what they do and achieve
 To create a climate in which productive and harmonious relationship can be maintained
through partnership between management and employees, including trade unions.
 To ensure maximum individual development of the personnel of an organization.
 To enable each person to make his maximum contribution to the effective working of the
organization.
 To ensure respect for human personality and the well- being of the individual.
 To ensure the satisfaction of various needs of individuals for achieving their maximum
contribution towards organizational goals (Armstrong, 2005; Sharma Sadana and Kaur,
2012).
4.2.3 Functions of Personnel Administration

The goal of personnel administration is to develop the workers in the organization to contribute
to its goal achievement by means of improved productivity, quality and service. To realize this,
there are two basic functions of personnel management. These are the managerial and
operational functions. The Managerial Functions A manager is one who exercises authority and
leadership over other subordinates in his department or organization. Below are the four
managerial functions of personnel management.
1. Planning: Planning means setting goals and stipulating actions and activities through which
the goals could be realized. The personnel manager is expected to formulate his personnel
programmes/goals in advance and specify actions through which they can be realized.
Through planning, the personnel manager anticipates forces that will influence future supply
of, and demand for employees in line with organizational goals.
2. Organizing: This simply implies designing an appropriate structure or means of achieving
the plan. The personnel manager must establish definite relationships among jobs, staff and
physical factors necessary for carrying out the job with respect to the personnel functions. He
must systematically structure, integrate and co-ordinate tasks, goals, activities and resources
in order to realize personnel objectives.
3. Directing: This personnel function seeks to build an effective work climate and create
opportunity for motivation, supervision and discipline. This is said to be central to goal
achievement as planning, organizing and staffing would be of little importance if the
directing function is lacking. The directing function is also known as commanding,
motivation or leadership. For people in the organization to perform effectively, there is need
to encourage them. This is often done through motivation. Motivation provides the incentive
for workers to put in their best towards a specified end. The personnel manager must
understand how best to motivate workers in the organization.
4. Controlling: This function seeks to ensure that all the activities performed by workers are in
line with the goals of the entire organization. Where deviations occur, these are corrected and
subsequent efforts directed towards the formulated plans.
The Operational Functions
1. Procurement: This is concerned with procuring or obtaining the human resource
requirements of an organization. It includes activities, such as the staffing functions of
recruitment, selection, placement etc. Through the procurement function, the organization
improves the quantity and quality of its personnel needed to discharge its duties.
2. Development: This function aims at improving the skills of the workers through training
and development programmes. Such programmes are specifically tied to job improvement/
performance.
3. Compensation: This is defined as the adequate and equitable remuneration of the
workforce for their contribution to organizational objectives. The fundamental factor here is
financial/economic-related compensation. Discussion within this function includes job
evaluation, wage policies, wage systems etc.
 4. Integration: This function aims at reconciling the interests of workers with those of the
organization and society. It is based on the understanding that both conflicting and mutual
interests exist in matters pertaining to these significant stake holders of the organization.
Included here are issues related to the handling of grievances, disciplinary actions, labour
unions etc.
5. Maintenance: The maintenance function deals with the continuous survival of the
organization and its component units. It includes coordination through effective
communication, maintaining the physical conditions of the work place, health and safety
conditions in the organization, etc.
6. Separation: This is the last operative function of personnel management. It deals with
issues of employee retirement, lay-off discharge etc.
4.3. Public Financial Administration
4.3.1 Meaning of Public Finance

Public finance is a study of income and expenditure or receipt and payment of government. It
deals the income raised through revenue and expenditure spend on the activities of the
community and the terms ‘finance’ is money resource i.e. coins.

Public finance is the approach to managing the public funds in the country’s economy that plays
the most important role in the development and growth of the nation, both domestically and
internationally. It also affects every stakeholder of the country, whether a citizen or not. Every
country needs money to run. The country’s revenue is the collection of various taxes and returns
on the investment, and the government expended from the collection of the revenue. Some
expenditure is healthcare, medical facilities, salaries to the staff, members, etc. All the revenue
and expenditure are collected by or for the public. Public finance management plays an
important role in developing the economy as its growth largely depends on its proper utilization.
Public finance can be defined as the study of government activities, which may include spending,
deficits and taxation.

4.3.2 Objectives of Public Finance

Managing Public Needs
The main objective is managing the basic needs of the public like food, shelter, health,
infrastructure, and education. All these are the government’s responsibilities so that the
fundamental public needs are fulfilled and contribute to the development of the economy.
Economic Development
Proper management leads to economic development that leads to the nation’s growth.

Removes Inequality
It also aims at removing the inequality by proper allocation of resources, i.e., providing relief to
the poor by collecting taxes from the rich class people.
Maintaining Price Stability
It helps control inflation by various packages and means for its development.
Other Objectives
1. Fulfilling the basic needs of the nation.
2. Generating employment.
 3. Maintaining the currency value in the international market.
4.3.3 Scope of Public Finance
The scope of public finance is not just to study the composition of public revenue and public
expenditure. It covers a full discussion of the influence of government fiscal operations on the
level of overall activity, employment, prices and growth process of the economic system as a
whole. public finance is classified under five broad categories: public revenue, public
expenditure, public debt, financial administration and economic stabilization. We shall now
explain them briefly.

A. Public Revenue
Governments undertake various activities and they must have funds, or revenue, to pay for these
activities. Public revenue is, therefore, represents the means for public expenditure. Accordingly,
most governments generate revenue from taxes, such as income taxes, capital taxes, and sales
and excise taxes. This category involves sources of the public revenue, principles of taxation,
effects of taxes on the economy, methods of raising revenue and the like are dealt with. Various
sources of public revenue are categorized in to tax revenue and non-tax revenue.
Tax Revenue
Taxes are compulsory payments to government without expectation of direct return or benefit to
tax payers. It imposes a personal obligation on the taxpayer. Taxes received from the taxpayers,
may not be incurred for their benefit alone. Tax revenue is one of the most important sources of
revenue. Taxation is the powerful instrument in the hands of the government for transferring
purchasing power from individuals to government.

The various types of taxes can be grouped under three heads. First type can be titled taxes on
income and expenditure which include income tax, corporate tax etc. The second is taxes on
property and capital transactions and includes estate duty, tax on wealth, gift tax etc. The third
head, called taxes on commodities and services, covers excise duties, customs duties, sales tax,
service tax etc. These three types can be reclassified into direct and indirect taxes. The first two
types belong to the category of direct taxes and the third type comes under indirect taxes.

Non-Tax Revenue
This includes the revenue from government or public undertakings, revenue from social services
like education and hospitals, and revenue from loans or debt service. To sum up, non-tax revenue
consists of interest receipts, dividends and profits, and fiscal services and others.

B. Public Expenditure

This category deals with the principles of public expenditure and its effect on the economy. The
term ‘public expenditure’ is used to designate the expenditure of government bodies. It differs
from private expenditure in that governments need not pay for themselves or yield a pecuniary
profit. Public expenditure can be done under two broad heads of developmental expenditure and
non-developmental expenditure. The former includes social and community services, economic
services, and grants-in-aid. The latter mainly consists of interest payments, administrative
services and defense expenses.

C. Public Debt
This category deals with the causes, methods and problems of public borrowings and its
management. This includes both internal debt and external debt.
Internal Debt
Increasing need of government for funds cannot be fully met by taxation alone in under
developed and developing countries due to limited scope of taxation. Government therefore has
to resort to alternate sources. Rising of debt is one such source. Debt, though involves withdrawal
of resources by curtailing private consumption, has certain advantages. Transfer of funds from
public to government is voluntary. Loans do not reduce the wealth of the lenders. Debt raised for
productive purpose will not be a burden on the economy.

There are many objectives of creation of public debt. Debt may be raised to meet the normal
current expenditure, exigencies like war, finance productive government enterprise, finance
public social welfare and economic development. Capital receipts mainly consist of market
borrowings, small savings and external loans, disinvestments of public sector undertakings and
recoveries of loans.
External Debt
In under developed and developing countries, internal sources are limited. Under developed and
developing countries, therefore go for external debt. The transfer of capital at international level
may take the form of financial aid through grants and loans, commodity aid and technical
assistance. External debt is an immediate source of funds for development. However, such debt
has drawbacks including political subordination and other obligation and excess supply of goods
and services in debtor country. However, such external inflows help to achieve faster growth.

D. Financial Administration
This category includes the preparation of financial budget, the control and administrations of the
budget and relevant problems including auditing. In other words, all financial activities involve
issues of financial including public budget, its passing, implementation, auditing and other
similar matters. The term budget includes ‘Annual Financial Statements’ which incorporates all
the annual statements of receipts and expenditures of the government.

E. Economic Stabilization

This category studies the use of financial policies of the government from the viewpoint of
economic development. Accordingly, it analyses the use of public finance to bring the economic
stability, growth and distributive justice in the country. These aspects of the economic policy of
the government have assumed such a great significance that they are often given a separate
treatment in the discussion of public finance theories.
4.4. Development Administration
Development Administration is an instrumental means for defining, consolidating, and
implementing national goals in developing countries. The concept of development
administration emerged shortly after the Second World War. The field of development
administration can be talked about in various contexts but its applicability depends upon mainly
the systems which affect it and in turn is affected by the systems.
The concept of development administration has two major aspects. One aspect of it refers to
'development of administration'. This means to develop administration. It involves
strengthening and improving administrative capabilities as a mean for achieving development
goals. Development of Administration concerns the nature of administrative capacity for
development and methods of improving and increasing it.
Development of Administration: Development administration is concerned with increasing and
improving the capabilities of the administrative system. The developmental goals are to be
carried out successfully with efficiency and effectiveness. There is the need of increasing the
capacity of those involved in developmental tasks. Development administration has to perform
the functions of improving the education of, and imparting training to, the personal engaged in
developmental goals.
Administration of Development: Development administration concerns the administration of
development which is further simplistically meant as administering development. This is
identified with organizational development—government departments, public enterprises,
regulatory agencies, public corporations, cooperative institutions, etc. The government
machinery is responsible for achieving the broader socio-economic and political goals. Precisely
development administration has two main functions one relates to realizing development goals
and objectives and second is to improving and enhancing capabilities of those involved in
development goals and objectives. Administration of Development' having a key role in
implementing the development programmes, projects and policies. Administration of
Development concerns the organization and management of various, development efforts.

Characteristics of development administration

 Change-Orientation: Development Administration is change-oriented administration.
Change involves the movement of system or a structure from one point to another.
 Goal-Orientation: Development administration, as defined by Weidner, is a ‘goal-oriented’
administration.
 Progressivism: The element of ‘progressiveness’ of goals is an accepted feature of
development administration.
 Planning: Planning is not a prerequisite to development administration, but it is the most
helpful aid to the whole process of goal-oriented change.
 Innovation and Creativity: Development administration is not dogmatic and traditional in
its approach to problem solving. Instead, it stresses upon identification and adoption of new
 structures, method procedures, policies, plans, programmes and projects, which would help,
achieve the developmental objectives with the greatest possible facilitations.
 Flexibility in Organisational Processes: ADevelopment-oriented administration requires an
optimum flexibility of operations, which would allow an administrator the required
autonomy to apply rules with discretion to certain unique and significantly distinctive
administrative situations. T
 Higher Level of Motivation: Motivated personnel are the backbone of any organisation
designed to achieve certain progressive goals. A development administrative system needs a
set of highly motivated personnel at top, middle and lower levels. Such personnel should be
committed to the progressive goals designed to be the achieved and should have a high
degree of enthusiasm and commitment to accomplish those goals.
 People-orientation: A development administrative system is a client-oriented (or a
beneficiary-oriented administration. It aims at providing maximum benefits of its services
and products to the very people for whom the organisation is designed. In other words,
Development administration is “people-centred” administration, which accords primacy to
the needs of its beneficiaries and tries to tune its policies, programmes and actions to these
needs.
 Participation: Development administration involves the participation of the people or the
beneficiaries in the formulation and implementation of development programmes. In
identifying goals, prescribing objectives, formulating plans, designing action strategies,
implementing projects and evaluating performance, the role of the beneficiaries is of utmost
importance.
 Effective Integration: development administration is characterised by a high degree of
coordination or integration.
 CHAPTER 5
COMPARATIVE PUBLIC ADMINISTRATION
5.1 Concept and Evolution of Comparative Public Administration
5.1.1 Evolution of Comparative Public Administration (CPA)
Comparison of various political systems has been a key concern of a political thinker, since the
time of Aristotle. Fred Riggs calls these studies the “governments of foreign countries” rather
than “comparative governments”.
Interest in comparative administration was only marginal in the pre-Second World War time, yet
there were a few interesting exceptions. Woodrow Wilson in his seminal article “The Study of
Administration” published the Political Science Quarterly (1887) had suggested that the USA
should learn from the patterns of European administrative systems without borrowing from them
their centralized monarchical political systems. Even L. D. White, who published the first text
book in Public Administration ‘Introduction to the Study of Public Administration’ in 1926, was
interested in constructing principles of administration that would provide guidelines of action in
public administration of Russia, Great Britain, Iraq, and the United States.
The factors that helped in the evolution of contemporary comparative public administration.
1. Experience during the Second World War
Several scholars of western countries, particularly of the United States, had the opportunity of
holding administrative positions in certain non-western nations during the war. Their experience
provided an important insight that there were noticeable differences among the western and non-
western nations in the sphere of their administrative structures and behaviour.
International Technical Assistance Programme
With the creation of the United Nations in 1945, there was a substantial emphasis on providing
financial and technical assistance to the non-western countries that were generally economically
poor. Besides, there was the Marshal Plan of the US designed to provide such assistance to
European countries. Several scholars of the US were engaged in the working of such institutions
of technical assistance. They also gave recommendations on reforming the administrative
systems of certain nations, including India. Interest and insights into the administrative systems
of developing countries thus became stronger and gave impetus to comparative administrative
studies.
2. Administrative Reforms
Almost all developing nations conducted studies on the desirable areas of administrative reforms
with the help of indigenous and foreign scholars. This created enormous information on the
administrative systems of a number of countries this led to cross-cultural and cross-national
analyses of administrative systems.
3. Emergent Developing Nations
With the decline and fall of colonialism after the Second World War, many countries became
independent in the continents of Asia and Africa. These countries faced acute problems of
socioeconomic transformation
A few scholars, while studying the political systems of different nations, also examined and
analysed their administrative systems. The Comparative Public Administration Movement
borrowed from Comparative Politics Movement several concepts, methodologies, models, and
theories.
4. Behavioural Movement
The behavioural movement encouraged a series of studies on administrative behaviour in
ecological settings, thus strengthening comparative public administrative literature.
5. Comparative Administration
Group In 1963, the Comparative Public Administration Group (CAG) was set up, as a committee
of the American Society for Public Administration. It was funded from 1963 to 1970 by the Ford
Foundation. Fred W. Riggs was the chairman of the group from its inception till the end of 1970.
The CAG conducted a series of seminars on comparative administrative systems, focusing on
theoretical as well as applied perspectives public administration.

5.1.2 Definitions of comparative public administration

Comparative public administration is the study of public administrative system from a
comparative perspective and in cross-national and cross-cultural contexts. It focuses on the
structure, processes, behaviour, roles, and impact of public administrative system at the
international level. Comparative Public Administration, in simple terms, refers to a comparative
study of government administrative systems functioning in different countries of the world.
Robert H. Jackson: "Comparative public administration is that facet of the study of public
administration which is concerned with making rigorous cross-cultural comparisons of the
structures and processes involved in the activity of administering public affairs.
Jong S. Jun: "Comparative public administration has been predominantly cross-cultural or
cross-national in orientation."
5.1.3 Nature of Public Administration
Comparative public administration is a relatively new field of study which emerged after the
Second World War. Henderson argued that the intellectual roots of comparative public
administration lie in the American behavioral sciences. Comparative administration movement
has been with developing methods for the scientific study of public administration.
Fredrick Riggs identified three major trends which were noticeable the comparative study of
public administration. These were:
 Normative to Empirical
Traditional studies of public administration were to a large extent influenced by the classical
approach. The emphasis was on proffering certain ideal principles for good administration.
Efficiency and economy were considered to be the primary goals of all administrative systems
and there were certain principles. These studies were more interested in finding out facts about
structural patterns and behaviors of administrative systems rather than in prescribing what was
good for each system.
 Ideographic to Nomothetic
The words ideographic and nomothetic have been employed by Riggs to explain specific
contexts of administrative studies. An ideographic approach concentrates on unique cases, e.g. a
historical event, study of a single agency, country or even a single cultural area. earlier studies of
comparative public administration which were ideographic in character were comparative only in
name and did not help the process of thereby building or develop generalization concerning the
functioning of administrative systems in different systems.
Non- Ecological to Ecological
The traditional studies of comparative public administration were mainly non Ecological in
nature. Studies undertaken after Second World War have specifically looked at similarities and
differences among environmental settings prevailing in different nations and cultures and have
attempt to examine the impact of the environment on the administrative system on the one hand
and the influence of the administrative system on the environment on other hand. The well-
known ecological approach relates to study of the interrelationship between a system and its
environment.
What to Compare?

