Public Investment Management
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Public Investment Management
- 1. Strengthening Public Investment Management World Bank Public Sector and Governance Group PRMPS April 2012 Page 1 The World Bank Public Sector & Governance
- 2. Definitions of public investment vary widely across countries • Gross public fixed capital formation of general government sector, excluding public corporations (IMF, World Economic Outlook) • Other definitions frequently used in countries: – Expenditure classification • Capital expenditure vs. recurrent expenditure – Time horizon • Projects of more than one year – Output • "Social" Infrastructure: education and health facilities and housing • "Economic" Infrastructure: transport, communications, energy, irrigation systems, water and sanitation Page 2 The World Bank Public Sector & Governance
- 3. There is renewed attention on public investment across the globe • Post-crisis environment: ensure efficiency of spending • Fiscal stimulus plans: reliance on public investment • Natural resource boom: spend resources wisely • Uncertain growth prospects: multi-year commitments need a strong rationale Page 3 The World Bank Public Sector & Governance
- 4. Spending often does not translate into productive assets Value for Money? Project delays Government Investment and Infrastructure Quality in the World 7 6 5 4 3 2 0 10 20 30 40 Average Government Investment (% GDP) 2005-2010 Source: IMF WEF (2010) and IMF WEO(2011) Source: CoST (2011), IMED for Bangladesh Page 4 The World Bank Public Sector & Governance
- 5. Why is public investment management so complex? • Localized and visible benefits: politicization? • Lumpy investments: transparency? • Cross-cutting nature: champions? • Multi-year nature: ownership? • Multi-sector: technical capacities? • Public and private sectors: regulatory capacity? Page 5 The World Bank Public Sector & Governance
- 6. Modalities of public investment General Mainly fiscal Fiscal Government financing Sector (Central State, Local) Public Investment Management Some fiscal Public & some corporate Corporations financing (Nonfinancial) PPPs Business Other sources of Private Sector Environment financing Private Mainly regulatory Investment Page 6 The World Bank Public Sector & Governance
- 7. Attention is needed across the eight critical steps of the project cycle…. Project Detailed project development design 1 2 3 4 5 6 7 8 - Guidance Formal Appraisal Project Implemen Project Service Project & Project Review Selection t ation Changes Delivery Evaluation Screening Appraisal & Budgeting Basic completion review Pre-feasibility Evaluation Feasibility CE CBA Regulatory requirements Source: Rajaram, Anand, et al. (2010), 'Framework for Reviewing Public Investment Efficiency', (Washington, DC: World Bank Policy Public Sector & Governance Page 7 Working Paper, No. 5397 (August), 17.
- 8. … but there are trade-offs: strengthen appraisal or implementation first? Strengthening appraisal first may take considerable time for benefits to accrue… … while improved implementation may also include poorly designed projects Well Poorly executed executed Good projects A C Poor projects B D Page 8 The World Bank Public Sector & Governance
- 9. Overall strategy of reform •Sound understanding of context • Tailored to fit individual country trajectories, PIMI circumstances and practices •PIM Drill Down Rely on “good-enough practice” • Carefully designed and sequenced Page 9 The World Bank Public Sector & Governance
- 10. The World Bank’s “Investing to Invest” Agenda Analytics and Tools Policy Dialogue Operational Diagnostics Assistance Diagnostic Framework PIMI Identifying needs, Diagnostic operations Framework for assessing Cross-country PIM index validation, peer to peer PIMI PIM “should-have” learning features Regional Studies PEFA-PIM Drill-down Conferences Technical assistance Country-specific Seoul, Hanoi, Brazil, operations PIM Drill Down Global Synthesis indicator assessment Washington D.C. Thematic analysis and country cases Page 10 The World Bank Public Sector & Governance
Editor's Notes
- Infrastructure bottlenecks: often a significant constraint to growth, social development, and competitiveness in many countries (HICs, MICs, LICs)Public investments can justify fiscal space, but only if: Good decisions on investment choices are made. Assets are efficiently created, operated and maintained.Infrastructure gaps: e.g. The Asian and Pacific region can expect a huge gap of about 180 billion USD annually between demand for infrastructure investment and supply from public and private sources. However, the annual average total funding received by developing countries in the period 2000–2003 for infrastructure investment from ADB, World Bank, and JBIC was only about 7 billion USD (UN ESCAP 2006), which represented less than 5% of the gap. Africa’s infrastructure needs would cost around $93 billion a year (about 15 percent of the region’s GDP). Some two-thirds of this total relates to capital expenditure, and the remaining one-third to operation and maintenance requirementsInsufficient resources for public investment but still significant share of public spending.
