February 29, 2008

PUBLIC INVESTMENT PLANNING IN PUBLIC INVESTMENT PLANNING IN TURKEYTURKEY

T.R. Prime MinistryT.R. Prime MinistryState Planning Organization State Planning Organization

(SPO) (SPO)

M. Cüneyd DÜZYOL (cduzyol@dpt.gov.tr)

DG for Economic Sectors and Co-ordination

22

ContentContent

National Development Planning in Turkey

Annual Program & Budget Preparation

Process

Public Investment Programming in Turkey

Project Cycle Management in Turkey

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2000 2005 2006 2013 2007-2013

Increase

GDP, Billion $ 200 363,4 402,7 797,4 --

GDP Growth 7,4 7,4 6,1 -- 7,0

GDP per Capita, $ 2879 5042 5519 10099 9,9

GDP per Capita, PPP, $ 6819 8145 8577 15332 8,3

CPI Rise, Year-end 39,0 7,7 9,7 3,0 --

Fixed Capital Investment/GDP, % 22,4 19,6 21,0 24,2 9,1

Public 6,0 4,3 4,3 6,0 8,1

Private 16,4 15,3 16,7 18,2 9,4

Export (F.O.B), Billion $ 27,8 73,4 85,5 210 14,2

Import (C.I.F.), Billion $ 54,5 116,5 139,6 275 10,9

Tourism Revenue, Billion $ 7,6 18,2 16,9 36 9,3

Tax Burden/GDP, % 30,6 31,7 30,0 30,0 30,8

Employment, (Number in Millions) 21,6 22,0 22,3 26,9 2,7%

Unemployment Rate, % 6,5 10,3 9,9 7,7 --

Main Economic Indicators for TURKEYMain Economic Indicators for TURKEY

National Development Planning in National Development Planning in TurkeyTurkey

(1960), State Planning Organization (SPO) established (1961), Constitution adopts Development Planning as a

basic tool for economic, social and cultural development (1963-1967) 1. National Development plan (1968-1972) 2. National Development plan (1973-1977) 3. National Development plan (1979-1983) 4. National Development plan (1985-1989) 5. National Development plan (1990-1994) 6. National Development plan (1996-2000) 7. National Development plan (2001-2005) 8. National Development Plan (2007-2013) 9. National Development Plan

A Brief HistoryA Brief History

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Composed of four main bodies ; Undersecretariat of State Planning Organization (SPO) Secretariat for High Planning Council (HPC) Secretariat for Economic and Social Council (ESC) Secretariat for Money, Credit and Coordination Council (MCCC)

Undersecreteriat of State Planning Organization (SPO) mainly; Advises the Government on economic, social and cultural development

policies Develops macroeconomic, sectoral, regional policies and strategies Prepares Development Plans & Annual Programs Draws investment strategies & Prepare Public Investment Programs Monitors, co-ordinates and evaluates implementation of development

plans and annual programs Co-ordinates and monitor activities of line ministries & public institutions Prepares regional develeopment plans and projects Co-ordinates and guides institutional strategic planning initiatives Draws general policy framework for the State Aid Schemes Coordinates EU-Instrument for Pre-Accession Assistance (IPA)

Components III and IV namely Regional Development & Human Resources Development

State Planning Organization (SPO)State Planning Organization (SPO)

77

ORGANIZATION CHART FOR UNDERSECRETARIAT OF SPO

Undersecretary

Deputy Undersecretary

DeputyUndersecretary

Deputy Undersecretay

DG Annual Programmes & Conjuncture

DG Economic Modelling and

Strategic Research

Budget and Local Administrations

State Economic Enterprises

Economic Modelling

DG EuropeanUnion

Relations

DG Economic Sectors and Coordination

DG Social Sectors and Coordination

Strategic Planning

DG Foreign Economic Relations

Agriculture

Infrastructure and Services

EU Policies

Human Resources

Development

KnowledgeSociety

Industry

Social and Phisical

Infrastructure

Project and Investment

Analysis

Social andTechnological

Research

EU Cohesion

Social Policies

Legal and Institutional

Arrangements

Secretary General

Deputy Secretary General

Conjuncture

PublicRelations Dept.