In comparative administration studies the unit of analysis is administrative system. The subject
matter of comparison would be one or all of the following phenomena
 Environment of the administrative system
 The whole administrative system
 The formal structure i.e. hierarchy, division of work, specialization, authority/responsibility,
network, decentralization, delegation, control mechanisms, procedures etc.
 The information patterns existing in an administrative set up including the nature of human
groups, relationships among individual, motivational system and state of moral, patterns
informal communication and the nature of leadership.
 Role of individual making up the system
 Introduction between personalities and the organizational system
 The policy and decisional systems of the organization that link its various parts.
 The communication system, which also involves the feedback mechanism.
 Performance of administrative systems
 Range of Comparative Studies
 Inter-institutional analysis: It involves a comparison of two or more administrative
systems. For example, a comparison of the structure and working of the Home ministry of
the Government of India with the Defense Ministry will a case of inter-institutional
analysis.
 Inter-national analysis: when an analysis in the comparative perspective is taken up
among various administrative systems functioning within a country, it would be an inter-
national analysis
 Cross-national analysis: when two or more administrative systems (or their parts) are
compared inter-nation, it forms a case of cross-national analysis. For example, comparing
the recruitment of higher civil services of China, Thailand and Tanzania would be cross-
national in nature.
 Cross cultural analysis: A cross national Analysis of administrative system involving
countries from different “Cultures” is called, a cross-cultural analysis. For instance,
comparing the administrative system of the U.S.S.R. (a socialist state) with the USA (a
capitalist system) or competition between developed and a developing a county would be
cross-cultural in nature.
 Cross-temporal analysis: Such comparison involves different time frames for analysis. For
instance, a comparison between the administrative system prevailing during Derg regime
and FDRE would be a cross-temporal analysis. A cross –temporal analysis may be inter-
institutional, inter-national, and cross-cultural.
5.2. Significance of Comparative Public Administration
Comparative administration is concerned with the study of different administrative system. There
are two factors that make comparative studies significant. The first factors relate to the academic
study of public administration. The study of comparative public administration also contributes
to a greater understanding of the individual characteristics of administrative systems functioning
in different nations and cultures.
The second important function of comparative public administration relates to its relevance to
the empirical world. Though a study of comparative public administration, administrators, policy
makers and academicians can examine causes for the success or failure of particular
administrative structure and patterns in different environment settings.
The importance of comparative public administration lies in its academic critics in terms of
scientific and systematic study of public administration and in improving the knowledge of about
other administrative systems
The positive influence and contribution of comparative public administration are summarized
as follows:
1. Scientific Study of Public Administration
Robert Dahl in his well-known article entitled ‘The Science of Public Administration: Three
Problems’ published in Public Administration Review, (1947) had observed that there cannot be
a science of public administration without a comparative analysis.
2. Inter-disciplinary Orientation
Comparative public administrative studies have several concepts and methodologies from
Political Science, Sociology, Economics, Anthropology, Psychology, and other disciplines. This
has broadened and enriched the study of public administration to a greater extent. A good
number of scholars from different disciplines have contributed to the development of
comparative public administration.
3. Strengthening Ecological Orientation
Traditional public administration was confined to the description of administrative structures
prevailing in certain western countries like the U.S, Great Britain, and France. The environment
of public administration was treated, as ‘given’. There was no focus on this issue. This approach
has made administrative analysis more realistic and dynamic.
3. Universalism
Comparative studies in public administration have challenged parochialism in western studies.
The non-western world has experienced and nurtured its own administrative reality that has been
elaborated by a host of comparative scholars of whom many of them are western. The conceptual
transformation of even the western administrative analysis can be attributed to the insights
provided by comparative public administration.
4. More Rational Use of Foreign Assistance
Comparative public administration studies have proved to be catalysts to the capacity building
of nations receiving aid from international agencies and big powers.
Administrative Development
Comparative studies of public administration have stressed improvements in the structures,
processes, and behavioural patterns of public administrative systems in diverse settings. This
approach has highlighted that the processes of socio-economic and even political development
get speeded up through effective administrative practices.
5. Development Administration
A related benefit of the study of comparative public administration has been in the emergence of
the concept of ‘development administration,’ which has become a key strategy for holistic
transformation of various societies
Administrative Reforms
Cross-national experiences of administrative reforms, such as of Britain, Zaire, Indonesia,
Bolivia, Sweden, and India have inspired the process of goal-directed administrative change
throughout the international community.
Responsiveness
An outcome of the systems and ecological approaches in comparative public administration has
been the stress on ‘inputs’ from the environment in terms of ‘demands’ and ‘support’. The
demands and aspirations of the common man and social groups have taken a central position in
the analysis of the governance systems.
Overcoming False Impressions
In traditional administrative theory, a purely ‘structural’ approach was adopted and hence the
non-western countries, not having certain the understanding of a variety of administrative
systems and their subsystems. Conventional structures of the west were considered to be less
developed and the structural function approach in comparative public administration has
highlighted that there are common functions being performed by administrative systems of most
nations.
5.3. Approaches in Comparative Public Administration
 Bureaucratic Approach:Bureaucracy as an organizational model was first developed
systematically by Max Weber. According to him, every organization can be defined as a
structure of activities (means) directed towards the achievement of certain objectives (ends).
To maximize efficiency and productivity every organization develops a system of
specialization and a set of systematic rules and procedure
 Behavioral approach emphasizes '"acts", rigorous scientific analysis etc. it focuses on the
analysis of human behavior in administrative settings.
 Systems approach views the public administration as a sub system of society. It looks at
various parts of an administrative system (formal organization, informal organization, roles,
and individuals) and examines the inter-linkages among various parts.
 Ecological approach has been stressed by Riggs. This approach examines the interactions
between an administrative system, economic system and its external environment. Thus the
impact of the political system, economic system, social system and the culture system on the
structure and behavior of the administrative system on this environmental structure is
highlighted in the ecological approach.
 Structural –functional approach is mainly drowned from anthropology and sociology. A
structural according to this a pattern of behavior that has become a standard of a social
system. Further a function denotes the impact of a structure on another structure and the inert
relationships among the various structures.
 Development Approach: A well-known conceptual approach in Comparative Public
Administration is of Development Administration' which has been elaborately dealt with in a
separate unit. This approach focuses on certain characteristics of a dynamic administrative
system, e.g. goal-orientation, change-orientation, progressiveness, innovativeness,
participation
References

 African Association For Public Administration And Management: The Ecology Of Public
Administration And Management In Africa; Vikas Publishing House, 1986
 Attwood M. And Stuart Dimmock, Personnel Management (Third Edition); Macmillan
Press Ltd, London, 1996
 Barber P. Michael, Public Administration (Third Edition); Macdonald And Evan Ltd,
1983
 Basu Rumki, Public Administration: Concepts And Theories (Third Edition); Sterling
Publishers Ltd, 1994
 Cole B. Graham, Managing The Public Organization, 1986
 David Osborne, Reinventing Government, 1992
 Dimock And Dimock, Public Administration, New York, 1966
 Golembiewski, R.T, Public Administration As A Developing Discipline, New York,
1977
 Jemal Abagissa, Public Administration: Concepts, Theories And Views, 2003
 Pfiffner, J.M., Public Administration; New York, 1967
 Shafritz, Jay M. And Russell, E.W., Introducing Public Administration, New York, 2003
 Simon Et Al, Public Administration, 1966
 Simon H.A, Administrative Behavior, 1957
 Waldo D., The Study Of Public Administration, 1995
Shriram Maheshwari, Administrative Theory, An Introduction
 Course: Introduction to Development Management
Code: PADM 2054
Course Credit: 3

Introduction

This course is composed of two interconnected themes that is the public administration in the
current context of 21st century, with relevance to developing countries and the development
management / development administration. The focus of public administration in the current and
recent nature, which duly focuses on the developing countries. The second part development
administration is intertwined with the concept of the New Public Administration and
Development concepts relevant to the developing countries. The themes, approaches and
paradigm shifts are clearly discussed in this course.

Learning Objectives

By the end of the course students should:

 To highlight major paradigm changes, concerns and approaches in the theories and
practices of the discipline, particularly in the context of development and development
administration.
 To describe the meanings and explain the essence of the different theories concepts,
arguments and approaches (thoughts / views).
 To identify the fundamental components of development and development administration
and discuss the theoretical development and development administration and discuss the
theoretical and practical problems from different dimensions.

Chapter 1: Trends in Public Administration Today;

Chapter 2: Features of New Public Administration:

Chapter 3: Development and Development Concepts:

Chapter 4: Development Administration: concepts and practices:

Chapter 5: Overview of the practices and problems of development in Ethiopia

Chapter One: The Basic Concepts of Development

Development is expansion, progress, advance, change, increase, enlargement, improvement,
improvement and growth of something.

Since development mean different things for different people, it is necessary that we establish
what we mean by development in this course. A multitude of meanings are attached to the idea
of development; the term is complex, contested, ambiguous, and elusive.
However, in the simplest terms, development can be defined as bringing about change that
allows people to achieve their human potential. It is a multidimensional process involving major
changes in social structures, political system, popular attitudes, gender equality, national
institutions, environmental health, acceleration of economic growth, reduction of inequality and
eradication of poverty among others. Therefore, development in the context of this course is
associated with social, political, gender, environmental and economic dimensions.

Social development

Social development: means a widened access to needs like education, healthcare, security, food,
job opportunities, and any other necessity that promotes developing and dignified livelihood. It
is about improving the well-being of every individual in society so they can reach their full
potential.

Social development means investing in people.

For UNDP (2005) the term social development refers to “the continuous promotion of more
equitable distribution of opportunities, income, assets, services and power in order to achieve
greater equality and equity in society”.

The International Consortium for Social Development (ICSD) conceptualizes social

development as “the building of social, economic and political capabilities of individuals,
families, communities and nation states in a given country”.

According to Bilance (1997), “Social development is the promotion of a sustainable society that
is worthy of human dignity by empowering marginalized groups, women and men, to undertake
their own development, to improve their social and economic position and to acquire their
rightful place in society”.

According to Amartya Sen (1995), “social development is equality of social opportunities”.

Social development necessitates the removal of barriers so that citizens can approach their
dreams with confidence and dignity. It is about refusing to accept that people who live in poverty
will always be poor.

It is about helping people so they can move forward on their path to self-sufficiency; develop
their own skills and contribute to their families and communities in a meaningful way.

If individual citizens are healthy, well educated and trained to join the workforce and earn better
wage amount they are equipped to fulfil their basic needs and be successful. Their families will
also do well and the whole of society will benefit. In other words, the success of society is
linked to the well-being of each and every citizen. A socially developed society is characterized
by national unity, social integration, cohesiveness and a sense of unity of purpose so that the
citizen readily identifies with the state. Lack of social development would mean that the people
are divided along cultural lines, racial lines or religious lines that create antagonism and
persistent conflict in society.
Economic development

Dear students,

What characteristics are typically associated with economic development? Write down a list of
features that in your view might distinguish an economically developed country from one that is
not. Traditionally, from the economic point of view development means achieving a sustained
rate of the growth. Each sector of the country’s economy reports its annual data on incomes,
expenditure and investment. Using the sectors’ data economists measure economic growth in
terms of gross domestic product (GDP) or related indicators, such as gross national product
(GNP) or gross national income (GNI).

Gross domestic product (GDP) is the total market value of the goods and services produced by
a country’s economy within a year. It includes all final goods and services—that is, those that are
produced by the economic agents located in that country owned by both the country’s citizens or
foreigners.

Gross national product (GNP), includes the total values of all final goods and services
produced by resources owned by that country’s residents, whether located in the country or
outside the country. It is also called Gross National Income(GNI).

Gross domestic product or gross national income divided by the country’s population yields per
capita income. Thus, income per capita refers to total national income divided by total
population. Economic development therefore aims at enabling a given country to sustainably
expand its output at a rate faster than the growth rate of its population.

There are a range of arguments regarding economic development. Some propose that if the
growth in GDP, GNP/GNI or per capita income is not sustainable it is not a economic
development rather economic growth. Economic growth is the increment in a country’s output
for a year or short period, not for long period of time.

According to this argument what differentiate developed countries from the underdeveloped or
developing countries is sustainability of their GDP or GNI growth. Conversely, the GDP,
GNP/GNI or per capita income growth in underdeveloped or developing countries is nowhere
sustainable. Some others argue that even a sustainable growth of GDP, GNP/GNI or per capita
income is not a guarantee for economic development especially when the levels of living of the
mass people remain unchanged.

This argument is not based on idle speculation or hypothetical situation. It is rather based on real
world experience. GDP, GNP/GNI or per capita income growth in the country might be ascribed
to the possession of the few citizens or business companies with no or little “trickle down” to the
poor.In real development situations the wealth of the country is fairly distributed among the
people. Even though the few have owned the largest portion of the wealth there is a trickle down
to the poor. Economy trickle down is understood in terms investors’ (richest citizens) paying
government taxes, employment opportunities and market stabilization among others.

If the largest portion of the wealth in the country belongs to few without trickle down for the
poor, GDP or GNP rate only represent a vain number which cannot demonstrate the true living
of the majority of the country’s people. The people's living remains unchanged despite the
growth of GDP, GNP/GNI or per capita income.

This kind of phenomenon was observed in 1950s and 1960s, the period in which developing
countries have met the targets of economic growth (increased GDP, GNP/GNI or per capita
income) without changing the living of the majority of the people. Despite an increased level of
GDP, GNP/GNI or per capita income these countries showed no improvement (little if any) or
even shown an actual decline in employment, equality and real income of the bottom 40% of
their population.

According to the economic development’s definition from the point of view of GDP, GNP/GNI
or per capita income the countries were developing in economy while in terms evaluative
definition of economic development in terms of reduced poverty, inequality and unemployment
they were not developing.

Because in these countries poverty, inequality and unemployment were not reduced. Instead,
there were a wide spread absolute poverty, inequitable income distribution and rising
unemployment. Consequently, the period 1970s has seen a redefined meaning of “economic
development”. Economic development start to be defined in terms of the reduction or elimination
poverty, inequality and unemployment.

The arguers hence make their point that there is something wrong with the definition of
economic development in mere growth of GDP, GNP/GNI or per capita income. The economists
and policy makers of 1970s acutely demanded the fair distribution of resources resulting from
growth of GDP, GNP/GNI or per capita income among citizens.

Their slogan was “redistribution from growth”.However, in 1980s and 1990s the situations
become worsened as GNI growth rates turned negative for many developing countries; their
governments facing increase in foreign debt, cutback their already limited social and economic
programs. The living of the people severely deteriorated. Savings and investments declined, and
unemployment increased. No redistribution from growth achieved

The spillover effect was a underdevelopment thereby a poverty. This evidences that the GDP,
GNP/GNI or per capita income growth back in 1950s and 1960 become unsustainable and for it
has not aimed at changing the living of the majority of the people the countries’ dream for
economic development has perished.

Once again in 2000s, GDP, GNP/GNI or per capita income growth throughout the developing
world (Africa, South east Asia and Latin America) become rapid. Review development
literatures, economic data and discuss what is currently happening to the countries achieved a
higher growth of GDP, GNP/GNI or per capita income in 2000s in Africa, South east Asia and
Latin America.

Political development

Political development: denotes a development dimension whereby citizens are free to: Choose
any leader they desire Contest for any public office they are interested in so long as they qualify.
The progress of political system from a less desirable state of being towards one that is more
desirable, driven by rule of law and built on democratic values is an indication of political
development.

According to United Nation’s definition political development is the achievement of stable

democracy that promotes the well-being of its citizens in equitable, humane and environmentally
concerned way. Lucian W. Pye links political development with political awakening of the
people. People’s participation in political process is a legitimate part of political development.
However, it has a danger of sterile emotionalism or corrupting demography which in turn
weaken the strength of the society.

Political participation can lead to the acceptance of political system characterized by many
demonstrations, mass responses to elite manipulation, populist movement … etc. as a politically
developed system.

According to Hunginton as mobilization and participation are increasing, institutionalization

become less focused which in tun lead towards political decay Politically developed societies is
where diverse opinion are accommodated and the free will of the people is respected. So,
political participation need to be rational and limited within legal framework. It can be in the
form of electoral campaign, voting, joining political parties, volunteering, contacting public
officials, contributing money, holding public office and protesting.

Political development endeavor in a country should focus on institutionalization.

Institutionalization of politics is a crucial element in political development. Political
institutionalization refers to the establishment of institutions through constitution or legal
mechanisms. It is the process by which political structures and practices take root.

In politically developed countries appropriate institutions (electoral commission, courts, civil

society) have been developed to manage political competition in a free fair, transparent manner
to the extent that candidates have confidence in such institutions so that any disputes that may
arise from such competition are also managed peacefully.

Political development requires that government is based on the rule of law that respects people’s
rights and allows them to enjoy fundamental freedoms such as freedom of speech, association,
and any other freedom they are interested in so long as this is done within the law. In addition,
political development manifests itself in terms of representation of all section of the people in
political administration. To sum up political development is the development of institutions,
attitudes and values that form the political power system of the country’s society.
Gender Development

Gender refers to socially constructed differences between men and women, whereas Sex refers to
biological differences between men and women. Being socially constructed, gender differences
vary depending on age, marital status, religion, ethnicity, culture, race, class/caste and so on.
Sexual differences vary little across these variables. Gender is a complex variable that is a part of
social, cultural, economic and political contexts.

Development analysts have recognized the need to ensure that gender is examined and integrated
into development projects. In integrating gender into development, practitioners respond to the
priority needs of women and men, and being aware of what benefits or adverse effects could
impact either.

This is because men and women often have different priorities, constraints and preferences with
respect to development and can contribute to, and be affected differently by, development
projects and campaigning interventions.

This approach of considering gender (needs of women and men) in development projects is
technically termed as a pursuit of gender development. To promote true development, these
considerations must be addressed in all development programs and, campaign design and
interventions.

If such considerations are not addressed thoughtfully and adequately, these interventions can
lead not only to inefficient and unsustainable results, but may also exacerbate existing inequities
between men and women. Gender development is defined therefore as a situation where both
men and women have been given equal rights and opportunities within the confines of the law
with regards to all socio-economic matters of the state and the society.

Gender development endeavors are meant to bring gender equality. Gender equality refers to a
combination of legal equality and equal opportunities including opportunities to speak out.
Historically, women’s rights are protected by international instruments and laws. The
Convention for Elimination of Discrimination Against Women (CEDAW, 1979) – a UN Treaty
adopted by the General Assembly in 1979 and signed initially by 64 states, Beijing Declaration
and Platform for Action (1995), and the Millennium Development Goals (2001) are the notable
ones.

Approaches towards gender development

An early approach involved targeting women by project design and interventions which focused
on women as a separate group. This was commonly referred to as WID (Women in
Development). It emerged in emerged in the 1960s.

It calls for greater attention to women in development policy and practice, and emphasizes the
need to integrate them into the development process. Critics of this approach pointed out that this
did not address men. After criticisms on WID, a new model arose in the latter part of the 1970s.
It is called Women and Development (WAD).

The main argument of WAD was that women had always been part of the development
processes. WAD asserts that women have always been important economic actors. The work
they do both inside and outside the household is critical to the maintenance of society. However,
this integration has only served to sustain global inequalities. Therefore, WAD argues that “the
WID approach that placed emphasis on integrating women into development was not correct”.

The main focus of WAD is on the interaction between women and development processes rather
than purely on strategies to integrate women into development.

WAD saw both women and men as not benefiting from the global economic structures because
of disadvantages due to class and the way wealth is distributed. WAD therefore argued that the
integration of women into development was to their disadvantage and only made their inequality
worse. WAD saw global inequalities as the main problem facing poor countries and, therefore,
the citizens of those countries. It sees women’s positions as primarily within the structure of
international and class inequalities. It argues that the position of women will improve if and
when international structures become more equitable.

In the 1980s further reflections on the development experiences of women gave rise to Gender
and Development (GAD).

Gender and Development model concentrated more on project design and interventions in the
development process to transform gender relations.

It seeks to analyze the causes of gender inequality within the context of relations between
women and men and social structure, and to change stereotyped division of labor as well as
institutions and systems that bring about gender disparity. Focuses on the socially constructed
differences between men and women, and challenge the existing gender roles and relations. It
argues that social relationship between men and women have systematically subordinated
women. As a result, it encourages women to participate on an equal basis with men in
determining their common future. This because it is also called a gender equality approach.

The gender equality approach is therefore about men and women and is thus a more
comprehensive approach to analysis and design of development interventions because it takes
into account the situation and needs of both men and women. It aims to involve both women and
men in addressing their development problems, to reform institutions to establish equal rights
and opportunities, and to foster economic development which strengthens equal participation.