- Infrastructure bottlenecks: often a significant constraint to growth, social development, and competitiveness in many countries (HICs, MICs, LICs)Public investments can justify fiscal space, but only if: Good decisions on investment choices are made. Assets are efficiently created, operated and maintained.Infrastructure gaps: e.g. The Asian and Pacific region can expect a huge gap of about 180 billion USD annually between demand for infrastructure investment and supply from public and private sources. However, the annual average total funding received by developing countries in the period 2000–2003 for infrastructure investment from ADB, World Bank, and JBIC was only about 7 billion USD (UN ESCAP 2006), which represented less than 5% of the gap. Africa’s infrastructure needs would cost around $93 billion a year (about 15 percent of the region’s GDP). Some two-thirds of this total relates to capital expenditure, and the remaining one-third to operation and maintenance requirementsInsufficient resources for public investment but still significant share of public spending.
- Infrastructure bottlenecks: often a significant constraint to growth, social development, and competitiveness in many countries (HICs, MICs, LICs)Public investments can justify fiscal space, but only if: Good decisions on investment choices are made. Assets are efficiently created, operated and maintained.Infrastructure gaps: e.g. The Asian and Pacific region can expect a huge gap of about 180 billion USD annually between demand for infrastructure investment and supply from public and private sources. However, the annual average total funding received by developing countries in the period 2000–2003 for infrastructure investment from ADB, World Bank, and JBIC was only about 7 billion USD (UN ESCAP 2006), which represented less than 5% of the gap. Africa’s infrastructure needs would cost around $93 billion a year (about 15 percent of the region’s GDP). Some two-thirds of this total relates to capital expenditure, and the remaining one-third to operation and maintenance requirementsInsufficient resources for public investment but still significant share of public spending.
- Challenges: efficiency (do more with less)The world seems to have lower infrastructure quality associated with higher government infrastructure investmentCost and time overruns can be significant
- Infrastructure bottlenecks: often a significant constraint to growth, social development, and competitiveness in many countries (HICs, MICs, LICs)Public investments can justify fiscal space, but only if: Good decisions on investment choices are made. Assets are efficiently created, operated and maintained.Infrastructure gaps: e.g. The Asian and Pacific region can expect a huge gap of about 180 billion USD annually between demand for infrastructure investment and supply from public and private sources. However, the annual average total funding received by developing countries in the period 2000–2003 for infrastructure investment from ADB, World Bank, and JBIC was only about 7 billion USD (UN ESCAP 2006), which represented less than 5% of the gap. Africa’s infrastructure needs would cost around $93 billion a year (about 15 percent of the region’s GDP). Some two-thirds of this total relates to capital expenditure, and the remaining one-third to operation and maintenance requirementsInsufficient resources for public investment but still significant share of public spending.
- Complexity: fiscal, financial, multi-sector and multiple modalities; and time horizon and transaction-intensive, politically challengingPublic Investment Managementcan be defined as a process for planning, implementation and control over capital investments by the public sector to achieve value for money. Public sector includes general government and nonfinancial public corporations.
- Strengthening appraisal first: implies I am in Cell CStrengthening implementation: I am in Cell B
- Identifying Needs, Validation, Peer to Peer Learning:e.g., Korea 2009, Hanoi 2010, Brazil, APEC conference in D.C., and Bangladesh 2011Operationalassitance:Technical assistance: ESW (Bulgaria, Turkey, Western Balkans), trust funds (Ukraine), co-financed activities (Kazakhstan), development policy operations (Georgia), and sector investment projects (Moldova, Albania); new fee-based-services on PIM may be emerging in Romania and Azerbaijan. The WB also partner with countries to share good practice in PIM through PEMPAL Budgeting Community Practice (Istanbul 2008 and Minsk 2011)The WB has published regional study: PIM in the new EU member states, 2009Regional workshop and case studies: Western Balkans 2010Specific sector work: e.g. lead by the TransportationPolicy dialogues with MoF and other Ministries on policy prioritization, selecting, executing, monitoring and assessing impact of projects.
- Identifying Needs, Validation, Peer to Peer Learning:e.g., Korea 2009, Hanoi 2010, Brazil, APEC conference in D.C., and Bangladesh 2011Operationalassitance:Technical assistance: ESW (Bulgaria, Turkey, Western Balkans), trust funds (Ukraine), co-financed activities (Kazakhstan), development policy operations (Georgia), and sector investment projects (Moldova, Albania); new fee-based-services on PIM may be emerging in Romania and Azerbaijan. The WB also partner with countries to share good practice in PIM through PEMPAL Budgeting Community Practice (Istanbul 2008 and Minsk 2011)The WB has published regional study: PIM in the new EU member states, 2009Regional workshop and case studies: Western Balkans 2010Specific sector work: e.g. lead by the TransportationPolicy dialogues with MoF and other Ministries on policy prioritization, selecting, executing, monitoring and assessing impact of projects.