PUBLIC INVESTMENT GUIDELINES
PITT
Contents
Elaboration of Public Investment Program
Introduction
The process of project approval
Identification
Initial clearance
PIP approval
Project Appraisal
Project funding
PIP Utilization
Private Sector involvement
Improving the current PIP
Project Implementation
Impact Evaluation
Annexes
1. PIP Forms
2. Responsibilities in PIP Production
Table of Tables
Table 1: criteria to select the sources of funds
Table 2: PIP timelines
Elaboration of Public Investment Program
Introduction
In the Retreat between National Budget and National Development Planning and Research Directorates, it was found that Public Investment Program (PIP) which is a 3-year rolling program contains very useful data which are not fully utilized because of their reliability and validity. In the meeting it was realized that sometimes PIP data are different from those in the budget and IFMIS. As PIP can serve the management in investment area and can be utilized by Planning, Budget, Macro and External Finance, the Retreat found important to improve PIP by undertaking the following activities:
-To identify roles and responsibilities of MINECOFIN Unit in project area
-To review the way projects to be put in PIP are approved
-To develop a timeline of finalizing PIP
-To enrich the current PIP with new data
To accomplish that task, a team from budget, EFU and PITT was set up to carry out the assignment. Team members are the following:
-Dr. Octave Semwaga (Team Leader)
-Bright Ntare (From NBD)
-Tom Butera (From EFU)
-Emmanuel Twagirimana (from PITT)
The team was also given the mandate to consult any resource person who could help in the improvement of the current PIP. Then were consulted Mr. Manish and Mr. Clement Ncuti.
This report is proposing what should be done to improve the current PIP.
The process of project approval
The approval process of projects will start by their identification, clearance, approval of studies and funding.
Identification
Projects will be identified by line ministries or districtsthrough Rwanda Local Development Support Fund (RLDSF) taking into account their strategic plans and District Development Plans.
Initial clearance
Identified projects are sent to PITT as Project Profile Documents (PPDs). PITT checks all PPDs sent by Line Ministries and RLDSF to see if they are coherent with National Priorities. Projects are ranked the report is submitted to the Investment Committee (IC) using the following criteria: (i) Desirability, (ii) Achievability and (iii) Sustainability.
The desirability criterion looks at the following:Strategic importance at sector level
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Impact on extreme poverty eradicationSupport to strategic investments promoting linkages, long term transformation, growth, jobs & competitiveness
Impact on export promotion at strategic level
The project promoter (political consideration)
For Achievability, the investment is evaluated taking into account:
Land availability & environmental impact (natural resources)
Risk assessment (1 = high risk, 5 = low risk)
Ease of raising funding (financial resources)
Absorptive capacity/HR resources (human resources)
Lastly, Viability brings evaluators to analyze:
Micro - impact of project in generating or saving foreign exchange
Financial viability and sustainability
Fiscal sustainability and affordability
PIP approval
The Investment Committee chaired by PS/ST will approve budgets for ongoing projects and new projects to be funded through the national budget.
For projects in pipeline, those selected after the initial clearance and for which studies are required, they will be approved by a PPD (Project Profile Document) review team chaired by DG/NDPR. At the time of carrying out the studies, line ministries, RLDSF and PITT will collaborate to make sure that their required studies are well done. For project studies needing more capacities, line ministries will be allowed to hire consultants. Study reports are sent to MINECOFIN for financing. The role of PITT in the study will be to ensure that terms of reference are well elaborated and followed.
PITT will also present to IC the proposed budgets for ongoing projects to be approved. To propose a budget for any ongoing project, PITT will ensure that the PIP form for the project was well filled and that the past execution rate of the project can assure that the requested budget will be consumed. The project execution rate will be obtained from PMMU reports.
Other MINECOFIN Investment Committee members are: DG Planning, DG National Budget, Chief Economist, Director External Finance and Director of Macro. PITT will serve as the secretariat of the Committee.
Project Appraisal
Reports from feasibility and detailed studies are submitted to MINECOFIN. PITT ranks the projects using results from CBA and Cost-effectiveness analysis Techniques. Criteria to be used are mostly Financial and Economic NPVs. Other criteria to be considered are:
-Technical feasibility of the project
-Institutional framework
-Cost-effectiveness of the intervention
-Risks
It is very crucial to notice that the size and the nature and the sources of funds of the project will dictate the depth of the project appraisal.
For a project to be financed with a loan or as a PPP, the appraisal will be undertaken deeply and for projects with at least a size of one million USD ($1,000,000). For smaller publicly financed projects, appraisal at the institution level and initial clearance of PITT will be sufficient.
