The Power of Public Investment Management

This article is an extract from "The Power of Public Investment Management," a publication by the World Bank

The uncertain socio-economic prospects and tight fiscal conditions increase the need to get higher value for money and greatest benefit for public spend.

The drivers of an inefficient Public Investment Management are:

• Weak inter agency coordination projects driven by political considerations

• Projects needing multiyear commitment with weak budget system

• Large projects requiring problematic, site acquisitions, consideration of environmental safeguards and complex procurements resulting in delays and cost overruns

• Increasing need for large investments in human and physical capital and economic infrastructure and poverty reduction

The critical features of a Public Investment System are:

1. Investment guidance, project development and preliminary screening

2. Formal project appraisal

3. Independent review of appraisal

4. Project selection and budgeting

5. Project implementation

6. Project adjustment

7. Facility operation

8. Basic completion review and evaluation

The first two features are key to enhance public value and wealth creation by selecting, and designing projects with positive net benefits

The change themes to improve Public Investment Management require careful thought and sequencing depending on the strengths and weaknesses of the existing Public Investment System. The potential themes to inform the change programme could be:

• Focus on better implementation first

• Focus on better planning first

• Establish a centre of excellence

• Establish a centre of power (e.g. politicians)

• Decentralise or centralise

• Legal change first (change the law)

• Increase transparency (of information to the public)

The Public Investment System needs to be able to cope with uncertainty. We cope with uncertainty by:

• Not being risk averse or overly optimistic

• Engaging key stakeholders including users

• Using contingency approvals

• Stopping projects if they are no longer needed or viable

• Allow agencies to adjust the pace and nature of implementation