Race to the Next Income Frontier
Chapter

Chapter 9. Making Public Investment More Effective: Lessons for Senegal

Author(s):
Ali Mansoor, Salifou Issoufou, and Daouda Sembene
Published Date:
April 2018
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Author(s)
Salifou Issoufou Mouhamadou Bamba Dlop and Rajesh Anandsing Acharuz

Introduction

There is a broad consensus in economics that public investment has a positive impact on economic growth and social welfare.1 Through the creation of physical capital, public investment makes it possible to deliver services essential to the mobility of persons, goods, and services. It also helps create economic opportunities, which constitute one of the driving forces behind economic growth. The relationship between public investment and economic growth has been a subject of long-standing interest among economists and decision makers. This relationship is even more important in developing countries, where governments still play a very important role in determining the level of economic activity.

Nevertheless, while studies have shown positive linkages between increased public investment and economic growth, they also indicate limitations and some negative implications. For example, the impact on growth can be limited. Warner (2014) shows that on average there is only a weak and short-lived association between public investment spending boom and growth. Other studies show that countries with ineffective infrastructure pay a growth penalty in the form of insufficient returns on their infrastructure investments (Hulten 1996), an inefficiency in public investment found in low-growth countries. Indeed, failures in the public investment management system in developing countries have historically led to low returns on public investment (Dabla-Norris and others 2012). These low returns are often attributed to poor project selection and implementation stemming from insufficient technical expertise.

While the level of efficiency of public investment may matter for the growth dividend of public spending, capital scarcity is a second key element driving the rate of returns on public investment. Berg and others (2012) show that the level of efficiency and the stock of public capital are inversely related and, moreover, that they offset each other in that the growth dividend of public investment does not depend on the level of investment efficiency. The basic intuition guiding the assumption that the effect of public investments on growth in high-efficiency countries is the same as that in low-efficiency countries is that the latter have a lower public capital stock and, therefore, a high marginal return to public investment.

However, as made clear by Berg and others (2012), this argument does not mean that the efficiency of public investment is unimportant. On the contrary, improvements in efficiency can have significant repercussions for growth. For example, by increasing the level of efficiency, the positive effects of public investments on growth can be enhanced, particularly if the improved efficiency involves structural reforms in the management of public investments pursuant to Collier’s (2010) “invest in investment.” Such reforms encompass several factors, which include, but are not limited to, the country’s capacity to conduct effective, independent project assessments; the selection of projects and appropriate mechanisms for their implementation; surveillance and monitoring; and ex post assessments of public investment projects. A reform approach that encompasses all of these elements would make it possible to limit the risks of compromising economic growth and budget and debt sustainability.

Consistent with the logic of Collier (2010), this chapter emphasizes improving the management of public investment in Senegal in connection with the country’s development plan, the Plan Sénégal Émergent, through which it aims to become an upper-middle-income emerging market economy. The chapter is divided into three main parts. The first part discusses the stylized facts needed to gain a better understanding of Senegal’s position relative to its peers in investment and growth. Next, based on Rajaram and others 2014, the chapter examines the existing public investment management system in Senegal to highlight both the theory and what is being done in practice so that the required reforms can be more effectively identified. The third and final part describes the reforms needed to improve public investment management, based on the experience of countries where such reforms have been successfully implemented. Key lessons are presented in the conclusion.

Stylized Facts

In Senegal, public investment represents a substantial share of total expenditure, accounting for more than 10 percent since 2014. Senegal’s Plan Sénégal Émergent, whose stated aim is to achieve high levels of growth (7 to 8 percent) while containing the country’s budget deficit, requires substantial investments in several economic sectors. Because resources are limited, public investments must be ranked in order of priority and carried out in a way that reflects their impact on public welfare. While political considerations will inevitably play a role, the trade-offs between these investment projects must be informed by economically relevant calculations, leading to an assessment of economic returns and the selection of optimal projects.

