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February 29, 2008

T.R. Prime Ministry State Planning Organization (SPO) . February 29, 2008. PUBLIC INVESTMENT PLANNING IN TURKEY. M. Cüneyd DÜZYOL (cduzyol@dpt.gov.tr) DG for Economic Sectors and Co-ordination. Content. National Development Planning in Turkey

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February 29, 2008

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  1. T.R. Prime Ministry State Planning Organization (SPO) February 29, 2008 PUBLIC INVESTMENT PLANNING IN TURKEY M. Cüneyd DÜZYOL (cduzyol@dpt.gov.tr) DG for Economic Sectors and Co-ordination

  2. Content • National Development Planning in Turkey • Annual Program & Budget Preparation Process • Public Investment Programming in Turkey • Project Cycle Management in Turkey

  3. Main Economic Indicators for TURKEY

  4. National Development Planning in Turkey

  5. A Brief History • (1960), State Planning Organization (SPO) established • (1961), Constitution adopts Development Planning as a basic tool for economic, social and cultural development • (1963-1967) 1. National Development plan • (1968-1972) 2. National Development plan • (1973-1977) 3. National Development plan • (1979-1983)4. National Development plan • (1985-1989) 5. National Development plan • (1990-1994) 6. National Development plan • (1996-2000) 7. National Development plan • (2001-2005) 8. National Development Plan • (2007-2013) 9. National Development Plan

  6. State Planning Organization (SPO) Composed of four main bodies ; • Undersecretariat of State Planning Organization (SPO) • Secretariat for High Planning Council (HPC) • Secretariat for Economic and Social Council (ESC) • Secretariat for Money, Credit and Coordination Council (MCCC) Undersecreteriat of State Planning Organization (SPO) mainly; • Advises the Government on economic, social and cultural development policies • Develops macroeconomic, sectoral, regional policies and strategies • PreparesDevelopment Plans & Annual Programs • Draws investment strategies & Prepare Public Investment Programs • Monitors, co-ordinates and evaluates implementation of development plans and annual programs • Co-ordinatesand monitor activities of line ministries & public institutions • Preparesregional develeopment plans and projects • Co-ordinates and guidesinstitutional strategic planning initiatives • Draws general policy framework for the State Aid Schemes • Coordinates EU-Instrument for Pre-Accession Assistance (IPA) Components III and IV namely Regional Development & Human Resources Development

  7. High Planning Council (HPC) • Inter-ministerial coordination and decision-making body • Chaired by Prime Minister • Undersecretariat of SPO provides secretarial services • Seven line ministers managing large investment portfolios appointed by Prime Minister & Undersecretary of the SPOare members • Chairman can invite ministers and bureaucrats depending on topics, • Provides assistance to the Council of Ministers in determining policy targets and planning of economic, social and cultural development • Examinesand approves development plans and annual programs • Approves sectoral strategy documents • Takes high level decisions concerning economic matters

  8. Main Stakeholders / Partners having roles in Development Plan Preparations • Grand National Assembly(TGNA) • Government : Council of Ministers • High Planning Council (HPC) • Undersecretariat of State Planning Organization (SPO) • Line Ministries and Public Institutions • Universities • Private Sector • NGOs etc.

  9. Basic Relationships in Decision-Making Process TGNA Government (Council of Ministers) State Planning Org. High Planning Council Undersecretariat of SPO Line Ministries & Public Institutions Markets (Sectors) Consumers Universities & NGOs

  10. Basic Characteristics of National Development Plans in Turkey • Comprehensive • Participatory (ad-hoc committees) • Compulsory for Public Sector • Indicative for Private Sector and NGOs • Five-Year Perspective (7 year for 9.National Development Plan (2007-2013) in line with EU Accession Target • Non-Rolling • Medium and long-term strategic objectives and priorities under thematic development axes, • Guides all macroeconomic, sectoral and regional policies and implementations • Sets the general framework of economic, social and regional indicative targets, • Coordinated by SPO • Turkish Grand National Assembly approves

