document of the world bank...jul 18, 2007 · bapin, 230 of which have been incorporated by...

Document of The World Bank

Report No: ICR0000194

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-39580 IBRD-3958A IBRD-3958S)

ON A LOAN

IN THE AMOUNT OF US$16.00 MILLION

TO THE

ARGENTINE REPUBLIC

FOR A

PUBLIC INVESTMENT STRENGTHENING TECHNICAL ASSISTANCE LOAN

June 29, 2007

Argentina, Chile, Paraguay and Uruguay Country Management Unit Poverty Reduction and Economic Management Latin America and the Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective – June 28, 2007)

Currency Unit = Arg. $

US$1.00 = Variable Arg. $3.1 Euro 1.00 = Variable Arg. $4.08

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS BAPIN National Investment Project Data Bank (Banco de Proyectos de Inversión Pública) CABEI Central American Bank for Economic Integration CAS Country Assistance Strategy DNIP National Directorate for Public Investment and Project Financing (Dirección Nacional de Inversión Pública y Financiamiento de Proyectos) DNPOIC National Directorate for Projects with International Financial Institutions (Dirección Nacional de Proyectos con Organismos Internacionales de Crédito) FOSIP Public Investment Strengthening Project (Programa de Fortalecimiento del Sistema Nacional de Inversiones Públicas) GDP Gross Domestic Product IADB Inter-American Development Bank ICR Implementation Completion and Results Report EIRR Economic Internal Rate of Return IFIs International Financial Institutions IMF International Monetary Fund ISR Implementation Status Results and Report ME Ministry of Economy NPIP National Public Investment Plan (Plan Nacional de Inversión Pública) OECD Organization for Economic Cooperation and Development PCU Project Coordination Unit PDO Program Development Objective QA Quality Assurance SAF Financial Administration Units (Servicios Administrativos Financieros) SEP Secretariat of Economic Programming SIDIF Integrated Financial Information System (Sistema Integrado de Información Financiera) SNIP National Public Investment System (Sistema Nacional de Inversión Pública)

Vice President: Pamela Cox Country Director: Axel van Trotsenburg

Sector Manager: Nicholas P. Manning Project Team Leader: Roberto O. Panzardi

ICR Team Leader: Roberto O. Panzardi

COUNTRY Project Name

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design............................................... 1 2. Key Factors Affecting Implementation and Outcomes............................................... 6 3. Assessment of Outcomes .......................................................................................... 13 4. Assessment of Risk to Development Outcome......................................................... 29 5. Assessment of Bank and Borrower Performance ..................................................... 31 6. Lessons Learned........................................................................................................ 35 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners........... 36 Annex 1. Project Costs and Financing .......................................................................... 38 Annex 2. Outputs by Component.................................................................................. 40 Annex 3. Economic and Financial Analysis ................................................................. 41 Annex 4. Bank Lending and Implementation Support/Supervision Processes............. 42 Annex 5. Beneficiary Survey Results (if any)............................................................... 43 Annex 6. Stakeholder Workshop Report and Results................................................... 45 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 46

Factores clave que afectaron la ejecución y los resultados ............................................46Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 48 Annex 9. List of Supporting Documents ...................................................................... 49

MAP

A. Basic Information Country: Argentina Project Name:

Public Investment Strenthening

Project ID: P037049 L/C/TF Number(s): IBRD-39580,IBRD-3958A,IBRD-3958S

ICR Date: 06/28/2007 ICR Type: Core ICR

Lending Instrument: TAL Borrower: GOVT OF ARGENTINA

Original Total Commitment:

USD 16.0M Disbursed Amount: USD 10.3M

Environmental Category: B Implementing Agencies: Ministry of Economy Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s) Concept Review: 08/19/1994 Effectiveness: 04/09/1997 04/09/1997 Appraisal: 06/18/1995 Restructuring(s): 02/09/1999 Approval: 11/21/1995 Mid-term Review: 08/01/1999 Closing: 06/30/2001 12/31/2006 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Moderately Satisfactory

Overall Bank Performance: Moderately Satisfactory

Overall Borrower Performance:

Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators Implementation

Performance Indicators QAG Assessments (if

any) Rating

Potential Problem Project at any time (Yes/No):

Yes Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

Moderately Unsatisfactory

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Central government administration 100 100

Theme Code (Primary/Secondary) Decentralization Secondary Primary Public expenditure, financial management and procurement

Primary Primary

E. Bank Staff

Positions At ICR At Approval Vice President: Pamela Cox Shahid Javed Burki Country Director: Axel van Trotsenburg Gobind T. Nankani Sector Manager: Nicholas Paul Manning Nathaniel Paul Meo Project Team Leader: Roberto O. Panzardi Luis-Jose Mejia ICR Team Leader: Roberto O. Panzardi ICR Primary Author: Maria Cecilia Zanetta F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The development objectives of the project are to: (1) enhance the effectiveness and efficiency of public expenditure management by (a) improving its investment process, (b) enhancing its project analysis capabilities, and (c) building up its project and program evaluation capacity; and (2) support the establishment within the Borrower's public administration of a results-oriented management approach and of a monitorable emphasis on providing service to the public.

Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) ─ from Program Document (pulled by the system from the ISR, where available)

Baseline Value (from approval

documents)

Original Target Values

(from approval documents)

Formally Revised Target Values

Actual Values Achieved

at Completion or Target Years

PDO Indicator 1: Preparation of the National Investment Plan (PNIP) Value

(quantitative or Qualitative)

No National Investment Plan

(PNIP) No target No target

Since 2003, a multi-year PNIP has been prepared using the BAPIN. The 2007-2009 includes over

2000 projects totaling Arg.$4.9 billion in

investments budgeted for 2007.

Date achieved 06/18/1995 6/30/2001 2/09/1999 12/31/2006 Comments

(incl. % achievement)

Fully Achieved: The PNIP is integrated into the annual budget cycle. No projects can be included unless they are incorporated into the BAPIN, the SNPI’s management tool; thus, they meet basic DNIP’s quality control standards.

PDO Indicator 2: The number of projects presented according to SNIP standards at the national level. Value

(quantitative or Qualitative) No standard

evaluation methodology for public investment

evaluation

Annual increase of projects selected that have been

chosen according to the selection methodologies

(no specific target)

The number of projects

presented according to

SNIP standards (no specific

target)

As of October 2006, 6,455 projects

amounting to Arg.$212 billions have been

incorporated into the BAPIN, 230 of which

have been incorporated by provincial governments.



Achieved: The BAPIN as been consolidated as the standard tool of public investment at the national level. Inclusion in the BAPIN is required for a project to have a budgetary allocation.

PDO Indicator 3: Establishment of a results-oriented management framework Value


Number of agencies that have

subscribed agreements to

implement results-oriented

frameworks and public level standards

frameworks.

Local Unified SIDIF

(SLU) implemented in 83 SAFS with over

5,000 users. 48 projects are utilizing

the UEPEX

Date achieved 6/08/2000 Comments


Indirectly achieved: The original focus on development results-oriented framework was replaced by the development of financial management tools (SLU) and a management system for project executing units with international financing (UEPEX).


documents)



Formally Revised

Target Values



PDO Indicator 4: Establishment of public service standards Value


Number of agencies that have

subscribed agreements to

establish public service standards

No substantial achievements

Date achieved 6/08/2000 Comments


Not achieved: Due to the lack of political support, there was no significant progress under FOSIP toward enhancing public service standards.

(b) Intermediate Outcome Indicators


documents)



Formally Revised

Target Values



IO Indicator 1: Number of national and provincial decision-makers and technical staff acquainted with the framework laws, regulations and guidelines, and the concepts of ex-ante, on-going and ex-post evaluation.

Value (quantitative or

qualitative)

Lack of awareness of the importance of sound public

investment programming.

20-30 high-level government

officials participated in

seminars.

Over 1 00 parliamentarians, journalists, and other decision

makers attended workshops.

250 public

employees and 50 private sector

students attending project analysis and evaluation

courses.

100 projects prepared by line

units during training.

Number of public

employees trained (no

number specified as

target)

564 public sector professionals have

attended post-graduate courses in project

evaluation taught by network of national universities during

2003-2004, with 112 projects prepared.

Over 2700 public employees at the

national, provincial level and municipal

level were trained on basic project

evaluation and the utilization of the

BAPIN during 2003 -2005, with 151

projects prepared.


documents)



Formally Revised

Target Values



Numerous other dissemination

activities targeting wider audiences have

been conducted. Date achieved 06/18/1995 6/30/2001 2/09/1999 12/31/2006

Comments (incl. %

achievement)

Achieved: A network of 12 national universities as a central element in capacity building, enhancing prospects for sustainability and impact on local/regional development. DNIP has played a key role in capacity building among sub-national governments as part of SNIP dissemination.

IO Indicator 2: Establishment of the National Public Investment System’s project management tool (BAPIN system) at the national level.

Value (quantitative or

Qualitative) No National

Investment Plan System (SNIP)

No target No target

At the national level, the BAPIN is

operational in 392 operational units

distributed among 233 public agencies.



Achieved: The BAPIN is firmly inserted among government agencies at the national level. Moreover, it is being increasingly used by provincial governments—13 provinces have uploaded 230 projects on the national BAPIN.

PDO Indicator 3: Establishment of the BAPIN system at the sub-national level. Value


Poor—if any—public investment management tools

among sub-national government

No target No target

18 provincial BAPIN operational, with over

4,700 projects

200 municipal BAPINs in six

provinces Date achieved 06/18/1995 6/30/2001 2/09/1999 10/30/2006

Comments (incl. %

achievement)

Achieved: Provincial and municipal governments are exhibiting a strong interest on developing their own BAPINs. The DNIP is actively supporting their efforts.