During the period 2000–12, Senegal recorded an average ratio of public investment to GDP of about 9.5 percent, with a real GDP growth rate of 3.9 percent. The country’s growth rate, however, is still relatively low in comparison with that of certain countries, particularly middle-income countries, that registered lower investment rates while achieving economic growth of more than 4 percent.

This disappointing performance of investment in Senegal is confirmed in comparisons with the average for the West African Economic and Monetary Union (WAEMU) and with emerging market economies. During the period 2000–11, Senegal registered the highest investment rate in WAEMU. However, in terms of growth, Burkina Faso and Mali were found to have the highest rates in the union (5.8 percent and 5.5 percent, respectively) as against Senegal’s growth rate of 3.9 percent. Moreover, during the period 1993–2003, Senegal reported a steady increase in its investment rate (Figures 9.1 and 9.2). By contrast, emerging market economies such as Brazil, Colombia, South Africa, and Thailand registered decreasing public investment rates but faster growth in per capita GDP during the same period.

Figure 9.1.Index of Public Investment as a Percentage of GDP, 1993–2013

(Percent of GDP; 1993 = 100)

Sources: IMF, World Economic Outlook, and IMF staff estimates.

Figure 9.2.Index of Real GDP Per Capita as a Percentage of GDP, 1993–2013

(Percent of GDP; 1993 = 100)

Sources: IMF, World Economic Outlook, and IMF staff estimates.

Recent literature has focused on determining whether public or private investment has greater effects on growth. Although the results are not conclusive, they converge toward a certain degree of complementarity between the two. This argument is based on the fact that a certain level of public investment is required to attract private investment. Accordingly, for investment to have a significant positive influence on growth, private investment must be combined with public investment.

In Senegal, the private investment rate averaged about 16 percent of GDP over 2000–12. The ratio of public and private investment to GDP was thus about 25 percent. We observe, however, that other countries generated substantially more growth with less public and private investment than Senegal, again suggesting Senegal’s low investment productivity. Efficiency is therefore fundamental to guaranteeing that public investment will have a positive economic and social impact. According to recent studies by the International Monetary Fund (2015) and Gupta and others (2014), enhanced management can make public investment more effective and increase its productivity.

A closer look at Senegal’s investment efficiency, as presented by Dabla-Norris and others (2012), reveals that Senegal is ranked 62nd out of a sample of 71 countries in terms of public investment management (Figures 9.3 and 9.4). Compared with other sub-Saharan Africa countries, Senegal is behind Botswana, Mali, Rwanda, and South Africa, among many others, in terms of project feasibility studies, project selection and implementation, and ex post assessment. Senegal turns out to be even more severely behind when one compares its level of public investment management with that in emerging market economies outside sub-Saharan Africa, such as Brazil, Colombia, Thailand, and Tunisia.

Figure 9.3.Public Investment Management Index Scores, Senegal and Four African Comparator Countries

(0–4 scale)

Figure 9.4.Public Investment Management Index Scores, Senegal and Four Non-African Emerging Markets

(0–4 scale)

The costs due to malfunctions in the public investment management system in Senegal are tremendous. According to information on projects initiated between 2007 and 2011, project cost slippage varied from 37 percent in 2007 to 47 percent in 2011. The costs were higher in 2007 and 2011, which were election years, reflecting the negative repercussions of poor public investment management (Figure 9.5). A specific example that illustrates this slippage is the construction of the Blaise Diagne International Airport, described in detail in Box 9.1. The work, which began in 2007, was scheduled to be completed in 2010 with an initial budget of CFAF 229 billion. After price increases and constant financing revisions, the work was finalized on December 6, 2017, and the airport was inaugurated the following day. The airport was estimated to have cost CFAF 407 billion, equivalent to an estimated overrun of nearly 80 percent of the initial amount.

Figure 9.5.Cost Overruns in Senegal, 2007–11

(Percent of initial total public investment cost)

Sources: Senegalese authorities; and IMF staff estimates.

