Public Investment Projects Research Articles

MIVES multi-criteria approach for the evaluation, prioritization, and selection of public investment projects. A case study in the city of Barcelona

A meaningful contribution to the evaluation of heterogeneous public investments is described in this article. The proposed methodology provides a step towards sustainable urban planning in which decisions are taken according to clear, consistent and transparent criteria assisted by the MIVES multi-criteria analysis framework. The MIVES methodology combines multi-criteria decision making (MCDM) and multi-attribute utility theory (MAUT), incorporating the value function (VF) concept and assigning weights through the analytic hierarchy process (AHP). First, a homogenization coefficient is calculated to develop the Prioritization Index for Heterogeneous Urban Investments (PIHUI), so that non-homogenous alternatives may be comparable. This coefficient measures the need of society to invest in each public project through the consideration of its contribution to the regional balance, the scope of its investment, the evaluation of the current situation and the values of the city. Then, the MIVES multi-criteria framework is used to evaluate the degree to which each investment would contribute to sustainable development. Different economic, environmental and social aspects were considered through a decision framework, constructed with the three aforementioned requirements, five criteria and eight indicators. The case study conducted for the Ecology, Urban Planning and Mobility Area of Barcelona municipal council is presented in this article, showing how this method performs accurate, consistent, and repeatable evaluations.

Systems Engineering in Front-End Governance of Major Public Investment Projects

This paper provides an account of how systems engineering principles are applied by the Norwegian government to improve up-front planning and decision-making of large public investment projects, as well as the effect of these efforts after 15 years of operations. It suggests that the results are promising, both in securing budgetary compliance, but also to ensure conceptual solutions that are economically viable in a life-time perspective.

Efectos del gasto público en riego en los hogares de la sierra del Perú

This study assesses the impact that public spending on irrigation has on households in the Peruvian highlands that hold cultivable land and practice agriculture on an independent basis. To this end, we calculated the budget executed for irrigation by central, regional, and local government between 2008 and 2010, which entailed crosschecking the Integrated Financial Administration (System de Administracion Financiera, SIAF) database and the National Public Investment Project Bank (Banco de Proyectos del Sistema Nacional de Inversion Publica, SNIP) to adequately identify this expenditure. We applied the differences-in-differences method with control covariates, for which we constructed a pool of households taken from the National Household Survey (Encuesta Nacional de Hogares, Enaho) conducted by the National Institute of Statistics (Instituto Nacional de Estadistica, INEI), using the cut-off years of 2007 and 2017 as the baseline and 2012 and 2013 for follow-up. We segmented the sample into two groups based on the incidence of monetary policy by district, per the 2007 Poverty Map: households in poor districts, and households in nonpoor districts. This segmentation allowed us to isolate the endogenous effect of the treatment of using the poverty line calculated for each household in the Enaho. The impacts estimated evince a positive effect on the non-poor households assessed, in the form of an increase in agricultural nonwage income (independent production) and in non-agricultural wage income (non-agricultural dependent activities). In the poor households, the effect on primary and secondary net income and on net agricultural income is statistically equal to zero.

The Determinants of Investment Efficiency in West African Economic and Monetary Union (Waemu)