PDO Indicator 4: Carrying out basic studies in support of public investment strategies in priority sectors. Value


Lack of basic information

supporting public investment

A series of 13 individual studies were identified at

appraisal

A different set of seven studies was identified at

the 1999 restructuring

Five studies completed by 1999,

including: infrastructure

networks and impact on privatization, a public expenditure

review, social expenditure

projections, and formulation of


documents)



Formally Revised

Target Values



investment strategies Date achieved 06/18/1995 6/30/2001 2/09/1999

Comments (incl. %

achievement)

Partially Achieved: Five out of the 13 original studies were completed by 1999. Four of the 7 studies identified at restructuring were cancelled.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual

Disbursements (USD millions)

1 03/13/1996 Satisfactory Satisfactory 0.00 2 06/30/1996 Satisfactory Satisfactory 0.00 3 12/26/1996 Unsatisfactory Unsatisfactory 0.00 4 06/27/1997 Satisfactory Satisfactory 0.50 5 01/30/1998 Satisfactory Satisfactory 0.50 6 02/25/1998 Unsatisfactory Unsatisfactory 0.50 7 07/02/1998 Unsatisfactory Unsatisfactory 0.61 8 12/17/1998 Unsatisfactory Unsatisfactory 0.68 9 05/06/1999 Satisfactory Satisfactory 0.68

10 12/22/1999 Satisfactory Satisfactory 2.60 11 06/28/2000 Satisfactory Satisfactory 3.25 12 12/21/2000 Satisfactory Satisfactory 3.98 13 06/28/2001 Satisfactory Satisfactory 4.72 14 12/19/2001 Satisfactory Satisfactory 4.72 15 06/28/2002 Satisfactory Unsatisfactory 4.81 16 12/20/2002 Satisfactory Unsatisfactory 4.81 17 06/24/2003 Satisfactory Unsatisfactory 5.34 18 12/11/2003 Satisfactory Unsatisfactory 5.73 19 12/12/2003 Satisfactory Unsatisfactory 5.73 20 06/01/2004 Satisfactory Satisfactory 6.97 21 12/10/2004 Satisfactory Satisfactory 8.29 22 05/05/2005 Satisfactory Satisfactory 9.48 23 06/29/2006 Satisfactory Unsatisfactory 10.23 24 12/27/2006 Satisfactory Satisfactory 10.30

H. Restructuring (if any)

ISR Ratings at Restructuring

Restructuring Date

Board Approved

PDO Change DO IP

Amount Disbursed at

Restructuring (US$ million)

Reason for Restructuring & Key Changes Made

02/09/1999 S S 0.68

Conceptual re-design that addressed some of the original design weaknesses:

Tighter focus; Targeting of sub-

national government; More robust capacity

building strategy; Redesign of the

BAPIN as a decentralized public investment management tool.

Cost reductions in line with budgetary restrictions.

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) By the early 1990s, Argentina lacked a coherent public investment strategy to identify, assess and prioritize public investments within the national government. Although individual agencies, such as the National Development Council (Consejo Nacional de Desarrollo) in the 1960s, the former water and electricity state enterprises, the National Highway Directorate (Dirección Nacional de Vialidad) and the Federal Investment Council (Consejo Federal de Inversiones – CFI), had had at various times a project evaluation culture, decades of inflation had drastically eroded the technical and institutional capacity of Argentina’s public institutions to ensure the economic and financial soundness of public investments. As a result, public investment decisions were ad hoc and fragmented, as reflected in the steady decline of the rate of return of public investments, both in absolute terms and vis-à-vis private investments, from the 1970s onward. As part of its broad public sector modernization agenda, the Government addressed these weaknesses in 1993 by creating the National Directorate for Public Investment and Project Financing (Dirección Nacional de Inversión Pública - DNIP) within the Secretariat of Economic Programming (Secretaría de Programación Económica - SEP) in the Ministry of Economy. In August 1994, supporting legislation—the National System for Public Investment Law (Sistema Nacional de Inversión Pública – SNIP; Law No. 24.453)—was approved by Congress, which assigned the DNIP the responsibility of formulating a tri-annual National Public Investment Plan. Other responsibilities assigned to the DNIP included: ensuring the quality of capital investments with national financing (even if implemented by provincial governments), determining norms and methodologies for project analysis and evaluation, maintaining an up-to-date inventory of investment projects, identifying projects of national interest, assisting in project preparation, and helping identify external sources of financing. The responsibility for project identification, preparation and evaluation remained with individual government agencies. Responsibility for physical and financial monitoring of execution was assigned to the Secretariat of Finance—also within the Ministry of Economy—through the recently implemented Integrated Financial Information System (Sistema Integrado de Información Financiera – SIDIF). The Government requested the Bank’s support in its efforts to enhance efficiency and effectiveness in public investment programming through a series of operations targeting critical areas of public investments at all levels of government. In response, several IBRD operations were designed to strengthen the technical and institutional capacity of key institutional actors in project identification, analysis and preparation as well as the use of M&E tools, including the First Social Protection Project (Loan No. 3957-AR) with a focus on social investments, the Second Provincial Development Project (PDP-II; Loan No. 3877-AR) with a focus on capital investment projects implemented at the provincial level, the Second Municipal Development Project (MDP-II; Loan No. 3860-AR) with a focus on capital investment projects implemented at the municipal level, and this