Such an approach aims to redress persistent disparities in access to resources and the ability to
speak out. Currently, the sustainable development goals (SDGs) serve as active international
instrument aimed at achieving ‘gender equality and empower all women and girls’.
Environmental development

It is the situation where by people live in a clean and conducive surroundings. Environmental
development also involves all positive changes brought about in a particular geographical area
through people-centered political, economic, social, cultural and even diplomatic efforts towards
a better environment for all live.

It is the direct result of investment in infrastructure, scenic surroundings, forestation, green areas
and public spaces. In addition, water catchment areas and water tower are highly preserved, both
mineral resources and wild animals are properly taken care of and pollution of all forms is
minimized. There is proper levels of waste management, proper drainage system and high levels
of sanitation.

Let us conclude the subject of development:

The practice of development throughout social, economic and environmental spheres has to
fulfill the requirements of sustainable development. The concept of sustainable development was
described by the 1987 Bruntland Commission Report as “development that meets the needs of
the present without compromising the ability of future generations to meet their own needs.”

Sustainable development is defined as an approach to developing or growing by using resources

for the benefit of current generation in a way that allows for them to renew or continue to exist
for the next generations. It is a development that is conducted without depletion of natural
resources. It promotes the kind of development that minimizes environmental problems. Through
sustainable development, a country can formulate organizing principles which help to sustain the
limited resources essential to provide for the needs of future generations.

The main features of sustainable development are:

 It respects and cares for all kinds of life forms, biodiversity.

 It improves the quality of the human life of present generation and ensure a bright future
for the future generation.
 It minimizes the depletion of natural resources; sustainable management of means and
resources.
 It enables the communities to care for their own environment; environment conservation.
 For business entities sustainable development means adopting business strategies and
activities that meet the needs of the enterprise and its stakeholders today while protecting,
sustaining and enhancing the human and natural resources that will be needed in the
future.
Development and underdevelopment are not only a question of economics or a quantitative
measurement of incomes, employment and inequality. Rather they are real fact of life.
Development should be manifested in mass populace’s life through the following achievements:
Low levels of poverty, inequality, unemployment, hunger and malnutrition, infectious diseases,
homelessness, crime and corruption, High levels of income, consumption, saving, investment
and employment,

Universal access to social safety nets for the unemployed and people on low incomes, Universal
access to primary and secondary education, healthcare services, good public services (policing,
fire service, refuse collection… etc.), Widespread access to good housing infrastructure, road
and transport infrastructure, public utilities (power, water and sanitation, telephones…etc.) and
Improved living standard.

Development represents positive change, economic development, educational development,

equality, equity, freedom, gender equality, good governance, increase in Gross Domestic Product
(GDP), health improvement, human development, human rights protection, increase in income,
justice, election, livelihood improvement, peace, participation, poverty reduction, process of
change, production increment, progress, rule of law, reducing vulnerability, self-determination,
social development, social inclusion, cultural transformation, positive values, positive norms and
customs, clean environment, sustainability and wealth accumulation.

Above all, development practice has to fulfill the criteria of sustainable development. On the
other hand, underdevelopment is the real fact of life fore more than 3 billion people in the world.

It represents the squalor, disease, unemployment, low per capita GDP, high level of illiteracy,
low life expectancy, high infant mortality, undernourishment, low level of income, mass poverty,
lack of capital formation, agricultural backwardness, ignorance, personal or social impotence to
difficulties. It is the opposite of development features.
 Chapter Two: Development Management
In the first chapter of the course, we have raised the fundamental meanings of development.
From the first chapter lessons it is worth recalling that true development means not only high
economic growth and per capita income but also enhancement of education, health,
environmental safety, gender equality, political system and living condition of the people. The
enhancements throughout these faces should also be sustainable; continuous.

To bring about sustainable development adoption of proper development management is

essential. This chapter will make you acquaint with development management. Scholastically,
various definitions were given by different scholars on development management. Some of them
are presented as follows:

According to Seers, “Development management means managing in such a way as to enhance

the potential of those working with development organizations”. According to Wuyt,
“Development management aims at promoting values as what is to be regarded as development”.
In the words of Korten, “Development management can be thought of in terms of positive
linkages between development, capacity building, and learning in individual, organizational,
institutional and societal levels”.

According to Solaiman, “development management means evaluating change from the present
situation into a better situation and it is a process of improving, building and innovating in order
to ensure better quality of life for the present human beings without jeopardizing those of the
future”.

Allan Thomas has critically discussed development management. He created a tripartite

categorization of development management

Management for development: development management as a management undertaken with a

development orientation. It is the normative idea of management oriented towards development.

Management of development: development management as an efficient management of

resources for rational organizational ends. It is the management of the specific tasks involved in
development interventions.

Management in development: development management as adaptation of international

management models to local contexts. It is the straightforward notion of management in a
development context

He further established that:

Development management is not just a question of getting the task at hand completed by the best
means available. It also means simultaneously building the capacity to undertake future tasks and
learning. Management for development implies a style of management in which any and every
activity is undertaken in such a way as to enhance development.
He argued that development management should take its cue from ‘external social goals rather
than internal organizational ones and manage activities ‘on behalf of the poor and powerless
against other powerful interests’. Its distinctive task was to promote the values of development
and the interests of the powerless.

Because the social goals were external to the organization, the organization's managers did not
have control over them in the way that they did with the organization's own internal goals. Thus,
development management should carry out its distinctive task by influencing actors and agencies
outside the organization to work towards the desired social goals.

However, management’s role with respect to the poor and powerless, the most important external
actors of all in Thomas’s view, was a different one: to empower them to achieve their own goals.
It might seem that this new science of influencing was not an alternative to the classic tasks of
management-planning, organizing, coordinating, and commanding rather as an overlay on top of
them.

In other words, the classic tasks would continue in relation to the organization's internal
functions, but they were no longer fundamental for development management.

From these definitions it can be concluded that development management is a process of

conducting development in a systematic way to improve the quality of life of the people.

Goals of Development Management

The goals of development can be outlined as follows:

Promoting development through the best alternative ways and in a cost-effective manner.
Improving the efficiency and effectiveness of the individuals as well as organizations for
achieving development objectives. Synergizing the three important aspects of management:
management of development, management for development, and management in development.

It is more value-laden and aims at promoting present development without affecting the future.
In other words, development management aims at sustainable development. To pursue is a
positive and proactive approach in formulating, considering, determining, and delivering
development activities. It employs a participatory approach in development project and
programme formulation, implementation, monitoring, and evaluation; instead of the one- sided,
top down approach. In other words, it is undertaken in the spirit of partnership and inclusiveness.

To improve the quality of life of the people through better management of development projects
and programmes. To build up both individual as well organization capacities in order to improve
efficiency and effectiveness at all levels.

Developing an alternative model of development, which is more efficient, effective, and

productive compared to its existing counterparts.

Effective management of funds, functions, and functionaries at various levels. Promoting just
and equitable way of development. To conclude, development management aims to improve the
management of development projects or programmes in a systematic manner, in order to
improve the quality of life of people at the grassroots level. It aims at management of manpower,
finance, and process involved in the development.

It also aims at the management of developmental values, principles, and ethics. The goals of
development management are summarized into four major dimensions as presented in the
subsequent diagram.

Functions Development Management

After the Second World War, most of the developing countries have adopted various
development models. Development management is regarded as an important tool of
development. Its functions are multiple in nature. They are described as follows:-

1.Hasten the process of development

Development management helps to hasten the process of development. Development

management intends to apply a systemic approach in the management of development
programmes and projects. A well formulated project with proper need assessment will not only
yield good results but also helps in the judicious use of resources and curtail wasteful
expenditure.

2. Facilitate empowerment

Development management in general and participatory development management in particular

lead to empowerment. Development management helps to achieve the goal of absolute,
collaborative, adaptive, tacit, and cosmetic empowerment. It empowers the employed and people
engaged in development projects and programmes

3. Allocation of funds

Application of management principles in development projects and programmes helps to achieve

the project’s goal and objectives with reduced cost. Proper manpower and resources management
checks wastage of financial resources.

Development management helps the managers engaged in development process and activities to
make their projects and programmes cost effective.Therefore, most of the projects funding
agencies are using a logistics framework in project design. Proper balancing of expenditure on
salary head and expenditure on service delivery is an important requirement of projects.

4. Strengthen development organization

The application of management principles/functions in development organization helps to

strength development organization.
5. Human resource development and capacity building

Human resource development is a system of developing continuously, and, in a planned way, the
competencies of individual employees, didactic groups and teams development objectives.
According to Tadaro, it is human resources which ultimately determine the character and pace of
economic and social development. Human resource development principles help to promote
human capital, and human capital is the most vital capital required for faster development.

Human capital is generally defined as the skill formation of employee through training and
capacity building which increases an individual’s contribution to total productivity and
development.

Elements of Development Management

In the course of influencing development processes development management focuses on

important aspects in development organization. It enhances the realization of development
organizations’ goals. Development management enhancement strategies involve the following
elements:-

I. Capacity building training

II. Technical assistance
III. Leadership and participation
IV. Decentralization and empowerment.

All four elements are directly focuses on people.

Development management needs to focus on four main areas:

i) Contextual factors

This is related to management which include the impact on local, physical, environmental,
political and cultural factors, as well as on external factors such as economic and political
conditions on the projects and programmes.

ii) Management strategy

This includes

A. The resources control encompassing financial, commodity, and logistic management.

B. The approach includes getting things done in an effective and efficient manner.

iii) Management enhancement strategy It involves:

Attempts to change administrative processes, such as ways of carrying out development

programmes in the local setting Efforts to increase consideration of human resources
management and behavioural factors, such as skills, performance, and management capacity of
the people who are part of, or, who will benefit from the project.
iv) Decentralization and empowerment

Development goal can be effectively and efficiently achieved if it is decentralized. The

decentralization principles thrust responsibility at all levels, thereby promoting accountability
and transparency. The decentralization of political, economic, and administrative decision
making would ensure better and effective implementation of developmental projects and
programmes. The capacity building of grassroots functionaries will be helpful to effectively deal
with decentralization and development

Effective management strategies for development must take care of following aspects.

I. Setting goals and benefits

II. Discussion with the stakeholders
III. Time horizon
IV. Resource management
V. Managerial leadership
VI. Training and technical assistance.
The development manager must set the goals of development and articulate the benefits of the
development projects and programmes. After setting goals, the development manager must
initiate discussion with the stakeholders. For example, in case of a rural development projects
and programmes, Akobo, Godere, Dimma and Itang woreda rural people is the main stakeholder.
The development manager has to initiate discussion with the villages in Akobo, Godere, Dimma
and Itang woredas before launching the development project. This will make the development
participatory.

The management of time is critical to any development initiative. The project and programme
has a certain time period limit. The development manager has to stick to the time limit. It is
better, if the development managers prepare a Gantt Chart of various projects and programmes
activities and move accordingly.

Management of both physical and financial resources of the project is very important. The
development manager must have adequate training on how to manage fiscal and financial
resources. The managerial leadership and training of development managers, from time to time,
is important for development management.
Chapter-3: Development management cycle
Development management intends to set out a detailed and wide variety of policies to guide the
decision making process for future planning. Customarily development management as an
instrument is largely used in:

I. Management of development sectors such as a agriculture, industry, rural development,

etc. and
II. Management of development projects and programmes.

The development management cycle begins with the formulation of development goals and
objectives and ends after the dissemination of development impact.

The nine steps of development management cycle are:

 1. Setting the development goal
2. Formulation of development objectives
3. Setting the development targets/ outcomes
4. Formulation of development strategies and activities
5. Allocation of Resources
6. Implementation of the development plan and activities
7. Monitoring
8. Evaluation / Impact assessment/ gap identification
9. Dissemination of result to the policy makers and donors
i. Setting the development goal

Development goals are formulated after the identification of development needs. Development
needs are the difference between what the development “should be” and “what it is”.

The development gaps are identified and documented in the plan and policy documents. Based
on the identified gaps, taken out of the plan and policy document, development goals are
formulated by the national and state government, and also by the NGOs involved in the
implementation of development projects and programmes at the grassroots.

ii) Formulation of development objectives

Development objectives are drawn out of the developmental goals. Development objectives are
the statement of a desired end product to be achieved through the development projects or
programmes. These statements should clearly spell out the desired outcomes and how they will
be attained and measured. The development objective as much as possible should be “SMART”,
which means:

 S-Simple
 M-Measurable
 A-Attainable
 R-Realistic
 T-Time-bound

Any development project or programme must intend to achieve its objective within a given time
frame

iii) Fixing up development targets/outcomes

After formulation of objectives, the next action in the development management cycle is the
setting of development targets and outcomes.

Setting targets and outcomes comes before the development activities, because outcomes based
on indicators provide clues to the development manager on how to fix the targets/ outcomes. The
targets and outcomes must be realistic and based on the objectives of the projects or
programmes, activities and strategies. For example, the outcome of universal immunization calls
for a door-to-door vaccination strategy by health workers.Otherwise, it will undermine the
development projects/ programme endeavour.

iv) Formulation of development strategies/activities

Development objectives and expected outcomes enable the development manager to formulate
suitable strategies. The activities must be in tandem with the development outcome. During the
formulation of strategies the development manager must take the help of area/ subject experts in
the specified development area in which development projects and programmes are being
launched.

v) Allocation of resources

Judicious allocation of resources on various activities and even between the programme
personnel and programme activities is critical to development management. Balance should be
maintained. Unbalanced allocation of resources has negative implications on the outcomes of
developmental projects

One of the important roles of the development manager is to see that resources are allocated
properly on various aspects of development. Moreover, the community contribution must be
resorted to wherever necessary so that the project activities become participatory and sustainable.

vi) Implementation of development plans and activities

Development projects have to be implemented according to the plans.

However, effective implementation of development plans and activities is a challenge before the
organization implementing development projects. The activity plan with a “Gantt chart” and
activity mapping are widely used by development institutions during the formulation of
developmental projects.

It helps the donor agencies as well as implementing agencies to monitor the activities against set
targets.

Vii Monitoring

Monitoring is a continuous and periodic review, and surveillance by the development

management at every level of the implementation of an activity to ensure that input deliveries,
work schedules, transected outputs and other required actions are proceeding according to plan.

The availability of an activity plan, as discussed in the preceding point, is a pre-condition for
monitoring. During monitoring, field data are collected, processed, analyzed, and presented to
management.

VIII Evaluation/impact assessment/gap identification

Evaluation is the process of determining, systematically and objectively, the relevance,

efficiency, effectiveness, and impact of project activities in the light of the stated objectives. It
provides information to the development manager about past or ongoing activities, and, in a way
helps, in case there is any need for modification to project activities.

xi) Dissemination

The result of the project evaluation and impact assessment needs to be disseminated in the form
of a report to the donor agencies. This can even be published in newspapers and journals so that
other stakeholders can learn and replicate it elsewhere.

While disseminating, it should be kept in mind that all the aspects including input, process,
output and outcome need to be covered. Complete details will help the stakeholders as well as
beneficiaries and also the development managers to interface with a larger audience.

Pre-requisites for Good Development Management

i.Inter & Intra Sectoral Coordination

For the effective management of development projects or programmes, the development

management must have a climate of healthy intersectoral coordination. Coordination among the
sectors is essential for smooth implementation of development activities. For example, the
development manager, while implementing any health programme at the grassroots level, has to
coordinate with health related departments such as education, public health, women and child
welfare, panchayati raj , etc.

Besides, intra sectoral coordination within the health sector at different levels, such as region,
zone, woreda, and village levels, is also essential for the smooth implementation of health
programme.

ii) Good Governance

In recent years good governance has become a buzz ward in development. It is widely felt that
good governance will ensure faster development. According to the United Nations, the important
features of good governance are consensus oriented, participatory, accountable, transparent,
responsive, equitable and inclusive.

Development management needs to use good governance as a tool for effective implementation
of development activities to achieve development goals.

Customarily, good governance helps create an environment in which sustained economic growth
becomes achievable.

iii) Convergence

Convergence in recent years has been emphasized to check the duplication of effort and wastage
of resources. It is seen that at the grassroots level, the activities implemented by different sectors
- different agencies and different institutions - sometimes overlap, which leads to wastage of
resources and man-hours.

For example, in an area, if the health and education programmes with similar objectives,
strategies, and activities are being implemented by the government, non-governmental
organization, and by the bilateral organizations, too, then it will not only be overlapping but
would create confusion in the minds of people. The convergence of the activities as well as of
funds will definitely check the wastage of resources

The judicious convergence of funds, functions and functionaries by the development manager
will make the entire programme cost effective.For example, the Ministry of Rural Development
and Ministry of Health can work on convergence in order to effectively implement rural
development and health programmes at the community levels.

iv) Decentralization

Decentralization of funds, functions, and functionaries to the lower level of governments lead to
effective implementation of programmes at the grassroots.

The significance of decentralization has been argued on following grounds:

Allocative efficiency- Local authorities and grassroots functionaries are more sensitive to local
priorities and needs and can allocate resources effectively.

Information Provision- The local government can keep can keep people better informed as they
are closer to them.

Responsiveness – The local government can be more responsive to the needs of people than
state and central government.

Local revenue maximization – As local governments are closer to the people they can better
motivate and collect taxes, fees, and user charges.
Accountability- Being closer to people, they will be more accountable to them and otherwise
people by putting pressure on them will make them accountable.

v) Leadership

Leadership is an essential pre-requisite for good development management. Development

managers must influence development workers and support them for the accomplishment of
developmental tasks.

Effective leadership is the key to good development management. It is said that an effective
leader is one who can successfully integrate and effectively utilize scarce resources for the
accomplishment of institutional goal. Five important traits of leadership are honesty, intelligence,
forward looking, competency, andinspirational.

Chapter four: Ecology of development management

The term ecology suggests the relations and interdependence between living organism and their
environment. Ecology deals with the organic life on the earth. It examines the interaction
between the living organism and their environment. Animals, men, and plants are conditioned by
their environment.

The study of development-administration also includes ecology. The ecological approach is

based on the view that an administrative system may not act as an independent variable in all
situations. The main contributors to the ecological study of development-administration are John.
A Gaus, Robert. A. Dahl and F.W. Riggs.

But the most notable contribution to the ecology was made by F.W.Riggs. He
wrote a book known as The Ecology of Public Administration. Riggs in his book stressed the
relationship between public administration and its environment. This concept has extended to the
realm of development management termed as ecology/environment of development
management.

In this sense ecology or environment does not directly refer to physical or biological aspects but
rather dimensions of human civilization throughout the social, economic, political and other
facets within which development management functions.

Social Context of Development-Administration

Development-administration is rooted in a larger social system. Social system is a

comprehensive term which includes in its fold many other sub-system like economic, political
system.

It also includes social change or social reform and it can be brought about by social policies.
Social policies have to be implemented by administrators. Many social problems are the
challenges to the development administrator.