Recently, there has been a noticeable increase in investment in West African Economic and Monetary Union (WAEMU) area. However, economic growth does not necessarily follow the observed increase in public investment. Even within WAEMU region, countries that have higher investment rate do not have the highest growth rate. Moreover, a comparative analysis of the relationship between investment rate and economic growth rate show that WAEMU countries are lagging some Africans countries with similar economic structure (reference countries). The objective of this study is twofold. First, it aims to analyze, comparatively, the efficiency of investment in WEAMU countries and in reference countries. To that aim, the Incremental Capital Output Ratio (ICOR) has been computed and used as a measure investment efficiency. The results show that two groups of countries emerge within WAEMU. The first consists of Burkina Faso, Côte d'Ivoire and Togo with an ICOR of less than 3. In these countries, investment is more effective than in the second group consisting of Guinea-Bissau, Benin, Mali, Niger, and Senegal, which have a combined average ICOR of 5.7. Overall, the average ICOR in WAEMU countries is 4.6, which is significantly higher than the average level of 2.8 observed in the reference countries. This results suggest that investments are relatively more efficient in the reference countries than in WAEMU countries. Botswana, Ethiopia, Mozambique and Rwanda are the countries where the return on investment is the highest. Second, the study seeks to understand the determinants of investment efficiency in a selected group of sub-Saharan African countries by analyzing the causal relationships that can exist between the ICOR and some macroeconomic and institutional variables, including GDP per capita, the real interest rate, the share of exports in GDP and corruption. In that regard, an empirical analysis using Dynamic Ordinary Least Square (DOLS) estimation procedure has found GDP per capita, real interest rate, human capital, the ratio of export to GDP and corruption to be the most important determinants of investment efficiency. The overall results of this article shed some light on how important public investment project management is to their efficiency. In the light of empirical results, the following policy recommendations could be made to improve the efficiency of investment in the WAEMU countries. First, investment should be made on growth promoting sectors or on sectors that can significantly improve the overall productivity of the economy. Second, policy makers in WAEMU Countries should improve transparency in awarding and the execution of public infrastructure contracts. Finally, WAEMU countries should step up their efforts to quantitatively and qualitatively improve human capital in the region.

БЮДЖЕТНЕ ІНВЕСТУВАННЯ В УКРАЇНІ: ПРІОРИТЕТИ ТА ТЕНДЕНЦІЇ

The article investigates the priorities of budget investment and trends in the distribution of capital expenditures among the budgetary system levels in Ukraine during 2010-2019 period. It has been established that capital expenditures of budgets in Ukraine cannot be equated with capital investments from the budget, since they contain articles that are inconsistent with the classical understanding of investments. But the analysis of their dynamics and structure makes it possible to identify the priorities of budget investment and the distribution of budget investment among the budget system levels. It has been established that since 2015 in Ukraine there has been an increase in the share of capital expenditures of the consolidated budget in the total expenditures of the consolidated budget at the expense of local budgets, which are a consequence of an increase in the local budgets resource base in relation to the decentralization reform. A positive trend of growth in the percentage of capital expenditures fulfillment of both state and local budgets was revealed. Also, since 2015, a change in the ratio of capital expenditures among the levels of the budget system in the direction of the prevalence of local budgets and a change in the structure of capital expenditures of the state and local budgets has been revealed: in the state budget, capital transfers to enterprises that are a form of support for certain sectors of the economy are decreasing, but in local budgets they are growing. Thus, the economic function of the state to support individual sectors of the economy is delegated to local budgets. It also revealed a change in priorities in the structure of financing public investment projects from the state budget of Ukraine during 2019-2020 from social development projects to transport infrastructure development projects (70% of funding). It has been established that capital investments from budgets of all levels are not aimed at multiplying budget investments; therefore, an increase in budget capital expenditures does not guarantee the acceleration of the state economic development. The improvement of the investment activities state management system should be realized in the direction of formation and budgetary financing the investment projects that will contribute to the introduction of new technologies, the creation of new jobs and the investment attractiveness of the country.

External Debt and Nigerian Economic Growth Connection: Evidence from Autoregressive Distributed Lag Approach

External Debt and Nigerian Economic Growth Connection: Evidence from Autoregressive Distributed Lag Approach ONAKOYA, Adegbemi Babatunde FCA PhD, OGUNADE, Ayomide Olayinka Abstract This study examined the impact of external debt in bridging the gap resource required for economic growth in Nigeria. After preliminary evaluation of the data which indicated the non-normality of all the variables, the research deployed the Autoregressive Bounds testing method Distributed Lag (ARDL) method using the Ordinary Least Squares technique. Evidence of long run association was reported. The follow-up error correction mechanism found out that 45 present of disequilibrium errors are corrected after short run shock. External debt is negatively related to economic growth. On the average, one per cent increase in export will decrease the real GDP by 0.25 per cent in the long run. Although statistically significant at 1 per cent it did not fill savings and/or external finance gap. Furthermore, the pairwise granger causality test showed that external debt does not cause economic growth at 5% level of significance. The study recommended that adequatemeasures be put in place to ensure that borrowed funds are expended on development-promoting capital projects. In addition, appropriate institutional checks and balances on government fiscal performances are prerequisite for analyzing and managing public investment projects Full Text: PDF DOI: 10.15640/jeds.v5n1a7