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operation—the Public Investment Strengthening Technical Assistance Loan (Programa de Fortalecimiento del Sistema Nacional de Inversiones Públicas – FOSIP; Loan No. 3958-AR) with a focus on capital investments financed by the national government.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The original Program Development Objective (PDO) was to enhance the effectiveness and efficiency of the government's public expenditure management by: i) improving its investment process; ii) strengthening its project analysis capabilities; and iii) building up project and program evaluation capacity. Key Indicators: Specific activities, a clear timetable for their implementation, and expected outcomes were explicitly defined during appraisal. For example, under Component 1 it was anticipated that between 20 and 30 high-ranking government officials would be attending high-level seminars to be held between January 1996 and August 1998. However, despite their detailed nature, emphasis was placed on activities (i.e., high-level seminars) and intermediate outcomes (i.e., 20 to 30 high-ranking government officials trained) rather than on measuring the overall impact of the individual components and the operation as a whole. In this regard, it is important to note that the project was prepared before the logical framework methodology was adopted Bank-wide.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The objective of the project remained unchanged at restructuring. However, on 8 June 2000, the Executive Directors authorized an amendment to the loan to add two new components in support of a broader state modernization reform. As a result, an additional PDO was added to the original one: to support the establishment within the public administration at the national level of: i) a results-oriented management approach; and ii) monitoring tools for citizen review of agency performance. Key indicators for the two new components were added as well. However, as the original ones, they focused on intermediate outcomes (i.e., number of agreements signed with public organisms) rather than on substantive impact.

1.4 Main Beneficiaries, (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project) As originally conceived, the project would build awareness of the importance of developing sound public investment practices among a wide constituency, including senior government officials and civil servants from all levels of government, parliamentarians, journalists, as well as individuals and firms from the private sector. The DNIP and other government agencies responsible for the identification, preparation and evaluation of capital investment projects were also to receive technical assistance under the project. At restructuring, more emphasis was given to capacity building on project

3

preparation and evaluation among public officials among the three levels of governments than to increasing awareness among a wider constituency. In addition, as a result of the 2000 amendment, several agencies within the national government were included in the project in the areas of result-oriented management and enhanced public service standards. The DNIP, the SEP, the National Directorate for Projects with International Financing (DIFIP) and the Budget Office also benefited from TA under this operation, either directly (i.e., the SEP and the DNIP), or indirectly (i.e., the Budget Office and the DIFIP) through the implementation of the financial management tools.

1.5 Original Components (as approved) As originally envisioned, the project had five components, as follows: Component A - Sectoral Investment Decision Making (US$1.2 million, or 5percent of total project cost). This component was aimed at fostering good practices in the formulation and implementation of strategic investment decision-making as well as building ownership and commitment among senior government officials. The component supported: i) a series of high-level seminars aimed at familiarizing decision-makers with best practices in the areas of public investment and public expenditure management; and ii) high level workshops directed at senior officials and decision makers, journalists as well as individuals and firms from the private sector. Component B - Improvement of Agencies’ Project Analysis and Evaluation Capacity (US$7.6 million, or 30 percent of total project cost). This component was aimed at building a sustainable decentralized capacity to identify, prepare, select and evaluate investment by national government agencies through: i) courses in investment decision-making, project management, procurement and project cycle implementation, aimed at middle-management and personnel of the investment agencies, as well as individuals from the private sector; ii) technical assistance to investment agencies in the application of project analysis techniques; and iii) technical assistance to investment agencies in the application of impact evaluation techniques through the analysis of selected existing projects. Component C - Basic Studies in Support of Sectoral Investment Strategies (US$8.6 million, or 35 percent of total project cost). This component consisted of basic studies aimed at developing public investment strategies in priority sectors, leading to project identification and the preparation of sectoral strategies for selected agencies. Component D - Support to the Preparation of the National Public Investment Plan (US$2.7 million, or 11 percent of total project cost). This component was aimed at supporting the DNIP in the implementation of the National Investment Plan System - SNIP, focusing not only on the DNIP itself but also on government agencies responsible for public investments. In addition, this component was intended to help disseminate the SNIP Law and its implementation. Component E - Project Administration (US$2.5 million, or 10 percent of total project cost). This component supported project administration, office equipment, yearly external

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audits and an agreement with a procurement agency for procurement and administration services.