  11. Steps of Development Plan Preparations 1.Formation of Ad-Hoc Commities & Data Collection, 2.Preparation of Plan Strategy Draft by SPO and Submission to HPC 3. Approval of Draft Strategy by HPC 4.Approval of Strategy by Council of Ministers, 5. Preparation of National Development Plan Draft by SPO consistent with Strategy and submission to HPC, 6.Discussions and approval of Draft Plan by HPC 7. Submission of Draft Plan to TGNA after approval of Council of Ministers 8. Discussions in Planning & Bugdetting Commission of TGNA 9. Enactment of Development Plan by the decision of TGNA

  12. Phases of Planning Process in Turkey • Analysis of basic macroeconomic & socio-economic data • Identification of basic macroeconomic policies & targets • Analysis of international developments (trade etc.) • Identification of Development Policies and Strategies • Macroecomomic Modelling Studies • Estimation of Macroeconomic Aggregates Macro Planning Top-Down Planning • Collection & Analysis of Sectoral Data • Analysis of production potential & market analysis • Sector Analysis and Master Plan Studies • Sectoral/sub-sectoral and Investment Priorities • Identificaton of sector policies, targets & sector investments • Linkage with regional development concerns Sectoral Planning National Development Plan • Investment priorities and volumes by sub-sectors • Project Opportunity Studies • Identification of Alternative Project Ideas • Pre-Feasibility Studies : Cost Benefit Analysis • Feasibility Studies : Detailed Cost Benefit Analysis Bottom-Up Planning Project Planning

  13. Macro Planning • Collection of main ecomomic & socio-economic data and analysis, • Identification of basic development strategies, • Identification of basic economic and socio-economic targets, policies and priorities, • Macroeconomic ModellingStudies, • Estimation of macroeconomic aggregates like consumption, savings, investments, exports, imports etc. consistent with targetted economic growth, • Resources-Expenditures Balance, Financial Balance and Balance of Payments • Draft macro policy set in parallel with own features of the country such as natural resources, growth potential, development strategy and political preferences etc. • Identification of Annual and Medium Term macroeconomic aggrregates based on long term development strategy

  14. Sectoral Planning • Definition of sectors/sub-sectors and their scope • Analysis of current situation& development potential in sectors/sub sectors • Sector Analysis: Identification of Targets, Policies& Priorities • Preparation of sectoral plans and programs in order to reach economic, social and phisical targets. • Establishment of the necessary links among national, sectoral, regional development policies and public investment policies • Breakdown of investments by sectors • Identification of investment priorities in the sector

  15. Investment Planning : Project Planning • Implementation tool for Plan & Program policies and objectives • Investment Planning : Budget projections, Investment projections by sectors and institutions • Investment Opportunity Studies • Pre-Feasibility Studies & Feasibility Studies Supply & Demand Analysis Choice of Technology, Capacity and Place Fixed Capital Investment Operation Revenues & Expenditures Financial Cost Benefit Analysis Economic Cost Benefit Analysis Environmental Analysis based on EIA Institutional Analysis

  16. Annual Program and Budget Preparation Process

  17. Hierarchy of Policy Documents and Place of Public Investment Program Long Term Strategy Development Plan Government Program Sector Strategies Regional Dev. Plans MTFP Medium Term Program Provincial Dev. Plans Inst. Strategic Plans Budget Annual Program National Program Public Investment Program Preaccession Econ. Prog. Cohesion Strat. Framework Operational Programs