Administrative and

Finance Dept.

Personnel Dept.

Regional Development

Bilateral Relations

Advisors

DG Regional Development

Monitoring and Evaluation

Multilateral Relations

Priority Development

Regions

Legal Advisor

Management Info System Secretariat for Councils

ORGANIZATION CHART FOR UNDERSECRETARIAT OF SPO

Undersecretary

Deputy Undersecretary

DeputyUndersecretary

Deputy Undersecretay

DG Annual Programmes & Conjuncture

DG Economic Modelling and

Strategic Research

Budget and Local Administrations

State Economic Enterprises

Economic Modelling

DG EuropeanUnion

Relations

DG Economic Sectors and Coordination

DG Social Sectors and Coordination

Strategic Planning

DG Foreign Economic Relations

Agriculture

Infrastructure and Services

EU Policies

Human Resources

Development

KnowledgeSociety

Industry

Social and Phisical

Infrastructure

Project and Investment

Analysis

Social andTechnological

Research

EU Cohesion

Social Policies

Legal and Institutional

Arrangements

Secretary General

Deputy Secretary General

Conjuncture

PublicRelations Dept.

Administrative and

Finance Dept.

Personnel Dept.

Regional Development

Bilateral Relations

Advisors

DG Regional Development

Monitoring and Evaluation

Multilateral Relations

Priority Development

Regions

Legal Advisor

Management Info System Secretariat for Councils

88

Inter-ministerial coordination and decision-making body

Chaired by Prime Minister

Undersecretariat of SPO provides secretarial services

Seven line ministers managing large investment portfolios appointed by Prime Minister & Undersecretary of the SPO are members

Chairman can invite ministers and bureaucrats depending on topics,

Provides assistance to the Council of Ministers in determining policy targets and planning of economic, social and cultural development

Examines and approves development plans and annual programs

Approves sectoral strategy documents

Takes high level decisions concerning economic matters

High Planning Council (HPC)High Planning Council (HPC)

Main Stakeholders / Partners having roles in Main Stakeholders / Partners having roles in Development Plan Preparations Development Plan Preparations

Grand National Assembly (TGNA)

Government : Council of Ministers

High Planning Council (HPC)

Undersecretariat of State Planning Organization

(SPO)

Line Ministries and Public Institutions

Universities

Private Sector

NGOs etc.

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Government(Council of Ministers)

Markets (Sectors)

Line Ministries & Public Institutions

Undersecretariat of SPO

Consumers

High Planning Council

State Planning Org.

TGNA

Basic Relationships in Decision-Making Basic Relationships in Decision-Making ProcessProcess

Universities & NGOs

Basic Characteristics of Basic Characteristics of National Development Plans in TurkeyNational Development Plans in Turkey

Comprehensive Participatory (ad-hoc committees) Compulsory for Public Sector Indicative for Private Sector and NGOs Five-Year Perspective (7 year for 9.National Development

Plan (2007-2013) in line with EU Accession Target Non-Rolling Medium and long-term strategic objectives and priorities

under thematic development axes, Guides all macroeconomic, sectoral and regional policies

and implementations Sets the general framework of economic, social and

regional indicative targets, Coordinated by SPO Turkish Grand National Assembly approves

Steps of Development Plan PreparationsSteps of Development Plan Preparations

1. Formation of Ad-Hoc Commities & Data Collection,

2. Preparation of Plan Strategy Draft by SPO and Submission to HPC

3. Approval of Draft Strategy by HPC

4. Approval of Strategy by Council of Ministers,

5. Preparation of National Development Plan Draft by SPO consistent

with Strategy and submission to HPC,

6. Discussions and approval of Draft Plan by HPC

7. Submission of Draft Plan to TGNA after approval of Council of Ministers

8. Discussions in Planning & Bugdetting Commission of TGNA

9. Enactment of Development Plan by the decision of TGNA

Phases of Planning Process in Turkey Phases of Planning Process in Turkey •Analysis of basic macroeconomic & socio-economic data•Identification of basic macroeconomic policies & targets•Analysis of international developments (trade etc.)•Identification of Development Policies and Strategies •Macroecomomic Modelling Studies•Estimation of Macroeconomic Aggregates

