Strengthening Public Investment Management
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Transcript of Strengthening Public Investment Management
Strengthening Public Investment Management
James BrumbyKai Kaiser
PREM Public Sector & Governance BrasiliaJune 16-17, 2011
The World Bank Page 2Public Sector & Governance
Aiming for Infrastructure Results
Public Investment
"Social" Infrastructureeducation and health facilities and housing
"Economic" Infrastructure
transport, communications, energy, irrigation systems, water
and sanitation
Creating and preserving economically and social productive public assetsEfficiency is “value for money”: budget to final cost, completion time to actual timeHow long will they last?
“Right” starting quality/standardDepreciation versus “service value”, O&MRisk: build, neglect, rebuild….
The World Bank Page 3Public Sector & Governance
Value for Money?
An g o la
Alb a n ia
Un ite d Ara b Emira te s
Arg e n tin a
Arme n ia
Au s tra lia
Az e rb a ija n
Bu ru n d i
Be lg iu m
Be n inBu rk in a Fa s o
Ba n g la d e s h
Bu lg a ria
Ba h ra in
Bo s n ia a n d He rz e g o v in a
Bo liv ia
Bra z il
Ba rb a d o s
Bo ts wa n a
Ce n tra l Afric a n Re p u b lic
Ca n a d a
Switz e rla n d
Ch ile
Co te d 'Iv o ire
Ca me ro o n
Co lo mb iaCa p e Ve rd e
Co s ta Ric a
Cz e c h Re p u b lic
Ge rma n y
Do min ic a n Re p u b lic
Alg e ria
Ec u a d o r
Eg y p t, Ara b Re p .
Es to n ia
Eth io p ia
Fin la n d
Fra n c e
Un ite d Kin g d o m
Ge o rg ia
Gh a n a
Ga mb ia , T h eGu a te ma la
Gu y a n a
Ho n g Ko n g SAR, Ch in a
Ho n d u ra s
Cro a tia
In d o n e s iaIn d ia
Ira n , Is la mic Re p .
Is ra e l
Ita ly
J o rd a n
J a p a n
Ka z a k h s ta n
Ke n y aCa mb o d ia
Ko re a , Re p .
Ku wa it
L e b a n o n
Sri L a n k a
L e s o th o
L ith u a n ia
Mo ro c c o
Mo ld o v aMa d a g a s c a r
Me x ic o
Ma li
Mo n te n e g ro
Mo n g o lia
Mo z a mb iq u e
Ma u rita n ia
Ma u ritiu s
Ma la wi
Ma la y s iaNa mib ia
Nig e ria
Nic a ra g u a
Ne th e rla n d s
No rwa y
Ne p a l
Ne w Ze a la n d
Oma n
Pa k is ta n
Pa n a ma
Ph ilip p in e s
Po rtu g a l
Pa ra g u a y
Qa ta r
Ro ma n ia
Ru s s ia n Fe d e ra tio n
Rwa n d a
Sa u d i Ara b ia
Se n e g a l
Sin g a p o re
El Sa lv a d o r
Se rb ia
Slo v a k Re p u b licSwa z ila n d
Sy ria n Ara b Re p u b lic
Th a ila n d
Ta jik is ta n
Trin id a d a n d To b a g o
Tu n is ia
Tu rk e y
Ta n z a n ia
Ug a n d a
Uk ra in e
Uru g u a y
Un ite d Sta te s
Ve n e z u e la , RBVie tn a m
So u th Afric a
Za mb ia
2.0
3.0
4.0
5.0
6.0
7.0
0.0 5.0 10.0 15.0 20.0 25.0Gov Investment / GDP (%) (WEO)
Quality of Overall Infrastructure (WEF 2010) Fitted values
Source: World Economic Forum (2010) & IMF WEO (2011)
Government Investment & Infrastructure QualityWEF InfrastructureQuality
The World Bank Page 4Public Sector & Governance
Quality of Effort?
Afg h a n is ta n
An g o la
Alb a n ia
Un ite d Ara b Emira te s
Arg e n tin a
Arme n iaAn tig u a a n d Ba rb u d a
Au s tra liaAz e rb a ija n
Bu ru n d iBe lg iu m
Be n in
Bu rk in a Fa s o
Ba n g la d e s hBu lg a ria
Ba h ra inBa h a ma s , T h e Bo s n ia a n d He rz e g o v in aBe liz e
Bo liv iaBra z il Ba rb a d o sBh u ta n
Bo ts wa n a
Ce n tra l Afric a n Re p u b licCa n a d aSwitz e rla n dCh ileCo te d 'Iv o ireCa me ro o n
Co n g o , Re p .Co lo mb ia
Co mo ro s
Ca p e Ve rd eCo s ta Ric aCz e c h Re p u b licGe rma n y
Djib o u ti
Do min ic a Alg e ria
Ec u a d o r
Eg y p t, Ara b Re p .
