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The World Bank's framework for assessing PIM systems - Anand Rajaram, World Bank,
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.
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The World Bank's framework for assessing PIM systems - Anand Rajaram, World Bank,
- 1. New Developments inInfrastructure Governance, OECD-IMF Seminar, March 23-24, 2015 The World Bank’s Framework for Assessing PIM Systems Anand Rajaram, World Bank
- 2. Key questions onpublic 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?
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- 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 PIMis 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 forAssessing PIM holistically
- 7. PIM: Building aKnowledge Base
- 8. PIM Systems acrossCountries 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 knowledgeon 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 SophisticatedImplementation 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 forpublic 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
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