Optimisation of Public Building Projects in the Design Phase

Currently, as a result of the recession, governments are deeply involved in public investment projects to promote economic growth. Public building projects (museums, universities, theatres), compared with private investments, have a range of specialist requirements. Among others, public project should serve political, cultural, social and urban interests. In the preparation phase, those interests are dominant, and overall cost-efficiency is only a secondary level decision factor. However, this factor must be taken into account and together with all other requirements, is an essential part of the project design phase. This process must be a part of a well-established feedback mechanism, which incorporates public requirements, building cost calculation, and other decision making factors related to the public investment project.A number of methods are well known for operational cost optimisation such as LCC analysis, Value Engineering, and benchmarking. After close investigation of the scientific literature, the author will describe potential organisational models, which incorporate evaluation and optimisation of building operational costs. The article suggests further research directions.

Estimation of social discount rate for Lithuania

Purpose of the article: The paper seeks to analyse the problematics of estimation of the social discount rate (SDR). The SDR is the critical parameter of cost-benefit analysis, which allows calculating the present value of cost and the benefit of public sector investment projects. Incorrect choice of the SDR can lead to the realisation of ineffective public project or conversely, cost-effective project will be rejected. The relevance of this problem analysis is determined by discussions and different viewpoints of scientists on the choice of the most appropriate approach to determine the SDR and absence of methodically based the SDR on the national level of Lithuania. Methodology/methods: The research is performed by the scientific and methodical literature analysis, systematization, time series and regression analysis. Scientific aim: The aim of the article is to calculate the SDR based on the statistical data of Lithuania. Findings: The analysis of methods of SDR determination, as well as the researches performed by foreign researchers, allows stating that the social rate of time preference (SRTP) approach is the most appropriate. The SDR, calculated by the SRTP approach, reflects the main purpose of public investment projects, i.e. to enhance social benefit for society, the best. The analyses of SDR determination practice of the foreign countries shows that the SDR level should not be universal for all states. Each country should calculate the SDR based on its own data and apply it for the assessment of public projects. Conclusions: The calculated SDR for Lithuania using the SRTP approach varies between 3.5% and 4.3%. Although it is lower than 5% that is offered by European Commission, this rate is based on the statistical data of Lithuania and should be used for the assessment of the national public projects. Application of the reasonable SDR let get the more accurate and reliable cost-benefit analysis of the public projects.

Cost Overruns in Public Sector Investment Projects

We analyze cost overruns in a large sample of public infrastructural investment projects in Portugal. The average cost deviation relative to the budgeted costs amounts to 24%. The large projects even have a higher cost deviation and a higher probability of cost overruns, which suggests that the public administration may not have sufficient expertise to forecast required investments and handle these types of projects. Cost overruns are more likely in election years, reflecting that politicians seem eager to speed up or conclude infrastructural investments, and thus, they inaugurate a new service to harvest political goodwill with the population. We document that cost deviations are reduced over time; however, this reduction does not appear to be the result of the new procurement laws but seem rather the result from the benefits of learning and increased fiscal constraints. A reduction in corruption positively correlates with cost deviations and the probability of cost overruns.

Public investment, time to build, and the zero lower bound

We study the effectiveness of public investment in stimulating an economy stuck in a liquidity trap. We do so in the context of a tractable new-Keynesian economy in which a fraction of government spending increases the stock of public capital subject to a time-to-build constraint. Public investment projects typically entail significant time-to-build delays, which often span several years from approval to completion. We show that this feature implies that the spending multiplier associated with public investment can be substantially large — nearly twice as large as the multiplier associated with public consumption — in a liquidity trap. Intuitively, when the time to build is sufficiently long, and to the extent that public capital raises the marginal productivity of private inputs, the resulting disinflationary effect will occur after the economy has escaped from the liquidity trap. At the same time, the increase in households' expected wealth amplifies aggregate demand while the economy is still in the liquidity trap. Using a medium-scale model extended to allow for the accumulation of public capital, we quantify the multiplier associated with the spending component of the 2009's ARRA, which allocated roughly 40% of the authorized funds to public investment. We find a peak multiplier of 2.31. Our results also indicate that failing to account for the composition of the stimulus by overlooking its investment component would lead one to underestimate the spending multiplier by about 50%.