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•Collection & Analysis of Sectoral Data•Analysis of production potential & market analysis•Sector Analysis and Master Plan Studies•Sectoral/sub-sectoral and Investment Priorities•Identificaton of sector policies, targets & sector investments•Linkage with regional development concerns

•Investment priorities and volumes by sub-sectors•Project Opportunity Studies•Identification of Alternative Project Ideas•Pre-Feasibility Studies : Cost Benefit Analysis•Feasibility Studies : Detailed Cost Benefit Analysis

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National Development Plan

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Macro PlanningMacro Planning

Collection of main ecomomic & socio-economic data and analysis,

Identification of basic development strategies, Identification of basic economic and socio-economic targets,

policies and priorities, Macroeconomic Modelling Studies, Estimation of macroeconomic aggregates like consumption,

savings, investments, exports, imports etc. consistent with targetted economic growth,

Resources-Expenditures Balance, Financial Balance and Balance of Payments

Draft macro policy set in parallel with own features of the country such as natural resources, growth potential, development strategy and political preferences etc.

Identification of Annual and Medium Term macroeconomic aggrregates based on long term development strategy

Sectoral PlanningSectoral Planning

Definition of sectors/sub-sectors and their scope

Analysis of current situation & development potential in

sectors/sub sectors

Sector Analysis: Identification of Targets, Policies & Priorities

Preparation of sectoral plans and programs in order to reach

economic, social and phisical targets.

Establishment of the necessary links among national, sectoral,

regional development policies and public investment policies

Breakdown of investments by sectors

Identification of investment priorities in the sector

Implementation tool for Plan & Program policies and objectives

Investment Planning : Budget projections, Investment projections by sectors and institutions

Investment Opportunity Studies

Pre-Feasibility Studies & Feasibility StudiesSupply & Demand AnalysisChoice of Technology, Capacity and PlaceFixed Capital InvestmentOperation Revenues & Expenditures Financial Cost Benefit AnalysisEconomic Cost Benefit AnalysisEnvironmental Analysis based on EIAInstitutional Analysis

Investment Planning : Project Planning Investment Planning : Project Planning

Annual Program and Budget Annual Program and Budget Preparation ProcessPreparation Process

1818

Development Plan

MTFPMedium Term Program

Annual Program

Public Investment Program

Budget

Regional Dev. Plans

Sector Strategies

Provincial Dev. Plans

Inst. Strategic Plans

Preaccession Econ. Prog.

National Program

Cohesion Strat. Framework

Hierarchy of Policy Documents and Hierarchy of Policy Documents and Place of Public Investment ProgramPlace of Public Investment Program

Long Term Strategy

Operational Programs

Government Program

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Publication of Public Investment Program (In two weeks after New Fiscal Year starts)

OVP(DPT) (Mayıs Sonu), OVMP (Maliye Bak.) ( 15 Haziran )

Bütçe Çağrısı (Maliye Bakanlığı) ( Haziran Sonu )

Bütçe Hazırlama Rehberi (Maliye Bakanlığı)( Haziran sonu )

Yatırım Programı Hazırlama Rehberi (DPT)( Haziran Sonu )

Bütçe ve Yatırım Programı Teklifleri (Temmuz Sonu)

Bütçe ve Yatırım Görüşmeleri ( DPT, Maliye, Kuruluş )

( Eylül )

Taslak makro ve kamu bütçe büyüklüklerinin son hale getirilmesi

( Eylül sonu )

Yılı Program Kararnamesi ve Yılı Programının Resmi Gazete’de yayımlanması

( Ekim )

Bütçenin TBMM’de kabulü ve Resmi Gazete’de yayımı ( Mali Yılbaşından önce)

