Public Investment Plans Research Articles

State management of public investment in road construction in Vietnam: Current situation and solutions

This study examines Vietnam’s state management of public investment in road construction. The development of road transport infrastructure is in extremely high demand as Vietnam undergoes an economic transition. Despite the fact that the effects of the COVID-19 pandemic have caused the economy to grow more slowly recently, public investment in the transport industry has increased significantly. Several modern, large-scale road works that have been finished and put into operation are having a significant positive impact on urbanization, connecting regions, and socioeconomic development. However, public investment in road transport construction still has a lot of issues that need to be fixed. The state’s weakness is one of the primary issues that reduces investment efficiency. This study analyzes the state management of public investment in road construction, according to the following contents: legal system and policies; formulation and implementation of public investment plans; inspection and supervision by state management agencies. The method of collecting secondary data and primary data (through sociological investigation) is used and combined with Statistical Package for the Social Sciences (SPSS) software to determine the influencing factors and find out the problems and their causes. Therefore, this study proposes a number of urgent and practical solutions to improve the state management of public investment in road construction and develop a synchronized road transport network.

Fiscal rules and the reliability of public investment plans: Evidence from local governments

We document that Italian public administrations systematically overestimate capital expenditures, and that the introduction of a cap on this spending item improves the accuracy of their plans. Our analysis relies on a unique dataset including budgetary figures (both planned and realized) for all Italian municipalities, and exploits a national reform which introduced a limit on realized capital expenditures only for municipalities above a given population threshold (5000 residents). One possible interpretation of our results is that by exploiting the imperfect knowledge of voters, policymakers benefit from promising overly ambitious investment plans. The introduction of some form of capital-expenditure limit makes these promises less credible, and helps to bring spending plans in line with reality. Furthermore, we find that capital revenues are also overestimated, and that the forecast accuracy of these revenues improves due to the reform. This is in line with our political-economy interpretation: as there is less room to inflate expenditures, politicians also have fewer incentives to indulge in window-dressing on the revenue side.

Completing the planning and implementation of plans of public investment in road infrastructure construction in Vietnam

In recent years, public investment has been crucial in promoting socioeconomic development. In the context of Vietnam's economic recession and difficulties due to the impact of the Covid-19 pandemic, public investment in road transport infrastructure construction has become an effective tool for macroeconomic management. Planning and implementation of plans have an essential function in ensuring investment efficiency. The article analyzed the current situation of public investment planning and implementation in road infrastructure construction, pointed out the shortcomings, and established 19 criteria to evaluate the planning function and organization of plan implementation. Also, in the article, quantitative analysis is performed through SPSS software to determine the level of achievement of the targets. That is the basis for the authors to propose some solutions to improve the planning and implementation of plans to enhance the efficiency of public investment in road infrastructure construction in Vietnam.

Paying for Performance in Public Pension Plans

We examine the relation between public pension plan chief investment officer (CIO) compensation and plans’ investment performance. Higher paid CIOs outperform their counterparts by 47–60 basis points per year, largely through increased and superior investment in private equity and real estate. This outperformance generates an additional $74.91–$95.63 million in economic value. Plans offering higher compensation hire better educated CIOs and are more likely to retain their CIOs. Higher CIO compensation is positively correlated with the use of incentive compensation, but incentive compensation does not directly affect performance. Demand- and supply-side frictions help explain the variation in CIO pay and the persistent low compensation paid by some plans despite the positive relation between compensation and performance. This paper was accepted by Victoria Ivashina, finance. Funding: S. Ray gratefully acknowledges a summer research grant from the Culverhouse College of Business at the University of Alabama. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2022.4554 .

