1 / 23

Strengthening Public Investment Management

Strengthening Public Investment Management. James Brumby Kai Kaiser PREM Public Sector & Governance . Brasilia June 16-17, 2011. Aiming for Infrastructure Results. Creating and preserving economically and social productive public assets

aiden
Download Presentation

Strengthening Public Investment Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Strengthening Public Investment Management James Brumby Kai Kaiser PREM Public Sector & Governance Brasilia June 16-17, 2011

  2. Aiming for Infrastructure Results Creating and preserving economically and social productive public assets Efficiency is “value for money”: budget to final cost, completion time to actual time How long will they last? “Right” starting quality/standard Depreciation versus “service value”, O&M Risk: build, neglect, rebuild….

  3. Value for Money? WEF Infrastructure Quality

  4. Quality of Effort? Investment “Stimulus 2008-09 Additional % GDP

  5. Ex Post Benchmarking Source:CoST (2011b:3)

  6. Addressing Infrastructure Gaps: Multiple Sectors & Modalities Engaged Public Investment Management Mainly fiscal General Government Sector (Central State, Local) Fiscal financing Financial Sector role • Examples • Power • Roads • Telecommunications/Internet • Schools • Clinics/Hospitals • Stadiums • “Green” Infrastructure; Adaptation Public Corporations (Nonfinancial) Some fiscal & some corporate financing PPPs Financial Sector role Private Sector Business Environment Other sources of financing Private Investment Mainly regulatory

  7. Public Investment Policy Choices • How much to spend • Levels (% GDP) • Volatility • Availability of financing • Quality of spending • PIM Process • Public Investment Modalities • “Standard” Public Investment • Across levels of governnment • Donor-financed public investment • Public-Private Partnerships • SOEs/Quasi-Fiscal • Resource for Infrastructure Deals

  8. A Framework for Assessing PIM • Two pillars of the approach • Desirable features of well-functioning system in 8 cycle • Diagnostic Indicators to assess actual system • Focus on how to inform reform design to enhance efficiency by Gap-Analysis Desirable Institutional Features Actual Functioning Gap Analysis Diagnostic Indicators

  9. The Eight “Must-Have” Core PIM Features 1 2 3 4 5 7 8 6 Guidance Formal Appraisal Project Implement Project Service Project & Project Review Selection ation Delivery Evaluation Changes Screening & Appraisal Budgeting Pre-feasibility Feasibility CE CBA Regulatory requirements Project development Detailed project design - Basic completion review Evaluation

  10. Different Countries Facing Various Challenges

  11. PIMI – LICs and MICs

  12. State Diversity in the US Source: Pew Center on the States (http://www.pewcenteronthestates.org) Grading the States Report, 2008

  13. Public Asset Creation and Preservation • Options for addressing infrastructure gaps in periods of fiscal consolidation • Managing fiscal space; balance sheet and operating spending • Leveraging modalities; full choice of interventions • Information/monitoring to improve quality • PIM cycle; supported by management information • Operations & Maintenance (O&M) • Special challenge of managing across levels of government, PIM modalities

  14. Strengthening “Good Enough” PIM prioritization in project portfolio Source:Rajaram et al (2010)

  15. Monitoring Implementation • Test: do current systems generate CoST type statistics and is it reported? • Variety of systems • Single system • Interlinked systems • Feedback mechanisms/demand critical

  16. Case: These planning and budgeting problems show up in project execution • 65% of the current roads projects have time overruns • In a sample of 10 road projects, 7 had time overruns with completion time of 3.1 years compared to original plan of 1.8 years. • Delays were worse in the directly contracted projects

  17. O&M Monitoring • Returns are high; commitments are low • Suggests incentive problem • Budget/costing benchmarks • De Facto responsibility across levels of government/types of assets? • Special institutions • Road Funds • Feedback mechanisms • Demand side, parents & schools • Accounting measures & capability • Accruals, balance sheets & capital charges

  18. Case: Low allocative efficiency: under-prioritization of maintenance and repair • 60 percent of the national paved road network is in poor condition • However, capital repair expenditures did not benefit from the expenditure boom… • …and have declined as a proportion of capital stock and of new investments

  19. Case: Balance sheet approach • rebuilding the state balance sheet buffer against future adverse events • systematically working to reduce the state’s risk exposures, including through strengthening the economy • sharpening incentives on State agencies to use existing state capital well • continuing to look at introducing private sector capital and disciplines where appropriate to help drive up the performance of State assets, and • more actively reprioritizing State capital to its highest value use.

  20. PIM Reforms • Three common challenges: • You need to work with politics • High corruption risk • PIM as extremely demanding area of public management • It is important therefore to ensure that PIM reforms are incentive compatible • Based on a sound understanding of and tailored to fit individual country paths, circumstances and practices • Technically feasible, relying on good enough practice • Carefully designed and sequenced • Targeted

  21. Lessons Learned • Ownership of assessment is important • Often, but not always MoF at the center of process • Develops the framework for investment decision and has oversight control of public investment • Clarity of roles and responsibilities is crucial for effective PIM • Coordination across sectors and levels of government • The role of central guidelines are a particularly critical aspect of a well functioning PIM

  22. Lessons Learned • Monitoring is important for early remedial action • Building capacity : gradual approach • PIM system do not operate in isolation • Well functioning PEM and budgeting system, SOE governance and debt management system is also important • Tailoring PIM to country context

  23. Catering “good fit” to country context: Programmatic Approach Country cases; analytic & advisory work • A synthesis of the findings of 15 case studies, presents a country typologies, and an assessment of patterns of binding constraints to PIM system performance and approaches to reform (w/ AusAID, Korea): incl. Brazil, Peru, East Timor, Vietnam, Korea, Australia Toolkits/Benchmarking • Rajaram et. al. (2009) eight “must-have” or minimum features of a sound public investment management and offers a systemic approach (studies inc: Korea, Chile, Vietnam, Peru). • Public Investment Management (PIMI) Benchmarking Indicator • PEFA “Drill Down” for Capital Spending Peer to peer • Facilitate exchange of experiences between developing countries that have successfully implemented reforms and those who are seeking to fill operational knowledge gaps • Seoul, Hanoi • Brasilia (5/2011), APEC Conference DC (6/2011) Bank operations • Fee-for-service • DPL, as in case of Vietnam or IL/TA

More Related