This document discusses public sector investment management. It notes that appropriate levels of public investment are needed to create infrastructure while ensuring value for money. Different modalities can be used including general government, public corporations, public-private partnerships, and the private sector with regulation. Strengthening core features of project development, appraisal, selection and implementation can improve outcomes even if full international standards are not attained. Reforms must be tailored to each country's political and institutional context.

1. Investing to Invest
ICGFM Winter Conference
Washington DC
December 2011
Adrian Fozzard
Lead Public Sector Specialist
PREM Public Sector & Governance

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. 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
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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 Private
Source: World Bank, Sub-National PER (forthcoming)
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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 d'Ivoi 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)
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6. Weakest Links & Failures
Guidance & Selection Implementation Operation
Appraisal
Lack of strategic Inappropriate Non- Unfinished projects
prioritization for selection of transparent, non-
Incomplete
development implementation competitive
projects, leading to
modality procurement
Failure of central loss of service value
finance agencies as Donor-led selection Emphasis on lowest
Failure of
gate keepers bid may
upkeep, operations
compromise quality
& maintenance
Cost and time
overruns
Annual budget
control rather than
on total cost control
Donor-monitored
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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
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8. PIMI Indicators

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. Country Needs Vary
Institutional Features Chile Ireland Korea Brazil Belarus China Vietnam Nigeria
Investment guidance &
preliminary screening
Formal project appraisal
Independent review of
appraisal
Project selection and
budgeting
Implementation
Adjustment for changes
in project circumstances
Facility operation
Evaluation
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11. Strengthening “Good Enough” PIM
prioritization
Well Poorly
executed executed
Good projects A C
Poor projects B D
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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
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