Project funding
Based on PITT Report, Investment Committeewill approve new projects to be funded in the financial year. The report will take into consideration information from RDB, MACRO and External Finance Units to propose the ways of funding each selected investment.
PITT report will also propose the way of funding different proposed investments taking into consideration the following possible ways of financing:
-Internal financing where Rwanda will finance projects from its own resources
-Grants: Donors could accept to grant funds to implement some projects
-Loans: Government could seek loans for some investments
-Purely Private
-Public-Private Partnership.
Selecting the how a project will be financed will depend on various factors. The starting point will be to calculate the viability of the project itself. The first step will be the calculation of the Financial and Economic NPVs at the investment point of view. If both financial and economic NPVs are negative, the project should be rejected. If the Financial NPV is positive and economic NPV is negative, the project should be implemented as purely private. On the other hand if all the NPVs are positive, the project could be funded as a PPP. Lastly the Financial NPV can be negative whereas the economical one is positive. In this case, only public money has to be used.
Ministries and RLDSF should be informed that any new projects with well filled PPD forms, budgets for ongoing projects with well filled PIP forms have to be presented before the end of September. If this deadline is not respected, those presented deadlines will not be considered in the next financial year.
Table 1:criteria to select the sources of funds
Sign of the NPV / Source of Fund / Action to be undertakenFinancial NPV / Economic NPV
+ / + /
- PUBLIC
- PPP
- PRIVATE
+ / - / PURELY PRIVATE / The project to be sent to ministry or RLDSF to work with RDB to find a private investor
- / + / PURELY PUBLIC / To look for grant
To use internal resources
To contract a loan
For projects which are purely public or PPPs, the government could find funds from its own resources, use grants or loans.
The privileged source will be to seek for grants if transaction costs are not very high and if there is a potential donor in the area of the project. PITT will work closely with external finance unit to identify a potential project donor. If no grant can be obtained, then the Government will start seeing how to use its own resources to implement the project as purely public or as a PPP.
A project proven to be funded as a PPP or as a private one will be sent to the institution (ministry or RLDSF) to work with RDB to find the required budget to undertake it.
When own resources are not sufficient,the government will seek for a loan. To contract a loan it will require the project to generate enough resources to repay it back. Therefore, the Government will consider its debt sustainability and the appraisal of the project should show if the project will be able to service the debt. Therefore the project will be analyzed at the owner’s point of view. The loan will be added to the net cash flows from the total investment point of view as cash receipts and subtracts payments of interest and loan repayment as cash outlays. This analysis will show if the project will pay back the loan.
Below is presented the figure summarizing roles to be played by each main stakeholder in PIP production
Figure 1: Project Cycle Implementation in Rwanda
PIP Utilization
New projects approved by the Investment Committee will be added in the Public Investment Program (PIP) which is a three-year investment program. Some investments will be in pipeline whereas others will be ongoing projects. The latter will be funded through the national budget and PMMU will monitor its implementation. Regarding the projects in pipeline, they will be useful for external finance unit to mobilize resources.
Macro department will use PIP to project the Country balance of payment as the narrative report of PIP will show foreign exchange inflows.
Private Sectorinvolvement
In EDPRS2, it is well stated that the private sector will play a big role to achieve Rwanda Development Goals. Public investment will rise to 15.0% of GDP in 2015 and decrease afterwards as a share of GDP. Private investment is projected to overtake public investment in 2016 to more than 15% of GDP by 2017 as public interventions targeted at further reducing the risk and cost of doing business bear fruit. The government will undertake strategic investments to boost productivity and increase access to resources in priority sectors of the economy, but will fall thereafter as the private sector becomes the driver of growth. Therefore, there is a need of making sure that PIP is playing its role of fostering the private investment.At early stage of PIP development, private sector will be consulted. For Districts, PIP will be discussed with the Private Sector Federation at the District level and presented in Join action District Forum for its validation. Regarding the sectors, sector working groups comprising of public and private people of the sector will validate the proposed public investments. At MINECOFIN level, PSF will be shown the proposed projects for its contribution and participation in funding it. RDB also will be required to share PIP with potential private investors.
PIP Production Calendar
The proposed calendar for producing PIP is taking into consideration the budget and the NDPR planning calendars. What is very important to notice is the fact that feasibility studies can last more than even one year.
The table below shows the proposed calendar.