1.6 Revised Components The original components were revised in February 1999 at restructuring. Two relatively small additional components (i.e., amounting to US$0.7 million) were added (i.e., Components E and F) in June 2000 In addition, individual activities were repeatedly modified and revised according to the priorities of successive administrations. Component A – To Create Awareness and Strengthen the Policy and Legislative Framework (US$0.7 million instead of the original US$1.4 million). The objective of this component was to promote an evaluation-oriented culture and to set up the policy and legal framework for further efforts. Expected products of this component were a draft of a Government Results Act and improvements to the regulations of the 1994 National Public Investment Law. Key indicators: Number of national and provincial decision-makers and technical staff acquainted with the framework laws, regulations and guidelines, and the concepts of ex-ante, on-going and ex-post evaluation. Component B - Improvement of Agencies' Strategic Investment Capacities (US$5.3 million instead of the original US$7.6 million). The objective of this component was to provide training to national, provincial and municipal investment agencies in the preparation, monitoring and evaluation (ex-ante, on-going and ex-post) of projects and programs, and to help put into effect the National Public Investment System Law. Expected products of this component included: a management information system for project implementation in the Under-Secretariat of Strategic Control; ex-post evaluation of selected projects; the creation of the Argentine Evaluation Society (Asociación Argentina de Evaluación - ASAE) as a step toward the institutionalization of capacity building efforts; the strengthening of the national projects databank; and assistance to the provinces in the creation of their own databanks. Key indicators: The number of projects presented according to SNIP standards. Component C - Basic Studies in Public Expenditure (US$5.9 million instead of the original US$ 8.6 million). The original studies leading to project identification and the preparation of sectoral strategies for selected agencies were replaced by alternative, less expensive studies, which included: i) a preliminary study for the definition of the continental platform; ii) an input/output matrix; iii) the infrastructure and territorial effects; iv) the effect of privatizations in Argentina; v) a public expenditure review; vi) the studies leading to social expenditure strategies; and vii) the consolidation of the effect of critical social programs and services. Key indicators: No specific indicators and/or outcomes were indicated for this component—presumably the completed studies were the expected outcomes.

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Component D - Institutional Strengthening of the Secretariat of Economic Programming (US$1.5 million instead of the original US$2.7 million). This component was aimed at strengthening the DNIP, the DIFIP, and the National Social Expenditure Directorate to enable them to provide guidance and support to decision-makers and expenditure agencies. Key indicators: No specific indicators and/or outcomes were indicated for this component. Component E – Results-Oriented Management System (US$0.7 million together with Component F). This component, which was also added in June 2000, was aimed at strengthening performance management within a group of public sector agencies. Main products of this component were diagnostic studies analyzing the situation in individual agencies, to, in turn, serve as inputs in the implementation of a results-oriented system. Key indicators: The number of agreements subscribed by government agencies. Component F- Public Service Standards (US$0.7 million together with Component E). This component, which was added in June 2000, was aimed at strengthening performance management within a group of public sector agencies. Main products of this component were diagnostic studies analyzing the situation in individual agencies, to, in turn, improve the delivery of public service standards. Key indicators: The number of agreements subscribed by government agencies.

1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) Loan amendments: The loan agreement was amended twice, in 1999 and 2000, as follows:

1999 Amendment: After a painfully slow start, the loan was restructured in 1999 to reflect the priorities of the new authorities at the Ministry of Economy and the increasing budgetary restrictions. While the number of components remained the same, the 1999 restructuring considerably scaled down the project, reducing the overall number of training activities and studies. Likewise, the nature of the activities to be financed under the project also changed, shifting away from international consultants and more expensive studies to local consultants and less expensive studies. The decision was also made to expand focus beyond the national government to also target provincial and municipal governments in a more aggressive way. Basic tools, such as the inventory of public investment projects, were reformulated to better respond to users’ needs. Likewise, the overall capacity building strategy also changed, incorporating universities throughout the country to carry out formal training in project evaluation. Overall, the restructured project retained the original objectives and had an increased scope but sharper focus. As a result, overall project costs (were reduced from US$25 million to US$ 16.5 million (Bank financing was also reduced from US$16 million to US$10.5 million). These changes and the cancellation of US$5.5 million of the loan amount were in line with the budgetary

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restrictions that were put in place in response to the increasingly difficult financial situation caused by the ongoing economic recession.

2000 Amendment: The loan was amended again in mid-2000 to respond to the priorities of the administration of President de la Rúa administration, which took office in December 1999. The new administration requested the Bank’s assistance for its state modernization agenda, a top priority in its government agenda. Given the urgency attached to the launching of a public sector reform early during the new administration’s tenure, it was deemed appropriate to seek Board approval to add two new components to the original project to support the preparation of a high priority effort. Moreover, the government’s efforts in the area of public sector reform would also support the attainment of targets in the economic program agreed with the International Monetary Fund. The amendment was approved on 8 June 2000 to support technical assistance, training and carrying out seminars to implement a Results-Oriented Management System and Public Service Standards. Perceived strong government support was an important factor in the decision to seek this amendment. However, this support shortly evaporated with the departure of vice-president Álvarez in October 2000, who had been the champion behind the public sector modernization efforts motivating this amendment. In retrospect, given the lack of interest on the part of the authorities in the original public investment focus, the project should have been canceled. Later on, when it became obvious that there was no political support for the implementation of the two added components, the operation should have been formally reduced in scope, recovering its pure public investment focus, or canceled. There was a de facto shift in the focus of these two components in mid-2002, away from results-oriented management and citizen-centered public sector evaluation toward the development of two financial management tools. While the shift helped ensure the effective utilization of the loan proceeds and responded to the post-crisis needs, it constituted one more incremental change to the operation’s scope. Extensions to original closing date: The project’s closing date was extended seven times beyond its original closing date of 30 June 2001 to its final closing date in 31 December 2006, leading to an overall lifespan of 11 years from approval to closing.1