Integrating Climate Risk Management in infrastructure PPPs in Developing CountriesER CONSIDERATIONS

Climate change is one of the largest threats to global economic growth and financial stability. While international cooperation to address climate change has increased in recent years, progress has been limited in transition to more climate-proof infrastructure management. Stakeholders involved in infrastructure development must urgently understand and integrate climate-related risks (CRR) from all three physical, transition, and liability aspects. As public-private partnerships (PPPs) are a key modality in delivering infrastructure projects, PPP process cycle provides many venues to proactively manage CRR that could arise throughout the whole infrastructure life cycle. To such an end, this paper identifies the specificities of CRR for infrastructure PPPs, providing illustrations on the relevant types of climate-related risks, conceptual analyses of the systemic implications, broader ecosystem-wide considerations facing the key stakeholders as well as granular practical recommendations to adapt the PPP process cycle. Finally, the broader considerations for key stakeholders, particularly the public sector, policymakers, and private sector are discussed. In doing so, this paper aims to contribute towards the development of good practices among PPP practitioners and stakeholders for managing climate-related risks. Keywords: stranded assets, valuation, public investment planning, infrastructure economics, climate change, public-private partnerships

What Are the Needs of City Dwellers in Terms of the Development of Public Spaces? A Case Study of Participatory Budgeting in Częstochowa, Poland.

Participatory Budgeting (PB) is considered a human-centered method of public resource management and investment planning, which strongly reflects the needs of the inhabitants of the municipality. The aim of this article is to assess the structure of the inhabitants’ needs expressed in the PB procedures in Częstochowa, Poland and their relation to the social and demographic characteristics of the city districts. The standard methods of quantitative and qualitative analysis were used (Pearson correlation coefficient and content analysis of the municipal documents), based on the data about: (1) the projects implemented in Częstochowa PB in the years 2015–2019; (2) the age structures and population density in the districts; and (3) qualitative data on district development characteristics. Based on the authors’ typology of projects, it was found that the most popular tasks were related to the comfort and safety of mobility and recreational facilities used for spending free time in public spaces. A relatively lower level of activity of the citizens was found when expressing their needs in central, densely populated districts with a high share of people aged over 65, and a relatively higher level of activity was found in the districts with a high proportion of people aged 0–18 and with lower population density. In the densely populated central districts, relatively high interest in the development of green areas was observed, while in the less populated developing peripheral districts, the preferred infrastructure was related to mobility. These correlations can be logically explained by the conditions related to the development processes of individual districts. The authors conclude that PB can be an important mechanism in determining local needs for the development of public spaces; however, it rewards the needs of the most active social groups.

Fiscal rules and the reliability of public investment plans: evidence from local governments

Fiscal rules and the reliability of public investment plans: evidence from local governments

Change of administrative management in sub-national governments and its impact on administrative systems: Amazonas region, 2018-2019

The present research evaluates the possible consequences of rescheduling the date of change of administrative management of the Peruvian local and regional governments, from December 31 to July 28, evaluated in the impacts on the administrative systems of the State. For this, a panel of experts or Delphi method was carried out, with twenty managers from the Amazon from six regional and local governments, who participated in at least one transfer of administrative management between 2018 and 2019. The results of the Delphi method were systematized, identifying the risks and strengths, as well as the advantages and disadvantages of the proposal on the administrative systems of the Peruvian State. It was observed that the proposal had a significant impact on the administrative systems of: Human Resources Management, Supply, Public Budget, Treasury, Accounting, Public Investment and Strategic Planning. Then the AHP (Analytical Hierarchy Process) methodology was applied to determine the priority of the proposals, using nine criteria distributed in four factors: Social, economic, institutional and legal. The application of the AHP method defines that the benefits for Peruvian citizens are greater when the change of administrative management is made on July 28.

Moving beyond opportunity narratives in COVID-19 green recoveries: A comparative analysis of public investment plans in France, Germany, and the United Kingdom

This article makes two contributions to the COVID-related green recovery literature, which is dominated by optimistic and speculative opportunity narratives. Mobilising insights from political science theories, our conceptual contribution is to suggest that green recovery analyses should focus not only on the opportunities (‘permissive conditions’) created by the COVID-crisis, but also on the actions and strategic considerations (‘productive conditions’) and pre-existing contexts (‘critical antecedents’) that shape the exploitation of these opportunities. Our empirical contribution is to analyse actual green recovery spending plans of three leading countries (France, Germany, and the UK), focusing on the size, sectoral allocation, and implementation choices, which differ markedly. France spends the most, both in absolute and GDP-relative terms, followed by Germany. UK spending is 43% less than France. The UK and France mostly support existing sectors (buildings, railways), while Germany focuses 57.8% of its funding on new technologies (electric vehicles, hydrogen). We explain country differences by analysing different mixes of strategic considerations, including climate mitigation, jobs, GDP growth, productivity, exports, global competitiveness, regional support, social fairness, party politics, and electoral ambitions. We relate these different motivations to pre-existing context conditions such as varying socio-economic effects of the COVID-crisis, pre-existing concerns (e.g., high unemployment, social and regional inequalities), the economic importance of particular sectors, and pre-existing climate policy plans. We conclude that the green recovery plans are powerfully shaped by pre-existing contexts, plans and developments, which constrain the use of the crisis-induced opportunities.

