The document summarizes a presentation on public investment management (PIM) systems given by Anand Rajaram of the World Bank. It discusses key questions around public investment and introduces a framework for assessing PIM systems. Examples are provided of advanced PIM systems in countries like the UK and emerging systems in countries like Vietnam and Sierra Leone. The document concludes that while calls for more public investment are growing, attention must also be paid to strengthening PIM institutions to ensure funds are well spent.

1. New Developments in Infrastructure Governance,
OECD-IMF Seminar, March 23-24, 2015
The World Bank’s Framework for
Assessing PIM Systems
Anand Rajaram, World Bank

2. Key questions on public investment
• How much can/should a country spend on
public investment?
• Should broad development plans/strategy
guide choice of sectors?
• How should individual public investment
project choices be made?
• What kinds of institutional arrangements will
help achieve good PIM outcomes?

3. http://blogs.ft.com/beyond-brics/2014/06/23/emerging-asia-to-drive-global-infrastructure-
spend-to-2025-says-pwc/
http://www.ft.com/intl/cms/s/2/9b591f98-4997-11e4-8d68-00144feab7de.html#axzz3G7Uidmg1
Present Day - Growing Focus on Infrastructure Investment

4. Public Investment – its current salience
Everybody talks about Infrastructure
• Developing countries now spend about
$1 tril. a year on infrastructure, but an
additional $1 tril./yr is required through
2020 .
• We wish to use our oil revenues to
invest in infrastructure which can
benefit future generations – Minister
Kiwanuka, Govt. of Uganda
• Time is right for an infrastructure push
in countries where conditions are right
– IMF, World Economic Outlook,
October 2014
• Real challenge is a lack of bankable
projects. – Jim Kim, WBG President, Oct
2014 at launch of Global Infrastructure
Facility.
• Growing support for Asia Infrastructure
Investment Bank
• G-20 focus on infrastructure investment
But few about the Institutions
• Unless PIM systems are in good
condition, much of this infrastructure
spend will be wasted
• There needs to be a corresponding
emphasis on the need for investment in
institutions to manage PIM
• We are now building knowledge on
how good, bad or ugly PIM systems
actually are across the globe

5. Why effective PIM is important
Common Problems
• Development plans disconnected
from actual budgets/projects
• Projects selected with poor/no social
cost benefit analysis
• Projects with low socio-economic
value consuming scarce resources
• PPP projects that create risk for govt.
• Projects awarded to unqualified firms
• Corruption in procurement
• Delays in land acquisition
• Cost escalation, delays
• Abandoned projects
• Poor quality of completed project
• Poor maintenance and operation
• No self-correcting response
Consequences
• Few valuable assets are created
• Stock of decaying infrastructure
– Power and water shortages, road and
railway accidents, crowded hospitals,
deteriorating HDI
• “Investment” fails to spark growth
and improved social welfare
• And if investment is financed:
– by debt – creates a liability
– by taxes - burdens citizens and private
sector
– by finite natural resource extraction -
reduces net wealth
• Macroeconomic instability, failure to
grow, political instability

6. A Framework for Assessing PIM holistically

7. PIM: Building a Knowledge Base

8. PIM Systems across Countries
AN IMPRESSIONISTIC PICTURE OF PIM SYSTEMS ACROSS SELECTED COUNTRIES
Country Examples> Haiti Sierra Angola MongoliaGeorgia Brazil VietnamIreland Korea U.K.
PIM Feature Leone
Guidance
Appraisal
Independent Review
Selection/budgeting
Implementation
Adjustment
Operation
Evaluation
Unified PPP?
GNI per capita 810 680 5010 3770 3570 11690 1730 39110 25920 39140
Source: PIM diagnostic country studies, World Bank
Good Weak Poor

9. Some emerging knowledge on PIM
• Typologies of PIM systems - Advanced / Emerging / Aid-
dependent/ Resource rich/ Fragile-post conflict
• Countries with good PIM outcomes typically reflect good processes
with regard to all eight features of a PIM system
• Advanced countries use more sophisticated techniques to achieve
better PIM functionality and risk management
• But the large majority of countries have poor PIM systems with a
wide variety of management/governance failures
• There are no standard blueprints to achieve a given PIM
functionality – but key principles apply
• PPPs are a complex modality for PIM – countries with limited
capability are approaching this without the necessary knowledge
• Procurement challenges are often a critical problem – PIM may
help create a new paradigm for procurement

