C. J. Martin
IN THE LAST DECADE development planners have been changing their interest and emphasis. They have been moving away from the mere formulation of medium-term plans toward a course of action which tends more and more to include the implementation of such plans—a process which involves the preparation of programs, assessment of projects, administrative coordination and development of policies.
This change in approach has brought problems in organization. As the Pearson Commission stated in its Report: “The capacity to prepare development plans depends on a relatively small group of well-trained individuals. These can be trained quickly abroad and they can be supplemented readily by small numbers of foreign advisers. The implementation of such plans, however, involves the whole administrative structure of the government together with the private sector. Because administrative structures are still weak, effective implementation is still too rare.” 1
Effective implementation of development plans requires, among other things, the organization of sector programs, their coordination, where appropriate, into a public sector investment program, and the preparation of projects. The absence of well-prepared projects has been a stumbling block to implementation in many countries, and even where individual projects have been prepared, there has often been little attempt to appraise them on a comparable basis and examine their complementarity. Mr. Robert S. McNamara, President of the World Bank Group, in his address of February 20, 1970 to the Columbia University Conference on International Economic Development, drew attention to this aspect when he stated: “Perhaps one of the most wasteful mistakes that both developing countries and aid agencies can make is to proceed on a random project-by-project basis, rather than first to establish an over-all development strategy, and then select projects that mutually support and interlock with one another within that over-all plan.”
The creation of suitable machinery to achieve what has been suggested by Mr. McNamara is not easy because the development of sector programs which will design the sector strategy and identify projects requires skills that are not easily found and which, when found, may be difficult to transplant to developing countries and expensive to maintain there. We, therefore, find ourselves with a new emphasis on implementation and at the same time a lack of experienced technicians to do the work. On the assumption of sufficient experts, the generally approved method for improving project preparation is by the creation of programing units in sector ministries, but in the actual circumstances of the present day, many small countries cannot find the technicians to do this. It is necessary to find some other mechanism. One promising alternative is a Central Projects Bureau.
FUNCTIONS OF A CENTRAL PROJECTS BUREAU
The main function of a Central Projects Bureau is to formulate viable projects that can be examined in relation to the priorities established in any national development plan and which can then be developed and executed by methods that attempt to ensure the highest economic returns. The Bureau becomes responsible for part of the functions which, in some countries, would normally be undertaken by ministerial programing units, but it works closely with the technical sections of each ministry to help the ministries to bring forward projects ready for implementation. It does not attempt to undertake all project preparation itself but provides specialized knowledge, both technical and economic, in cooperation with the technical and local information provided by the individual ministries and, where necessary, special skills provided by foreign consultants. In addition to these executive and advisory functions, the Central Projects Bureau helps to train staff from technical ministries in the art of project preparation and also lays down standards, advises on methods to be adopted by technical ministries in project preparation, and helps in the preparation of projects. The Central Projects Bureau designs all terms of reference to be used by the Projects Bureau itself and by technical ministries, both those for internal study as well as those for the guidance of consultants.
To be successful, project preparation should be a team activity involving experts of different disciplines who have to be given help and also have to be organized. Mr. John H. Adler, in Some Aspects of the Economic Philosophy of the World Bank,2 stated:
“Any economist, or for that matter, a member of any other profession who claims that he is an expert in project analysis, should be fired immediately. Project analysis takes a good deal of field work and a good deal of reliance on the technical competence and the imagination of other disciplines, frequently the natural sciences as well as the social sciences.”
One advantage of a Central Projects Bureau is that it can provide the manpower and management needed to achieve efficient project preparation.
Locating the Bureau
A Central Projects Bureau should be located where it can serve the largest number of ministries. In a government with a Ministry of Planning or similar central planning organization, the Bureau will form a major division of the Ministry and work closely with other divisions. In governments without a central planning organization, the Bureau will best be located in the ministry responsible for deciding on the choice of public sector projects in relation to available finance and for preparing the public sector capital development program. In the absence of a planning ministry, this function is often undertaken by the Ministry of Finance. In rarer cases the Bureau could form part of a Ministry of the Economy or in a very simple government administration it might be located in the Ministry of Public Works. It will function best, however, in a location which will allow it to have the authority to initiate, coordinate, and set standards for project preparation.