Taslakların YPK’ya sunulması ve YPK’da görüşülmesi

( Ekim’in ilk haftası )

Bütçe Tasarısının TBMM’ye sunulması ( 17 Ekim )

Programming and Budgetting ProcessProgramming and Budgetting Process

Medium Term Program (SPO) (End May), Medium Term Fiscal Plan (MoF) ( June 15)

Budget Call (Ministry of Finance) ( End June )

Budget Preparation Guidelines (MoF)( End June )

Investment Prog. Prep. Guidelines (SPO)( End June )

Budget and Investment Program Proposals from Public Institutions ( End July )

Program, Budget and Investment Negotiations ( SPO, MoF, Institutions )

( September )

Finalization of Draft Macro and budget aggregates

( End September )

Issuing Decree on Implementation, Coordination and Monitoring of Annual

Program and Annual Program ( October) )

Budget Approval by TGNA( Before new fiscal year starts)

Discussions in High Planning Council and Approval of Macro & Budget

Aggregates ( First Week of October)

Submission of Budget Draft to TGNA (October 17 )

Public Investment ProgrammingPublic Investment Programming

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Indicative Public Investment Policies & Priorities and aggregate investment ceiling in MTP

Indicative Investment Ceilings by sectors & instiutions in MTFP Budget Call & Guidelines for Budget Preparation (MoF) Investment Call & Guidelines for Investment Program

Preparation (SPO) Investment Program Proposals from Public Institutions Public investment policies and priorities consistent with

development policies set in Annual Program Sectoral & Institutional Investment Ceilings approved by HPC Budget Draft including investments sent to TGNA by Council of

Ministers Enactment of Bugdet Law in TGNA Public Investment Program on project basis consistent with

sector & intitution ceilings

Basic Steps of Public Investment ProgrammingBasic Steps of Public Investment Programming

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Consists of “Fixed Capital Investment Projects” in the form of ;

New projectsExtension projectsMaintenance & Operation Projects Completion ProjectsBottleneck Elimination ProjectsModernization and Rehabilitation Projects

in the following sectors.

Public Investment ProgramPublic Investment Program

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Agriculture Irrigation Agricultural Production Live stock Fisheries ForestryMiningManufacturingEnergyTransportation Highways Airways Maritime Railways PipelinesCommunicationsTourismHousingEducation Primary and Secondary

Education Vocational and Technical

Education Higher Education, Culture, Sports

Sectors for public investmentsSectors for public investments

I.  HealthK. Other Public Services

General Administration Security Services Cadastra & Mapping

Potable Water Sewerage Rural Area Planning Municipal Services Resettlement and

Urbanization Environment Artisans and SMEs Technological Research Social Services and Aid Disaster Management

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Agriculture Dams, Irrigation Channels, Flood Control Structures, Fishery Ports, Forest Structures etc.

Energy Power Plants, Transmission & Distribution Grids

Transportation Highways: Dual Carriage Ways, Motorways, Bridges, Viaducts etc.Railways: Infra & Super Structure, Train Sets etc. Maritime: Ports, Waterbreaks, Shipyards etc. Airways: Airports, Terminal Buildings, Aircraft Fleets etc.Urban Transport: Metro & Light Rail Systems etc.Pipelines : Transmission and Distribution Lines, Natural gas Storage Facilities, Compressor Stations etc.

Tourism Infrastructure for Touristic Regions

Education Schools , University Campuses, Faculties, Cultural Centers, Libraries, Sports Facilities, Machinery-Equipment etc.

Health Hospitals and other Health Facilities etc.

Urban Infrastructure

Potable Water, Sewerage, Waste Water Collection Systems and Solid Waste Storage Facilities etc.

Other Public Services

Security & Justice Buildings, Prisons, Public Service Buildings etc.

Basic Investments for Fixed Capital FormationBasic Investments for Fixed Capital Formation

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General & Special Budget Institutions (Ministries, Universities, State Highways, State Hydrolic etc.)

