Kyiv, March 21, 2013 – The World Bank with additional funding from the Swiss Cooperation Office completed a Public Investment Management Performance Assessment for Ukraine. This assessment report contains a comprehensive analysis of public investment management (PIM) cycle, benchmarking against good international practices, and identification of key constraints to efficient functioning of the PIM in Ukraine.
Adequate and efficient public investments are vital to provide basic public services, to achieve and sustain economic growth, and to promote shared prosperity for the population. While increasing the amount of resources going into public investment projects is important, the efficiency of such investment could not be achieved without good public investment management practices. “Efficiency in public investment is particularly essential at times like this when public resources are severely constrained”, says Qimiao Fan, World Bank Country Director for Belarus, Moldova and Ukraine.
Ukraine has vast public investment needs. At the same time, Ukraine’s public investment management system has a number of drawbacks including: lack of a clear definition of what constitutes a public investment project that allows many projects to avoid public scrutiny, lack of a clear link between public investment projects with the country’s and sector development strategies that would allow the prioritization of public investment projects, and absence of effective project appraisal and appraisal review procedures.
These drawbacks result in high under-execution rates for public investments with many unfinished or delayed projects and significantly higher costs. In fact, the average cost of construction in Ukraine is about 20% higher than in Germany although labour costs are much, much lower in Ukraine. This means that even if the average costs of construction in Ukraine is brought down to just the same level as in Germany, Ukraine can built 12 schools for the cost of current 10, or rehabilitate 120 km of roads at the cost of current 100 km!
Based on the assessment of the current Public Investment Management system, the report makes a number of recommendations that will help Ukraine achieve better value for money in implementing public investment projects:
- The government should clearly define the nature of Public Investment Programs and Projects in a legally enforceable manner, so all projects financed from the budget as well as through public-private partnership undergo proper appraisal and selection prior to implementation.
- The government should strongly consider the development of a medium-term Strategic Investment Planning tool that links public investment programmes to country and sector development strategies.
- The government should ensure adequate institutional and human resource capacity that is key to make Public Investment Management system function - adequate staffing and training is important for central agencies such as Ministry of Economic Development and Trade and Ministry of Finance as well as other government agencies that are initiating and implementing public investment projects.
Public investment management reform, particularly capital budgeting reform is spelled out as one of the key areas in the President’s Economic Reform Programme for 2010-2015. “While there have been some progress, much more remains to be done,” says Mr. Fan. The World Bank stands ready to engage all stakeholders in a constructive dialogue and to support further reforms.