Public Investment for Health in Vietnam: The Current State and Policy Recommendations

The latest Vietnamese health system is being steadily renewed and strengthened in the direction of equality- efficiency-development and social security. Over past years, the health sector has been involved in investing in the construction of central-to-local medical examination and treatment facilities with state budget money, government bonds, ODA and other sources. The main purpose of this study is to empirically test the Public investment for health in Vietnam. The author collected secondary data from previous studies and the reports of Ministry of Health, Ministry of Planning and Investment, Ministry of Finance. The results of the research show that the public investment plan for the period 2016-2020 is focused on the ability to collect the state budget; State budget expenditure on health is not consistent every year, but tends to increase; the demand for investment in health in the period 2016-2020 is very large and is surely to increase in the future. Based on the findings, some conclusions are given.

Making the Eurozone work: a risk-sharing reform of the European Stability Mechanism

This work presents an original proposal for the reform of the Eurozone architecture according to an approach based on risk sharing (aiming to reach in the long-term the mutualization of public debt). The proposal envisages a new role for the European Stability Mechanism (ESM) which should gradually become the guarantor of the public debts of the European Economic and Monetary Union (EMU). In this way, the new ESM would support the full transition from national debts to a single Eurozone public debt (e.g. Eurobonds) with a single yield curve for all countries. Our proposal would benefit both core and peripheral EMU countries. Indeed, the riskiest countries, which would gain from the ESM conditional debt guarantee, should give up the possibility of redenominating their national debt and would pay to the ESM the corresponding market price of the guarantee. This would strengthen the capital endowment of the ESM and also allow it to use its leverage capability to support the realignment of the economic cycles of the different countries through profitable public investment plans concentrated in the weakest regions of the EMU. Such plans would be coordinated and implemented by the European Union. After a transition period, our Insurance Fund proposal would contribute to a much more resilient monetary union, with a European fiscal policy and mutualized debt. Admittedly this proposal presupposes a political consensus at the EU level to reinterpret the no bailout rule enshrined in the treaties so that risk sharing institutions implemented with fairly priced insurance scheme can be allowed. New risk sharing institutions will foster a common vision of belonging to the same federal, political union in the making, the only one compatible with the abdication of fiscal sovereignty by national governments.

Making the Eurozone Works: A Risk-Sharing Reform of the European Stability Mechanism

This work presents an original proposal for the reform of the Eurozone architecture according to an approach based on risk sharing (aiming to reach in the long-term the mutualization of public debt). The proposal envisages a new role for the European Stability Mechanism (ESM) which should gradually become the guarantor of the public debts of the EMU. In this way, the new ESM would support the full transition from national debts to a single Eurozone public debt (e.g. Eurobonds) with a single yield curve for all countries. Our proposal would benefit both core and peripheral EMU countries. Indeed, the riskiest countries, which would gain from the ESM conditional debt guarantee, should give up the possibility of redenominating their national debt and would pay to the ESM the corresponding market price of the guarantee. This would strengthen the capital endowment of the ESM and also allow it to use its leverage capability to support the realignment of the economic cycles of the different countries through profitable public investment plans concentrated in the weakest regions of the EMU. Such plans would be coordinated and implemented by the European Union. After a transition period, our Insurance Fund proposal would contribute to a much more resilient monetary union, with a European fiscal policy and debt. Admittedly this proposal presupposes a political consensus at the EU level to reinterpret to the no bailout rule enshrined in the treaties so that risk sharing institutions implemented with fairly priced insurance scheme can be allowed. New risk sharing institutions will foster a common vision of belonging to the same federal, political union in the making, the only one compatible with the abdication of fiscal sovereignty by national governments.