BOX 9.1The Blaise Diagne International Airport Project: Fundamental Factors and Governance

According to the authorities, completion of the Blaise Diagne International Airport (AIBD) aims to provide Senegal with infrastructure commensurate with its economic ambitions, to open up the city of Dakar, and to promote more effective territorial development. It is also an expression of the real willingness to make Senegal a preferential stopover point in Africa for international air traffic.

For that purpose, Senegal’s geographic position, equidistant from western Europe, North America, South America, and all of southern Africa, gives it a substantial comparative advantage in international trade flows and makes it a natural hub. Operation of AIBD therefore should constitute a golden opportunity for tourism development policy, which aims to make Senegal a destination of choice. Moreover, AIBD will make it easier for tourists to travel to Senegal’s tourist areas, such as the resorts of Saly Portudal, Mbodiène, Pointe Sarène, and Joal Fadiouth, where works are being directed by the Société d’Aménagement de la Petite Côte (SAPCO). The fishing and horticulture farming sectors add to the potential of this area and could also benefit from a modern airport. The major conference center built in Diamniadio, approximately 10 kilometers from Diass, where the AIBD is located, offers further potential to create a dynamic economic center if accompanied by the development of the airport.

The authorities established a fee for the development of airport infrastructures with a tax of €60 for all travelers entering and leaving Senegal. On this basis, BNP Paribas and BMCE Bank provided the first bridge loans and structured the financing for the project. The financing also involves a pool of banks led by the African Development Bank (€70 million) and the Islamic Development Bank (€70 million). The other participants are the French development authorities (€70 million), the Investment Climate Facility for Africa (€30 million), the West African Development Bank (€26 million), and the Industrial Development Corporation of South Africa (€50 million) for the conventional tranche and the Saudi Fund (€70 million) and the Organization of Petroleum Exporting Countries Fund (€20 million) for the Islamic tranche.

The work, undertaken in 2007, was expected to be completed in 2010 with an initial budget of CFAF 229 billion. In addition to constant financing revisions and price increases, the work was not completed by the end of 2016, as initially expected, as further problems arose. It should be noted that the revised cost of construction was estimated at CFAF 380 billion in 2014 and could increase to CFAF 400 billion or more. In August 2015, the senior management of AIBD estimated that the project would cost CFAF 407 billion to complete. At that time, the authorities considered the work 85 percent completed.

From the Senegalese standpoint, a succession of different reports has brought to light problems with the implementing agency, complex project planning, and financial engineering. As a result of these factors, the country has been exposed to delays, negligence, and poor financial supervision, resulting in misunderstandings and potentially leading to disputes. Further delays have resulted from the July 2015 request for a fifth contract amendment, in the amount of CFAF 64 billion, by Bin Laden Group of Saudi Arabia, in order to complete the construction of the airport. The government of Senegal seemed poised to reject the rider, considering the justifications provided by the construction company to be unfounded.

Aside from the clear lack of technical capacities on the Senegalese side, there were administrative inefficiencies in disbursements and in making technical decisions that have proven to harm expenditure control and to cause lags.

The review process of the project’s governance resulted in the arrival of the Turkish group Summa-Limak at the end of 2016, following the suspension of work by Saudi Bin Laden. Since Bin Laden had a dispute with the government of Senegal, the work experienced a slowdown before the restart, which focused on the need to finalize the construction of the airport. The AIBD airport was delivered as expected on December 6, 2017. The official inauguration took place on December 7, 2017, under the chairmanship of the President of the Republic, Macky Sall.

This box was prepared by Abdoulaye Ly.