Table 2: PIP timelines
Month / ActivityJuly /
- Update guidelines for Project Preparation
- Train planner on the application of guidelines and preparation of ToRs and the Integrated Financial Analysis Techniques
- Coach planners in Concept notes preparation
- Monitoring the preparation of Project Concept Notes
August /
- Coach planners in the development of terms of reference for project studies
- Monitoring of feasibility studiesstarted in the same year or in the past year
September /
- Submission of proposed new projects
- Submission of feasibility studies
October-December /
- Initial clearance of new investments
- Ranking of projects with feasibility studies
- Preparation of IC Report
- Processing of PIP forms for ongoing projects
- PPD review team approves project in pipeline[1]
First-half of January /
- Planning Consultations
Second-half of January /
- Production of the draft PIP
- Circulation of the draft to EFU, MACRO and Budget
February /
- Preparation of the IC meeting
- Investment committee approves the draft PIP
March /
- Discussion of the draft PIP in the budget consultation
April /
- Presentation of PIP in BFP Annexes
May-June /
- Fine-tuning PIP with comments from Cabinet
Improving the current PIP
Current PIP contains internally funded projects which do not have any project document. This becomes a big problem at the implementation level. It is proposed here to have all the sectors develop for each project a project charter document according to the annexed template.
Project Implementation
This section presents roles and responsibilities of PMMU and Internal Audit Departments as well as the role of Account General Office in implementing and closing the approved PIP.
After producing PIP the document is shared with all MINECOFIN Departments. PMMU is in charge of making sure that projects are implemented as planned. This Unit will be producing quarterly reports showing the achievements for each investment and any encountered challenges in the implementation. Taking into account recommendations from PPMU, Internal Auditor Department will identify projects which need to be inspected. Criteria to select which investments to be scrutinized will be developed later by that unit. On its side, Public Accounts Unit will follow all accounts for each project and Accountant General Office will play a major role in project closure.
Impact Evaluation
Project evaluation is a systematic method for collecting, analyzing, and using information to answer questions about particularly the project effectiveness and efficiency.
According to the project cycle, there are three types of evaluation:
- Ex-ante evaluation: process that supports the preparation of proposals for new projects. Its purpose is to gather information and carry out analyses that help to define objectives, to ensure that these objectives can be met, that the instruments used are cost-effective and that reliable later evaluation will be possible.
- Ongoing evaluation: evaluation during the implementation of a project or a program.
- Ex-post evaluation: the project ex-post evaluation is conducted some years after the project is completed. It includes the acceptance and final inspection as well as the ex-post economic evaluation and the ex-post management evaluation.
Project experts are familiar with the first two evaluations which concern respectively the design of projects or programs and the mid-term evaluation. After the period of implementation of a project, people are more concerned about writing a final report which shows that planned outputs have been achieved and especially the rate of budget execution.
However, MINECOFIN is aware that the project impacts are observed several years after the closure of the undertaken investment. The impact is at the sectorial level.
The ex-post evaluation (or Impact evaluation) assesses the changes that can be attributed to a particular project. In contrast to outcome monitoring, which examines whether targets have been achieved, impact evaluation:
(i)involves counterfactual analysis, that is, “a comparison between what actually happened and what would have happened in the absence of the project.”
(ii)seeks to answer cause-and-effect questions. In other words, the evaluation looks for the changes in outcomes that are directly attributable to the project directly or in which the project contributed to be achieved.
If we refer to the positive results of the EICV4, projects that have been implemented in recent years by the Government of Rwanda may have had a positive impact on the lives of Rwandans. However, we are not able to tell whether a project has had a more positive impact than another due to the absence of regular and systematic impact assessment. It is therefore very important for the Government of Rwanda to make this kind of assessment to determine the impact but also we would emphasize that conclusions from these studies are used in the formulation of new projects.
Impact evaluation helps to improve the project design phase. Impact evaluation permits to evaluate considered assumptions. Those which were true will be considered in the future and those which were false will be corrected in appraising new investments. Impact evaluation is very important to improve how projects are implemented. Successes found in the implementation will be repeated and failures will be avoided for other projects.
Annexes
1. PIP Forms
- Prioritization of new projects
Ministry /District
1 / 2 / 3 / 4 / 5
Sector Programmes (MTEF) / Sub-Programmes (MTEF) / Project Name / Status / Priority
4 Status of the Project: / OG= On-Going; PIC= New project approved by PIC;
PL= Pipe Line Project (not ready to be programmed in the PIP, due to lack of funding); ID= Idea; Other
5 Priority of the project: / H= High priority; M= Middle priority; L= Low priority
- Project Description
1 Ministry/District
2 Executing Agency
A. Project identification
3 Project name in English
4 Projet name in French / 7 Starting year
5 Project status / 8 Completion year
6 Location / 9 Main component of the project
10 Contact in the Ministry (name, position, address, phone, fax, e-mail)
11 Contact in the Project (name of Project Manager, address, phone, fax, e-mail)
5 Project status: / OG= On-Going; New= New project ready to start;
PL= Pipe Line Project (not ready to be programmed in the PIP, due to lack of funding or poor preparation); ID= Idea; Other
9 Main component: / Please indicate here the biggest project component: INV (Investment= Civil works, Buildings, Equipment, micro-credits)), PPF(Project Preparation Facility),
TA (Technical Assistance), TRA (Training), REC (Recurrent expenditure; general support)
12 Objectives of the project: / What are the specific objectives (or purpose) of the project?
13 Project description: / What are the components of the project? What will be done, constructed, studied, implemented with the achievement of the project?