Public investment, inflation persistence and central bank independence

PurposeThe purpose of this paper is to investigate, both theoretically and empirically, the institutional setting of monetary policy making that mitigates the effects of productive public investment on inflation persistence.Design/methodology/approachIn the theoretical approach, the authors consider a simple monetary game model à la Barro-Gordon introducing, apart from stochastic output shocks, indexed wage contracts and public investment effects. Then, the authors empirically produce inflation persistence and public investment persistence by estimating a first-order autoregressive model in a fixed rolling window of 36 months for the UK and also use a dummy in order to incorporate the regime switch in monetary policy since 1997, giving a clear increase in the level of central bank independence.FindingsThe theoretical framework suggests that an independent central banker could better manage inflation expectations and therefore inflation persistence despite the occurrence of persistent public investment shocks. From the perspective of fiscal policy, the appointment of a conservative and independent central banker could absorb adverse effects on inflation dynamics resulting from persistent expansionary fiscal policies. Empirical evidence in the UK indicates that the creation of an independent monetary policy committee reduces the positive link between public investment and inflation persistence.Practical implicationsFrom a monetary policy perspective view, the best response to public investment policies is to increase the degree of independence to alleviate effects on inflation dynamics. From the perspective of fiscal policy, an independent central banker can provide the necessary conditions to undertake a long-run public investment plan, since long-run growth will not be undermined by adverse inflation inertia.Originality/valueThe authors introduce, in the debate of inflation persistence, both theoretically and empirically, the role of public investment and monetary policy design.

Why Europe Needs a Public Investment Plan

In the continuing stagnation of European economies, the persistence of inadequate demand plays a crucial role that deserves greater attention. First and foremost, we are in a context of slower international growth, in which global world trade is growing more slowly than global GDP. This implies that exports are not in the position to be the driver of renewed growth for Europe.

Economics of public capital expenditure in the Sri Lankan road infrastructure sector

The Sri Lankan Government spends a significant share of its capital budget on road infrastructure. Therefore, it is important to ensure the efficiency of capital deployment in road sector projects. This research was undertaken with the objective of assessing capital efficacy in road development. In addition, the research sought to appraise strategies adopted in the institutionalisation of an appropriate public investment management mechanism, such that the maximum possible economic gain could be obtained. Road projects undertaken by the Road Development Authority of Sri Lanka over the period 2005-2012, covering an overwhelmingly large share of public spending on road sector, were examined. The indicator used as the inverse of capital efficacy was the real capital expenditure intensity per unit of surface area, which was regressed against a selected set of cost-influencing factors, whereby significant determinants of capital intensity were identified. Project size, class of road, nature of terrain, funding mechanism and contract procurement process emerged as significant determinants with their influence being exerted in the expected direction, while the surface technology and the type of contractor were not significant. It was found that to fund projects through bilateral credit tied to contractors domiciled in lender countries without competitive bidding was highly capital intensive, and therefore inefficient, in terms of capital deployment. The outcomes of the study recommend that public investments should be executed through local contractors to the maximum possible extent, and that, whenever foreign funding becomes necessary, contract negotiation with a pre-designated company without competitive bidding should be avoided, given that such a modality would be prone to wastage, leakages, mismanagement, and corruption. It is strongly recommended to institutionalise a competitive procurement process through an effective mechanism for public investment planning, appraisal, and implementation management, to ensure the efficiency of public sector capital expenditure.

Operationalizing Iterative Risk Management under Limited Information: Fiscal and Economic Risks Due to Natural Disasters in Cambodia

Iterative risk management and risk-sensitive public investment planning are increasingly seen as essential elements of natural disaster resilience. This article assesses the disaster risk facing the hazard-prone Southeast Asian country of Cambodia and discusses its fiscal preparedness and need for proactive disaster risk management. The study provides a bottom-up assessment of flood and cyclone risks to public and private buildings including educational structures, health facilities, and housing and estimates the total direct economic damage to range from approximately USD 304 million for a 5-year return period event to USD 2.26 billion for a 1000-year return period event. These estimates were further analyzed using the fiscal risk due to disasters, which indicates that Cambodia will likely face a resource gap whenever a hazard as large as that of a 28-year return period event strikes. Given the frequent occurrence of disasters and rapid accumulation of capital assets taking place, proactive risk reduction is highly advisable. But interviews with national policymakers also revealed that there are a number of barriers to effective risk reduction and management in Cambodia. The general lack of awareness regarding risk-based concepts and the limited availability of local risk information necessitate a continued and sustained effort to build iterative risk management in Cambodia.

