Investment Programming and Aid in East Asia: -- Thailand, Malaysia and the Philippines--

1. Investment Programming and Aid in East Asia: -- Thailand, Malaysia and the Philippines-- Policy Formulation in Developing Countries GRIPS Development Forum

2. Highlights • Coherence between development planning and investment programming in three East Asian countries • Decision making parameters and coordination mechanisms for public investment selection and prioritization • Project preparation and investment decision process for locally funded projects and ODA projects • Summary

3. 1. Coherence between development planning and investment programming

4. Coherence between development planning and investment programming <Thailand> • Annual budget and • debt approval • Project approval (as part of annual budget/debt approval process) National Economic and Social Development Plan (NESDP)  5-year plan* Project approval • Development Plan * 1st NESDP was the only 6-year plan <Malaysia> Malaysia Plan  5 year-plan • Development Plan • Public Investment Plan • Project approval • Annual budget and • debt approval Project approval <Philippines> Medium-Term Philippine Development Plan (MTPDP)  6-year plan* • Development Plan * coincides with the presidential term • Project approval • Annual budget and • debt approval Medium-Term Public Investment Program (MTPIP)  companion document of the MTPDP • Public Investment Program Source: Author

5. Thailand: Overview of development planning and investment programming <National Economic and Social Development Plan (NESDP)> • Annual budget and debt approval conducted as a part of the annual budget/debt approval process • Development planning Project approval <Focal point> NESDB (National Economic and Social Development Board) <Focal point> BOB (budget)and FPO+PDMO(1999-) (loans) <Coordination> <Coordination> • Coordination mainly among central economic agencies): • NESDB • BOB (Bureau of the Budget) • FPO (Fiscal Policy Office) + PDMO (Public Debt Management Office, 1999-) • Central Bank *macro-sector coordination relatively weak • Budget hearings and dialogues: • BOB “mobile units” • State enterprises • Consultation with other central economic agencies: • NESDB • FPO, PDMO • Central Bank • <Coordination mechanisms> •  Centralized system, with strong coordination among central economic agencies (CEAs) -- subtle check and balance functions built-in, leading to shared responsibilities among CEAs Source: Author – drawn from information provided by NESDB, BOB, FPO and PDMO to the GRIPS team

6. Malaysia: Overview of development planning and investment programming <Malaysia Plan> • Development planning • Public investment planning • Project approval • Annual budget and debt approval Project approval <Focal point> MOF (Ministry of Finance) <Focal point> EPU (Economic Planning Unit) <Coordination> • Budget hearings and dialogues: • “Planning cells” in the relevant ministries and agencies • State governments • Private sector • NGOs • Consultation: • EPU • ICU (Implementation Coordination Unit) • PSD (Public Service Department) <Coordination> • Coordination for planning: • National Planning Council (Cabinet level) • National Development Planning Council (Officials level) • Inter-Agency Planning Groups (Working level) • Coordination for project approval: • Development Projects Examination Committees (ministries, agencies, state gov’ts) • <Coordination mechanisms> •  Rule-based operations duly installed in the coordination machinery Source: Author -- drawn from “Development Planning in Malaysia” issued by the EPU in 2004 and information provided by EPU to the GRIPS team

7. The Philippines: Overview of development planning and investment programming <Medium-Term PhilippineDevelopment Plan (MTPDP)> • P Project approval <Focal point> • Development planning NEDA <Coordination> Weak linkage • Coordination for project approval: • NEDA Board Investment Coordination Committees (ICC) • ICC-Cabinet Committee • ICC-Technical Board • ICC-Secretariat <Medium-Term PublicInvestment Program (MTPIP)> • Public investment programming <Focal point> NEDA (National Economic and Development Authority) • Annual budget and debt approval <Coordination> • Coordination for MTPDP: • Planning Committees • Technical Working Groups • Legislative Executive Development Advisory Council (LEDAC) • Coordination for MTPIP: • NEDA Board Committees • Planning Committees • Regional Development Council Committees <Focal point> DBM (Department of Budget and Management) <Coordination> • Coordination for budget process: • Development Budget Coordination Committee (DBCC) Source: Author -- drawn from information provided by NEDA to the GRIPS team

8. Coherence between development planning and investment programming Additional points to be featured <Thailand> • NESDPs used to be quantitative, strategic guidance with resource allocations now descriptive, qualitative analysis <Malaysia> • Malaysia Plans maintaining the roles as the quantitative and strategic guidance for development objectives and resource allocations <The Philippines> • Executive efforts on-going to strengthen the MTPDPs and the MTPIPs to become strategic guidance for development objectives and resource allocation • …but “legislative interventions” undermining these efforts

9. 2. Decision making parameters and coordination mechanisms for public investment selection and prioritization <Thailand> • Substantive roles of the NESDB was reduced with: (1) the enactment of the legislation on public-private partnerships (1992), and (2) the advancement of decentralization (late 80s - ) • Before 1992, the NESDB exercised centralized, “top-down” power for public investment approval process • After the late 80s, line agencies/ministries increased their involvements in the planning and investment programmingMinistries began to make budgetary requests, bypassing the NESDB in the project approvalBOB (Bureau of the Budget) has become a crucial agency for investment programming

10. Thailand: Approval process for public investment projects Project Approval Process prior to 1992 -- all public investment projects in theory (based on the NESDB Act in 1978) Annual budget approval process Inclusion in Annual Budget Plan BOB (Gov’t budget) Cabinet Parlia-ment Line agenciesor State enterprises (SOE) Reporting Ministries of Gov’t units or SOE NESDB Cabinet by line agenciesor SOE Inclusion in Annual Borrowing Plan (both domestic and foreign loans) FPO (Domestic and foreign loans) Cabinet NESDB: National Economic and Social Development Board BOB: Bureau of the Budget FPO: Fiscal Policy Office Annual debt approval process Source: Author -- drawn upon provisions from the National Economic and Social Development Board Act of 1978 and information provided by BOB, FPO and PDMO to the GRIPS team