Problems include poverty, unemployment, beggary, racial discrimination, unemployment, dowry

system, prostitution, delinquency, destitution, concentration of the wealth in the hands of the few
and so forth. These are all the hindrances to development-administration. All these are the anti-
social activities which requires proper policies to be framed by the government. And these
policies should be effectively implemented by efficient administrators. Social conflicts arises in
society due to the scarcity of resources.

The administrator should have sufficient knowledge of such conflicts and he should seek the
means to resolve or manage those conflicts. He has to see that society is not attacked by evils
like casteism, communalism, regionalism, sectionalism, language, and so on. Implementation of
laws and policies with regard to social problems is a great task before the administrative
machinery.

The problems of society in every country whether democratic or communistic are too complex
and complicated. Every person has to live in society as a civilized member. But due to the
development made in science and technology and growing population, society has been facing
many problems.

Society is getting divided into 'haves’ and 'havenots.' And that will affect the development
administration.

All people are not equal with regard to resources, facilities and other opportunities. Most of the
people are poor who are not able to make their both ends meet. They are not in a position to get
their minimums. They are illiterate, ignorant about the development set up, political set up,
economic set up etc.

Social conflicts are increasing day-by-day, that will seriously affect the development activities.
There is no peace, unity, harmony among the members of the society. So, the people are forced
to engage in anti-social activities like theft, rapism, looting, demonstration, murdering, killing,
kidnapping and so on
All these they do because, they (both men and women) have been facing the problems of
poverty, hunger, unemployment and so on.

Sometimes some people are forced to commit suicide crimes knowingly or unknowingly-due to
the pressing of time and circumstances. Women are suffering from the evil practices of the
society like divorce, dowry and other problems

All these various evils, issues and problems of the society require the passing of the proper laws
and formulation of proper policies by the government. Whether it is social law or social
legislation or social policy it should be effectively and timely implemented. The implementation
of social law or social legislation is the job of development-administration.

Unless, there is an efficient, honest, non-corrupt, well trained administrative machinery to

implement social policies, plans, programmes and laws, there is no development, no social
justice or social welfare.

So, the ideals of social justice or social welfare can be realized only when there is good
administration.

Political context of development administration

Development-administration is very close to a political system. Development-administration is

completely depends upon the political system. Therefore, the political factor influences the
structure and functioning of development administration. The influence of politics on
development is very great. No aspect of development can be studied without political influence.

Politics influences almost every aspect of development-administration.

The whole field of administration operates in the political environment or

milieu. Every aspect of development-administration is influenced by politics. The administrators
activities are politically directed and controlled. Political process and development process
although distinct, different, separate and independent, still, they are inter-related, inter-linked,
inter- connected and inter-woven.

Politics is, thus, the 'struggle' for the control of public policy. Politics frames the policies.
There is a continuous interaction between politics and development. They are corelative.

Policy formulation is the job of politics, while enforcing is the job of development-
administration where policy formation ends, implementation begins.

Bureaucracy plays a very important role in development-administration. But inefficient

bureaucracy is a great impediment in the way of development. Bureaucracies in many ways
particularly in developing countries are weak and inefficient as it cares more for the rules,
regulations and formalities without caring for the real needs and problems of the citizens.
Corruption has become routine in governmental administration. Both citizens and the
government are equally responsible for the evil of corruption

We talk of neat, clean, and efficient administration, but in practice, quite reverse is
the result. So, the evils like red-tapism, nepotism, corruption etc., have become the hindrances in
the way of development administration. Developing countries are dominated by party politics.

Party politics have become more important than economic development. In the west (developed
countries), economic development is more important than politics.

Politics is not characterized by stability due to the splits in political parties which is a great
difficulty in the way of development. The splits in the different political parties have created a
confusion in the minds of the voters.

It has become very difficult to say, which party stands for what? No party has established its
credibility, faith and confidence in the voters. All parties have become too opportunistic, just to
play the game of politics, to get power and misuse power.

The slogans, statements at the time of elections are used as a means to win the elections.
Aristotle, the father of political science, said that "man is a social animal" and he is necessarily a
political anima. That means he participates in political-affairs. Participation is most important for
his development.

Voting, public discussion, critical assessment of governmental functioning, public interest

movements, organisations, consulting and contacting the political representatives are the political
context of development-administration.

Economic Context of Development-Administration

Economics is the study of the wealth.

It covers almost every economic aspect of human life. Pricing, currency, banking,
planning, budgeting, production, distribution, consumption, exchange all these are the economic
terms.

All these affect development-administration. Imports exports taxation poiicies, acquiring of

wealth, saving capacity of man, purchase capacity, industrial development all these have a
bearing on development-administration.

To Prof. Riggs economic productivity is the most important feature which has influenced
development-administration.

In other words, production and consumption of material goods affects the nature and
characteristics of development-administration.
Development-administration is influenced by the mode of production and "Production relations"
without doubt. The economic context of development-administration has some positive aspects.
Such as the protection of tenancy, distribution of surplus land to the poor, giving loans and
subsidies to the poor and marginal farmers, creation of employment opportunities, reservation in
the distribution of surplus lands etc…. These are all the positive economic context of
development administrations.

Cultural Context of Development-Administration

The impact and the influence of culture on development-administration is quite direct and
immediate.

Development-administration has a philosophy of its own, culture affects the development-

administration.

 It is bound by people’s culture.

 Culture is dynamic and influencing force.
 The various developmental policies and programmes of the government have a cultural
dimension.
 Both culture and development-administration act as an instrument of social and economic
change.

References

 Basu Rumki (1994), Public Administration: Concepts and theories (third edition), Sterling
Publishers Ltd.
 Cole B. Graham (1986) Managing the Public Organization
 David Osborne (1992) Reinventing Government
 Friedman, J., (1992) Empowerment: The politics of alternative development Blackwell
Publishers, USA.
 Gant F George, (1979) Development administration: concepts, goals, methods, The University of
Wisconsin Press.
 Course: Project Planning and Management
Code: PADM 3133
Course Credit: 3

Introduction
Various organizations, whether private, public, or CSO, are finding that traditional project
management principles are no longer applicable in today's extremely dynamic and demanding
environment. In other words, a fixed approach to project planning and management is no longer
a good method, as it is very difficult to anticipate everything in advance and react to it. Instead,
more agile project planning and management methods are required to cope with the ever-
increasing dynamics. As a result, many organizations are choosing to define their own "specific"
approach to planning and managing projects. Hence, this course helps students to grasp the
knowledge and skills of project planning and management with current content so that they can
fit the prevailing demand. This course provides a systematic and thorough introduction to all
aspects of project planning and management. Projects are an increasingly important aspect of
modern organizations.

Therefore, the course emphasizes the importance of understanding the relationship between
projects and the strategic goals of the organization. The course also covers the technical, cultural,
environmental, and interpersonal skills necessary to successfully plan and manage projects from
planning to delivery and/or completion. It is emphasized that project planning and management
is a professional discipline with its own tools, body of knowledge, and skills. In this course,
generic concepts are reinforced through case studies covering a wide range of project types and
institutions.
Learning Objectives
At the end of this course, students will be able to:
 Understand the project, project planning and management concepts, tools, and techniques;
 Understand the project management life cycle and have knowledge of the various phases of
project planning and management from project initiation to completion;
 Develop a detailed project plan that includes: Defining project scope and tasks, estimating
resource requirements, assessing project risk and response strategies, communication plan
UNIT ONE

INTRODUCTION TO PROJECT

1.1. Definition of Project

A project can be defined in different ways.

A project is a complex of economic activities in which we commit scarce resources in

expectation of benefits that exceed these resources.

So, a project is a sequence of unique, complex, and connected activities having one goal or
purpose and that must be completed by a specific time, within limited budget, and according to
specification. The following constitutes each part of the definition.

1.2. Characteristics or features of project

In most cases, it is easier to describe than to define a project.

This definition tells us quite a bit about a project. To appreciate just what constitutes a project,
let’s look at each part of the definition.

I. Sequence of Activities
ii. Unique Activities
iii. Complex Activities
iv. Connected Activities
v. One Goal
vii. Specified Time
Viii. within Budget
Ix. According to Specification
Plan, Programs and Projects

Some time, people confuse a project with a program and often use interchangeably, but the terms
are not the same. Unlike a project, a program is an ongoing development effort or plan.

The plan is the written explanation of goals, objectives, targets and means to achieve it.

A project is comprised of individual tasks that aim at specified outputs or deliverable products.

Programs, on the other hand, are organization activities aimed at achieving broader organization
objectives by coordinating a group of projects.

1.3. Classification of projects

The project undertaking may be conducted either public sector or private sector.
Here are differences between public and private organizations:

 Complexity: public organizations are confronted with a wider variety of stakeholders,

each of which places demands and constraints on managers than private projects;
 Permeability: public organizations are “open systems” easily influenced by external
events than their counter private sector;
 Instability: because of political constraints determine frequent changes in politics and the
imposition of short time horizons;
 Absence of competitive pressures: public organizations generally have few competitors.
Even when competition is present, public managers often enjoy a dominant position in
the market, such as in education and healthcare.

1.4. Project success criteria

The scope, time, and cost limitations are sometimes referred to in project management as the
triple constraint.

To create a successful project, a project manager must consider scope, time, and cost and balance
these three often-competing goals:
 1. Scope: What work will be done as part of the project? What unique product, service, or
result does the customer or sponsor expect from the project?
2. Time: How long should it take to complete the project? What is the project’s schedule?
3. Cost: What should it cost to complete the project? What is the project’s budget? What
resources are needed?
Other people focus on the quadruple constraint, which adds quality as a fourth constraint.
Quality: How good does the quality of the products or services need to be? What do we need to
do to satisfy the customer? Other also suggests these four constraints plus risk.
Risk: How much uncertainty are we willing to accept on the project?
1.5. Project Management: An Overview
Project management is planning, scheduling, controlling and monitoring the complex non-
routine activities that must be completed to reach the predetermined objectives of the project

Planning is the process of preparing for the commitment of resources in the most economical
manner. Project planning deals with specified tasks and operations of activities, which must be
performed to achieve the project goals.

One of the main reasons for the failure of many projects in the developing countries is the
inadequacy of managerial skill for project implementation and imperfect planning and control of
projects.

Controlling is the process of making events to conform to schedules by coordinating the action
of all parts of the project outlined to achieve its objectives.
1.6. Project Stakeholders
Stakeholders are the people involved in or affected by project activities. These include the
project sponsor, the project team, the support staff, customers, users, suppliers and opponents to
the project.
 CHAPTER TWO
PROJECT LIFE CYCLE
2.1. Introduction
Project cycle is referred to as the various stages through which project planning proceeds from
inception to implementation. It is the project’s life span through which a project advances
from infancy to maturity. Different guidelines, manuals and foreign authors have called project
phases by different names.

2.2. United Nations Industrial Development Organization (UNIDO) Project Life Cycle
UNIDO has divided project cycles into phases and stages as follows.
1. Pre - investment phase: Identification of investment opportunity (opportunity study),
Preliminary selection stage (pre-feasibility study/Analysis of Project Alternatives), Project
formulation stage (feasibility study) and Evaluation and decision stage (evaluation
report/project appraisal and investment decision)
2. Investment phase: Negotiation and contracting stage; Project design stage, Construction
stage; Preproduction marketing stage; Training stage; Start up stage
3. Operational phase: Long-term views (expansion, innovation); Short-term views

2.3. The Baum Cycle (adapted by the World Bank in 1970)

The Baum Cycle has five stages. The breakdown of the phases in the project cycle is artificial. In
reality the process is continuous and interactive. The phases are:
I. Identification
II. Preparation (feasibility study)- ex-ante evaluation
III. Appraisal
IV. Implementation
V. Evaluation – added after a certain period (1978). It involves ex-post evaluation.
2.4. New Project Cycle (World Bank 1994)
 Emphasis on the issue of participation
 Particularly relevant to projects where beneficiary participation is critical.
 It has four phases
- Listening- listen the stakeholders.
- Piloting- trying it in small scale.
- Demonstrating- demonstrating the pilot
- Mainstreaming- duplicating the pilot.
 Listening - Piloting- Demonstrating – Mainstreaming
 UNIT THREE
PROJECT IDENTIFICATION

3.1. Introduction
The search for promising project ideas is the first step towards establishing a successful venture.
As the traditional adage goes, the key to success lies in getting into the right business at the right
time. While this advice is simple, its accomplishment is difficult because good business
opportunities tend to be elusive. Identification of such opportunities requires imagination,
sensitivity to environmental changes, and a realistic assessment to what the firm can do

 Generation of ideas  Preliminary screening

 Monitoring the environment  Project rating index

 Corporate appraisal
 Sources of positive net present value
 Profit potential of industries
 On being an entrepreneur
 Scouting for project ideas

3.2. Generation of Ideas

‘Necessity is the mother of invention’ and also equates with projects, as they are rooted to human
needs and wants. These needs may be social, political, economic, commercial, technical or
environmental that drives the actions of entrepreneurs to pursue some creative actions. That is
project ideas are generated in order to satisfy the needs and wants.

Stimulating the flow of ideas

To stimulate the flow of ideas, the following are helpful:

SWOT Analysis. SWOT is an acronym for strengths, weaknesses, opportunities, and threats.
SWOT analysis represents a conscious, deliberate, and systematic effort by an organization to
identify opportunities that can be profitably exploited by it. Periodic SWOT analysis facilitates
the generation of ideas.

Clear Articulation of Objectiv: A clear articulation and prioritization of objectives helps in

channeling the efforts of employees and prods them to think more imaginatively.
Fostering a conductive climate- To tap the creativity of people and to harness their
entrepreneurial urges a conducive organizational climate has to be fostered.

3.3. Identifying Investment Opportunities

There are several useful tools or frameworks that are helpful in identifying promising investment
opportunities. The more popular one is the Porter model.

Porter Model: Profit Potential of Industries

Micheal Porter has argued that the profit potential of an industry depends on the combined
strengths of the following five basic competitive forces:

 Threat of new entrants

 Rivalry among existing firms

 Pressure from substitute products

 Bargaining power of buyers

 Bargaining power of sellers

a. Threat of New Entrants. New entrants add capacity, inflate costs, push prices down, and
reduce profitability.

b. Rivalry between Existing Firms. Firms in an industry compete on the basis of price, quality,
promotion, service, warranties, and so on. Generally, a firm’s attempts to improve its
competitive position provoke retaliatory actions from others

c. Pressure from Substitute Products. In a way, all firms in and industry face competition
from industries producing substitute products

d. Bargaining power of Buyers. Buyers are a competitive force. They can bargain for price cut,
ask for superior quality and better service, and induce rivalry among competitors

e. Bargaining power of Suppliers. Suppliers, like buyers, can exert a competitive force in an
industry as they can raise prices, lower quality, and curtail the range of free services that they
provide.

Scouting for Project Ideas

Good project ideas key to success are elusive. So a wide variety of sources should be tapped to
identify them. Here are some suggestions in this regard:

Analyze the performance of Existing Industries. A study of existing industries in terms of

their profitability and capacity utilization can indicate promising investment opportunities-
opportunities which are profitable and relatively risk-free

Examine the Inputs and Outputs of Various Industries. An analysis of the inputs required
for various industries may throw up project ideas. Opportunities exist when (i) material and
purchased parts for supplies are presently being procured from distant sources with attendant
time lag and transportation cost, and (ii) several firms produce internally some components/parts
which can be supplied at a lower cost by a single manufacturer who can enjoy economies of
scale.

Review Imports and Exports. An analysis of import statistics for a period of five to seven
years is helpful in understanding the trend of imports of various goods and the potential for
import substitution.

Study Plan Outlays and Governmental Guidelines. The government plays a very important
role in the economy of a country. Its proposed outlays in different sectors provide useful pointers
toward investment opportunities.

Look at the Suggestions of Financial Institutions and Developmental Agencies. In a bid to

promote development of industries in their respective states, state financial corporations, state
industrial development corporations, and other developmental bodies conduct studies, prepare
feasibility reports, and offer suggestions to potential entrepreneurs

Investigate Local Materials and Resources A search for project ideas may begin with an
investigation into local resources and skills. Various ways of adding value to locally available
materials may be examined. Similarly, the skills of local artisans may suggest products that may
be profitably produced and marketed.

Analyze Economic and Social Trends A study of economic and social trends is helpful in
projecting demand for various goods and services. Changing economic conditions and consumer
preferences provide new business opportunities.
Study New Technological Developments. There is a large network of research laboratories in
India under the umbrella of the Council of Scientific and Industrial Research, and other bodies.

Draw Clues from Consumption Abroad. Entrepreneurs willing to take higher risks may
indentify projects for the manufacture of products or supply of services which are new to the
country but extensively used abroad.

Explore the Possibility or Reviving Sick Units. Industrial sickness is rampant in the country.
There are innumerable units which have been characterized as sick. These units are either closed
or face the prospect of closure.

Identify Unfulfilled Psychological Needs. For well-established, multi-brand product groups like
bathing soap, detergents, cosmetics, and toothpaste, To find out whether such an opportunity
exists, the technique of spectrum analysis is useful. This analysis is done in the following
manner: (i) Important factors influencing brand choice are identified. (ii) Existing brands in the
market are positioned on a continuum in respect of the factors indentified in step (i). (iii) Gaps
which exist in relation to consumer psychological needs are identified.

Attend Trade Fairs. National and international trade fairs provide an excellent opportunity to
get to know about new products and developments.

Stimulate Creativity for Generating New product Ideas New product ideas may be generated
by thinking along the following lines: Modification, Rearrangement, Reversal, Magnification,
Reduction, Substitution, Adaptation, and Combination.

Chance. Hope that the chance factor will favor you. Identification of investment opportunity
may be influenced by the chance factor. Two examples may be given here.

3.4. Preliminary Screening

By using the suggestions made in the preceding section, it is possible to develop a long list of
project ideas. Some kind of preliminary screening is required to eliminate ideas which prima
facie are not promising. For this purpose, the following aspects may be looked into:

i. Compatibility with the promoter

The idea must be compatible with the interest, personality, and resources of the entrepreneur.
According to Murphy, a real opportunity has three characteristics: (i) It fits the personality of the
entrepreneur-it squares with his abilities, training, and proclivities. (ii) It is accessible to him. (iii)
It offers him the prospect of rapid growth and high return on the invested capital.

ii. Consistency with Government Priorities

The project idea must be feasible given the national goals and governmental regulatory
framework.