Debt sustainability, public investment, and natural resources in developing countries: The DIGNAR model

Policymakers in resource-rich developing countries often face complicated fiscal choices to manage natural resource revenues. While investing resource revenues in public capital may promote economic growth, spending without saving or borrowing against future revenues can expose the economy to debt sustainability risks. This paper presents the Debt, Investment, Growth, and Natural Resources (DIGNAR) model for analyzing the macroeconomic and debt sustainability effects of scaling up public investment in resource-rich developing countries. It captures pervasive problems of these countries that may be aggravated during scaling-ups, including investment inefficiency and limited absorptive capacity. It also allows for flexible fiscal specifications: investment can be jointly financed by resource revenues and debt; a resource fund may be used as a buffer; and distorting fiscal adjustments are subject to feasibility constraints. The application to an average low-income country shows that, when fiscal adjustment is implementable, a delinked public investment approach combined with the resource fund – such that government spending is a-cyclical with respect to resource revenues – can reduce macroeconomic instability relative to a spend-as-you-go approach. However, even with the fund, ambitious frontloading public investment plans combined with more borrowing can induce debt sustainability risks, especially with declining investment efficiency or when future resource revenues turn out to be lower than expected.

The Way Forward: Moving from the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness

We argue that the U.S. economy is presently mired in a particularly tenacious, Fisher-style debt-deflation rooted in long term secular trends in the domestic and global economies. Global productive capacity has steadily outpaced global absorptive capacity for several decades now, and the latter will not catch up with the former for a good many years to come -- if ever. In order to avert long-term Japanese-style stagnation at home and quite possibly slowdown and slump worldwide, the U.S. will have both (a) to eliminate private sector debt-overhang from 'both sides' of the same, and (b) to act in concert with other nations to reverse and eliminate persistent trade imbalances once and for all. We accordingly describe and prescribe a detailed economic recovery program comprising three 'pillars.' The first is a robust public infrastructure investment plan to compensate for retrenchment-rooted lags in consumer demand. The second is a comprehensive mortgage debt restructuring plan including bridge loan assistance, principal reduction, and 'rent to own' components for mortgage debtors facing three distinct kinds of distress. The third includes medium and long term fiscal and currency policy reforms designed first to recycle trade surpluses into demand stimulus where presently needed, and ultimately to prevent any recurrence in future of imbalances such as have characterized global trade over the past several decades.

Multi-level integrated planning and greening of public infrastructure in South Africa

The South African government has named the transition towards a greener economy one of its priorities. Meanwhile it has developed a new multilevel integrated planning process, and announced a massive public infrastructure investment plan. The converging point of these three dynamics should be the integration of green infrastructure principles into the different plans as the foundation of the green transition. This paper uses a policy integration analytical framework to assess whether this convergence is in fact taking shape. It analyses the level of integration of green infrastructure principles into the different plans and suggests options to move the green infrastructure agenda forward.

Debt Sustainability, Public Investment, and Natural Resources in Developing Countries: the DIGNAR Model

This paper presents the DIGNAR (Debt, Investment, Growth, and Natural Resources) model, which can be used to analyze the debt sustainability and macroeconomic effects of public investment plans in resource-abundant developing countries. DIGNAR is a dynamic, stochastic model of a small open economy. It has two types of households, including poor households with no access to financial markets, and features traded and nontraded sectors as well as a natural resource sector. Public capital enters production technologies, while public investment is subject to inefficiencies and absorptive capacity constraints. The government has access to different types of debt (concessional, domestic and external commercial) and a resource fund, which can be used to finance public investment plans. The resource fund can also serve as a buffer to absorb fiscal balances for given projections of resource revenues and public investment plans. When the fund is drawn down to its minimal value, a combination of external and domestic borrowing can be used to cover the fiscal gap in the short to medium run. Fiscal adjustments through tax rates and government non-capital expenditures—which may be constrained by ceilings and floors, respectively—are then triggered to maintain debt sustainability. The paper illustrates how the model can be particularly useful to assess debt sustainability in countries that borrow against future resource revenues to scale up public investment.