What Is a Project?
Since the Bureau will be dealing with projects, it is important first to define what is meant by a project. There are different views on what constitutes a project, but in the World Bank it has been taken in general to mean “a proposal for a capital investment to develop facilities to provide goods and services.”3 The capital investment can be designed to build something entirely new, quite specific and virtually a unit in itself, such as a new electric power station; or it can be a measure for the improvement of existing facilities or even a more generalized investment that permits the improvement of many facilities and activities. The technique of project appraisal for which the Bank is noted has application to the identification and preparation of projects by entrepreneurs and by government agencies.
The identification, selection, and preparation of projects should, in ideal conditions, follow from the preparation of a national development plan that will have identified the priority sectors and production targets, thereby providing the criteria for the selection of projects. Although projects can be derived from a plan in this way, usually they are selected to meet specific needs which have been identified in order to take advantage of special opportunities, such as the presence of natural resources or other special circumstances that would permit the production of a commodity at a relatively low cost or to meet domestic demand, either unsatisfied or satisfied through imports. In these circumstances, the desirability of the project being examined is determined, not by comparing it with other possible projects, but by measuring it against the estimated real marginal rate of return on other newly invested capital in the country.
But a proposal that merely suggests that it would be useful for a country to build a fertilizer factory, grow groundnuts, or irrigate a large area of land does not constitute a project. Before a project exists, much data have to be collected and analyzed. Until this has been done and reviewed, and a satisfactory assessment made of the technical facilities and economic justification, the project has not been adequately prepared and remains merely an idea. From the time an idea is brought forward by an individual or institution until the project is ready for implementation, the examination and review will go through many stages, each of which becomes more complex as the criteria to be met become more exacting. How these data are collected and reviewed has been described extensively elsewhere,4 but what is generally involved needs to be explained with reference to the activities of a Central Projects Bureau.
Once the basic guidelines of development proposed in the plan have been accepted by a government, it is important to consider the preparation of sector programs. There is no unique definition of a sector program, but for the purpose of implementing a plan it may be taken to mean a program for a particular economic or social sector, designed to extend over a number of years, to highlight the directions of development proposed, to describe the strategy to be used, and to include lists of projects in various stages of readiness. The program will also provide for continuous evaluation of results to ensure that the priorities and objectives will be achieved.
Like a national development plan, a sector program goes through a number of steps as it is being prepared, some interrelated but each distinct. First, the basic goals and objectives have to be set, such as a general contribution to economic development, reduced unemployment, or the development of a particular region. This step is then followed by an inventory of existing knowledge and activities. For the transport sector, for example, this inventory will include an analysis of all types of transport including rail, road, sea, and air, giving the facilities, their condition, and use.
For the agricultural sector it is necessary to undertake a study of resource availability including the supply of inputs, such as credit facilities, seeds, fertilizers, and tools, as well as the general institutional framework for promoting agricultural expansion. Full details of agricultural marketing need to be enumerated. Descriptions of types of soils and types and amounts of crops grown and livestock raised, in addition to information on water resources and basic transport facilities, are included in the inventory. Of equal importance is the development of appropriate strategies, since the adoption of suitable policies in agriculture can result in a situation in which investment can be made by private farmers. These conditions have been expounded by John de Wilde in the book Experiences with Agricultural Development in Tropical Africa,5 which lists those efforts most likely to be successful in developing the agricultural sector.
A sector program is not merely a listing of possible projects. It includes objectives and priorities, the attainment of which will, in the public sector, require investment in a number of appropriate and economically justified projects. The period of a sector program will vary depending on the stage of the country’s development and the state and importance of the particular sector being examined. As sector programs are developed, they will need coordinating to ensure the elimination of contradictions and to develop complementary policies. The organizational structure of each sector is examined and its suitability assessed. Coordination is achieved through the Central Planning Organization of the country and through the Central Projects Bureau, which can be part of that organization.