Availability of Inputs

The resources and inputs required for the project must be reasonably assured. To assess this, the
Adequacy of the Market

The size of the present market must offer the prospect of adequate sales volume. Further, there
should be a potential for growth and a reasonable return on investment

Reasonableness of Cost

The cost structure of the proposed project must enable it to realize an acceptable profit with a
price. The following should be examined in this regard:

 Cost of material inputs  Selling and distribution costs

 Labor cost  Service cost

 Factory overheads  Economies of scale

 General administration expenses

iii. Acceptability of Risk Level

The desirability of a project is critically dependent on the risk characterizing it. In the assessment
of risk-a difficult task indeed-the following factors should be considered:

 Vulnerability to business cycles  Competition from imports

 Technological changes
 Governmental control over price and
 Competition from substitutes distribution
 3.5. Project Rating Index

When a firm evaluates a large number of project ideas regularly, it may be helpful to streamline
the process of preliminary screening

On Being an Entrepreneur

Many persons have an entrepreneurial urge to set up their own project and be on their own.
Hence, it may not be out of place here to discuss the questions every entrepreneur must answer
and the qualities and traits of a successful entrepreneur.

The Questions Every Entrepreneur Must Answer

What qualities and traits are required to be a successful entrepreneur? It appears that a successful
entrepreneur has the following qualities and traits:

 Willingness to make sacrifices

 Leadership
 Decisiveness
 Confidence in the project
 Marketing orientation
 Strong ego
 Open mindedness
 3.6. Monitoring the Environment

Basically, promising investment ideas enable a firm (or the entrepreneur) to exploit opportunities
in the environment by drawing on its competitive strengths. Hence, the firm must systematically
monitor the environment and assess its competitive abilities. For purposes of monitoring, the
business environment may be divided into two broad sectors i.e macro and micro environment:

Macro – external environment

The macro environment (which include the economic, political and legal, social and cultural, and
technological forces) and its important aspects studied in monitoring consist of the following:
Economic sector - State of the economy
- Overall rate of growth
- The growth rate of primary, secondary and tertiary sectors.
- Projected national income trends, GNP trends
- Provisions of infrastructure
- Inflation rate, interest rate, exchange rate
- Unemployment level
- Linkage with the world economy etc
Governmental (political - Manifestoes of party in power and the opposition
and legal) sector - Attitude towards investors
- Restrictions on areas of investment by private sector
- Restrictions on imports
- Control over prices and distribution of goods etc
Technological sector - Emergence of new technologies
- Access to technical know-how, foreign as well as indigenous
- Transport
- Product processing etc
Social and cultural sector - Population trends, shift in population among regions
- Age shifts in population
- Educational profile
- Employment of women etc

Micro – External environment

The micro external environment is also known as Task environment. The micro – external
environment is mainly concerned with industry, market, competitors, etc. and the major factors
to be studied consist of:
Competition sector (analysis of the - Number of firms in the industry and the market
industry and the market) share of the top few
- Degree of homogeneity and differentiation among
 products
- Exit and Entry barriers
- Comparisons with substitutes in terms of quality,
price and functional performance
Supplier sector - Availability and cost of raw materials and sub-
assemblies
- Availability and cost of energy
- Availability and cost of money
- Exit and entry of suppliers
- Power of suppliers

3.7. Corporate Appraisal

A realistic appraisal of corporate strengths and weaknesses is essential for identifying investment
opportunities which can be profitably exploited. The broad areas of corporate appraisal and the
important aspects to be considered under them are as follows:

Marketing and Distribution

 Market image
 Product line
 Market share
 Distribution network
 Customer loyalty
 Marketing and distribution costs
Production and Operations
 Condition and capacity of plant and machinery
 Availability of raw materials, sub-assemblies, and power
 Degree of vertical integration
 Location advantage
 Cost structure
Research and Development

 Research capabilities of the firm

 Track record of new product developments
 Laboratories and testing facilities
 Coordination between research and operations
Corporate Resources and Personnel

 Corporate image
 Clout with governmental and regulatory agencies
 Dynamism of top management
 Competence and commitment of employees
 State of industrial relations
Finance and Accounting
 Financial leverage and borrowing capacity
 Cost of capital
 Tax situation
 Relations with shareholders and creditors
 Accounting and control system
 Cash flows and liquidation
 UNIT FOUR
PROJECT PREPARATION
4.1. Introduction

Some investment proposals pass through a stage of checking out the feasibility. Large projects
usually need feasibility test to be carried out before a handsome amount of capital is committed.
A feasibility study is part of the process of project identification, preparation and selection. This
process involves the appraising of projects or groups of projects and choosing to implement
some of them. Feasibility literally means whether some idea will work or not. Feasibility is a
multivariate concept; that is, a project has to be viable not only in technical terms but also in
economic and commercial terms too.
These proposals as pointed out above take the following forms of feasibility studies:
1. Market/Commercial viability
2. Economic feasibility
3. Financial feasibility
4. Technical feasibility
5. Social Cost Benefit analysis
6. Other feasibility considerations like legal, administrative, ecological

When projects are evaluated by government or government agencies, economic and social
feasibility is also considered. Market feasibility is also emphasized, but technical and financial
feasibility is less emphasized.

Market and Demand Analysis

A market, whether a place or not, is the arena for interaction among buyers and sellers.
From seller’s point of view, market analysis is primarily concerned with the aggregate demand
of the proposed product/service in future and the market share expected to be captured.

After all, the whole universe cannot be your market. You have to carefully segment the market
according to some criteria such as geographic scope, demographic and psychological profile of
the potential customers etc.

Requirements for market and demand analysis

A. Information requirement

The principal types of information required for market and demand analysis relate to:
1. Effective demand: to gauge the effective demand in the past and present, the starting point
typically is apparent consumption.

2. Breakdown of demand: to get a deeper insight into the nature of demand, the aggregate
(total) market demand may be broken down into demand for different segments of the
market.

(i) Nature of product: One generic name often subsumes many different products: steel covers
sections, rolled products, and various semi-finished products; commercial vehicles cover
trucks and buses of various capacities etc.
(ii) Consumer groups: Consumers of a product may be divided into industrial consumers and
domestic consumers.

(iii) Geographical division: A geographical breakdown of consumers, particularly for products

which have a small value-to-weight relationship and products which require regular, efficient
after-sales service is helpful.

B. Price: Price statistics must be gathered along with statistics pertaining to physical quantities.

C. Methods of distribution and sales promotion: the method of distribution may vary with the
nature of product. Capital goods, industrial raw materials or intermediates, and consumer
products tend to have differing distribution channels.

D. Consumers: two categories of information about the consumers may be required:

a) Demographic and sociological information-, information on: age, sex, income,

avocation, residence, religion, customs, beliefs, and social background, and

b) Attitudinal information- information on - preferences, intentions, attitudes, habits, and

responses.

E. Governmental policy: import duties, export incentives, excise duties, sales tax, industrial
licensing, preferential purchases, credit controls, financial regulations, and
subsidies/penalties of various kinds.

F. Supply and competition: it is necessary to know the existing sources of supply and whether
they are foreign or domestic
G. Demand estimation

The first and most difficult step in market feasibility analysis is determining the potential
demand for the product or the service we are intending to produce/render. There are different
methods of estimation.

A. Market survey

The information sought in a market survey may relate to one or more of the following;

o Total demand and rate of growth of demand;

o Demand in different segments of the market;
o Attitudes toward various products
o Distributive trade practices and preferences;
o Socio-economic characteristics of buyers.

B. Demand forecasting
After gathering information about various aspects of the market and demand from primary and
secondary sources, an attempt may be made to estimate future demand. Several methods are
available for demand forecasting. The important ones are qualitative and quantitative methods.

I. Qualitative Methods

Qualitative or judgmental forecasting does not rely on numbers to conclude forecast, but
rather on intangible factors. This method is especially common when sufficient historical data is
not available,

Jury of Executives Opinion Method

This method, which is very popular in practice, involves soliciting the opinions of a group of
managers on expected future sales and combining them into a sales estimate.

Delphi Method
This method is used for eliciting the opinions of a group of experts with the help of a mail
survey.

II. Quantitative Methods

Simply stated, the word quantitative signifies an estimate of a particular, indefinite or

considerable amount of anything. Quantitative techniques rely primarily on numbers to
conclude forecasts. These numbers are multiplied, added or correlated and then placed in a
formula to predict the company's sales.

A. Trend Projection Method

When the trend projection method is used, the most commonly employed relationship is the
linear relationship. Trend projection consists of determining the trend of consumption by
analyzing past consumption statistics, and projecting future consumption by extrapolating the
trend. The trend of consumption may be represented by one of the following relationships:

Linear Relationship: Yt = a + bt

Where; Yt = demand for year t,

t = the time variable,
a = intercept of the relationship
b = slope of the relationship
a, b are constants.
The values of a and b can be determined using the following formula:
To illustrate demand forecasting using simple regression analysis, consider the following data
concerning demand for product x during the last eight years.
Year Actual demand
1 200
2 250
3 175
4 186
The linear equation for the above data is formulated as follows: assuming that the base line is the
first five years:
n ∑ TY −∑ T ∑ Y
∑ Y −b ∑ T
n ∑ T −( ∑ T )
2 2
b= a= n
Using the above data, the computations of a and b are as follows:
Year (T) Actual demand (Y) TY T2
1 200 200 1
2 250 500 4
3 175 525 9
4 186 744 16
5 225 1125 25
 = 15  = 1036  = 3094  = 55

n ∑ TY −∑ T ∑ Y
n ∑ T 2 −( ∑ T )
2
b=
1036− ( −75 ( 15 ))
= 5
1036−(−21 )
= 5
= 211.40
7
T
Yt = 211.40 - 5

∑ Y −b ∑ T
a= n

5(3094 )−(15 x 1036)

= 5 (55 )−(15)2
15470−15540
= 275−225
−70
= 50
−7
= 5
 B. Exponential smoothing

Exponential smoothing is another very popular demand forecasting method. Under exponential
smoothing, the current forecast is the weighted average of the last forecast and the current value
of demand. That is:
New forecast:  (current observation of demand) + (1-) (last forecast)
In symbols,
Ft =  Dt-1 + (1 - ) Ft-1
Where 0 <   1 is the smoothing constant.  (alpha) determines the relative weight placed on
the current observation of demand. 1 -  is interpreted as the weight placed on past observations
of demand. D refers to the actual demand of current period (t-1). The above formula can be
rewritten as follows:
Ft = Ft-1 +  (Dt-1 – Ft-1)
where
Ft-1 = previous forecast
 = smoothing constant
Ft = New forecast
Dt-1 = the demand for the current period.
From the above description, it is possible to conclude that exponential smoothing method
requires only three items of data: the last period’s forecast, the demand for the current period,
and the smoothing constant ().
To illustrate demand forecasting using exponential smoothing, assume that demand for product
X in April was forecasted to be 120 units (F t-1 = 120). Actual April demand was 140 units (D t-1 =
140). If smoothing constant is 0.4 ( = 0.40), the forecast for May would be:
FMay = Ft-1 + (Dt-1 – Ft-1)
= 120 + 0.40 (140 – 120)
= 120 + 8
= 128
Thus, alpha () indicates the weight of importance given for past forecasting inaccuracies in
forecasting the next time period dictating how much correction will be made.
To further illustrate exponential smoothing, assume that Grace company has the following
recorded demand for its product Y in the last 8 quarters: The smoothing constant is 10%.
Quarter Actual demand (D) Forecast (F)
1 200 200 (By assumption)
2 250
3 175
4 186
5 225
6 285
7 305
8 190
The demand forecast for periods 2 – 5 are shown below:
Ft = Ft-1 +  (Dt-1 – Ft-1)
F2 = 200 + 0.10 (200 – 200) = 200
F3 = 200 + 0.10 (250 – 200) = 205
Moving Average Method
According to this method, the forecast for the next period is equal to the average of the sales
for several preceding periods.
St + St−1 +. ..+ S t−b +1
F t+1=
n
where:
Ft+1 = Forecast for the next period
St = Sales for period t
n = period over which averaging is done
To illustrate, consider the following data for the past 10 years.

Year Sales (Actual)

1 80
2 60
3 70
4 90
5 75

C. End use method

End use method, also called consumption coefficient method, is more suitable for estimating the
demand for intermediate products. Intermediate products are considered output of one company
and then input of another company. For example, chips are the output to the chip manufacturer
but input to computer producing company. The use of end use method in demand forecasting
involves the following steps.
Step 1. Identify the possible uses of the product
Step 2. Define the consumption coefficient (usage rate) of the product for various uses.
Step 3. Project the output levels for the consuming industries
Step 4. Derive the demand for the product.
The company collected consumption coefficient and projected output of each industry and
summarized the data below:
Industry Consumption Projected output for
Coefficient each industry

Electronics 5 10,000
Computer 4 30,000
Electricity 6 15,000
Telecommunication 7 20,000

Required: Determine the total forecasted demand for chips

To give a solution to the above question, it is advisable to understand the data properly. The
consumption coefficient indicates the rate of input (chips) per unit of output. For instance, the
consumption coefficient of 5 for electronics industry implies that the industry uses 5 chips to
produce one unit of its output. The 3 rd column shows the planned production for each industry.
Accordingly, demand for chips in the coming year is computed as follows:

Industry Consumption Projected Projected demand

coefficient output for chips
Electronics 5 10,000 50,000
Computer 4 30,000 120,000
Electricity 6 15,000 90,000
Telecommunication 7 20,000 140,000
Total forecasted chips 400,000

3.2. Economic feasibility

Economics is the study of costs- and- benefits. In regard to the feasibility, the study of the
entrepreneur is concerned whether the capital cost as well as the cost of the product is justifiable
vis-à-vis the price at which it will sell at the market place.

Apart from the cost-benefit analysis as above, which we also refer to as private cost-benefit
analysis, it is also useful to do what is known as social- cost-benefit- analysis (SCBA). For
example, the entrepreneur may be getting subsidized electricity in which case private cost would
be less than social cost.

Financial feasibility

The objective of financial analysis is to ascertain whether the proposed project will be financially
viable in the sense of being able to meet the burden of servicing debt and whether the proposed
project will satisfy the return expectations of those who provide the capital.

Capital budgeting is project decision-making as to whether a project is worth undertaking.

Capital budgeting is basically concerned with the justification of capital expenditures. Current
expenditures are short-term and are completely written off in the same year that expenses occur.
Capital expenditures are long-term and are amortized over a period of years are required by the
tax authorities

Basic Steps of Capital Budgeting

1 Estimate the cash flows (initial outflow and subsequent net inflows)
2 Assess the riskiness of the cash flows.
3 Determine the appropriate discount rate.
4 Find the PV of the expected cash flows.
5 Accept the project if PV of inflows > costs. IRR > Hurdle Rate and/or payback < policy
Payback Period (PBP)
Payback period refers to the length of time it takes to recover initial investment of the project.
Depending on the nature of net cash flows, payback period may be computed in two ways.
a) When cash flow is in annuity form
Annuity refers to equal amount of cash flows that occur every period over the life of the
project
Initial Investment
PBP = Annual Net Cash Flows
To illustrate the computation of payback period, assume that a project requires an initial
investment of Br. 24,000 and annual after tax cash flows of Br. 6000 for five years. How long it
takes the company to recover its initial investment?
24 ,000
PBP = 6000 = 4 years
It is expected to take the company four years to recover the project’s initial investment of Br.
24,000
b) When cash flows are not in annuity form
When net cash flows are not annuity, payback period is obtained by adding net cash flows for
successful years until the total is equal to initial investment. To exemplify, assume that a project
requires an initial investment of Br. 60,000. The after tax cash flows (or net cash flows) are as
follows:
Year 1 = 8000 Year 4 = 20,000
Year 2 = 15,000 Year 5 = 20,000
Year 3 = 22,000
The payback period is computed as follows:
15 , 000
PBP = 3 years + 20 , 000 = 3.75 years
In the above example, if the 1 st three years’ net cash flows are added, the sum is equal to Br.
45,000. But the initial investment is Br. 60,000. If the fourth year net cash flows (Br. 20,000) is
added to Br. 45,000, the sum is Br. 65,000 which is greater than the initial investment. Thus, the
payback period is between year 3 and year 4. To find the exact payback period, we take the three
years and divide the remaining cash flows by the fourth year net cash flows. If the exact payback
period is needed in months the fraction can be computed as follows:
15 , 000
(12 months)
PBP = 3 years + 20 , 000
= 3 years and 9 months

Decision Rule for Payback Period

i. Accept the project if its payback period is less than or equal to the required payback period
(standard)
ii. Reject the project if its payback period exceeds the required payback period. The shorter
the payback period, the more desirable the project.

Accounting Rate of Return (ARR)

Also called the average rate of return on investment, the accounting rate of return is a measure of
profitability which relates net income to investment.
 Both net income and investment are measured in accounting terms.
Although there are several methods of computing ARR, the most common method is shown
below:
Average annual net income
ARR = Average investment
Original costs + salvage value
Average Investment = 2
To illustrate, assume that a project has original investment of Br. 70,000, life of 4 years, and
salvage value of Br. 6000. Straight-line method of depreciation is used. Income before
depreciation and taxes for each of the four years are as follows: year1, Br. 40,000; year 2, Br.
42,000; year 3, Br. 36,000; and year 4, Br. 50,000. Income tax rate is 40%.
Depreciation = 70,000 – 6000 = 16,000
4
Before ARR is determined, it is necessary to compute net income for each of the four years as
follows:
Year 1 Year 2 Year 3 Year 4
Income before depreciation tax 40,000 42,000 36,000 50,000
Less: Depreciation 16,000 16,000 16,000 16,000
Income before taxes 24,000 26,000 20,000 34,000
Less: Taxes (40%) 9600 10,400 8000 13,600
Net income 14,400 15,600 12,000 20,400
14 , 400+15 ,600 +12 ,000+20 , 400
=15 ,600
Average Net income = 4
70 , 000+6000
=38 , 000
Average Investment = 2
Average Annual Net Income
ARR = Average Investment
15600
=41 %
= 38000
Decision Rule for Accounting Rate of Return
i. Accept the project if ARR exceeds the required rate of return.
ii. Reject the project if ARR is less than the required rate of return.
Net Present Value Method
The net present value of project is the difference between the present value of net cash inflows
and present value of initial investment. In formula,
n Ct
∑ −I 0
NPV = i=1 ( 1+r )t
Where:
NPV = Net present value
Ct = Net cash flows at the end of year t
n = Life of the project
r = Discount rate
I0 = Initial investment
Net present value can also be determined as follows:
NPV = PV of NCF – I0
Where: PV = Present value
NCF = Net cash flows
To illustrate, assume that a project is expected to have initial investment and life of Br. 40,000
and five years respectively. The annual after tax net cash flow is estimated at Br. 12,000 for each
of the five years. The required rate of return is 10%. Net present value is determined as follows:
NPV = PV of NCF – I0

( )
1
1−
( 1+0.10 )5
− 40,000
= 12,000
0.10
= 12,000 (3.791) – 40,000
= 45,492 – 40,000
= 5492
1
1−
( 1+ 0. 10 )5
In the above formula, 0 . 10 represents the discount factor and its value is equal to
3.791. This discount factor can be taken from the present value of annuity of 1 table from the
intersection of i = 10% and n = 5. It can also be determined using your calculator.

