Promoting Public Investment EfficiencyGlobal Lessons and Resources for Strengthening

World Bank Support for Client Countries

Kai Kaiser

Tuan Minh Le

Preparatory Workshop, July 7, 2010

2

Structure of Presentation

• Introduction of work program• Brief overview of key policy issues for PIM• Expectations for workshop• Country case synthesis: Preliminary findings

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Scope of Work Program and Audience

• Scope of this work program– Flagship volume “Promoting PIE: International Experience”– Workshops and global conferences, BBLs

• Audience– Policy makers in client countries– Country teams and other development partners working on

PIM reform agenda

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Guidance on Work Program

• Guidance on substantive issueso Coverage of volume and scope of chapterso Technical issues versus “politics” of reformo Audience of the book

• Guidance on process issues o Quality assurance mechanismo Dissemination strategy

• Specific guidance on Hanoi Conference preparation– Participants– Selection of country cases for presentation

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PIM Challenges by Country Typology

• Aid-dependent countries have neglected PIM functionality– E.g., Uganda, Zambia

• Resource dependent countries have seen ebb and flow of resource rents

• Middle-Income Countries have sought to respond to financial crisis

– Fiscal stimulus and now concerned with quality of investment

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Public Investment Policy Choices

• How much to spend– Levels (% GDP)– Volatility

• Quality of spending– PIM Process Indicators

• Public Investment Modalities– “Standard” Public Investment– Donor-financed public investment– Public-Private Partnerships– SOEs/Quasi-Fiscal– Resource for Infrastructure Deals

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Scope of Public Investment

The Eight “Must-Have” Core PIM Features

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1

Guidance &

Screening

2

Formal Project

Appraisal

3

Appraisal Review

4

Project Selection

& Budgeting

7

ServiceDelivery

6

Project Changes

5

Implementation

8

Project Evaluation

Pre-feasibility

Feasibility

CE

CBA

Regulatory requirements

Project development

Detailed project design

Basic completion

review

Evaluation

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Country Case Synthesis: Overview

• Over the last two years, a large number of studies of PIM in diverse range of country settings were conducted.

• The case studies reflect a common focus on assessing how national PIM systems are actually functioning.

• The studies also take a systemic approach, assessing the whole public investment cycle rather than one or two stages only.

• Most of the studies are specifically based on applying the framework in Rajaram et al.

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Country Case Studies by Classification and RegionCountry classification Africa East Asia and Pacific Europe and central Asia South America

1. Advanced economies South Korea

IrelandSlovakiaSloveniaSpainUK (England)

2. Emerging and developing economies Vietnam

AlbaniaBelarusLatviaMacedoniaMontenegroPolandSerbia

BrazilChile

3. Natural resource- dependent states

AngolaD. R. CongoRepublic of CongoEquatorial GuineaSierra Leone

East TimorMongolia Peru

4. Aid-dependent states

D. R. CongoRepublic of CongoRwandaSierra LeoneUgandaZambia

BosniaKosovo

5. Post-conflict/fragile states

AngolaD. R. CongoRepublic of CongoSierra Leone

East Timor BosniaKosovo

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Main PIM Challenges by System TypologyAdvanced PIM systems • Total quality management over the complete PIM cycle, with review at specific decision

points.• Efficient allocation of risk between government and contractors.• Rigorous appraisal of PPPs against standard modes. • Strengthening impact evaluation.

Donor-dependent settings • Preliminary screening of projects against comprehensive, authoritative and costed national and sector strategies that are integrated with the budget.• Building capacity for project appraisal, and defining steps in project preparation.• Consistency between development and recurrent budgets.• Strengthening CFA gate-keeping (including project database).• Better insulation of investment spending from donor funding volatility.• More effective project accounting, reporting and monitoring.• Strengthening implementation of procurement.• Rationalizing and mainstreaming PIUs.• Basic post-project review, and effective compliance audits of projects by SAI.

Resource-dependent settings • Comprehensive national and sector strategies applying across all public investment modalities.• Building demand for project appraisal.• Building capacity for project appraisal, and defining steps in project preparation.• Consistency between development and recurrent budgets.• Strengthening CFA gate-keeping (including project database).• Better insulation of investment spending from revenue volatility.• Sound frameworks for appraisal of non-standard modes of investment.• Strengthening implementation of procurement.• Basic post-project review, and effective compliance audits of projects by SAI.• Transparency of public investment across PIM cycle.

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Main PIM Challenges by System Typology (Continued)

Post-conflict/Fragile settings • Re-establishing national consensus over public investment priorities.• Donor-coordination, comprehensive project database.• Building capacity for project appraisal.• Consistency between development and recurrent budgets.• Basic project accounting, reporting and monitoring.• Procurement reform.• Basic post-project review.• Transparency of public investment across PIM cycle.

EU-accession settings • National and sector strategies that reflect both domestic and EU-financing.• More effective appraisal and independent review of non-EU funded projects.• More effective oversight of implementation of non-EU funded projects.• More cost-effective procurement.

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A Modality for Rating of PIM System Performance

Well Executed Poorly Executed

Good Projects A C

Poor Projects B D

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PIM Reforms

• Three common challenges:– Public investment likely highly politicized– 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 trajectories, circumstances and practices

– Technically feasible, relying on good enough practice– Carefully designed and sequenced

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Proposed Dissemination Strategy

September 8/9 • Hanoi Conference

January • Nairobi Workshop

Feb 2011: • Brazil Conference

April: • Publication launch events: DC & Seoul?

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Next Steps

• Decide on final chapter/background paper selection

[e.g. organization, quantitative approaches, e.g. IMF]

• Review capacity building resources and consultants (on-going)

• Support country teams in FY 2011

• Finalize selection of country chapters

• Confirm agenda for Hanoi: Thematic Presentations, 6 Selected Country Cases, Counterpart Participants (ASEAN/Beyond)

• Work with KDI to finalize details of cooperation