Although sector programs should be undertaken wherever possible by programing units in individual ministries, in small countries it may be possible to deal only with one or two major sectors at any one time. Since this prevents the adoption of a coordinated approach, it can reduce the efficiency of planning. Where, however, there are shortages of manpower and finance the only course open to the government may be to establish a Central Projects Bureau which can plan and develop programs for these important sectors, allocating to the technical sections of individual ministries responsibility for collecting materials and for helping in the preparation of the program. A Central Projects Bureau is also responsible for coordination and for the submission of the final sector program to the Central Planning Organization, after agreement with the technical ministry.
At the project level, what investigations need to be undertaken before a decision is taken on investment and what role can a Central Projects Bureau play in these investigations? There is a need to establish the priority of the project, determine its feasibility, and discover the changes in government policies, operations, or institutions which may be necessary to ensure the successful implementation and functioning of the project. The study, therefore, covers the full range from a basic resource inventory and studies of alternate development patterns to the functional design, preliminary engineering, and financial or economic analysis. It would also, where necessary, cover the analysis of project-related organizations, administrative problems, manpower resources, training requirements, and similar activities. There are certain general basic examinations which need to be undertaken and which should be described briefly to explain the functions to be performed by the Central Projects Bureau, but it should be remembered that each project has its own idiosyncrasies. The position is well described by Hugh B. Ripman in his article “Project Appraisal” 6 where he states, “It is in the nature of the subject that no treatment can be exhaustive. The fact that no project is exactly like another, that every project has its own peculiar problems, provides the interest and challenge of appraisal work.”
The study of a project is made from a number of aspects, namely, economic, technical, managerial, commercial, and financial, and goes through a number of stages before it is ready for financing. Since project preparation is a skilled operation requiring people of different disciplines working together if the project is to be undertaken successfully, the Central Projects Bureau recruits the necessary permanent staff to undertake the basic work and is responsible for recruiting consultants who undertake the more specialized work. If there should be only one project requiring special knowledge and experience, it would be wasteful to try to employ a specialist full time and make him a member of the Central Projects Bureau. Therefore, the Bureau makes use of short-term consultants or consulting firms, bringing them in so that their specialties can be used fully and then coordinating their reports and recommendations with those of the specialists in the technical ministries and those stationed in the Central Projects Bureau. The Central Projects Bureau has a part to play in all the activities described earlier, but in addition has certain important specific responsibilities that need to be explained and appreciated.
Terms of reference are basic to project development even if the Central Projects Bureau does the work itself. They describe the information that has to be gathered, the studies needed to provide such information, the analyses to be made, and the alternatives to be covered. The Bureau draws up a model check list to ensure internal consistency, but however good the Central Projects Bureau may become, it will need, from time to time, to use the services of consultants. In the early stages it may need to use such services on many occasions. One of the major problems facing a Central Projects Bureau in the employment of individual consultants or consulting organizations is the preparation of suitable terms of reference, explaining what the experts should do. After completion of a study, arguments can develop and problems can arise because consultants were under the impression that only certain activities were to be undertaken while the government or sponsoring organization believed that much wider activities were to be included in the consultants’ responsibilities. Time spent on discussing terms of reference is time well spent. One of the responsibilities of a Central Projects Bureau is to prepare terms of reference but it is not sufficient for these terms of reference to be merely given to the consultants. They require to be examined and discussed in depth with the consultants and may require to be expanded since the consultants, with their specialized knowledge, may well have a number of suggestions to make to help to improve the study. Each project has its own problems but model terms of reference can be prepared for practice and reviewed as an aid to the drafting of special ones.