In the above example, net cash flows are annuity. The same procedure can be followed if net
cash flows are not in annuity form. To illustrate the computation of NPV when net cash flows are
not annuity, suppose the project has initial investment and useful life of Br. 30,000 and four
years respectively. Its annual cash flows are as follows: Year 1, Br. 10000; Year 2, Br. 8000;
year 3, Br. 15000; and year 4, Br. 12,000. If the required rate of return is 10%, NPV is
determined as follows:
 Year Net cash flows Discount factor (10%) Present value
1 10,000 0.909 9090
2 8000 0.826 6608
3 15,000 0.751 11,265
4 12,000 0.683 8196
Present value of NCF 35,159
Less: Initial investment 30,000
NPV + 5159

What does NPV represent? NPV represents the amount by which the value of (wealth of) the
firm will increase if the project is accepted.

Decision Rule for NPV

1. If NPV is greater than zero (NPV > 0), the project is considered desirable.
2. If NPV is less than 0, the project is considered undesirable.
Internal Rate of Return (IRR)
Internal Rate of Return is the discount rate which equates the project NPV equal to zero. It is the
discount rate at which the present value of Net cash flows is equal to the present value of initial
investment. In other words, IRR is the rate of return on investments in the project. The
determination of IRR is purely based on project cash flows. Mathematically, at IRR,
n Ct
∑ ( 1+ r )t = Initial investment
i=1

IRR is determined using trial and error: the complexity of determining IRR is greater if net cash
flows are not in annuity form. This section illustrates the determination of net cash flows when
cash flows are annuity as well as non-annuity.

a) Determination IRR when NCFs are annuity.

Assume that the project has initial investment of Br. 40,000, and useful life of five years. The
annual net cash flows is estimated at Br. 12000 for five years. The required rate of return is 10%.
The following steps can be followed to determine IRR.

Step1: Compute the leading discount factor (payback period)

Initial Investment 40 , 000
=
PBP = Annual net cash flows 12, 000 = 3.333
Step2. From the present value of annuity table, find two discount factors and their corresponding
interest rates closest to the computed leading discount factor. If we look in the PV of annuity
table on n = 5 years row (horizontally), the leading discount factor (3.333) is found between 15%
and 16%.
Interest rate 15% 16%
Discount factor 3.352 3.274

Step 3: Compute the actual IRR using the following formula

IRR = r –
( PBP−DFr
DFr L−DFr H )
Where:
r = Either of the two interest rates (15% or 16%)
DFr = Discount factor for the taken interest rate
DFrL = Discount factor for the lower interest rate
DFrH = Discount factor for the higher interest rate
Let's take r = 15%, IRR is determined as follows:

( 3 .333−3 .352
IRR = 15% - 3 .352−3. 274
)
= 15% - (-0.24)
= 15.24%
If we take r = 16%, the computation of IRR looks like the following:

( 3 .333−3 .274
IRR = 16% - 3 .352−3 .274
)
= 15.24%

b) Determination of IRR when net cash flows are non-annuity

The steps followed in the preceding section are equally applicable for non-annuity cash flows.
However, one step is added at the beginning to determine the weighted average net cash flow,
which will be used to determine the leading discount factor. To illustrate, assume that a project
has initial investment of Br. 40,000 and the following net cash flows: year 1, Br. 15,000; year 2,
Br. 10,000; year 3, Br. 10,000; year 4, Br. 15000; and year 5, Br. 15,000. The discount rate is
15%. The following steps can be used to compute IRR:
Step 1. Compute the weighted average net cash flows.
Year Net cash flows Weight NCF X weight
1 15,000 5 25,000
 2 10,000 4 40,000
3 10,000 3 30,000
4 15,000 2 30,000
5 15,000 1 15,000
Total 15 190,000
Note that the weight is assigned in the reverse order of the project's useful life.
190 , 000
Weighted average NCF = 15
= 12,667
Step 2: Compute the leading discount factor (PBP)
Initial Investment
PBP = Weighted average NCF
40 ,000
= 12 , 667
= 3.158
Step 3: From the present value of annuity table, find the starting rate (a good first guess) by
looking for the closest interest rate and discount factor. In this case, the nearest rate is 18% (i.e.,
first guess = 18%)
Step 4: Compute NPV at the 1st guess (18%)
NPV (18%)
Year NCF Discount factor (18%) Present value
1 15,000 0.847 12,705
2 10,000 0.718 7180
3 10,000 0.609 6090
4 15,000 0.516 7740
5 15,000 0.437 6555
Present value of net cash flows 40,270
Less: Initial Investment 40,000
NPV + 270
Since, at IRR, NPV is equal to zero, 18% is not the exact IRR. Thus, another rate should be tried.
Which rate should be tried next? Generally as we go down (in rate decreasing direction),
discount factor increases. Now we need to find a rate at which NPV = 0. Thus, we should try a
higher rate. The next (2nd) guess could be 19%. Then NPV should be computed at 19% using the
above procedure.
NPV at 19%:
Year NCF Discount factor (19%) Present value
1 15,000 0.840 12,600
2 10,000 0.706 7060
 3 10,000 0.593 5930
4 15,000 0.499 7485
5 15,000 0.419 6285
Present value of net cash flows 39,360
Less: Initial investment 40,000
NPV -640
At 19% NPV is negative, this implies that IRR lies between 18% and 19%. Thus, such iteration
process ends when two neighboring rates, at lower rate NPV are positive and at higher rate is
negative. To find the exact IRR, steps 4 and 5 will be followed:
Step 4: Obtain the absolute sum of the two present values
Sum = |+270| + |-640|
= 270 + 640
= 910
Step 5: Divided the NPV of the smaller rate by the absolute sum and add to the smaller rate
270
IRR = 18% + 910
= 18.30%
Decision Rule for IRR
Accept: If the IRR is greater than the discount rate
Reject: If the IRR is less than the discount rate

Profitability Index (PI)

The profitability index, also called benefit - cost ratio, is the ratio of the present value of net cash
flows and initial investment.
Pr esent value of NCF
PI = Initial investment
To illustrate, assume that a project is expected to have initial investment and useful life of Br.
90,000 and four years respectively. Annual net cash flows amounted to Br. 40,000. The discount
rate is 10%. Profitability index can be computed as follow:
Pr esent value of NCF
PI = Initial investment
40 ,000 (3. 170 )
= 90, 000
126,800
= 90,000
= 1.41
Decision rule for profitability Index
 i. Accept if the project's profitability index is grater than 1
ii. Reject if the project's profitability index is less than 1

3.3. Technical feasibility

The technical aspects of a typical project idea can be scrutinized in detail to evaluate its technical
feasibility, as distinct from commercial, financial, economic and managerial feasibility. For the
sake of comprehensiveness we will cover Environmental Impact Analysis (EIA) also, as a part of
this analysis.

3.3.1. Objectives:

First, the project proposal must fall within the ambit of the stated mission of the sponsor(s).
Next, the proposal must be able to further the objectives and priorities of the sponsor(s). These
must therefore be ascertained and clearly recorded, along with detailed specifications for the
output which constitute the basic frame of reference for all future decisions.

Location and site

Initially, as many locations as possible should be identified which meet the most fundamental
operational requirements of the proposed project. These should then be evaluated and an
optimum location selected using the criteria of material versus market orientation, quality
standards, infrastructural status, local laws, and socio-economic and living conditions.

Note: Resource-oriented projects like mining of minerals involve items like geological analysis
covering geological structure, hydrological conditions, characteristics of the resource, resource
reserves, prospecting status, and expected geological problems.

Plant Size

Determination of an optimum plant size is critical to the success of a project. A plant represents
sunk costs and any under utilization of its capacity means either reduced profits or, for levels
below the Break-Even Point, losses. The adverse impact of an extra-large capacity is felt all the
more keenly during the early years when profits are all the more important for survival.
Technology

The same product or service can generally be obtained using quite different technologies.
Electricity, for example, can be generated using solar panels, coal (thermal plants), hydraulic
power plants, and nuclear power plants and so on. Basic telephone Sol-vices can similarly be
provided using manual, semiautomatic, or automatic exchanges. And, even the last-named
category is available if] various technological versions like Stronger, Crossbar, Analogue
electronic and Digital electronic.

Design, Layout & Plant & Machinery

The feasibility study should broadly specify the recommended design of the processes and plant
(giving essential assumptions and design calculations). It should also present a rough layout of
various facilities and list out all the major equipments needed, with key specifications and
available source(s) of supply. Moreover, it should consider, and evaluate alternative equipments
as well and give reasoned recommendations about them.

Construction Process

This needs to be tackled in the feasibility study in terms of its five aspects,

Inputs

These relate to the operation phase of the project, but need to be identified at this stage of the
feasibility study to examine the technical feasibility of the proposed system(s).

Infrastructural Facilities

Availability and characteristics of roads, bridges, railway facilities (like station, yards), air
transportation, waterways, ports, etc. depending upon their relevance to the assessed
requirements of the project at both implementation and operation stages need to be studied.
Manpower

The availability in needed numbers, of manpower of requisite skills where and when required,
has to be studied. This covers both the project implementation and the operation (&
maintenance) phases.

Environment Impact Assessment (EIA);

This study identifies the environment in which a project is to be implemented, assesses the short
-- and long-term impacts the former is likely to be subjected to as result of the project activities
during construction as well as operation phases, and generates preferred alternative courses of
action, if possible.

Social cost benefit analysis

Social cost benefit analysis (SCBA) is a perfect necropsy where the identification and
determination of the best among project alternatives is made with reference to a country’s
economic and social prerogatives. It is a systematic procedure for comprehensive review of all
the costs, benefits, and effects of a project. Such appraisal is preformed for development and
infrastructure projects usually by emphasizing the economic, technical, operational, institutional,
and financial factors to ensure that the selected project meets all necessary requirements and is
implementable.

The net benefits equation can be written as:

NB = α ( βγδ X −βM−γδ d )
Where α = weighing factor for exchange rate stability;
β = weighing factor for impact of protective practices;
γ = weighting factor for labor availability
δ = weighting factor for adequacy of support services
3.4. Other feasibility issues

Ecological Feasibility

We have discussed Environmental Impact Analysis under the Technical analysis. When there are
serious ecological implications, it is worthwhile to have a separate and full-fledged ecological
feasibility.
 Legal and Administrative Feasibility

Legal and administrative feasibility is another element of the study. Clearances and Approvals:
Setting up of an industrial unit requires the entrepreneur to obtain a number of clearances and
approvals regarding land use, pollution control and safety.

References

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 Course: Theories and Politics of Development
Code: PADM 2054
Course Credit: 3

Introduction:

Development implies social transformations involving a complex of economic, social, political, and
cultural changes towards positive ends. In this course, the concepts, measures and objectives of
development will be discussed. The roles of different development actors including nongovernmental
organizations (NGOs), Government (State), International donor agencies, and community will also be
analyzed. Besides this, the course focuses on the issues related with the development including the impact
of population growth on environment, world trade, and foreign aid and their conditionality. At the end,
this course attempts to examine the development strategy adopted the Ethiopian government and the
challenges faced by the Ethiopian government including infrastructure and urbanization.
Learning Objectives: By the end of the course students should:
 Describe the basic concepts of development.
 Discuss different theories concerned with development.
 Explain the roles of different actors associated with the process of development.
 Discuss the emerging issues concerned with development including population growth,
trade, and foreign aid.
 Describe the development strategies adopted by the developing countries
 Analyze the challenges faced by Ethiopia in achieving development objectives.
Chapter One: Development: An Introduction

Chapter Two: Development Paradigms and Theories

Chapter Three: Development Paradigm-II: Development from Below (bottom-up)

Chapter Four: Actors in Development

Chapter Five: Issues in Development with developing countries’ perspectives

Chapter Six: Development in Ethiopia

Chapter one: The Concept of Development

Development meaning

Development represents positive change, economic development, educational development,

equality, equity, freedom, gender equality, good governance, increase in Gross Domestic Product
(GDP), health improvement, human development, human rights protection, increase in income,
justice, election, livelihood improvement, peace, participation, poverty reduction, process of
change, production increment, progress, rule of law, reducing vulnerability, self-determination,
social development, social inclusion, cultural transformation, positive values, positive norms and
customs, clean environment, sustainability and wealth accumulation.

Development as fundamental or structural change –for example, an increase in income;

Development as intervention and action, aimed at improvement, regardless of whether

betterment is, in fact, actually achieved;

1.1 Perspectives and evolution of development

Traditional perspective of development

In the 1950s and 1960s, development was considered as synonymous to economic growth.
Accordingly, in this period, it has been defined as the capacity of the economy to generate and
sustain fast growth rate of GDP (per capital income).

Therefore, development has traditionally meant achieving sustained rates of growth of income
per capita to enable a nation to expand its output at a rate faster than the growth rate of its
population.

Development was until recently nearly always seen as an economic phenomenon in which rapid
gains in overall and per capita GNI growth would either “trickle down” to the masses in the form
of jobs and other economic opportunities or create the necessary conditions for the wider
distribution of the economic and social benefits of growth.
Problems of poverty, discrimination, unemployment, and income distribution were of secondary
importance to “getting the growth job done.” Indeed, the emphasis is often on increased output,
measured by gross domestic product (GDP).

New perspective of Development

The experience of the 1950s and 1960s, when many developing nations did reach their economic
growth targets but the levels of living of the masses of people remained for the most part
unchanged, signaled that something was very wrong with this narrow definition of development.

An increasing number of economists and policymakers clamored for more direct attacks on
widespread absolute poverty, increasingly inequitable income distributions, and rising
unemployment.Consequently, during the 1970s, economic development came to be redefined in
terms of the reduction or elimination of poverty, inequality, and unemployment within the
context of a growing economy.

“Redistribution from growth” became a common slogan. Dudley Seers posed the basic question
about the meaning of development succinctly when he asserted:

If all three of these have declined from high levels, then beyond doubt this has been a period of
development for the country concerned. If one or two of these central problems have been
growing worse, especially if all three have, it would be strange to call the result “development”
even if per capita income doubled.

Development must therefore be conceived of as a multidimensional process involving major

changes in social structures, popular attitudes, and national institutions, as well as the
acceleration of economic growth, the reduction of inequality, and the eradication of poverty.
According to the new perspective development is a process that creates growth, progress, and
positive change in physical, economic, environmental, political, social, and demographic
components.
The purpose of development is a rise in the level and quality of life of the population, without
damaging the fate of the next generation.

Development brings overall national progress in terms of education, employment, security,

political system, popular attitudes, equality, equity, institutionalization, environmental safety,
economic growth, eradication of poverty, and respect for diversity among others

Development improves the provision of basic needs; food, housing, and shelter. Development
brings improved governance; participation, rule of law, transparency, responsiveness, consensus-
oriented, equity and inclusiveness, effectiveness and efficiency, and accountability.

Development involves empowerment; gender empowerment, social empowerment., economic

empowerment, and political empowerment. Development is visible and useful, not necessarily
immediately, and includes the aspect of quality change and the creation of conditions for a
continuation of that change.

Measures of Development

A. Measures by economists-Quantitative approach

In the pre 1970s, development has been measured in terms capacity to produce a high level of
material output or resources in relation to size of population which manifested with the following
items.

 Gross National Product (GNP)

 Gross Domestic Product (GDP), and
 Per Capita Income (PCI)

GNP is calculated as the total domestic and foreign value added claimed by a country’s residents
without making deductions for depreciation of the domestic capital stock. GDP measures the
total value for final use of output produced by an economy, by both residents and non-residents.
Thus GNP comprises GDP plus the difference between the income residents receive from
abroad for factor services (labor and capital) less payments made to non residents who contribute
to the domestic economy.

Per capita income refers to total gross national income of a country divided by total population.

This income measure of development is also used to compare the economic performance of
different countries.

Limitations of the quantitative approach of measuring development Development ultimately

refers to the quality of life and of human welfare. Thus, in essence income indictors are
incomplete and limiting measures of development.
The calculations of the GNP/GDP based measures suffer from a number of shortcomings; the
GNP/GDP measure excludes non-market activities, transactions and subsistence production. This
in turn leads to the distortions of the GNP/GDP figures.

B. Measures by other social scientists-Qualitative approach

Focus on the forms of social and economic organization as prevailed or evidenced in developed
countries. Such measures are relative or qualitative in nature:

 Justice and equality

 Utilization of modern technology
 Criteria of rewards based on achievement rather than ascription
 Political and administrative modernization

International development agencies (like UNDP and the World Bank) often apply the Human
Development Index (HDI) as a measure of development, which may include:

 Education, employment rate, clothing, and shelter

 Infant and child mortality rate
 Life expectancy
 Access to modern health facilities and safe drinking water
 Nutritional status as measured by calorie intake
 School attendance as a percentage of the school-age population

HDI is ranking various countries according to the relative success they have had with the human
development of their population.

HDI is based on three variables:

Longevity as measured by life expectancy at birth

Educational attainment as measured by a condition of adult literacy (two-thirds weight) and a

combined primary, secondary, and tertiary school enrollment ratios (one-third weight)

Standard of living measured by real per capita income at PPP.

To construct the index fixed minimum and maximum values are taken for each of the variables.
For life expectancy at birth, the range is 25-85 years. For adult literacy and gross enrollment, the
range is 0 – 100 percent. For real per capita income, the range is $100 – 40,000.

For any component of the HDI, the individual indices can be computed according to the general
formula of :
Life Expectancy Index (LEI) = LE - 25 / 85 – 25; Life expectancy

Education Index = 𝟐/𝟑 (MYSI) + 𝟏/(EYSI), Mean Years of Schooling Index, Expected Years of
Schooling Index

Income Index (II) = ln(GNIpc) - ln(100) / ln(40,000) - ln(100)

For any given year, HDI measures relative not absolute level of human development and that its
focus is on the ends of development (longevity, educational achievement and standard of living).

Limitations of HDI as a measure of development It does not include non-quantitative elements

of human development such as human freedom, the existence of civil liberties and the degree of
political participation. It is biased in the choice of indications.

Its statistical methodology may also be compromised by insufficient or inaccurate data.

Three core values of Development

1. Sustenance: Ensuring and widening the availability and distribution of basic life sustaining
goods. All people have certain basic needs without which life would be impossible. These life-
sustaining basic human needs include food, shelter, health, and protection.

No country can be regarded as fully developed if it cannot provide its entire people with such
basic needs as housing, clothing, food and minimum education.

Without sustained and continuous economic progress at the individual as well as the societal
level, the realization of the human potential would not be possible. Hence, economic
development is a necessary condition (but not sufficient condition) for the improvement of the
quality of life in providing these life sustenance needs and bringing development.

2. Self-Esteem: To Be a Person—a sense of worth and self-respect, of not being used as a tool
by others for their own ends. All peoples and societies seek some basic form of self-esteem,
although they may call it authenticity, identity, dignity, respect, honor, or recognition.

No country can be regarded as fully developed if it is exploited by others and does not have the
power and influence to conduct relations on equal terms.