BOX 9.2The Implications of Absorptive Capacity Constraints: Empirical Evidence

Public investment in Senegal increased from 5.9 percent of GDP in 2005 to 7.1 percent in 2014, as part of a general trend across most developing countries (IMF 2014). Public investment scaling-up is often aimed at infrastructure financing, and it is motivated on the grounds of expected growth dividends. However, the empirical evidence on the impact of public investment on economic growth is mixed, and investment booms do not seem to be associated with growth acceleration (Warner 2014). The presence of absorptive capacity constraints could be one of the reasons behind the weak association between public investment accelerations and growth. In fact, when the pace of investment goes beyond a certain threshold, many developing countries do not have the capacity—in terms of skills, institutions, and management—to reap the benefit of any additional public investment. The selection and implementation of several investment projects at that point would require a varied set of technical and managerial resources that cannot be expanded in the short term.

The evidence in regard to absorptive capacity constraints in developing countries is quite limited, because the availability of data on project costs and outcomes is itself limited. In a seminal paper, Isham and Kaufmann (1999) show that once the ratio of public investment to GDP becomes too high (above 10 percent), the increase in public investment is associated with a declining productivity of investment projects. More recently, Presbitero (2016), using a large data set of investment projects financed by the World Bank since the 1970s in 100 developing countries, has tested whether public investment scaling-up is associated with project outcomes. That analysis shows that investment and infrastructure projects undertaken in periods when public investment accelerates compared to its historical patterns are less likely to be successful, indicating the presence of absorptive capacity constraints.

The experience of Colombia, Mali, and Senegal over the period 1980–2009 suggests that increases in public investment are indeed associated with lower success rates of investment projects. Figure 9.2.1 plots the average public-investment-to-GDP ratio for each decade and the corresponding average share of successful World Bank-financed investment projects. A few stylized facts, consistent with the aggregate evidence discussed above, emerge. First, the recent increase in public investment in Senegal has been associated with a decline in the project success rate. Second, the rate of public investment to GDP in Mali has been consistently higher than that in Senegal, but Mali’s project success rate has been lower. Colombia, by contrast, has been able to sustain both a higher investment rate and a relatively high project success rate, which is consistent with having a more efficient public investment management capacity, as highlighted by the Public Investment Management Index (see Figures 9.3 and 9.4). Finally, even Colombia shows clear evidence of a negative relationship between project success rate and public investment, consistent with the presence of absorptive capacity constraints.

Figure 9.2.1.Investment Scaling Up and Project Outcomes, Senegal, Mali, and Colombia, 1980–2009

Sources: World Bank Independent Evaluation Group (IEG) Project Performance Ratings data set; and IMF staff estimates.

Note: Bars represent levels of public investment (left scale), and circles represent the percentage of successful projects (right scale), for each country.

The evidence discussed here is consistent with the presence of supply bottlenecks and poor project selection in periods of sharp investment accelerations. It also points out the importance of sound policies and institutions for the selection and management of public investment projects. Finally, it speaks to the importance of carefully assessing the design and the financing of public investment plans and to the necessity of gradually scaling up public investment in the presence of absorptive capacity constraints (see Berg and others 2012 and Richmond, Yackovlev, and Yang 2015 for model applications).

This box was prepared by Andrea F. Presbitero.

The “Eight Commandments” of Public Investment Management

One of the major challenges all policymakers face is to ensure that financial resources are put to effective use in support of development that is both sustainable and equitable. A key factor that can make this possible is having a sound, effective public investment management system. Rajaram and others (2014) conclude that every effective public investment system has eight essential features, which we refer to as the “eight commandments” of public investment management:

  • Begin by setting out a clear strategic orientation. In guiding investment and project development, an expanded strategic orientation is needed. Such a strategic orientation underpins and guides the government’s decisions consistently with national priorities. It may derive from a national plan or from another long-term strategy paper that establishes the economic development priorities.

  • Conduct a feasibility study to evaluate each project rigorously. The objective of the study is to answer the essential question whether a project should be considered, once it has first been established that it is compatible with the government’s priorities. It has two stages: a prefeasibility study, to identify relevant alternatives, and then a full feasibility study, to determine early on whether a proposed project is feasible. The full feasibility study expands on the prefeasibility study in order to compile all of the relevant data, to fine-tune the expected results of the projects, to conduct a thorough analysis of the solution selected to achieve the project objectives, and to undertake a number of different thorough assessments, including environmental and social impact analyses.