Since most projects start as general schemes in the mind of a politician, civil servant, or private entrepreneur, there must be a method to guarantee that all proposals which come forward are screened and examined on a comparable basis. Such a system ensures that those projects are chosen which have the highest economic and social returns and that the others are rejected. There are many different ways of examining a project proposal; sometimes only the technical aspects are studied and alternatives and economic justification omitted. Cost estimates may be prepared on different bases and with different coverage. It is the responsibility of the Central Projects Bureau to prepare standard procedures and to see that, within the possible limits, the various ministries and the consultants prepare projects on a basis that will permit rational choices to be made.
Standardization of Basic Data
At the stage when a general scheme is being translated into a project, many of the projects require the same type of basic information. There is a general demand for knowledge of population totals, income distributions, size of crops, availability of transport and types of transport systems, and details of water and power supplies. A Central Projects Bureau can bring together this information and make it available to all. A central statistical office may also collect such information, but it rarely has the time or the inclination to collect it in the manner required for project work. If the Central Projects Bureau demands that certain standards be maintained and requests that similar basic information be used in all project analysis, this standardization allows relatively easy comparison of basic data affecting more than one project. To help with data collection the Projects Bureau knows where to search for information and whom to contact, whether it be the statistical office, the department of customs, the chamber of commerce, libraries, or organizations overseas. The Bureau provides an intelligence service as well as demanding acceptance of certain basic rules.
Standardization in Other Fields
In addition to the setting of standards for the preparation of market information, the Bureau also sets standards for the submission of project information for individual projects. The latter deals with the necessary inputs for the development of the project. Forms are designed describing the general information needed for different kinds of projects, setting out the requirements of such inputs as raw materials, transport, basic infrastructure, and training. The Central Projects Bureau also prepares standards for commercial profitability and estimates of the economic return. General forms setting out all these details should be prepared and treated as check lists.
The Central Projects Bureau prepares for each project, as it is started, a timetable describing the stages through which the project is expected to go. The Bureau is responsible for ensuring that no new stage is started until satisfactory information on all previous stages has been obtained. Waste of time and financial resources can result from new stages of project preparation being developed before basic information has been collected and the project has been approved for further investigation.
The Central Projects Bureau does not merely keep timetables of the progress of preparation. Together with the staff of the central planning bureau it evaluates implementation and learns lessons from the mistakes that have been made. In the central planning bureau the planners are responsible for the general evaluation of progress, but the special expertise of the staff of the Central Projects Bureau gives it a basic responsibility for evaluating the performance of individual projects and examining actual results against the forecasts made.
The type of staff required in a Central Projects Bureau will depend on the priorities set by the government in its development plan. If no priority has been given to the industrial sector, an industrial engineer would obviously be wasted. If high priority has been placed on the development of water resources for irrigation and hydroelectric power, it is necessary to obtain the services of a competent electrical engineer as well as an expert in agriculture and irrigation. In addition to such specialists it is important to have on the staff an economist trained in microeconomic problems. In some countries the original staff of a Projects Bureau might consist of a director; technical specialists in agriculture, infrastructure, and either livestock, forestry, or industry; and an economist, possessing wide experience in project preparation, capable of making the calculations connected with the economic and financial appraisals and of measuring economic rates of return using techniques such as cost benefit analysis. Before staff is recruited a detailed job description should be prepared for each specialist.
In most writings on development organization it is proposed that for sector programing and project preparation, a programing unit in each technical ministry should be established, the activities of which should be coordinated by the central planning organization. Nothing in this article should be taken as criticism of such an approach; in large countries with sizable investment programs it may well be the best method. What I have suggested, however, is that in some small countries with modest development programs it is impossible to recruit sufficient experts to develop programs in each ministry. In order that skilled manpower should be used most efficiently, I propose that a Central Projects Bureau be established with responsibility for initiating sector programing in one or two major sectors, developing project preparation by allocating specific functions to the staff of the technical ministries, to short-term specialists, and to permanent members of the Central Projects Bureau (the setting of standards, the design of terms of reference, the coordination of project activities, and the control of timetables). Such a program might be criticized on the grounds that a Central Projects Bureau should not be responsible for detailed development of projects. But it could be that if such a Bureau were not responsible, little project preparation would be accomplished. The creation of such a Bureau still allows the establishment, at a later date, of programing units in individual ministries by the secondment of staff from the Bureau to the ministries or by the training of the staff of the ministeries in the Central Projects Bureau. Even if sector programing units can be created later, the Central Projects Bureau still has a function as a setter of standards, a controller of activities, and a coordinator of project development, a responsibility often at present placed on the central planning bureau, where the economists rarely have the skills required for this type of work.