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) Overall, quality at entry is considered moderately satisfactory. The strengths and weaknesses of the operation’s design can be summarized as follows:

1 Successive closing dates: 6/30/2001; 6/30/2002; 6/30/2003; 12/31/2003; 12/31/2004; 6/30/2005; 7/31/2006; 12/31/2006.

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Correct identification of needs: By focusing on the modernization of public investment mechanisms, the Bank’s team correctly identified a serious institutional weakness within Argentina’s public sector. It also capitalized on the commitment of Argentina’s authorities to the adoption of a modern public investment system, which was demonstrated with the approval of the National Public Investment System Law in August 1994 and of its regulation in May 1995. Full consistency with the Bank’s CAS: The operation was fully consistent with the Country Assistance Strategy (CAS) presented to the Board on May 4, 1995 (Report No. 14278-AR), which focused on: i) consolidating structural reforms; ii) reducing poverty and developing human resources; and iii) rebuilding infrastructure. Specifically, the project contributed towards the first objective—i.e., consolidation of structural reforms—by improving fiscal management through a more efficient use of scarce budgetary resources. Likewise, the project contributed toward the third objective—i.e., rebuilding infrastructure—by improving the effectiveness of public investments that are complementary to private sector development. As mentioned earlier, the operation complemented the strengthening efforts carried out under other Bank projects, including the Social Protection Project, the Second Provincial Development Project, the Second Municipal Development Project, and the Public Sector Reform Technical Assistance Loan. Adequate incorporation of lessons learned: The Bank’s team incorporated important lessons learned in previous IBRD and IADB operations. Specifically, it correctly identified factors that could hamper the success of the operations and effectively addressed them in the operation’s design, including: i) adequately gauging the TA efforts required to attained the proposed PDOs by designing a stand-alone operation rather than a secondary component within a larger operation; and ii) conceiving the SNIP as a decentralized system with multiple users, focusing not only on the DNIP but also sectoral government agencies within the national government. Supportive legal and institutional framework: The operation benefited from the legal and institutional framework established by Law No. 24.453, which was highly conducive to the establishment of a modern public investment system. In particular, the 1994 legislation offered several advantages, including: i) it conceived the PNPI as fully integrated into the annual budgetary cycle, thus, inserting public investment programming into the broader scheme of public expenditure management; ii) the conceptualization of the SNPI went beyond the national government to include also provincial and municipal governments, thus fully capitalizing on the potential advantages of such a system in terms of horizontal and vertical coordination among the three levels of government; and iii) the DNIP was the natural conduit for strengthening efforts, as all activities supported under the operation were in line with DNIP’s basic functions. Excessive emphasis on training rather than on institutional development: As originally designed, the operation placed more emphasis on training and dissemination activities rather than on providing a sound road map for the institutional development of the SNIP and the strengthening of public investments processes in general. The definition of the

8

institutional development process to be carried under the program was vague. As designed, the operation was to provide the means to define such process—through the financing of basic studies and study tours to review best practices—rather than to support the implementation of an already well defined process. This constituted a significant weakness in project design, increasing the likelihood of a convoluted implementation process and the inefficient use of the loan resources. Partial risk assessment: At appraisal, the Bank’s team partially identified some of the main risks affecting the operation, including the potential erosion of the government’s commitment to reform and the excessive politicization of the selection of projects, resulting in improper use of the investment system. Other significant risks, however, were overlooked, including the difficulties of implementing a decentralized TA program, unfavorable governance conditions, lack of ownership among the public bureaucracy, the lack of a clear institutional development strategy, and weak management. The challenge of achieving the cultural transformation of public agencies with respect to public investments was also underestimated. Not surprisingly, implementation proved to be more challenging than expected, resulting in significant delays and detours during the life of the project. Poor M&E framework: As mentioned earlier, the project lacked a sound Results Framework, as key indicators focused on activities and intermediate outputs rather than on measuring substantive outcomes and overall impact.

2.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) Despite its overall accomplishments, the project encountered significant obstacles during its implementation. The project had a slow start, with actual cumulative disbursements significantly lagging behind expected ones during 1997 and 1998. Although implementation took renewed momentum in 1999 and 2000, it came once more to a complete halt in 2001 as a result of the country’s economic collapse in December of that year. Several factors, both within and outside the government’s control, affected project implementation, including frequent changes in political leadership, delays and obstacles in execution, and, most notably, the impact of the 2001-2002 economic crisis. The various aspects affecting implementation can be summarized as follows: Slow project start up: Initial progress was slower than planned, in large due to internal struggles within the government after the project’s approval. The Office of the Chief of the Cabinet of Ministers (Jefatura) was created in July 1995 to coordinate the work of all ministries. For about a year, ambiguities on the precise role of the Ministry of Economy vs. Jefatura slowed down the project’s progress. These ambiguities disappeared with the departure of Minister of Economy Domingo Cavallo in July 1996. His departure not only reduced role of the Ministry of Economy in general, but also resulted in a shift in the direction of the country’s overall reform program. Cavallo’s departure was detrimental to the development of the SNIP, as he and his team had been its architects. The lack of strong interest on the part of the incoming authorities was reflected in the amount of time