State Economic Enterprises (SEEs) (State Railways, etc.) State Economic Enterprises under Privatization (TEDAŞ, TEKEL

etc.)  Revolving Funds & Social Security Institutions (TRT,Social

Security Inst. Etc.)) Bank of Provinces Local Administrations (only foreign credit financed projects) Independent Regulatory Bodies (for monitoring purpose)

Public Investing InstitutionsPublic Investing Institutions

Investments not included in Investment Investments not included in Investment ProgramProgram

Defence Projects of Ministry of National Defence & Armed Forces

Projects implemented by own resources of Local Administrations

Projects of Public Banks Other institutions established by special laws (Türk

Telekom etc.)

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Basic Characteristics of Public Investment Basic Characteristics of Public Investment ProgramProgram

Top-Down & Bottom-Up Aprroach is used for decision of aggregate level of investments

Focuses on basic economic and social infrastructure Investment decisions are often taken on project basis

consistent with sector policies, very limited regional development concerns

Limited budget resources and always need for additional financing

Number of projects are high compared to budgetary financial resources available

Limited number of new projects initiated each year especially after rationalization of the stock in 2001

Average completion time of the existing project pipeline (stock) is around 6 years

Around 20 percent of annual investment allocation is from foreign credit financing

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2000 2001

2002 2003

2004

2005

2006

2007

2008

Number of projects

5.321 5.047 4.414

3.581

3.555 2.627 2.525 2.710

2.759

Total project cost

150,4 147,3 92,6 105,7

122,3 128,2 141,3 135,9

158,9

Cum.Expend as of

previous year

104,9 100,0 56,0 60,3 68,1 76,1 80,3 75,2 84,6

RemainingStock

45,5 47,3 36,6 45,4 54,1 52,1 61,0 60,7 74,3

Program allocatıon

10,3 9,7 5,9 7,1 7,5 10,0 12,5 11,1 12,4

Ave. Completion time (years)

(2)

9,2 9,4 8,5 7,6 8,1 6,6 5,5 5,8 5,8

(At Current Prices, Billion USD)

Public Fixed Capital Investment Stock (2000-Public Fixed Capital Investment Stock (2000-2008)2008)

(1) Excludes investments of local administrations, expenditures for exproprations and inverstment workers payments.

(2) Average time of completion is calculated as the amount of time required to finish up the remaining stock completely, assuming that no other projects are taken into the investment program in the following years and an appropriation and expenditure is made of the magnitude of the current year level.

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Million $ % Share Million $ % Share Million $ % ShareAgriculture 948 7,7 3.507 11,8 11.916 10,2Mining 441 3,6 794 2,7 3.803 3,3Manufacturing 307 2,5 118 0,4 1.046 0,9Energy 1.744 14,2 1.804 6 12.241 10,5Transport-Communication 3.913 31,8 7.644 25,6 30.361 26Tourism 33 0,3 138 0,5 530 0,5

Housing 75 0,6 271 0,9 903 0,8

Education 1.720 14 6.541 21,9 22.348 19,1

Health 874 7,1 2.576 8,6 9.857 8,4

Other Services 2.237 18,2 6.429 21,6 23.887 20,4

-Economic 1.192 9,7 2.919 9,8 10.775 9,2

-Social 1.045 8,5 3.510 11,8 13.112 11,2

Total 12.292 100 29.823 100 116.893 100

Investment Operation 1.699 2.704 13.228

Local Administrations 7.372 15.461 73.059

Total Sum 21.364 47.987 203.180

Sectors2006 (Current Prices) 2013 (Current Prices) 2007-2013 (2006 Prices)

Public Investments in 9. Dev. Plan Period (2007-Public Investments in 9. Dev. Plan Period (2007-2013)2013)

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Share of Investments in GDP (%)Share of Investments in GDP (%)