  • Ensure that projects undergo an independent examination. This is always a sound practice, as it makes it possible, for example, to avoid projects that are excessively optimistic, underestimating the real costs or overestimating the advantages.

  • Link project assessment and selection with the budget cycle. This is true even if the project assessment cycle differs from the budget calendar. The budget framework and annual budget must establish limits so that feasible, sustainable investment programs can be undertaken.

  • Have realistic contracting plans, as well as guidelines and institutional capacities for project management and surveillance. Ideally, a government should establish a total cost budget management system for the project covering several years to anticipate the budget requirements throughout the project execution period.

  • Embed enough flexibility in the budgeting to make needed adjustments possible. The review of project financing that is generally part of the annual budgeting process should be somewhat flexible so that changes may be made in the disbursement profile. This approach would make it possible to take into account any cost slippage resulting from delays in project implementation.

  • Have a process to certify operational readiness. When the project has been completed, there should be a process to ensure that the resulting facility is ready to operate and that the services can be delivered. This requires an effective mechanism to transfer responsibility for operational management and maintenance of the assets created.

  • Carry out a basic examination and assessment at completion. This consists of examinations by a ministerial office or agency after the project is completed, with the purpose of determining whether the budget limits and deadlines were observed and whether the finished product was delivered as expected. As a supplement to this basic review, a supervisory institution should periodically conduct compliance inspections on a sample of investment projects.

De Jure System of Public Investment Management

On paper, public investment management in Senegal appears to be adequate. The approach provided in connection with Senegal’s national planning system is to find the best allocation of public resources with the choice of projects having high levels of economic returns, rigorous selection of economic and social infrastructure projects that are directly productive, and rehabilitation and maintenance of existing assets. This approach is also designed to ensure the transition to a flexible and dynamic system, aiming to improve the policy management framework, gradually transfer the planning function to the sectoral ministries, promote better management of project life cycles, rationalize public expenditure, and establish a procedure so that optimal public investment choices can be made.

Senegal’s de jure public investment management system includes the following stages:

  • Identification and formulation: This phase, which involves the technical ministries, makes use of economic, social, and financial information to help identify and formulate projects.

  • Feasibility study: This assessment is undertaken to verify both that projects are consistent with the objectives of the economic and social development strategy (plan) and that they are feasible. Projects identified and formulated by the technical ministries are submitted to the planning services for cross-assessment.

  • Selection, programming, and search for financing: The ministry responsible for finance classifies proposed projects and programs that have met the above feasibility study criteria. Final project selections must be made based on the proposed projects’ level of priority.

  • Physical and financial monitoring of projects and programs: A project/program execution bulletin is prepared on an annual basis, using quarterly and annual reports produced by the technical ministries and complementary and follow-up studies.

  • Final evaluation of projects/programs: Final evaluations are carried out by the planning services to assess the degree to which the objectives have been met and to identify any lessons and good practices learned.

  • Ex post assessment of projects and programs: This evaluation is conducted by the planning services for projects and programs in the three-year public investment program. It is undertaken a number of years after execution to estimate the real impact of investments and to measure any discrepancies between the results and effective performance.

The second stage, conducting an ex ante assessment of all proposed projects and programs, is carried out before any projects are included in the country’s three-year public investment program. This assessment makes it possible to ensure that projects and programs (1) contribute to achieving the national and sector objectives, (2) generate financial and economic returns, and (3) meet the preestablished admissibility criteria (relevance, coherence, efficiency, efficacy, fairness, and sustainability).