Eritre a
Es to n ia Eth io p iaF in la n dFiji F ra n c e
Ga b o nUn ite d Kin g d o m
Ge o rg ia
Gh a n a
Gu in e a
Ga mb ia , T h eGu in e a -Bis s a u
Eq u a to ria l Gu in e a
Gre n a d a
Gu y a n aHo n g Ko n g SAR, Ch in a
Ho n d u ra sCro a tia In d o n e s ia In d ia
Ira n , Is la mic Re p .Ira q
Is ra e l Ita ly
J o rd a n
J a p a n Ka z a k h s ta nKe n y a
Ca mb o d ia
St. Kitts a n d Ne v isKo re a , Re p .
Ku wa it
L e b a n o n
L ib y aSt. L u c ia
Sri L a n k a
L e s o th o
L ith u a n ia
Mo ro c c o
Mo ld o v aMa d a g a s c a r
Ma ld iv e sMe x ic oMa li
My a n ma r
Mo n te n e g roMo n g o lia
Mo z a mb iq u eMa u rita n ia
Ma u ritiu s
Ma la wi
Ma la y s ia
Na mib ia
Nig e r Nig e riaNic a ra g u aNe th e rla n d sNo rwa yNe p a l
Ne w Ze a la n d
Oma n
Pa k is ta n
Pa n a maPe ruPh ilip p in e s
Pa p u a Ne w Gu in e aPo rtu g a l
Pa ra g u a yQa ta r
Ro ma n iaRu s s ia n Fe d e ra tio n Rwa n d a
Sa u d i Ara b ia
Su d a n
Se n e g a lSin g a p o re Sie rra L e o n eEl Sa lv a d o r
Se rb ia
Sa o T o me a n d Prin c ip e
Su rin a me
Slo v a k Re p u b lic Swa z ila n d
Se y c h e lle s Sy ria n Ara b Re p u b licCh a dTo g o
Th a ila n dTa jik is ta n
Tu rk me n is ta n Trin id a d a n d To b a g o
Tu n is iaTu rk e y
Ta n z a n ia
Ug a n d a
Uk ra in e
Uru g u a yUn ite d Sta te sUz b e k is ta n
St. Vin c e n t a n d th e Gre n a d in e sVe n e z u e la , RB
Vie tn a m
Sa mo aYe me n , Re p .
So u th Afric a
Co n g o , De m. Re p .
Za mb ia
-10.
00.
010
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.0
0.0 5.0 10.0 15.0 20.0 25.0Gov Investment / GDP (%) (WEO)
Change in Gov Investment Level (% Points GDP) (WEO) Fitted values
Source: IMF (2011)
Government Investment 2008-9 (Exp Allocation)
Investment “Stimulus 2008-09Additional % GDP
The World Bank Page 5Public Sector & Governance
Ex Post Benchmarking
Source: CoST (2011b:3)
The World Bank Page 6Public Sector & Governance
Addressing Infrastructure Gaps: Multiple Sectors & Modalities Engaged
General Government
Sector (Central State, Local)
Public Corporations (Nonfinancial)
Private Sector
Fiscal financing
Other sources of financing
Some fiscal & some corporate financing
Examples•Power•Roads•Telecommunications/Internet•Schools•Clinics/Hospitals•Stadiums•“Green” Infrastructure; Adaptation
Business Environment
PrivateInvestment
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Public Investment
Management
PPPs
Mainly fiscal
Mainly regulatory
Financial Sector role
Financial Sector role
The World Bank Page 7Public Sector & Governance
Public Investment Policy Choices• How much to spend
– Levels (% GDP)– Volatility– Availability of financing
• Quality of spending– PIM Process
• Public Investment Modalities– “Standard” Public Investment
• Across levels of governnment– Donor-financed public investment– Public-Private Partnerships– SOEs/Quasi-Fiscal– Resource for Infrastructure Deals
The World Bank Page 8Public Sector & Governance
A Framework for Assessing PIM
• Two pillars of the approach– Desirable features of well-functioning system in 8 cycle– Diagnostic Indicators to assess actual system
• Focus on how to inform reform design to enhance efficiency by Gap-AnalysisDesirable Institutional
Features Actual Functioning
DiagnosticIndicators
Gap
Analysis
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The Eight “Must-Have” Core PIM Features
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1Guidance
& Screening
2Formal
Project Appraisal
3Appraisal Review
4Project Selection
& Budgeting
7ServiceDelivery
6Project
Changes
5Implementation
8Project
Evaluation
Pre-feasibility
Feasibility
CE
CBA
Regulatory requirements
Project development
Detailed project design
Basic completion
review
Evaluation
The World Bank Page 10Public Sector & Governance
Different Countries Facing Various Challenges
The World Bank Page 11Public Sector & Governance
PIMI – LICs and MICs
The World Bank Page 12Public Sector & Governance
State Diversity in the US
Source: Pew Center on the States (http://www.pewcenteronthestates.org)Grading the States Report, 2008
The World Bank Page 13Public Sector & Governance
Public Asset Creation and Preservation
• Options for addressing infrastructure gaps in periods of fiscal consolidation– Managing fiscal space; balance sheet and operating
spending– Leveraging modalities; full choice of interventions
• Information/monitoring to improve quality– PIM cycle; supported by management information– Operations & Maintenance (O&M)
• Special challenge of managing across levels of government, PIM modalities
The World Bank Page 14Public Sector & Governance
Strengthening “Good Enough” PIM prioritization in project portfolio
Source: Rajaram et al (2010)
Well executed
Poorly executed
Good projects A CPoor projects B D
The World Bank Page 15Public Sector & Governance
Monitoring Implementation
• Test: do current systems generate CoST type statistics and is it reported?