10. Advanced PIM systems: United Kingdom
• The UK addresses all 8 PIM stages in great depth
• High degree of integration across the 8 stages –
reporting and tracking from appraisal to completion
• PPPs are integrated as a specific PIM modality
• Major projects and high risk projects given special
attention
• System is constantly being improved
– 2012 Olympics used to upgrade good practice
– Requirement that senior govt. staff undertake training in
major project management at Oxford University program

11. Advanced PIM systems: United Kingdom
Guidance
Evaluation
Appraisal
3Stage
Review
Selection
Implementation,
Adjustment
Operation
Major Projects Authority, Cabinet Office
HM Treasury
MPA
Guidance
Gateway reviews at initiation, pre-market and
pre-final negotiation stages
Review of Integrated Assurance and Approval
Plan by MPA and HMT
National
Audit Office
Green
Book
Strategic, Outline and Final Business
Case

12. UK: A Sophisticated Implementation Assurance Process

13. Ireland - PIM
• Five year plan and 5 year rolling capital budget
• Guidelines for project appraisal and PPPs
• 2 stage - screening/detailed project appraisal
• Appraisal techniques vary – simple appraisal to MCA to CBA
• Independent review by central unit/consultants
• Project selection as part of the budget process
• Implementation monitored through spot checks on
compliance/ cost overruns can trigger project termination
• Post-project evaluations undertaken by sponsoring agency
Year 2009 2010 2011 2012* 2013*
Exchequer capital, €m 8,231 8,297 8,193 9,672 9,159
Exchequer capital, % of GNP 5.2% 5.0% 4.7% 5.3% 4.7%
PPP (incl. user charges), €m 957 1,783 2,139 2,387 2,173
Total (Exchequer + PPP), €m 9,188 10,080 10,331 12,059 11,333
Total, % of GNP 5.8% 6.1% 6.0% 6.6% 5.8%

14. Vietnam PIM – system in transition
• High levels of investment until recently: Total investment and
consolidated public investment, respectively, accounted for 41%
and 13% of GDP (2008); reduced to 30% and 10% (2013).
• But increasingly through provincial government: 77% of public
investments are managed at the provincial and lower levels where:
– Weak guidance and screening of proposals. Sectoral and provincial masterplans are not an
adequate basis for screening investment proposals.
– No structure or formal technical guidance to appraisal. The system is mainly administrative,
concerned mostly with procedural compliance and set timeline.
– There is no independent review of project appraisal by provinces or sectors.
– Project selection and budgeting. Too many projects chasing insufficient funding.
– Project implementation/adjustment during construction: Monitoring of provincial public
investments is only required for projects with at least 30% of total cost financed by
government budget. Cost overrun as much as 50% over estimates.
– Facility operation: No asset registry for constructed works. Despite Law on Management and
Use of State Property, there are no specific regulations so assets are poorly managed and
maintained.
– Ex-post evaluation: Largely a missing function.

15. Sierra Leone – Aid dependent PIM
• Project appraisal reliant on donors
• Natural resource revenue growth raising share of
domestically funded projects w/o review
• Early efforts to define guidelines for PIM
• But limited capacity to appraise/review and
fragmented responsibilities weaken process
• Unsolicited PPPs poorly handled – conflict between
PPP unit & privatization commission
• Implementation is poor due to multiple failures
• Weak PIM not surprising – challenge is how system can
be strengthened
• Source: Sierra Leone Diagnostic and Policy Note, World Bank, June 2013

16. Conclusion
• Calls for public investment must be matched by
attention to quality of PIM
• Building knowledge on PIM systems is high value
• PPPs need to be integrated into PIM systems
• Diagnosis is easy, institutional reform is difficult
• Important that reforms are tailored to “load-bearing”
capacity in country and sustained over time
• Growing portfolio of PIM reform TA projects at WB
• World Bank ready to collaborate closely with other
partners including KDI, IMF, OECD and others

17. Recent book – Public Investment Management

18. Thank you