Whether operational or advisory, the Central Projects Bureau attempts to use the scarce manpower available to the best advantage and to ensure that projects are prepared in a manner which permits comparison and rational choice by the government.
Staff Papers is a publication through which the Fund makes available some of the studies on monetary and financial problems prepared by members of its staff. The studies published thus far have dealt with such subjects as international liquidity, balances of payments and exchange rates, inflation in relation to economic development, and national monetary and fiscal policies. Summaries in French and Spanish are appended to each article. There are three issues each year.
The subscription is $6.00 a year or $2.50 for a single copy; university libraries, faculties, and students may obtain it for $3.00 a year or $1.00 a single copy.
Orders may be sent to
INTERNATIONAL MONETARY FUND
19th and H Streets, N.W.
Washington, D.C. 20431, U.S.A.
THE INTERNATIONAL MONETARY FUND, 1945-1965
Twenty Years of International Monetary Cooperation
Vol. I. Chronicle, 663 pp.
Vol. II. Analysis, 621 pp.
Vol. III. Documents, 549 pp.
Price: $12.50 the set ($5 a volume if sold separately), or the equivalent in most other currencies.
This history of the first 20 years of the International Monetary Fund has been written by past and present members of the Fund staff, and is based upon both the Fund’s own records and research into other documents.
Volume I starts with a description of the several different plans formulated in 1941-44 for an international monetary institution, leading up to a review of the proceedings at Bretton Woods. It then describes, year by year, the principal events in the Fund’s history. Extensive summaries of the discussions in the Boards of Governors and Executive Directors elucidate the arguments for and against the decisions which the Boards took.
Volume II briefly outlines the process of policymaking in the Fund, and its functions and objectives, and then treats systematically the formation of the Fund’s policies in three important fields—exchange rates (including gold); exchange restrictions; and the use of the Fund’s resources (including stand-by arrangements and stabilization programs). It concludes with a detailed study of the constitutional development of the Fund from 1945 to 1969.
Volume III reproduces most of the documents referred to in Volumes I and II, including early versions of the plans devised by Lord Keynes and Mr. Harry Dexter White which have not been previously published.
Volume I was written by J. Keith Horsefield; Volume II by Margaret G. de Vries, Joseph Gold, Mary H. Gumbart, J. Keith Horsefield, Gertrud Lovasy, and Emil G. Spitzer.
Available in English only.
Orders should be addressed to
International Monetary Fund
19th and H Streets, N.W.
Washington, D.C., 20431
Pearson, Lester B., Partners in Development: Report of the Commission on International Development, Praeger (New York, 1969), pp. 43-44.
Adler, John H., “Allocations of Investment,” in Some Aspects of the Economic Philosophy of the World Bank (Transcriptions of talks by World Bank economists at a seminar for Brazilian Professors of Economics in Rio de Janeiro, 18-22 September 1967), September 1968, p. 44.
King, John A. Jr., Economic Development Projects and Their Appraisal: Cases and Principles from the Experience of the World Bank, The Johns Hopkins Press (Baltimore, Maryland, 1967), p. 3.
See “The Project Cycle” by Warren C. Baum, Finance and Development, June 1970.
de Wilde, John, Experiences with Agricultural Development in Tropical Africa, Vol. 1, The Synthesis, The Johns Hopkins Press (Baltimore, Maryland, 1967).
Ripman, Hugh B., “Project Appraisal,” Finance and Development, December 1964, p. 178.