Investing to Invest


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Adrian Fozzard
Lead Public Sector Specialist
PREM Public Sector & Governance

Published in: Economy & Finance, Business
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Investing to Invest

  1. 1. Investing to Invest ICGFM Winter Conference Washington DC December 2011 Adrian Fozzard Lead Public Sector Specialist PREM Public Sector & Governance
  2. 2. Policy Considerations• Appropriate Quantity of Investment – Creation of economically and socially productive fixed capital assets – Public Infrastructure Gaps for Development – Stimulus & Adjustment• Appropriate Quality of Investment – Value for Money – Spending/flows versus net changes in productive stocks – Investment modality
  3. 3. Multiple Modalities Engaged General Fiscal Mainly fiscal Government financing Sector (Central External State, Local) financing / Public grants Investment Management Public Fiscal, quasi fiscal Corporations & (Nonfinancial) corporate financing PPPs Business Environment Corporate financing, leas Private Sector ing, resource for Private Mainly regulatory infrastructure Investment 3 Public Sector & Governance Page 3The World Bank
  4. 4. Indonesia Trends 8 7 6 % of GDP 5 4 3 2 1 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Central Sub-national SOE PrivateSource: World Bank, Sub-National PER (forthcoming) Public Sector & Governance Page 4 The World Bank
  5. 5. Value for Money? Government Investment & Infrastructure Quality 7.0 Swi tzerl and Hong Kong S AR, China France Si ngapore Finland Germany United A rab Emirates 6.0 PortugalCanadaJapan Korea, Rep. Netherlands Barbados Belgium United S tates Oman Chil e Bahrain Namibia T unisia Estonia MalaysiaSaudi Arabia United K ingdom Austral ia Jordan 5.0 Croati a Norway urkey Czech Republic El Salvador T Lithuani a Qatar Israel Kuwait T hailand Guatemala New Zealand Gambi a, T he T rinidad and T obago Botswana South Africa Mauritius Uruguay Swazi land Sl ovak Republ ic Georgi a Sri Lanka Azerbaij an Egypt, Arab Rep. Panama Rwanda 4.0 UkraineMorocco Ital y Armenia Kazakhstan Iran, Islami c Rep. Cote dIvoi re Ri ca Costa Mexico Al bania Senegal Brazil HondurasCambodi a Kenya Ghana Ethi opia geri a Al Indonesia Russian FederationArab Republ ic Colombia Syrian India Guyana T aji ki stan Argentina Pakistan Ecuador Verde Cape Zam bi aUganda Mali Malawi Lesotho Boli via Mozambique Dominican Republic Phil ippi nes Ni caragua Madagascar 3.0 Cameroon Bulgaria Moldova Montenegro Venezuela, RB Serbia T anzani a Vi etnam Benin Mauritania Burkina Faso Burundi Bangl adesh Lebanon Central African Republ ic Paraguay Nepal Romani a Ni geri a Mongoli a Angol a 2.0 Bosni a and Herzegovi na 0.0 5.0 10.0 15.0 20.0 25.0 Gov Investment / GDP (%) (W EO) Quality of Overall Infrastructure (W EF 2010) Fitted values Source: World Economic Forum (2010) & IMF WEO (2011) Public Sector & Governance Page 5The World Bank
  6. 6. Weakest Links & FailuresGuidance & Selection Implementation OperationAppraisalLack of strategic Inappropriate Non- Unfinished projectsprioritization for selection of transparent, non- Incompletedevelopment implementation competitive projects, leading to modality procurementFailure of central loss of service valuefinance agencies as Donor-led selection Emphasis on lowest Failure ofgate keepers bid may upkeep, operations compromise quality & maintenance Cost and time overruns Annual budget control rather than on total cost control Donor-monitored Public Sector & Governance Page 6 The World Bank
  7. 7. Investing to Invest Diagnostic Framework  Framework for Assessing “Should Have” Features Global Knowledge EI Sourcebook PIMI Global Synthesis Consortium Cross-Country Index on 17 Sub-Elements  Thematic Analysis & Country Cases PEFA DrillEconomy Regional Dialogues Political Down Identifying Needs, Validation, Peer to Country PEFA Application Peer Learning (e.g., Korea ‘09, Hanoi ‘10, Brazil, DC Bangladesh ‘2011) Hot Topics CoST Operational Assistance Diagnostic, Exchange, Operations Public Sector & Governance Page 7 7 The World Bank
  8. 8. PIMI Indicators
  9. 9. The Eight “Must-Have” Core PIM Features Project Detailed project development design 1 2 3 4 5 6 7 8 - Guidance Formal Appraisal Project Implement Project Service Project & Project Review Selection ation Changes Delivery Evaluation Screening Appraisal & Budgeting Basic completion review Pre-feasibility Evaluation Feasibility CE CBA Regulatory requirements 9
  10. 10. Country Needs VaryInstitutional Features Chile Ireland Korea Brazil Belarus China Vietnam NigeriaInvestment guidance &preliminary screeningFormal project appraisalIndependent review ofappraisalProject selection andbudgetingImplementationAdjustment for changesin project circumstancesFacility operationEvaluation Public Sector & Governance Page 10 The World Bank
  11. 11. Strengthening “Good Enough” PIM prioritization Well Poorly executed executed Good projects A C Poor projects B D Public Sector & Governance Page 11The World Bank
  12. 12. Designing PIM Reforms• Common challenges: – Public investment likely highly politicized – High corruption risk – PIM is technically demanding – Requires collaboration across institutions• Feasibility factors – Good diagnostic of technical problem – Based on and tailored to fit political economy context – Clarity of roles and responsibilities – Technically feasible, relying on “good enough” practice – Carefully sequenced as part of broader PFM reforms – Monitoring of progress Public Sector & Governance Page 1212 The World Bank