9

that elapsed between project approval and effectiveness—the project was approved by the Board on November 1995 and became effective only in April 1997, 15 months after its approval. Political and macroeconomic instability: Argentina’s unstable political and macroeconomic environment in the late 1990s was a negative factor in the implementation of the operation. Political instability translated into frequent changes in the project’s administration, which had a detrimental effect on project implementation as the result of the time required to become familiarized with the project, changing priorities, or just lack of interest in the project. Reflecting the government’s own muddling through, the activities financed under the project were often revised and, having lost its original footprint, the operation slowed down and even stalled, bringing it to the brink of closure during 1998. Between 1999 and 2000, the operation received a new lease on life with renewed political support from the SEP. During this period, the operation was restructured and implementation took renewed momentum, with disbursements totaling US$3.3 million during 1999 and 2000 compared to only US$68,000 between its effectiveness in April 1997 and June 1999. The implementation pace slowed down again as a result of the increasing political and economic instability leading up to the country’s economic collapse in December 2001. The economic collapse affected the FOSIP operation even more that other Bank projects, since, being housed in the Ministry of Economy, it was right at the epicenter of the crisis. The operation did not get back on track until mid-2002, when new leadership within the SEP brought renewed momentum to the operation, setting in motion a new wave of expansion and consolidation of the SNIP, which, fortunately, has been sustained for over four years. The operation reached full momentum during 2004 and 2005, when roughly 40 percent of the loan was disbursed. Changing government priorities: Project implementation was deeply affected—both favorably and unfavorably—by the changing priorities of the various administrations. Although the portfolio of public investments was dramatically reduced during the 1990s as a result of the large scale privatization of state-owned enterprises, the development of modern management tools such as the SNIP was an important component of the government’s reform program. The operation was conceived in this context, for which the preparation process received full government support. Toward the late-1990s, however, the interest on public sector reform began to wane, as the government became increasingly focused on responding to the challenges posed by the country’s economic slowdown, a succession of international financial crises, and growing political instability. Not surprisingly, this environment was not favorable for this operation, as it did not offer a good match to the government’s priorities or a particularly relevant tool, given that the level of public investments was declining steadily to reach its lowest point during the 2000-2002 period. Although in the year 2000, the Bank sought to respond to the priorities of the incoming de la Rua administration by adding two components that reflected priorities of its government agenda, the initial political support given to the project quickly eroded, together with the administration’s overall ability to govern. The 2001 crisis and ensuing recession had severe consequences, not only from an economic perspective but also political, institutional and social, and brought the operation to a total

10

standstill. The situation changed in the aftermath of the 2001-2002 crisis, when the Duhalde administration utilized the project to improve budget performance and oversight—a high priority given the scarcity of financial resources at the time. As a result, the implementation of two additional financial management tools (the Unified Local SIDIF – SLU, and a management system for Project Executing Units administering projects with external financing - UEPEX) was included in the project. Under the Kirchner administration, the operation offered a perfect match to the administration’s priorities, which responded to a development model that emphasized economic production in the context of territorial development and regional integration, with public investments acting as a catalyst for private investments, economic growth and increased equality. In this context, the FOSIP was used as a strategic tool by the SEP to rebuild relationships between the national government and the provinces and to disseminate the administration’s economic model among provincial authorities. The SNIP, including its capacity building in project evaluation and its overall potential for enhancing the economic return of public investment, proved to be a strategic tool for the Kirchner administration, which increased budgeted national public investments from Arg.$800 million to Arg.$4.9 billion between 2003 and 2006. Not surprisingly, the operation reached its momentum during this period. Inherent complexity of public investment programming: Although it is clear that effective project appraisal procedures are fundamental for attaining value for public investments, project evaluation methodologies and calculations are inherently complex. These complexities pose additional challenges in strengthening programs to be implemented across a broad spectrum of institutional actors with wide differences in technical capacity as well as areas of focus. Moreover, the challenges go beyond the complexities of the substance matter, as the insertion of a sound, government-wide public investment system also requires a deep cultural transformation within government institutions. Thus, it is not surprising that a high and sustained the level of effort—including time and financial resources—is required for such a process. Federal conceptualization and implementation of the SNIP: The SNIP was conceived as an integrated tool that went beyond the sphere of the national government, to include also autonomous provincial and municipal governments. This federal approach has been vital to the successful development and relevance of the SNIP given the relative importance of provincial governments in Argentina, which account for the bulk of public investments (78 percent in 2005). While a large portion of provincial public investments are financed by transfers from the national government (50.9 percent in 2005), including housing, roads, electricity, for which the SNIP law mandates their inclusion into the national BAPIN, the inclusion of public investments by sub-national governments is key to fully capitalize on the potential benefits of a national public investment system. Moreover, the expansion of the SNIP among sub-national governments has been successful as a result of the incentive-based approach adopted by the national government, by which provinces are given free access to the BAPIN software, equipment and training as an incentive to join the SNIP. Provincial governments are not required to provide the national government access to their databases, although they are given full access to the national BAPIN. As a result of this approach, 23 out of 24 provincial jurisdictions have formally