3. Freedom from Servitude: To Be Able to Choose

Freedom here is to be understood in the sense of emancipation from alienating material
conditions of life and from social servitude to nature, other people, misery, oppressive
institutions, and dogmatic beliefs

Objectives of Development

Development is both a physical reality and a state of mind in which society has, through some
combination of social, economic, and institutional processes, secured the means for obtaining a
better life.

 To increase the availability and widen the distribution of basic life-sustaining goods
 To raise levels of living, including, in addition to higher incomes,
 To expand the range of economic and social choices available to individuals and nations
by freeing them from servitude and dependence not only in relation to other people and
nation-states but also to the forces of ignorance and human misery.

Development administration

Government plays a leading role in bringing about development through its administrative
system.

Government is engaged not only in fixing priorities but also in making efforts to realize them.

Development administration is a means through which government brings or realizes

quantitative and qualitative changes. Development administration is an effort toward planned
transformation involving not only the sphere of administration but also the formulation of
policies and indeed the society as a whole.

The development administration is summarized as follows:-

 Application of innovative strategies for development

 Emphasis on development at the grassroots level. Development has to be a need-oriented
and self-reliant process.
 Stress on social development and human capital as a major resource.
 Development has to be viewed as an ideological norm.
 Profound and rapid change in order to establish a distinct and just social order.
 Effective and efficient use of scarce resources.

Development in Developing Countries

Developing countries of the current period have both similarities and difference among them in
economic, geographical, historical, political, social, cultural and institutional factors.

This section attempts to specify the diversities and common characteristic features of developing
countries. It portrays the structural diversity of developing nations.
It will focus on regional comparisons of the developing countries of Africa, Asia, and Latin
America and their sub-regions.

Diverse structure of developing countries

To structural diversity of development in developing countries is attributed to eight critical

components. These are:-

1. Size of the country (geographic area, size of population, and income levels)
2. Historical and economical background
3. Endowments of physical and human resources

4. Ethnic and religious composition

5. Relative importance of their public and private sector

6. Nature of their industrial structure

7. Degree of dependence on external economic and political forces

8. Distribution of power and the institutional and political structure within the nation.

1. Size and Income Level

Evidently, the economic potential of a country is significantly determined by its physical and
population size, and its level of national income per capita. In developing countries, larger
and populated nations such as Brazil, India, Nigeria, and Ethiopia exist side-by-side with
small countries like Paraguay, Nepal, and Djibouti.

2. Historical & economical background

The other sources of diversity among the developing countries are their traditional and colonial
heritages. The European colonial powers had a dramatic and long-lasting impact on the
economies, political and institutional structures of their African and Asian colonies. The
economic structures of these nations, as well as their educational and social institutions have
typically been modeled on those of their former colonizers.

3. Physical and Human Resources

Endowments of physical and human resources are other sources of disparities in the economic
growth potential of the counties.

Physical resource endowments, on one hand, there are countries that are extremely and favorably
endowed in resources such as minerals, raw materials, and fertile land. The human resource
endowments include not only the number of people and their skill levels but also their cultural
outlooks, attitudes toward work, access to information, willingness to innovate, and desire for
self-improvement.

4. Ethnic and Religious Composition

The greater the ethnic and religious diversity of a country the more likely it is that there will be
internal strife and political instability. There is also distinction in ethnic and religious
composition among nations.

In the first half of the 1990s, ethnic and religious conflicts leading to wide spread death and
distinction took place in many African countries and some countries of other regions.

Ethnic and religious diversity need not, however, necessarily lead to inequality, turmoil, or
instability.

5. Relative Importance of the Public and Private Sectors

Most developing countries have mixed economic systems, featuring both public and private
ownership and use of resources.

The division between the two and their relative importance is mostly determined by the historical
and political circumstances of the countries. Economic policies, such as those designed to
promote more employment, will naturally be different for countries with large public sectors and
ones with sizeable private sectors.

6. Economic Structure

Developing countries are predominantly agrarian in economic, social, and cultural out look.
Labor force in most of these countries is overwhelmingly engaged in agriculture. The
agricultural sector contributes significantly also to the GDP of many of the poor nations.

7. External Dependence (Economic, political, and Cultural)

The degree to which a country is dependent on foreign economic, social, and political forces is
related to its size, resources endowment, and political history.

8. Political Structure, Power, and Interest Groups

It is often not the correctness of economic policies alone that determines the outcome of national
approaches to critical development problems.

Common Characteristics of Developing Countries

I. Low level of living, characterized by low income, inequality, poor health, and inadequate
education
II. Low levels of productivity
 III. High rates of population growth and dependency burden
IV. High and rising levels of unemployment and underemployment
V. Substantial dependence on agricultural production and primary product exports
VI. Prevalence of imperfect markets and limited information
VII. Dominance, dependence, and vulnerability in international relations.

i. Low levels of Living

In developing nations, general levels of living tend to be very low for the vast majority of people.

This is true not only in relation to their counterparts in rich nations but often also in relation to
small elite groups within their own societies.

The political structure and the vested interests and allegiances of ruling elites (e.g., large
landowners, urban industrialists, bankers, foreign manufacturers Economic and social
development will often be impossible without corresponding changes in the social, political, and
economic institutions of a nation.

These low levels of living are manifested quantitatively and qualitatively in the form of low
income (poverty), inadequate housing, poor health, limited or no education, high infant
mortality, low life and work expectancies, and in many case a general sense of malaise and
hopelessness.

Per Capita National Income:

The GNP per capita is often used as a summary index of the relative economic well-being of
people in different nations. One common distinguishing feature of developing countries as
compared to developed nations is the extremely low level of income.

Growth Rates of Income:

Many developing countries not only have much lower levels of per capita income but also have
experienced slower GNP growth rates than developed nations. For example, the average growth
rate slowed considerably during the 1980s. The real per capita GDP even declined by 0.2% in
1990 and in 1991 before rising again for the next five years.

Distribution of National Income:

All nations of the world show some degree of income inequality. There are large disparities
between the income of the rich and of the poor in both developed and underdeveloped countries.
Nevertheless, the gap between rich and poor is generally greater in less developed nations than in
developed nations.

Extent of Poverty
In the last decade of the 20th century, some 1.3 billion people, or 32% of the developing world
population, were living in absolute poverty. Looking at individual regions the highest poverty
rate (43%) in South Asia (Bangladesh, India, Pakistan, etc.) where the largest number of poor
people live (515 million). But sub-Saharan Africa with 219 million absolute poor has by far the
fastest poverty growth rate.

Education

The attempt to provide primary school educational opportunities has probably been the most
significant of all LDC development efforts. In most countries, education takes significant share
of the governments’ budget.

In spite of some impressive quantitative advances in school enrollments, literacy levels remain
strikingly low compared with the developed nations. For example, among the least developed
countries, literacy rates average only 45% of the population.

ii. Low levels of Productivity

Developing countries are characterized by relatively low levels of labor productivity.

Production function is systematically relating outputs to different combinations of factor inputs

for a given technology.

For example, the principle of diminishing marginal productivity states that if increasing amounts
of a variable factor (labor) are applied to fixed amounts of other factors (e.g., capital, land,
materials), the extra or marginal product of the variable factor declines beyond a certain number.

Low levels of labor productivity can therefore be explained by the absence or severe lack of
"complementary" factor inputs such as physical capital or experienced management.

iii. Population Growth and Dependency Burdens

Statistics on demographic evolution by country show that the present rhythm of global
population growth is largely the result of the acceleration of growth in the developing regions.

Consequently, the population of the Third World rose from 1.7 billion in 1950, to 3.313 billion in
1980 and 4.036 billion in 1990. During the same year, the population of the developed countries
stood respectively at 832 million, 1.137 billion and 1.210 billion.

Birth rates

Population growth in developing countries is due to their higher birth rate as compared to death
rate, though death rate also is high.

Birthrates (the yearly number of live births per 1,000 population) in less developed countries are
30 to 40, whereas those in the developed countries are less than half that figure.
Death rates (the yearly number of deaths per 1,000 populations) in Third World countries are
also high relative to the developed nations.

Hence, the differences in death rate between developing and developed countries are
substantially smaller than the corresponding differences in birthrates.

Dependency: Both older people and children are often referred to as an economic dependency
burden.

This means that they are nonproductive members of society and therefore must be supported
financially by a country's labor force (usually defined as citizens between the ages of 15 and 64).

iv. High Unemployment and Underemployment

In the 1980s the unemployment and underemployment problem became increasingly pronounced
and emerged as one of the most serious development problems.

Unemployment increased as a result of the fact that employment has been growing during the
past at a rate which is much slower than the rate of growth of the labor force.

Stagnating economic growth, the austerity programs implemented as a result of the Structural
Adjustment Programs (SAPs) and high levels of rural-urban migration combined to precipitate
this situation.

Unemployment in the developing world averaged 8% to 15% of the labor force. The
unemployment rates in the 1980s for selected African countries were: Botswana, 3.2%; Cote
d’Ivoire, 20%; Ethiopia 23%; Kenya, 16.2%; Nigeria, 9.7%; Senegal, 17.3%; Somalia, 22.3%;
Tanzania, 21.6%; Zambia, 19% and Zimbabwe, 18.3% (ILO, 1991).

Moreover, in urban areas rural urban migration is causing the labor force to grow at explosive
annual rates of 5%, to 7% in many countries (especially in Africa).

v. Substantial Dependence on Agricultural Production and Primary-Product Exports

Over 65% are rurally based, compared to less than 27% in economically developed countries.
Similarly, 58% of the labor force is engaged in agriculture, compared to only 5% in developed
nations.

Agriculture contributes about 14% of the GNP of developing nations but only 3% of the GNP of
developed nations.Agricultural productivity is low not only because of the large numbers of
people in relation to available land but also because LDC agriculture is often characterized by
primitive technologies, poor organization, and limited physical and human capital inputs.

Dependence on Primary Exports: Most economies of less developed countries are oriented
toward the production of primary products. These primary commodities form their main exports.
vi. Imperfect Markets and Incomplete Information

The benefits of market economies and market-friendly policies depend heavily on the existence
of institutional, cultural, and legal prerequisites that are taken for granted in the industrial
societies. In many LDCs, these legal and institutional foundations are either absent or extremely
weak.

vii. Dominance, Dependence, and Vulnerability in International Relations

Less developed countries, a final significant factor contributing to the persistence of low levels
of living, rising unemployment, and growing income inequality is the highly unequal distribution
of economic and political power between rich and poor nations.

Examples include the colonial transfer of often inappropriate educational structures, curricula,
and school systems; the formation of Western-style trade unions; the organization and orientation
of health services in accordance with the curative rather than preventive model; and the
importation of inappropriate structures and procedures for public bureaucratic and administrative
systems.

Finally, the penetration of rich countries’ attitudes, values, and standards also contributes to a
problem widely recognized and referred to as the international brain drain.

Brain drain is the migration of professional and skilled personnel, who were often educated in
the developing country.

The net effect of all these factors is to create a situation of vulnerability among Third World
nations in which forces largely outside their control can have decisive and dominating influences
on their economic and social well-being.

Chapter Two: Development Paradigms

Development Paradigm

Paradigm is a “universally recognized scientific achievement that, for a time, provides model
problems and solutions to a community of practitioners”. Development paradigm is a way of
perceiving development in terms of its manifestations, process, and causes through a certain
prism.

Paradigm shift in development need to meet three conditions:

1. It must provide a metatheory, that is, one that serves to explain many other theories;
2. It must be accepted by a community of practitioners; and
3. It must have a body of successful practice, ‘exemplars’, that are held up as ‘paradigms’ in
practice.
Development should be people-centered; democratically organized; responsive to the whole
environment, not only the ecological and the economic, but also the political, social, and cultural
and balanced, for example between center and periphery, between public and private, between
the roles of men and women.

The center of effort in development needs to shift from resource-based strategies to interactive or
participative strategies.

V.R. Panchamukhi, in his article, ‘New Paradigms of Development’ has the following
observations about the development

1. Development can no longer be identified as a process of shifting surplus labor from

agriculture to the industrial sectors
2. Growth is no longer the guarantor for trickle-down effects
3. Market as an instrument for ensuring optimum allocation of resources has been
discredited
4. Concepts such as take-off, big push, great support, and backward and forward linkages,
have also lost their essence.

Therefore, he said that simplistic paradigms of the development economics are no longer valid.

The existence of large pockets of poverty, despite a long period of planned development,
widening gaps between the haves and have-nots, neglect of the inadequacies of the social aspects
of development, such as education, health, and other basic needs, have cast doubts on the utility
of received paradigms of development.

Development, in the sense customarily perceived as growth and increase in income, no longer
persists

Some of the facets of the development paradigm are

 Development not only means the increase of GNP, but includes aspects such as social,
human, cultural, and political dimensions
 The focus has shifted from the one sector model to dual sector models, for example,
rural-urban; agriculture and industry linkages, etc.
 The shift from a centralized to a decentralized model, for faster development.
 Inclusive development, where every individual participates in development processes,
and exclusion is minimal.
 Linkages of the national economy with the international economies, and the role of FDI
in development of the developing economy.
 Development with a humane face removing poverty, hunger, and human misery from
society.

Different paradigms of development are as follows:

Less Consumerism and More Welfare Paradigm

The modern philosophy of development intends to enhance the human wellbeing. In other words,
it wants to move from consumerism towards welfare and from the concentration of wealth to the
reconcentration of wealth.

Consumerism is guided by selfish motives leading to malpractice and distortions of the market.

The use of terms such as, creative capitalism, or, benevolent capitalism, are steps towards
moving away from the consumerism of an elite group.

In the new paradigm of development, economic growth, consisting of the accumulation of wealth
and gross national product, would not be considered as sole objectives of development.

2. Human Development Paradigm

Human beings are the key factors of the development. The concept human capital came into the
development arena in the 1960s. It emphasized the quality of human capital, their skills and
education, for the generation of wealth, and for the accumulation of capital.

The per capita expenditure on education, and the expenditure on education as a percentage of
GDP are much higher in developed countries compared to that of developing countries.

Harbinson (1973) says:

“human resources constitute the ultimate basis for the wealth of nations. Capital and
resources are passive factors of production. Human beings are the active agents who
accumulate capital, exploit natural resources, build social, economic and political
organizations and carry forward national development. The human resource development is
one of the pivotal aspects of development, which promote economic, social and all other
development”.

Human capital plays a significant role in simulating growth and a central, if not a dominant one,
in meeting basic human needs.

It is the quality of the human beings that counts. It is a man who builds up the wealth and fabric
of a nation.

The UNDP launched its first Human Development Report in 1990 and constructed a composite
index called the Human Development Index (HDI).

The three important components of HDI are:-

1. Life Expectancy- representing a long and healthy life;

2. Literacy-educational attainment; and,
3. Real GDP- representing a decent standard of living.
Real GDP is different from nominal GDP. Nominal GDP is the total value of all goods and
services produced in a given time period, usually quarterly or annually.

Real GDP is nominal GDP adjusted for inflation. Real GDP is used to measure the actual growth
of production without any distorting effects from inflation.

3. Basic Needs Paradigm

The basic needs approach is an attempt to deal directly with poverty in the fields of food,
nutrition, sanitation, health, education, and housing.

The ILO (International Labour Organization) has indicated two crucial elements in the Basic
Needs Approach: Minimum requirements of a family for private consumption, i.e., adequate
food, shelter, and clothing, as well as certain household equipment and furniture; and

4. Social Development Paradigm

Social development is not only influenced by economic development, it also influences

economic development. Social indicators such as education, health, women’s empowerment, and
participation by the socio-economically backward people in the development process would
promote faster development.

Maiti in his book “Development Ethics” gives eight components of social capital (see the figure
below)

All eight components of social capital play important role in the development processes.

Social capital must be emphasized for the speedy socio-economic development of a nation.

5. The Agriculture-Industry Interface Paradigm

Development requires frequent, equity-based interaction between agriculture and industry.

For balanced development, both agriculture and industry must be interdependent and help one
another for their mutual promotion.
In this model, agriculture (A) sells coffee to the world (W) and buys manufacturing products
from industry (I) which, in turn, requires capital good from foreign markets.

Another type of interlink between agriculture and industry is the establishment of agro-
processing industries for the advancement of agriculture.

Unless strong linkages are established and maintained between agriculture and industry, either
sector will face demand bottlenecks, thereby retarding the overall pace of growth and
development.

The strength of the agriculture-industry linkages influences the pace of development, and weak
linkages between agriculture and industry would have detrimental effects on both the sectors, as
well as on the economy.

6. Decentralization and Development Paradigm

In a given country, the independence of development decisions must begin at the bottom.

The decentralized model adopted by the Scandinavian countries in Europe, and in Kerala of
India has enabled these nations and states to achieve all-around development.

The decentralization of economic decision-making and implementation would not only reduce
the cost of development but would also ensure a more equitable distribution of the fruits of
development.
The top-down centralized approach is more instructive and less participatory as compared to the
bottom-up approach. Further, the top-down approach is too bureaucratic in nature and allows less
room for peoples’ participation. The bottom up approach has been found to be a more successful
approach, to facilitate faster development.

The paradigm of development in recent years is shifting from the highly centralized towards the
decentralized system.

The decision maker at the bottom level must be given complete freedom to exercise their power
with less bureaucratic interventions.

7. Inclusive Development Paradigm

Inclusive development is the process and the outcome, where all groups of people have
participated in the organization of growth, and have benefited from it. Inclusive growth is
achieving a growth process in which people from different walks of life participate and benefit
from the process of growth and development.

In inclusive development, contributions made by each individual are valued.

Thus, inclusive growth, by very definition, implies an equitable allocation of resources with
benefits accruing to every section of society.

 Inclusive development can have several dimensions.

 It is a development process in which every individual feels included.
 It includes the excluded groups such as women, the disabled and other marginalized
sections in the process of development. They not only receive benefits, they also
contribute equally to growth and development. They are not treated as passive
beneficiaries of the fruits of development but are active participants in the development
process.
 It gives equal emphasis to both rural and urban development. The urban bias is
minimized and an equal emphasis is placed on the balanced development of both rural
and urban sectors.
 In inclusive development, all the sectors, both formal, as well as informal, are equally
empowered to contribute towards development.

8. The Development with a Human Face Paradigm

This paradigm emanates from the declaration of the Right to Development, adopted by the UN
General Assembly on 4th December 1986 in the course of formulation and recognition of new
human rights.

The declaration recognized that development is comprehensive which aims at the constant
improvement of the well-being of all, and of all individuals on the basis of their active, free, and
meaningful participation in development, and, in the fair distribution of benefits resulting
therefrom.

The declaration envisages that nations have the right, and a duty to formulate appropriate
national development policies that aim at constant improvement of the wellbeing of the entire
population.

Development with a human face means the removal of poverty, hunger, child labor, human
morbidities, and preventable diseases.

9. The International vs. National Factors Paradigm

No country can remain de-linked from the rest of the world. This paradigm induces global
economic integration; globalization.