An Exploring an Alternative to limitations in the Economic Feasibility Analysis of the Public Investment Project: Focusing on the Discount Factor

An Exploring an Alternative to limitations in the Economic Feasibility Analysis of the Public Investment Project: Focusing on the Discount Factor

Public Investment and Output Performance: Evidence from Nigeria

Abstract This study examined the direct/indirect long-run relationships and dynamic interactions between public investment (PI) and output performance in Nigeria using annual data spanning 1970-2010. A macro-econometric model derived from Keynes’ income-expenditure framework was employed. The model was disaggregated into demand and supply sides to trace the direct and indirect effects of PI on aggregate output. The direct supply side effect was assessed using the magnitude of PI multiplier coefficient, while the indirect effect of PI on the demand side was evaluated with marginal propensity to consume, accelerator coefficient and import multiplier. The results showed relatively less strong direct effect of PI on aggregate output, while the indirect effects were stronger with the import multiplier being the most pronounced. This is attributed to declining capital expenditure, poor implementation and low quality of PI projects due to widespread corruption. By and large, we concluded that PI exerted considerable influence on aggregate output.

Propuesta metodológica en proyectos públicos de inversión real bajo el principio de desarrollo sostenible

Based on the general economic approaches that account natural resources, we analyze the establishment of the Principle of Sustainable Development Brundtland (PDSBrundtland) in public investment projects. Analyzing the PDS-Brundtland arise aspects of knowledge and boundaries necessary for its realization. These aspects are: a) the definition of the investment community and its evolution; b) knowledge of the communities that give value to natural resources, for which it will be necessary to have a discount rate and acceptable valuation methods; c ) establishment of the lifetimstainable Development Brundtland (PDS-Burndtland) in public investment projects. This paper discusses these aspects. It establishes a discount rate wich takes into account the development of the poorest countries, and a time rank to study these projects. Conditions are established inability to carry out these projects. Feasibility conditions are established to carry out investment projects under PDS-Brundtland.

Planowanie i zasady finansowania inwestycji publicznych na poziomie lokalnym w Polsce w latach 2008–2013

The aim of the research was to establish the most important economic and administrative factors that had shaped the possibility of using available sources of financing of public investment projects. The analysis was concentrated on attempts to identify and asses the process of regulating general value of public investment at the municipal level. Significant difficulties in maintaining a stable level of financing for the development tasks were rooted mainly in changes in economic conditions, particularly the financial crisis, and from changes in the aces and scope of the EU funds during the programming period 2007–2013.

Risk Assessment in Public Investment Projects: Impact of Empirically-grounded Methodology on Measured Values of Intangible Obligations in Lithuania

In the previous paper (Jasiukevicius & Vasiliauskaite, 2015) we have provided the empirically-grounded probability distributions (PDs) and their parameters best enable to assess the investment cost overrun risk (ICOR) in public investment projects (PIPs). From the beginning of 2015, this statistics has been officially applied for ICOR assessment in the public sector of Lithuania as well as development of the former ICOR assessment methodology (Methodology) (CPVA, 2014) theretofore based solely on the theoretical assumptions. This resulted in changes of the estimating values of not only ICOR estimates, but also therewith related intangible obligations (IOs) of the public sector. The purpose of this paper was to provide the assessment of impact of the empirically-grounded ICOR methodology on the values of the IOs previously estimated under the theoretical assumptions. For this purpose a comparative analysis of both theoretically-based and empirically-grounded ICOR estimates was performed. The results disclosed the values of ICOR estimates of land, real estate, construction and equipment as being lower and the estimates of services as being higher in the case of application of empirically-grounded statistics. Respectively, this revealed over- and underestimation of appropriate IOs prevailed in the past.