  18. OVP(DPT) (Mayıs Sonu), OVMP (Maliye Bak.) ( 15 Haziran ) Taslak makro ve kamu bütçe büyüklüklerinin son hale getirilmesi ( Eylül sonu ) Bütçe Çağrısı (Maliye Bakanlığı) ( Haziran Sonu ) Taslakların YPK’ya sunulması ve YPK’da görüşülmesi ( Ekim’in ilk haftası ) Bütçe Hazırlama Rehberi (Maliye Bakanlığı) ( Haziran sonu ) Bütçe Tasarısının TBMM’ye sunulması ( 17 Ekim ) Yatırım Programı Hazırlama Rehberi (DPT) ( Haziran Sonu ) Yılı Program Kararnamesi ve Yılı Programının Resmi Gazete’de yayımlanması ( Ekim ) Bütçe ve Yatırım Programı Teklifleri (Temmuz Sonu) Bütçenin TBMM’de kabulü ve Resmi Gazete’de yayımı ( Mali Yılbaşından önce) Bütçe ve Yatırım Görüşmeleri ( DPT, Maliye, Kuruluş ) ( Eylül ) Programming and Budgetting Process Medium Term Program (SPO) (End May), Medium Term Fiscal Plan (MoF) ( June 15) Finalization of Draft Macro and budget aggregates ( End September ) Budget Call (Ministry of Finance) ( End June ) Discussions in High Planning Council and Approval of Macro & Budget Aggregates ( First Weekof October) Budget Preparation Guidelines (MoF) ( End June ) Submission of Budget Draft to TGNA (October 17 ) Investment Prog. Prep. Guidelines (SPO) ( End June ) Issuing Decree on Implementation, Coordination and Monitoring of Annual Program and Annual Program ( October) ) Budget and Investment Program Proposals from Public Institutions ( End July ) Budget Approval by TGNA ( Before new fiscal year starts) Program, Budgetand Investment Negotiations ( SPO, MoF, Institutions ) ( September ) Publication of Public Investment Program (In two weeks after New Fiscal Year starts)

  19. Public Investment Programming

  20. Basic Steps of Public Investment Programming • Indicative Public Investment Policies & Priorities and aggregate investment ceiling in MTP • Indicative Investment Ceilings by sectors & instiutions in MTFP • Budget Call & Guidelines for Budget Preparation (MoF) • Investment Call & Guidelines for Investment Program Preparation (SPO) • Investment Program Proposals from Public Institutions • Public investment policies and priorities consistent with development policies set in Annual Program • Sectoral & Institutional Investment Ceilings approved by HPC • Budget Draft including investments sent to TGNA by Council of Ministers • Enactment of Bugdet Law in TGNA • Public Investment Program on project basis consistent with sector & intitution ceilings

  21. Public Investment Program Consists of “Fixed Capital Investment Projects” in the form of ; • New projects • Extension projects • Maintenance & Operation Projects • Completion Projects • Bottleneck Elimination Projects • Modernization and Rehabilitation Projects in the following sectors.

  22. Agriculture Irrigation Agricultural Production Live stock Fisheries Forestry Mining Manufacturing Energy Transportation Highways Airways Maritime Railways Pipelines Communications Tourism Housing Education Primary and Secondary Education Vocational and Technical Education Higher Education, Culture, Sports Sectors for public investments I.  Health K. Other Public Services General Administration Security Services Cadastra & Mapping Potable Water Sewerage Rural Area Planning Municipal Services Resettlement and Urbanization Environment Artisans and SMEs Technological Research Social Services and Aid Disaster Management

  23. Basic Investments for Fixed Capital Formation

  24. Public Investing Institutions • General & Special Budget Institutions(Ministries, Universities, State Highways, State Hydrolic etc.) • State Economic Enterprises (SEEs)(State Railways, etc.) • State Economic Enterprisesunder Privatization(TEDAŞ, TEKEL etc.) • Revolving Funds & Social Security Institutions (TRT,Social Security Inst. Etc.)) • Bank of Provinces • Local Administrations(only foreign credit financed projects) • Independent Regulatory Bodies (for monitoring purpose) Investments not included in Investment Program • Defence Projects of Ministry of National Defence & Armed Forces • Projects implemented by own resources of Local Administrations • Projects of Public Banks • Other institutions established by special laws (Türk Telekom etc.)

  25. Basic Characteristics of Public Investment Program • Top-Down & Bottom-Up Aprroach is used for decision of aggregate level of investments • Focuses on basic economic and social infrastructure • Investment decisions are often taken on project basis consistent with sector policies, very limited regional development concerns • Limited budget resources and always need for additional financing • Number of projects are high compared to budgetary financial resources available • Limited number of new projects initiated each year especially after rationalization of the stock in 2001 • Average completion time of the existing project pipeline (stock) is around 6 years • Around 20 percent of annual investment allocation is from foreign credit financing

  26. Public Fixed Capital Investment Stock (2000-2008) (At Current Prices, Billion USD) (1) Excludes investments of local administrations, expenditures for exproprations and inverstment workers payments. (2) Average time of completion is calculated as the amount of time required to finish up the remaining stock completely,assuming that no other projects are taken into the investment program in the following years and an appropriation and expenditure is made of the magnitude of the current year level.