11. Thailand: Approval process for public investment projects Project Approval Process (recent normal procedures) -- public investment projects (including SOE projects) over one billion baht If shortcut route is taken, Cabinet will ask comments from the concerned agencies including the NESDB, the MOF and the BOB prior to approval. Annual budget approval process Inclusion in Annual Budget Plan BOB (Gov’t budget) Cabinet Parlia-ment Line agenciesor State enterprises (SOE) Reporting Ministries of Gov’t units or SOE Shortcut Cabinet by line agenciesor SOE Inclusion in Annual Borrowing Plan (both domestic and foreign loans) PDMO (Domestic and foreign loans) Cabinet Required if SOE (i) Ministries must submit project proposals to the NESDB if they were SOE projects but (ii) they can submit project proposals either directly to the Cabinet, bypassing the NESDB for shortcut, or through the NESDB, if they were not SOE projects. NESDB PDMO: Public Debt Management Office* PDMO was formed after 1999 through transfer of divisions and units from the FPO and the Comptroller General’s Department to ensure coherent public debt management under one agency Annual debt approval process Source: Modification of the figure in “Policy Coordination, Planning and Infrastructure Provision: A Case Study of Thailand”, a background paper commissioned for the ADB-JBIC-World Bank East Asia and Pacific Infrastructure Flagship Study in 2004

12. Decision making parameters and coordination mechanisms for public investment selection and prioritization <Malaysia> • Public investment selection and prioritization have been taking place as part of project approval process within the Malaysia PlansAny candidate projects must be included in the project list in the Malaysia Plans to be carried out for implementation • EPU has been functioning as the strategic core center for development planning and investment programming • State EPUs scrutinize candidate projects proposed by the state agencies to decide regional priority before submitting project requests to the EPU

13. Malaysia: Approval process for public investment projects Project Approval Process for the Malaysia Plans (Five-year Dev’t Plans) by ministries/agencies and state government (for both development and recurrent budget) Ministries Agencies State gov’ts EPU Development Projects Examination Committees Chair: EPU EPU Cabinet Parlia-ment MOF Parlia-ment Consultation (If Federal Ministries, consultation through their state branches) Consultation Reallocation of development budget among sectors, if necessary Budget hearings and budget dialogues EPU ICU PSD State EPUs “Planning cells” in the relevant ministries and agencies, State governments, Private sector, NGOs As a part of Five-year Development Planning process EPU: Economic Planning Unit MOF: Ministry of Finance ICU: Implementation Coordination Unit PSD: Public Service Department Annual budget and debt approval process Source: Author -- drawn from “Development Planning in Malaysia” issued by the EPU in 2004 and information provided by EPU to the GRIPS team

14. Decision making parameters and coordination mechanisms for public investment selection and prioritization <The Philippines> • NEDA plays the focal point in evaluating and programming public investment projects by coordinating the ODA, and appraising projects/programs • The ICC (Investment Coordination Committee), the inter-agency committees of the NEDA Board, is responsible for investment decision, particularly for ODA and BOT projects • Investment projects funded by the PDAF (i.e. pork barrel funds allocated to each legislator) are not subject to the ICC approval The administrative system allows legislative intervention that may lead to allocative distortion, undermining transparency and efficiency in investment selection

15. The Philippines: Approval process for public investment projects Project Approval Process -- public investment projects (namely ODA and BOT projects) subject to ICC approval Three levels of ICC Line agencies ICC Secretariat (NEDA Technical Staff) ICC-Technical Board ICC-Cabinet Committee NEDA Board Project approval Locally-funded projects are submitted to the DBM and/or the NEDA depending on the size of the project. The ICC has yet to evaluate and approve a locally-funded project, as projects submitted to the DBM for local funding are below the ICC threshold of 500 million pesos. Hence, inclusion of the project in the national budget by the DBM becomes the crucial selection decision for locally-funded projects. Inclusion of the project in the national budget constitutes final project approval by line agencies DBM DBCC Cabinet President Congress Annual budget approval process NEDA: National Economic and Development Agency ICC: Investment Coordination Committee DBM: Department of Budget and Management DBCC: Development Budget Coordination Committee Source: Author -- drawn from information provided by NEDA to the GRIPS team

16. 3. Project preparation and investment decision process for locally funded projects and ODA projects

17. Project preparation and investment decision process for locally funded projects and ODA projects <Thailand and Malaysia> • “Integrated system” • Strategically and selectively utilized aid Both gov’ts regarded foreign aid as temporary, supplementary recourses to fill domestic financial and capacity gaps Both gov’ts strategically shifted donor composition and the form of aid in accordance with their development stages  Both gov’ts have been careful about maintaining bargaining power against donors

18. Project preparation and investment decision process for locally funded projects and ODA projects <The Philippines> • “Dual system” • Setting up dual and exceptional system for ODA would increase gov’ts administrative burden create distortion and inefficiency to the economy as a whole

19. 4. Summary • Diverse institutional framework, coordination mechanism and approval procedures for development planning, public investment planning and project approval among the three countries • Different configuration in terms of coherence between development plans and investment plans • “Integrated system” vs. “dual system” between locally-funded projects and ODA projects giving different implication in the use of aid and efficiency considerations THE END