Estimation of the Social Discount Rate for the Public Investment Projects

2008년 금융위기 이후 시장이자율의 지속적 하락으로 공공투자사업의 조달금리 수준 역시 하락하였다. 따라서 본 논문은 근본적으로 변화된 제반 경제 환경을 반영하여 사회적 할인율을 재추정함으로써 현재의 우리 경제상황에 적합한 할인율을 제시하는 것을 목적으로 한다. Ramsey의 방식에 근거하여 국내 공공투자 사업의 적정 사회적 할인율을 추정한 결과 3.3∼4.5% 값이 도출되었다. 따라서 2007년 이후 5.5%로 유지되고 있는 사회적 할인율을 하향조정할 필요성이 제기된다. 그러나 국가별 사회적 할인율 적용사례, 변경시기 및 국고채 금리 대비 할인율의 수준을 고려할 경우 기존 공공투자사업에 대한 사회적 할인율의 조정은 큰 폭의 조정보다는 1% 내외의 감축이 적절할 것으로 판단된다.

Application of Social Discount Rate for Assessment of Public Investment Projects

The article is aimed to analyse problems of determination of social discount rate (hereafter SDR) used for cost-benefit analysis of public investment projects. The relevance of this problem analysis is determined by both discussions and different viewpoints of scientists on the choice of the most appropriate approach to determine SDR and absence of methodically based SDR on the Lithuania's national level. In this article the critical analysis of SDR determination approaches has been performed and examples of foreign countries’ practice in determining SDR have been analysed. References for further researches related to SDR application in assessment of investment projects in Lithuanian public sector are presented. This article seeks to encourage discussions of Lithuanian scientists related to assessment of SDR in the investment projects cost-benefit analysis. The results of this article provide presumptions for further SDR researches aimed to prepare the methodology for determining SDR based on Lithuanian data.

European Union Funds as a Growth Stimulant of Electromobility on the Example of Electric Public Transport in Poland

The aim of the study was to analyse the dependence between nature conservation instruments and the percentage of land covered by local spatial development plans and to assess the effect of conservation areas on the type of spatial management in a commune. The material for the analyses comprised local spatial development plans, an administrative decision concerning terms of construction and land management (the WZiZT decision) and administrative decisions on location of public purpose investment projects (LPP decisions) issued in the years 2004–2012. Based on the Mosina commune (in Wielkopolskie Province) an analysis was conducted on land allocated to individual land use forms in spatial development plans as well as their distribution in relation to existing land surface conservation areas. The study investigated the issue of whether the current spatial planning approach at the commune level covering all land within the boundaries of conservation areas with spatial development plans ensures rational spatial management.

The Effect of Nature Conservation Legal Instruments on Spatial Management in a Commune

The aim of the study was to analyse the dependence between nature conservation instruments and the percentage of land covered by local spatial development plans and to assess the effect of conservation areas on the type of spatial management in a commune. The material for the analyses comprised local spatial development plans, an administrative decision concerning terms of construction and land management (the WZiZT decision) and administrative decisions on location of public purpose investment projects (LPP decisions) issued in the years 2004–2012. Based on the Mosina commune (in Wielkopolskie Province) an analysis was conducted on land allocated to individual land use forms in spatial development plans as well as their distribution in relation to existing land surface conservation areas. The study investigated the issue of whether the current spatial planning approach at the commune level covering all land within the boundaries of conservation areas with spatial development plans ensures rational spatial management.

A dynamic feasibility analysis of public investment projects: An integrated approach using system dynamics and agent-based modeling

Increasingly, public sector investment projects face a dynamic environment that incorporates both macroscopic system and microscopic individuals. Prior attempts to analyze the feasibility of those projects, however, have been subject to limitations in accommodating such environmental changes. As a remedial measure, the combination of system dynamics (SD) and agent-based modeling (ABM) is proposed due to their complementary strengths. Consequently, this paper suggests a new approach to dynamic feasibility analysis for public investment projects through an integrated simulation model using SD and ABM. The former SD part elucidates the relationships among system elements that constitute project's benefits and costs, while the latter ABM part depicts users’ emergent behavior with their heterogeneity. A bridge construction case study demonstrates the applicability of the proposed approach. The findings show that the proposed approach can provide a valuable and flexible framework for analyzing project feasibility in a dynamic environment.