• Variety of systems– Single system– Interlinked systems
• Feedback mechanisms/demand critical
The World Bank Page 16Public Sector & Governance
65% of the current roads projects have time overruns In a sample of 10 road projects, 7 had time overruns with completion time
of 3.1 years compared to original plan of 1.8 years. Delays were worse in the directly contracted projects
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Case: These planning and budgeting problems show up in project execution
The World Bank Page 17Public Sector & Governance
O&M Monitoring• Returns are high; commitments are low
– Suggests incentive problem• Budget/costing benchmarks• De Facto responsibility across levels of government/types of assets?• Special institutions
– Road Funds• Feedback mechanisms
– Demand side, parents & schools• Accounting measures & capability
– Accruals, balance sheets & capital charges
The World Bank Page 18Public Sector & Governance
60 percent of the national paved road network is in poor condition
However, capital repair expenditures did not benefit from the expenditure boom…
…and have declined as a proportion of capital stock and of new investments
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Case: Low allocative efficiency: under-prioritization of maintenance and repair
The World Bank Page 19Public Sector & Governance
Case: Balance sheet approach• rebuilding the state balance sheet buffer against future
adverse events• systematically working to reduce the state’s risk exposures,
including through strengthening the economy• sharpening incentives on State agencies to use existing state
capital well• continuing to look at introducing private sector capital and
disciplines where appropriate to help drive up the performance of State assets, and
• more actively reprioritizing State capital to its highest value use.
The World Bank Page 20Public Sector & Governance
PIM Reforms
• Three common challenges:– You need to work with politics– High corruption risk– PIM as extremely demanding area of public management
• It is important therefore to ensure that PIM reforms are incentive compatible
– Based on a sound understanding of and tailored to fit individual country paths, circumstances and practices
– Technically feasible, relying on good enough practice– Carefully designed and sequenced– Targeted
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Lessons Learned
• Ownership of assessment is important– Often, but not always MoF at the center of process– Develops the framework for investment decision and
has oversight control of public investment• Clarity of roles and responsibilities is crucial for
effective PIM– Coordination across sectors and levels of government
• The role of central guidelines are a particularly critical aspect of a well functioning PIM
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Lessons Learned
• Monitoring is important for early remedial action• Building capacity : gradual approach
– PIM system do not operate in isolation– Well functioning PEM and budgeting system, SOE
governance and debt management system is also important
• Tailoring PIM to country context
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The World Bank Page 23Public Sector & Governance
Catering “good fit” to country context: Programmatic Approach
Country cases; analytic & advisory work• A synthesis of the findings of 15 case studies, presents a country typologies, and an assessment of
patterns of binding constraints to PIM system performance and approaches to reform (w/ AusAID, Korea): incl. Brazil, Peru, East Timor, Vietnam, Korea, Australia
Toolkits/Benchmarking– Rajaram et. al. (2009) eight “must-have” or minimum features of a sound public investment
management and offers a systemic approach (studies inc: Korea, Chile, Vietnam, Peru).– Public Investment Management (PIMI) Benchmarking Indicator– PEFA “Drill Down” for Capital Spending
Peer to peer• Facilitate exchange of experiences between developing countries that have successfully implemented
reforms and those who are seeking to fill operational knowledge gaps• Seoul, Hanoi• Brasilia (5/2011), APEC Conference DC (6/2011)
Bank operations• Fee-for-service• DPL, as in case of Vietnam or IL/TA