Project Cycle Management in TurkeyProject Cycle Management in Turkey

Project CycleProject Cycle

INDICATIVE INDICATIVE PROGRAMMINGPROGRAMMING

PROJECT PROJECT IMPLEMENTATIONIMPLEMENTATION

PROJECT PROJECT IDENTIFICATION & IDENTIFICATION &

PREPARATIONPREPARATION

PROJECT APPRAISALPROJECT APPRAISAL

PROJECT FINANCINGPROJECT FINANCING

MONITORING & MONITORING & EVALUATIONEVALUATION

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Indicative ProgrammingIndicative Programming

Investment Policies & Strategies and Priorities stated in the following

official policy documents in different levels :

National Development Plan Medium Term Program Annual Program Annual Investment Circular and Guidelines for Public

Investment Program Preparations

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Project IdentificationProject Identification

Sources for project ideas are diverse

(National Development Plan, Annual Programs, Sector and thematic Strategy Documents, Master Plans, Opportunity Studies, Regional Dev. Plans, Local Administrations, Politicians, Line Ministries, EU Accession Process, Int. Development Institutions etc.)

Spontaneous demands and pressures from local politicians

Pre-selection of project ideas not possible, creates a public support behind, not easy to stop

Methodology for project development is not systematic Insufficient participatory mechanisms and technigues for

development of project ideas

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Project Preparation : Feasibility StudyProject Preparation : Feasibility Study

Feasibilty studies prepared by investing institutions or outsourced

Public Financial Management and Control Low and Investment Circulars reguires a sound feasibility study consisting of financial, economic and environmental analysis for public finance

SPO gives a standart format for feasibility studies in the Guidelines for Investment Program Preparations

Tendency to use external consultants is low Data and analysis quality of feasibility studies are low,

International standarts are often neglected Unrealistic cost & completion time estimates Preparation facilities and capacities in investing

institutions are quite insufficient Preparation process is seen as time consuming bureucratic

procedure Environmental analysis based EIA is often disregarded or

underestimated Budget restrictions are often neglected during

preparations

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Project AppraisalProject Appraisal

Project appraisal carried out in two levels : Institutional level and SPO level

Limited capacity of project appraisal in line ministries and public institutions,

Relativelly sufficient capacity in SPO but often blocked by low quality feasiblity reports lacking sound data and analysis

In-house units within SPO responsible for appraisal of feasibility studies

Lack of national parameters and data for economic analysis

Environmental analysis based EIA is often neglected or underestimated

Lack of standart appraisal procedures implemented

Opportunity cost considerations are often not taken into account

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National Bugdet Foreign Credit Grant Schemes PPP Models

Need for additional investment financing Faster implementation Reduced operation & construction costs Transfer of managerial skills Currently airport terminals, ports, dams, HEPPs etc. realized Current PPP Models in Turkey has limited scope (BOT, BO,

BLT,TOR) Lack of Harmonisation among several sector specific laws Lack of Central Administrative Structure for PPP Projects

New PPP Frame Law drafted by SPO; Unifies the PPP legislation Sets the legal basis for additional PPP models Sets the legal basis for extending sectoral scope Brings a rational and objective project selection procedure Establishes a central PPP unit within SPO Sets the principles of risk management for PPP projects

Project FinancingProject Financing

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Project ImplementationProject Implementation

Responsibility of Line Ministries and Public Institutions

Lack of modern project implementation approaches and mechanism

Insufficient implementation capacity (bidding documents,TOR Writing, controlling services etc.)

Insufficient experience on International Bidding Procedures (International Financial Institutions)

Insufficient institutional capacity in terms of skilled personnel

Capacity problems in Legal Contract Management

Need for improving negotiation skills

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Project Monitoring & EvaluationProject Monitoring & Evaluation

Responsibility of Public Institutions and SPO Very limited capacity in public institutions In-house unit within SPO responsible for project

monitoring

and evaluation On-going project monitoring & evaluation is carried out

on expenditure basis not in physical terms Lack of experience on ex-post evaluation causing

problems in iterating new projects Monitoring & Evaluation activities are not systematic Need for further improvement of on-going project

monitoring & evaluation capacity both in SPO and public institutions

Capacity that should to be created in terms of ex-post evaluation is vital