De Facto System of Public Investment Management

In practice, Senegal’s public investment management has departed from the path identified under the reform of 1987 on which the new national planning system was based. This departure underlies the modest impact of public investments on economic growth and the development indicators. In general, the 2000s were not excessively “generous” to public investment management, with the multiplicity of medium-term planning papers and confusion between the players in the system. Management was found to have gaps in coordination between the national strategy and the sector policy papers, feasibility studies, cost estimates, execution lags, supervision of contracting procedures, and uncertainties as to the ongoing selection of projects and programs.

The feasibility studies were systematically abandoned in favor of project sheets including only basic descriptive information and cost summaries. A total absence of assessments in the budget timetable and cycle led to major cost overruns, failures to observe project execution deadlines, and insufficient correlations with economic growth, that is, problems of budget credibility. (See also Chapter 7, which covers the rationalization and composition of public consumption.)

The criteria that should be given priority for project or program eligibility are not clearly defined or universally known. The selection committee established for that purpose is not operational. The insufficient gross fixed capital formation content of public investments derives, among other things, from a total absence of assessment criteria based on development options (sectoral allocation problem) for projects and programs and the substantial share of operating expenditure in the consolidated capital budget (recurrent costs of projects and programs). These problems are essentially linked to the insufficient capacities of the technical ministries, the lack of linkages between investment programming and public investment planning, breakdowns in the selection function, and the absence of ex post assessment to determine how public policy has affected living conditions.

We can state with certainty that public investment management in Senegal does not follow the “eight commandments” recommended by Rajaram and others (2014) to enable even a low-capacity country to establish the basic disciplines for the selection and management of economic and social development projects.

How the System can be Improved

Lessons to Be Learned from Mauritius

Prior to 2006, before major reforms were implemented, public investments in Mauritius faced a number of systemic issues ranging from cost overruns to project execution delays, inadequate preparation, and even the absence of a portfolio of pending projects. The following reforms were implemented to resolve these problems and improve the design and management of public investment.

  • Project Plan Committee. Established in 2009, the Project Plan Committee is chaired by the Minister of Public Infrastructure and is assisted by authorities from other ministries in reviewing and selecting major projects having a present value of more than MUR 25 million (about US$736,000). The committee makes recommendations for the inclusion of projects in the country’s Public Sector Investment Program, which is responsible for creating a portfolio of credible projects ready for execution. The selection criteria focus on the priority status of the project, its returns, and whether the costs associated with the project are reasonable.

  • The framework for public investment management was further reviewed in 2017, and a new process is provided in a Capital Project Process Manual (CPPM) that links project appraisal, funding, and implementation and guides public bodies on each step of the public investment cycle. Depending on certain thresholds, ministries are required to seek the cabinet’s approval prior to proceeding with project preparation and implementation.

  • For the purpose of ensuring value for money on capital projects, a Public Investment Management Unit has been set up in the Ministry of Finance to appraise proposals for capital projects, monitor large projects, and update the Public Sector Investment Program.

  • A Build Operate Transfer Projects Act was also introduced in 2016. It provides a legal framework for the execution of projects under Build Operate Transfer agreements. To initiate the Build Operate Transfer project process, public bodies have to identify potential Build Operate Transfer projects satisfying, among other things, a combination of criteria prior to submitting the project to the Build Operate Transfer Projects Unit for registration.

  • Public Sector Investment Program. This is a five-year rolling program of public sector investment projects approved to receive budget appropriations, assistance from public institutions, and loans and grants from technical and financial partners and foreign direct investment. The program also provides for a project preparation unit. This relieves political pressure on the Minister of Finance to adopt projects while they are still in their conceptual phases; in fact, projects should be fully developed for appropriations to be released.

  • Contract awards and limits applicable to contracting. The contracting system was partly decentralized to improve the contractual and project execution phases. To reduce lags in contract awards, the decentralization work was expanded in a clearly defined framework. Accordingly, the contracting limits granted to the spending ministries and departments were increased from MUR 5 million (US$150,000) to MUR 50 million (US$1.5 million).

  • Procurement Policy Office. The Procurement Policy Office was established to provide a mechanism for supervising and following up on the results and progress registered in the contracting system and to guide and promote its development and improvement on an ongoing basis.