14 Reference to EDPRS progamme: / To what sector policy /EDPRS programme the project is contributing?
B. Preparation studies / Study n°1
15 Title of the study
16 Level of the study
17 Author/Company, City
18 Date of the study
19 Conclusions of the study
16 Level of the study: / PID=Project identification document; PFS=Pre-feasibility study; FS=Feasibility study; PAD= Project Appraisal document; DES=Complete design study
C. Environmental Impact Assessment
20 Is the project feasible from an environmental point of view?
21 What negative environmental impacts could arise if the project is implemented with the propose design
22 Is thereany other alternativedesign with less negative environmental impact?
23 Have all environmental concerns associated with the project been eliminated?(identify ways of eliminating/mitigating)
24 Prepare a comprehensive environmental monitoring and management plan
- Project Financing
Project title
D. Project Financing Resources by donor and by Financing Agreement (or Financing Convention, or Memorandum of Understanding).[2]
Financing Agreement n°1 / Financing Agreement n°2 / Financing Agreement n°3 / Financing Agreement n°4
25 Donor (Source of financing)
26Date of Financing Agreement (if signed)
27 Number of reference of the Financing Agreement
28 Status of financing
29 Currency
30 Total funded(in currency)
31 Civil Works & Buildings
32 Equipment
33 Sub-loans, Micro-credits
34Technical Assistance
35 Training
36 Direct salaries (TA excluded)
37 Running costs
38Miscellaneous-Contingency
39 Grant or loan
40 If loan: interest rate
41 If loan: duration and grace period
25 Source of Financing: / Put here the name of the financier. Use one column for each Financing Agreement. Budget Funding shall appear in one separate column.
If one donor provides several types of financial support (grants and credits), fill out 2 separate columns, one for each financing agreement.
If there is a gap in the financial construction, please introduce a column for "Local unknown" or "Foreign unknown"
28 Status of financing: / 4 possibilities: / CE=Certain (=signed);
QC=Quasi-Certain (negotiations are finished but no formal agreement has been signed yet);
UN=Under negotiation (donor is interested, but the definitive amount or type of financing have not been agreed);
NA= Not Available
30 Amount funded / Express financial figures 31 to 38) in the currency shown in 30 (as specified in the Financing Agreement)
All budget resources are expressed in millions of RWF, Rwandan Francs; all other currencies in thousands;
39 Grant or Loan
Loan = the Government shall reimburse the funds to the donor
- Programming of Funds[3]
Project name:
E. Financial data by [4]source of financing 40 / Grant or
Loan
41 / Status of financing 42 / Currency 43 / Total for the whole project 44 / accrued 30/06/2011 45 / 2011/12 estimate 46 / 2012/13 programmed 47 / 2013/14 programmed 48 / 2014/15 programmed 49 / Total PIP 50 / After 51 / Control
Box
Source of Financing / Category / OK
OK
OK
OK
OK
OK
OK
OK
OK
OK
OK
Please give the detail by Financing Agreement and by nature of expenditure for each source of financing, according to previous table boxes30 to 36
RWF in millions, other currencies in thousands
NB: Figure in column 44 = Sum of figures in columns 45 to 49 plus 50 and 51
F. Project actual performance year 2011/12 52 / Results, events, issues, delays, problems, modification achieved or expected by the project in 2009/2010
G. Expected Project Outcomes / Realization 2012/13-2014/15 53
2. Responsibilities in PIP Production
Institution/Unit / RolesLine-Ministry /
- Identifies new projects to be sent to PITT
- Sends the proposed budget for ongoing projects
- Fills PIP and PPD forms
RLDSF / Compiles projects from Districts before they are sent to PITT
PITT /
- Ranks project ideas
- Reviews proposed budgets for ongoing projects
- Proposes to IC new projects
- Proposes how a project can be funded
NBD /
- Allocates budgets to new projects and to feasibility studies
- Shares with PITT the execution rates of ongoing projects
EFU /
- Fundraises for new approved projects
- Shares with PITT the potential donors of grants
MACRO /
- Uses PIP to project balance of payment
- Shares with PITT the amount of loans that could be contracted
PPD Review Team /
- Approves pipeline projects
- Approves budget for the feasibility studies
Investment Committee /
- Approves new projects to be put in PIP
- Approves budget for the ongoing projects
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