Globalization is the process that integrates economies across the world through global trade and
investment and has become an economic reality for almost all countries.

Following this paradigm developed countries, through different multilateral organizations, are
investing a lot of money in the economic and social development of developing countries. As a
result, the impact of FDIs on various sectors of development become visible in many developing
countries.

10. Sustainable Development Paradigm

Sustainable development emerged as an important theme of development in 1987.

The Brundtland Commission on Environment and Development, in its report, “Our Common
Future”, called for the application of sustainability as a criterion for all development initiatives.
The commission said that “in order for development to be sustainable, it must meet the needs of
the present without compromising the ability of future generations to meet their own needs.”

Sustainable development has two important goals

1. Basic needs for all human beings, i.e., food, clothing, shelter, education, health, and
social security, and ;
2. It must maintain ecological balance.
Thus, sustainable development can be looked at from a variety of perspectives, such as
environmental, economic, social, political, cultural, and technological. The Brundtland Report
envisaged that sustainable development requires:-

 A political system that secures effective citizen participation in decision making

 An economic system that is able to generate surpluses, and technical knowledge on a
self-reliant and sustained basis
 A social system that provides solutions for the tensions arising from disharmonious
development
 A production system that respects the obligations to preserve the ecological base of
development
 A technological system that search continuously for new solutions
 An international system that offers a sustainable pattern of trade and finance
 An administrative system that is flexible, and has the capacity for self-correction

11. Poverty Reduction Paradigm

How to scale up the fight against global poverty is a new development paradigm of the new
millennium. Here, scaling up means formulating and implementing programmes, policies, or
projects in different places over time and space to fight against poverty.

Hussein (2003), in his article on “A New Paradigm for Overcoming Poverty” states that “if
poverty is to be overcome, what is required is to understand the processes of poverty creation,
and, to identify the points of intervention in the poverty process through which the poor can be
enabled to overcome poverty on a sustainable basis.”

Chapter Three: Development Theories

Rostow’s stages of Growth

The most influential and outspoken advocate of the stages-of-growth model of development was
the American economic historian Walt W. Rostow.

According to Rostow, the transition from underdevelopment to development can be described in

terms of a series of steps or stages through which all countries must proceed. Rostow has
identified 5 growth stages:

1. Traditional Society

 Here the economic system is stationary and dominated by subsistence agriculture with
traditional cultivating forms.
 The people have little collective ability to raise their economic productivity because they
lack the technical and scientific knowledge to do so.
  Political power is concentrated in the hands of the landowners. Trade is undertaken by a
barter system
 This stage is characterized by a subsistent, agricultural-based economy with intensive
labor and low levels of trading, and a population that does not have a scientific
perspective on the world and technology

2. Preconditions for Take-Off (Transitional Stage)

During this stage the rates of investment are getting higher and they initiate a dynamic
development.

This stage is mainly characterized by:

 Development of mining industries

 Increase in capital use in agriculture
 Necessity of external funding
 Some growth in savings and investment
 Advancement of education
 Establishment of banks, and
 The efficiency of farming and increase in productivity
 Increased specialization generates surpluses for trading.
 Emergence of a transport infrastructure to support trade.
 Entrepreneurs emerge as incomes, savings and investments grow.
3. Take Off

This stage is characterized by dynamic economic growth.

 The main characteristic of this economic growth is self-sustained growth which requires
no exogenous inputs. Industrialization increases with workers switching from the
agricultural sector to the manufacturing sector.
 At this stage, industrial growth may be linked to primary industries.
 Generally “Take Off” lasts for two to three decades, e.g. in England, it took place by the
middle of the 17th century or in Germany by the end of the 17th century.
 The main features of this stage include:
 Increasing industrialization
 Further growth in savings and investment, the level of investment reaches over 10% of
GNP.
 Regional growth, growth is concentrated in a few regions of the country
4 Drive to Maturity
 The economy is diversifying into new areas.
 Technological innovation is providing a diverse range of investment opportunities.
 The economy is producing a wide range of goods and services and there is less reliance
on imports.
 Urbanization increases.
  It is characterized by continual investments that share 40 to 60 percent of GDP.
 Economic and technical progress dominate this stage. As the economy matures,
technology plays an increasing role in developing high-value-added products.
 Growth becomes self-sustaining – wealth generation enables further investment in value-
adding industry and development.
 Industries get more diversified; new forms of industries like neo-technical industries
emerge, e.g. electrical industry, chemical industry, or mechanical engineering.
5 Age of High Mass Consumption

This is the final step in Rostow’s five-stage model of development.

Most parts of society live in prosperity, and persons living in this society are offered both
abundance and a multiplicity of choices. Society in this stage is also called post-industrial
society.

 Service industry dominates the economy – banking, insurance, finance, marketing,

entertainment, and so on.
 High levels of production from many industry sectors
 Mass consumption of consumer durables;
 High proportion of employment in the service sector
 Technology is extensively used.
 The service sector becomes increasingly dominant.
 Urbanization is complete.
 Multinationals emerge.
 Income for large numbers of persons transcends basic food, shelter, and clothing.
 Increased interest in social welfare.

Criticism of Rostow stages of growth

 The model assumes that every country begins the process of development from the same
starting point. In reality, this doesn’t hold true.
 The model failed to accommodate the economic and cultural differences between
countries.
 Very narrow understanding of development with a single focus on a parameter called
linear economic growth. As such the model failed to consider the importance of
investment and monetary aid from other countries which might stimulate economic
growth.
 The model is Eurocentric which is based on American/western European experiences
 Rostow argued economies would learn from one another and reduce the time taken to
develop. This hasn’t happened in practice.

Harod-Domar Growth Model

The Harrod Domar Model suggests that the rate of economic growth depends on two things:

1. Level of Savings (higher savings enable higher investment)

2. Capital-Output Ratio. A lower capital-output ratio means investment is more efficient and
the growth rate will be higher.

These 2 factors jointly account for the rate of growth.

As such, the principal strategy for development is the mobilization of savings and the generation
of investment to accelerate economic growth.

Harrod-Domar’s growth model emphasizes an economic relationship in which the growth rate of
gross domestic product (g) depends directly on the national net savings rate (s) and inversely on
the national capital-output ratio (c).

The capital-output ratio (c) is the amount of capital(K) needed to increase output(Y).

c = K/Y; capital-output ratio (productivity of investment), this also implies c= ΔK/ΔY. ΔK is a

change in capital and ΔY is a change in national output or income

A lower capital-output ratio means investment is more efficient and the growth rate will be
higher.

A high capital-output ratio means investment is inefficient.

Level of savings (s) = Average propensity to save (APS) – which is the ratio of national savings
to national income.

S=sY; this means that saving is a function of national income. If the national income is higher,
there is more ability (more money) to save.

Higher savings enable higher investment

If capital stock is changing, the reason could be people are making investments(I). Hence, I=ΔK

I = S; Because banks collect saving as deposit and use it to lend out to investors.
Therefore, what the H-D growth model conclude is that the rate of growth of GNP (ΔY/Y) is
determined jointly by the ability of the economy to save (savings ratio) (s) and the capital-output
ratio (productivity of investment) (c).

The importance of the Harod-Domar growth model (AK model) is that it explains the mechanism
by which investment leads to growth. It argues that investment comes from savings.

According to the H-D model, there are three kinds of growth:

Warranted growth, actual growth, and the natural rate of growth.

i) Warranted growth

This is the rate of growth at which all saving is absorbed into investment. (e.g. birr 5 million of
saving = birr 5 million of investment).

It is also the growth rate at which the ratio of capital to output would stay constant. let us assume
the saving rate is 5% and the capital-output ratio is 2.

In other words, 5% of the investment, increases output by 2.5%. In this case, the economy’s
warranted growth rate is 2.5% (5/2).

ii) Natural growth rate

This is the rate of economic growth required to maintain full employment. If labor force grows at
3% per year, then to maintain full employment, the economy’s annual growth rate must be 3%.

iii) Actual growth rate

This is the real rate increase in a country’s GDP per year.

Criticism of Harod-Domar model

Low rate of savings in developing countries gives rise to savings gap and capital constraints and
it is not so easy for these countries to increase savings and investment

Structural-Change Models

Structural-change theory focuses on the mechanism by which underdeveloped economies

transform their domestic economic structures from traditional to an industrial economy

Structural Transformation is the process of transforming an economy in such a way that the
contribution to national income by the manufacturing sector eventually surpasses the
contribution by the agricultural sector.

Representatives of this model are:

 1. The Lewis theory of development
2. Chenery’s patterns of development

1.Lewis Theory of Development

Also known as the two-sector surplus labor model; explains how economic growth gets started
through structural change – an increase in the size of the industrial sector relative to the
subsistence agricultural sector.

Savings and investment are necessary conditions for accelerated economic growth but not
sufficient conditions.

Assumptions are based on western experience

 The model ignores factors such as labor productivity, technological progress, and
institutional factors.
 The effect of technological progress has not been incorporated in the model
 The model ignores human capital formation

The growth of the industrial sector increases demand for the agricultural sector’s produce and
attracts labor from the low-productivity agricultural sector to the industrial sector, thus raising
the overall output and productivity of the economy as a whole.

The process of self-sustaining growth and employment expansion continues in the modern sector
until all of the surplus labor is absorbed.

As a result, structural transformation of the economy takes place with the growth of the modern
industry.

Chenery’s Model: Structural Changes and Patterns of Development

Views increased savings and investment as necessary but not sufficient for economic
development

In addition to capital accumulation, the transformation of production, the composition of

demand, and changes in socio-economic factors are all important according to this model

Dualistic Development Theories

Dualism theories assume a split of economic and social structures of different sectors so that they
differ in organization, level of development, and goal structures. Usually, the concept of
economic dualism differentiates between two sectors of the economy:

The traditional subsistence sector consists of small-scale agriculture, handicraft, and petty trade,
has a high degree of labor intensity but a low capital intensity and little division of labour; and
The modern sector of capital-intensive industry and plantation agriculture produces a capital-
intensive production with a high division of labor.

There are different theories that view the poverty and underdevelopment of poor countries is
attributed to their dualistic character.

Technological dualism__ between labor and capital-intensive sectors.

Social dualism__ the absence of relationships between people of different races, religions, and
languages, which, in many cases, is a legacy of colonialism.

Financial dualism__ the coexistence of organized and unorganized money market

Regional dualism__ as a lack of communications and exchange between regions & the capital

Economic, technological, & regional dualisms are the consequences of social dualism.
Development in dualism concepts is the suppression of the traditional sector by concentrating on
and expanding the modern sector.

The productive employment of the laborers in the modern sector would increase the production
of the economy and hence the priority of investment in the industrial sector is necessary.

Balanced growth Model

Balanced growth refers to the simultaneous, coordinated expansion of several sectors.

Balanced growth strategy is the strategy that stresses simultaneous development of all sectors of
the economy so that they complement each other and grow at a more or less the same level,

On the other hand, an unbalanced growth strategy is a strategy that calls for investment in one or
a few vital sectors of strategic linkage.

The International Dependence Model (IDM)

The IDM rejects the exclusive emphasis on GNP growth rate as the principal index of
development.

Instead they place emphasis on international power balances and on fundamental reforms
worldwide.

IDM was very popular in the 1970s and early 1980s

They were questioning ‘why are so many countries in the world not developing?’

The IDM models argue that developing countries are up in dependence and dominant
relationship with rich countries
International-dependence models view developing countries as beset by institutional, political,
and economic rigidities, both domestic and international, and caught up in dependence and
dominance relationships with rich countries.

There are three streams of thought under IDM:

1. Neocolonial dependence model

2. False-paradigm model
3. Dualistic-development thesis

1.Neocolonial Dependence Model

Defines [Dependency is] . . . a historical condition which shapes a certain structure of the world
economy. It favors some countries to the detriment of others and limits the development
possibilities of the subordinate economies.

Dependency is a situation in which the economy of a certain group of countries is conditioned by

the development and expansion of another economy, to which their own is subjected

They were single mindedly incorporated LDCs into a capitalist system through trade thereby
undertaking the modernization of United States & Europe only.

2.False-Paradigm Model

Attributes underdevelopment to the faulty and inappropriate advice provided by well-meaning

but biased and ethnocentric international “expert advisers” The policy prescriptions serve the
vested interests of existing power groups, both domestic and international

Developing countries have failed to develop b/c their development strategies (usually given to
them by Western economists) have been based on an incorrect model of development,

3.Dualistic- Development Thesis

Dualism: the coexistence of two situations (one desirable and the other not) that are mutually
exclusive to different groups of society

For example, extreme poverty and affluence, modern and traditional economic sectors, growth
and stagnation.

It represents the existence and persistence of increasing divergences between rich and poor
nations and rich and poor peoples at all levels.

The concept holds four key arguments

 Superior and inferior conditions can coexist in a given space at a given time
 The coexistence is chronic and not transitional
  The degrees of the conditions have an inherent tendency to increase
 Superior conditions serve to “develop under-development”

Neoclassical Counterrevolution

Underdevelopment is caused by the domestic issues arising from heavy state intervention such as
poor resource allocation, government-induced price distortions, and corruption

Neoclassical-counterrevolution in the 1980s called for freer markets, the dismantling of public
ownership, and government regulations

Used three approaches to counter IDM :

i. Free-market approach

Argues that markets alone are efficient

Free markets allocate resources best to investment (equipment, human capital, R&D)

Argues that product markets provide the best signals for investments in new activities; Labor
markets respond to these new industries in appropriate ways; Producers know best what to
produce and how to produce it efficiently, and product and factor prices reflect accurate scarcity
values of goods and resources now and in the future.

Competition is effective, if not perfect; technology is freely available and nearly costless to
absorb; information is also perfect and nearly costless to obtain.

Any government intervention in the economy is distortionary Imperfections are of little

consequence

ii. Public Choice Theory (New Political Economy Approach)

Governments can do nothing right. assumes that politicians, bureaucrats, citizens, and states act
solely from a self-interested perspective, using their power and the authority of a government for
their own selfish ends. Politicians use government resources to consolidate and maintain
positions of power and authority.

Market failures (monopolies, externalities) have to be compared to state failures (interest groups,
bureaucratic self-interest, etc.). ‘Minimal’ government is the best government

iii. Market-friendly Approach

Governments have a key role to play in facilitating operations of markets through nonselective
interventions In the LDC market failures are particularly heavy. Phenomena such as missing and
incomplete information, externalities in skill creation and learning. The state’s role is to make
markets work.
Chapter Four: Actors of Development

Government (State)

Although many commentators have opposed the role of government in the development process,
a number of others strongly argue in support or recognition of the role of government. The
following are the supporters of the role of government in development.

Chambers (1993)

He states that the state besides being the protector and provider should also be a liberator and
enabler for the poor, permitting and promoting both diversity and choice”.

Friedman (1992)

He criticized the doctrine that the state is bureaucratic, corrupt, and unsympathetic to the needs
of the poor. He rather argued that the state is the instrument to create social equity and well-
being.

Above all state exists with multi-dimensional social responsibilities one of which is its welfare
concern, the concern towards bringing social equality. Therefore, the state should carry on the
responsibility to play a major role in development activities.

Unless the state continues to play a major role, the welfare of the poor cannot be significantly
improved. For this reason, Friedman argued that development should not be understood and
implemented in isolation or by excluding the government.

Schroeder (1995)

He remarked that “Development is not an autonomous process independent of cultural and

political factors. It always occurs in the context of the state system and political leadership
committed to development”.

Rondinelli (1993)

States that all actors of development are not beyond the scope of politics.

He noted, “No system of development can be effective that ignores or discounts the political
dimension of decision-making. Ultimately, all development plans are political statements and all
attempts to implement them are political acts……”.

Menedez (1991)

He explained the three major actors in development or poverty alleviation initiatives

(governments, NGOs and multilateral and bilateral organizations).
However, he gave more emphasis to the role of government and said, "governments can alleviate
the worst aspects of poverty by directing public expenditure to the most vulnerable groups and
by creating an environment within which the initiative of other actors can develop and flourish“.

Administrative system

Public administration, of any country is an indispensable instrument to implement development

policies and programmes. Administrative systems perform specialized services and undertake
vast range of developmental activities. As administrative systems have specialized skills and
have rich experience there is a heavy dependence on this instrument to realize development
goals.

Political parties

Political parties mobilize people in support of developmental programmes. They resolve social
conflicts and pave the way for development. Therefore, they are considered as an important
instrument of development and development administration.

NGOs

For the proponents of a “state-free” development approach, NGOs are the best actors in
development. Fowler (1988) noted that NGOs have better ability than governments and
identified two distinctiveness features of “comparative advantages” in ensuring development.

The first advantage is their relations with the intended beneficiaries on the basis of the
voluntarism principle rather than the controlling method.

Secondly unlike the government, NGOs are organized in a non-bureaucratic structure with the
guiding principles of flexibility, responsiveness, experimentation, and a learning-by-doing
process.

Cooperatives

According to Lambert “a co-operative society is an enterprise formed and directed by an

association of users, applying within itself the rules of democracy and directly intended to serve
both its own members and community as a whole.

“It is a broad definition of a cooperative society that seeks to achieve members’ welfare and
which also works for the betterment of the community, as a whole.

The essential objectives of co-operatives include:

 The provision of goods and services of high quality at low prices;

 Elimination of the middleman (unnecessary profits in trade and commerce );
 Prevention of exploitation of the weaker members of society (e.g. by money lenders);
  Protection of the rights of the people, both as producers and consumers;
 Promotion of education and mutual understanding among their members, and Promotion
of social and economic well-being of their members, in the long run, among all people.

Voluntary Associations

There is no doubt that voluntary agencies have been playing a pioneering role in development
activities.

The voluntary agencies have to supplement and not compete with government efforts. The
government should not consider their activities as a duplication.

They act as eyes and ears of the people and act as a source of reliable feedback to the
government so that it can design the policies and programs accordingly.

It is possible for the voluntary agencies to reach a large number of people and set an example for
others.

Dissemination of information is another potential area in which the voluntary agencies is of

immense use. Information is power and the role of the voluntary body is to distribute such power
and make it accessible.

Voluntary sector has been in the forefront in utilizing skills and talent. Further, it is possible to
minimize the dependency syndrome through various methods and a sense of self-reliance has to
be instilled among the villagers.

International donors

A number of writers acknowledge the role of aid agencies, particularly those multilateral donors,
which have disbursed an increasing proportion of development assistance.

Unless the roles of multilateral donors are in place, it could be very difficult to undertake
development in poor countries since government budgets often allocated for the implementation
of development projects are limited.

Communities

Another major actor of development is the community itself. Advocates of this approach believe
that without the involvement of local people development activities cannot achieve the goal of
poverty alleviation. Therefore, the rising idea of local-level development as an option for poverty
alleviation considers the community as a unit of solution.

It is generally based on the belief that problems in communities have solutions in communities,
so people should participate in matters that affect them at the grassroots level.

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