  • Central Procurement Board. All contracts exceeding MUR 50 million (US$1.5 million) are managed by this board. When contracts are concluded, the spending ministries are responsible for monitoring their implementation.

  • Independent Review Panel. Bidders that believe they have sustained damages may file a complaint with the Independent Review Panel, which has 30 days to issue a binding decision.

  • Preferential margin. All bidders based in Mauritius employing local labor for at least 80 percent of the total person-days deployed to execute a public works contract may receive a preferential benefit of 15 percent.

  • Contracting deadlines. To accelerate contracts to implement projects, the law provides a maximum deadline for contract awards. The Procurement Policy Office checks closely to ensure that this rule is being observed.

  • Construction Industry Development Board. This board was established as a regulatory authority to lead and guide activities designed for the development of a competitive, modern construction sector. One of its main activities is registering and training entrepreneurs and consultants. This approach makes it possible to ensure that performance of construction enterprises is appropriately monitored.

  • National Schedule of Rates. This schedule provides the reference prices for construction materials applicable to players in the construction sector.

  • Project implementation units in key ministries. The ministries most involved in infrastructure, such as education and health, have each been provided with experts who staff project implementation units; the objective of these units is to oversee project implementation and monitoring.

  • Project managers. Public bodies may appoint project managers for large public sector projects. Project managers are hired, in addition to the consulting firms recruited by the spending ministries, to supervise the contractors involved in the projects.

  • Fixed consultant fees. The objective of establishing fixed fees for consultants was to put an end to incentives that tolerated or even encouraged cost overruns. Fees were initially established as a percentage of the total project cost. They are now fixed and equivalent to a lump sum or set percentage of the initial value of the project (and not linked to the total amount actually spent).

  • Public-private partnerships. The implementation of public-private partnerships has been slow in Mauritius. This contracting method is different from others and often requires lengthy project preparation periods. In fact, when the contracts have been executed, they often extend over several political cycles, leading to difficulties in the decision-making process. Although Mauritius adopted the relevant regulations for the implementation of public-private partnerships, the ministries do not have sufficient internal capacities to manage this type of project, even when consultants are recruited to help in preparation and execution, as has been the case in the past.

Reforms Recommended for Senegal

Recent research has shown that public investments can be a catalyst for economic growth if they are truly effective and high quality (Issoufou and others 2014; Buffie and others 2012). Close linkages between economic growth and public investments depend, according to Gupta and others (2014), on effective management of public investment. For low-income countries such as Senegal, improving the capacity to select public investment projects and programs and to implement them effectively is essential in order to substantially improve the efficiency of the investments and thereby their impact on economic growth and development. The following nonexhaustive list of reforms is offered to help improve Senegal’s public investment management system.

  • Improve the quality of public investment expenditure by continuing to reclassify systematically operating expenditure recorded in the consolidated capital budget. In fact, the inefficiency of public investment in Senegal also derives from confusion between capital expenditure and recurrent costs in connection with the operation of projects and programs.

  • Accelerate institutional reforms to improve the quality of public investments (Grigolli and Mills 2013). In Senegal, these reform efforts should involve strengthening the coordination role of the central planning body by enabling it to ensure that realistic public investments are selected. This body could also more effectively lead and monitor the coherence of the system. In addition, bringing together the state structures responsible for public investment planning and programming could help minimize the risks of bypassing the system and lead to a more effective allocation of resources among sectors.

  • Ensure that the agencies have the resources required to conduct systematic feasibility studies of public investment projects to help improve public investment management. In Korea, the government in 1999 established a dedicated structure (the Public and Private Infrastructure Investment Management Center) to conduct feasibility studies for all projects exceeding a certain level (Rajaram and others 2014). As emphasized in the preceding section, Mauritius implemented a similar framework in 2009. Such a framework could be adapted in Senegal to improve public investment management.