  27. Public Investments in 9. Dev. Plan Period (2007-2013)

  28. Share of Investments in GDP (%)

  29. Project Cycle Management in Turkey

  30. Project Cycle INDICATIVE PROGRAMMING PROJECT IDENTIFICATION & PREPARATION MONITORING & EVALUATION PROJECT APPRAISAL PROJECT IMPLEMENTATION PROJECT FINANCING

  31. Indicative Programming Investment Policies & Strategies and Priorities stated in the following official policy documents in different levels : • National Development Plan • Medium Term Program • Annual Program • Annual Investment Circular and Guidelines for Public Investment Program Preparations

  32. Project Identification • Sources for project ideas are diverse (National Development Plan, Annual Programs, Sector and thematic Strategy Documents, Master Plans, Opportunity Studies, Regional Dev. Plans, Local Administrations, Politicians, Line Ministries, EU Accession Process, Int. Development Institutions etc.) • Spontaneous demands and pressures from local politicians • Pre-selection of project ideas not possible, creates a public support behind, not easy to stop • Methodology for project development is not systematic • Insufficient participatory mechanisms and technigues for development of project ideas

  33. Project Preparation : Feasibility Study • Feasibilty studies prepared by investing institutions or outsourced • Public Financial Management and Control Low and Investment Circulars reguires a sound feasibility study consisting of financial, economic and environmental analysis for public finance • SPO gives a standart format for feasibility studies in the Guidelines for Investment Program Preparations • Tendency to use external consultants is low • Data and analysis quality of feasibility studies are low, International standarts are often neglected • Unrealistic cost & completion time estimates • Preparation facilities and capacities in investing institutions are quite insufficient • Preparation process is seen as time consuming bureucratic procedure • Environmental analysis based EIA is often disregarded or underestimated • Budget restrictions are often neglected during preparations

  34. Project Appraisal • Project appraisal carried out in two levels : Institutional level and SPO level • Limited capacity of project appraisal in line ministries and public institutions, • Relativelly sufficient capacity in SPO but often blocked by low quality feasiblity reports lacking sound data and analysis • In-house units within SPO responsible for appraisal of feasibility studies • Lack of national parameters and data for economic analysis • Environmental analysis based EIA is often neglected or underestimated • Lack of standart appraisal procedures implemented • Opportunity cost considerations are often not taken into account

  35. Project Financing • National Bugdet • Foreign Credit • Grant Schemes • PPP Models • Need for additional investment financing • Faster implementation • Reduced operation & construction costs • Transfer of managerial skills • Currently airport terminals, ports, dams, HEPPs etc. realized • Current PPP Models in Turkey has limited scope (BOT, BO, BLT,TOR) • Lack of Harmonisation among several sector specific laws • Lack of Central Administrative Structure for PPP Projects New PPP Frame Law drafted by SPO; • Unifies the PPP legislation • Sets the legal basis for additional PPP models • Sets the legal basis for extending sectoral scope • Brings a rational and objective project selection procedure • Establishes a central PPP unit within SPO • Sets the principles of risk management for PPP projects

  36. Project Implementation • Responsibility of Line Ministries and Public Institutions • Lack of modern project implementation approaches and mechanism • Insufficient implementation capacity (bidding documents,TOR Writing, controlling services etc.) • Insufficient experience on International Bidding Procedures (International Financial Institutions) • Insufficient institutional capacity in terms of skilled personnel • Capacity problems in Legal Contract Management • Need for improving negotiation skills

  37. Project Monitoring & Evaluation • Responsibility of Public Institutions and SPO • Very limited capacity in public institutions • In-house unit within SPO responsible for project monitoring and evaluation • On-going project monitoring & evaluation is carried out on expenditure basis not in physical terms • Lack of experience on ex-post evaluation causing problems in iterating new projects • Monitoring & Evaluation activities are not systematic • Need for further improvement of on-going project monitoring & evaluation capacity both in SPO and public institutions • Capacity that should to be created in terms of ex-post evaluation is vital

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