  • Ensure better coordination between the national strategy and sectoral policy. The results-based management introduced under the new harmonized public finance framework supports close involvement of the sectors in attaining development objectives. This approach strengthens transparency and accountability. A sectoral definition of development objectives also makes it possible to consolidate the planning, programming, and budgeting sequence. The principle of multiyear budgeting ensures that public expenditure is accurate and transparent and that its management is based on performance. It is a major challenge to optimize the composition of public investment, so the government must develop capacities for its sectoral allocation (World Bank 2005). To that end, it must establish a methodology for the allocation of resources to sectors that support economic growth.

  • Improve capacity in public investment management. A better institutional framework for public investment planning should aim to strengthen the culture of assessment by building the capacities of the ministries to define the sectoral strategies, prepare projects and programs, and conduct appraisal analysis. Chile, an example cited in relation to developing countries, sustainably strengthened its government’s capacities in the area of project evaluation so that it now has an effective national public investment system. In this connection, the use of guides in Senegal for the preparation, selection, and assessment of projects is highly recommended. At the line ministry level, a new approach must be established for the research and planning units of the technical ministries by clearly specifying the content of their missions and by providing high-quality, motivated human resources (a multidisciplinary team that draws skills from the national private sector or the diaspora to create banks of projects that have been evaluated by the ministries) (see Chapter 13).

  • Rehabilitate the selection function and systematize midterm reviews. Harmonization and facilitation of the process of evaluating public projects or programs in Senegal requires rehabilitation of the function of selecting investment projects and programs and observance of the process used to validate the life cycle of program projects. Systematization of midterm reviews makes it possible to apply any adjustments that may be necessary. For that purpose, an effective monitoring and assessment system, to ensure reporting and adequate collection of project information, must be in place. Therefore, the creation of an independent project review and selection unit similar to the Project Plan Committee and the Independent Review Panel in Mauritius should promote a neutral approach.

  • Improve project and program supervision and monitoring to ensure success in achieving project objectives. Effective supervision of project and program execution and monitoring/evaluation are essential factors in achieving objectives and minimizing risks of collusion and corruption. This approach requires the availability and execution of working plans, controls over contracting procedures, timetables, and execution periods. The execution rates for projects can in fact be improved if authorities continue their efforts to implement information systems so that any problems can be identified in a timely manner. Senegal could also benefit from the creation of project implementation units in key ministries, similar to those deployed in Mauritius.

  • Make final and ex post assessments of programs and projects mandatory. Practically speaking, all projects exceeding a certain cost threshold must be systematically subject to such an exercise. Making a guide available to all ministries will provide an identical template and make it possible to agree on the evaluation criteria.

Conclusion

In moving toward emergence, Senegal is at a crossroads in terms of the efficiency of its public investment. It benefits from a historic opportunity through the Plan Sénégal Émergent. Reforms in the area of public investment management constitute a guarantee for the success of this economic and social development strategy.

The diagnostics of the public investment management system in Senegal show it to be at a relatively low level as compared with other sub-Saharan African countries and with emerging market economies outside the African continent. It is highly recommended for the government to strengthen the culture of ex ante evaluation by bringing together the units responsible for the planning and programming of investments, to avoid circumvention effects, to conduct systematic feasibility studies and other ex ante evaluations, and to improve monitoring of the implementation of public investment projects significantly.

Across-the-board improvement in capacity is crucial to reversing the current trend in public investment management. In addition, the continuation of any reform efforts must include effective implementation of multiyear budgeting to ensure budget unity, accuracy, transparency, and accountability.

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The views expressed are those of the author and do not necessarily represent those of the IMF or IMF policy. The authors are grateful to Vishnu Vassant, Alexei Kireyev, Philip English, Ali Mansoor, Andrea Presbitero, and participants in the January 2016 book sprint for their useful comments. Research assistance from Yanmin Ye, Edna Mensah, and Hilary Devine is gratefully acknowledged. Any remaining errors are the authors’.

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