11

adhered to the SNIP. In contrast, only five provinces had formally joined the SNIP when the national government tried to implement a more coercive approach earlier on in the process. Project add-ons: While the addition of the two public sector modernization components in 2000 may have helped the Bank to respond to the request for assistance of the incoming administration in an expedient manner, it detracted from the operation’s original focus and added more complexity to its already challenging implementation. The new area of intervention did not fit within the original PDO and required expanding it. Moreover, the Ministry of Economy, where the operation was located, was not the natural executor for such endeavors, which would have been more appropriately implemented within Jefatura—as they eventually were under the State Modernization Loan (Loan No. 4423-AR). The subsequent inclusion in mid-2002 of two additional financial administration tools—i.e., the SLU and the UEPEX—were more compatible with the operation, since all responsible parties were under the Ministry of Economy. Lack of adequate counterpart funds: Insufficient budgetary allocations for the project as a result of tight budgetary conditions represented a bottleneck from 1999 until 2003, contributing to the slow down in project implementation. At the same time, the devaluation of the Peso that took place in early 2002 generated additional resources, as the hard-currency loan proceeds were multiply by almost a factor of 3 for the purchase of domestic goods and services. Moreover, the strong support from the Director of the Budget’s Office was a key factor ensuring that the project had sufficient counterpart funds during the last stage of implementation. Too narrow focus on training and ex-ante project evaluation: During its implementation, the project suffered from an excessive focus on capacity building (particularly training) at the expense of a more result-oriented focus on structural changes in the public investment and financial management systems, which reduced project impact and sustainability. Within capacity building, efforts focused on training in the preparation of public investment projects and ex-ante evaluation, without giving much attention to on-going and ex-post evaluation. Poor fiduciary reporting: In December 2004, the supervision mission identified poor reporting by the Project Coordinating Unit (PCU), which led to thorough ex-post reviews (see Section 7.4). While both the Bank and the government teams fully acknowledge the necessity to conduct ex-post reviews and to take corrective financial, procurement or administrative actions during a regular process of supervision to ensure operations/ full compliance with all regulations, they also recognize that the due diligence process severely disrupted implementation and supervision efforts, as these activities consumed the attention and energy of all actors. The government cooperated in providing all the requested information.

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2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization (a) M&E Design: As mentioned earlier, the design of the monitoring and evaluation indicators was not fully developed at appraisal, particularly in terms of capturing the operation’s overall impact. (b) M&E Implementation: The project was not retrofitted into the Results Framework, so the original weakness in the M&E persisted during implementation. The PDO indicators included in the ISRs (i.e. strengthening of the National Directorate of Public Investment, Social Expenditures and Projects with International Organizations to provide guidance and support to expenditure agencies) referred to objectives rather than outcomes. Likewise, additional outcomes were added over the years to the already original long list to reflect the successive amendments. As a result of this piecemeal approach, the project’s formal M&E framework was largely ineffective. However, information of key project outcomes was regularly recorded as part of the project’s implementation and supervision. This information has proved vital to assess the project’s overall impact and was included in the Results Framework developed in June 2006 by the supervision team in preparation for the project’s closing. (c) M&E Utilization: The frequent changes in administration had a detrimental effect on project implementation, as each administration revised the activities being financed under the project according to its own priorities. In an attempt to respond to the needs of the various administrations, the project ended up financing an extremely diverse set of activities over the life of the project, as opposed to the set of activities that were envisioned—albeit vaguely—at appraisal. The Action Plans agreed with the Bank on an annual basis as well as the Mid-term Review were useful in providing some structuring for the revised project activities, helping compensate for the disruptions in the project’s conceptual and strategic continuity resulting from the frequent changes in management that took place until mid-2002.

2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) As mentioned earlier, the Bank Fiduciary team raised concerns regarding the arrangements—procurement, financial management, and potential conflict on interest—between the PCU and a local non-government organization (Asociación Argentina de Evaluación – ASAE) whose creation had been supported by the Bank as part of the 1999 restructuring to manage and provide training funded by the project. A thorough fiduciary due diligence process took place, which included Legal/Procurement and Financial Management reviews as well as extensive discussions with the authorities. The key findings reported by the Regional Vice-Presidency of the due diligence process were: i) there was no mis-procurement in the FOSIP-ASAE context; and ii) funds transferred from FOSIP to ASAE were accounted for and the amounts transferred to ASAE had been used for the purpose of the project and expenditures were eligible. Under the Bank Consultant Guidelines (1981) prevailing at the time FOSIP was approved, the hiring of government staff as done by ASAE (which is also legal in Argentina for training

13

purposes) was acceptable to the Bank.2 As FOSIP was an ongoing project at the time, ASAE subsequently provided the services for which project funds had been already transferred and provided supporting documentation satisfactory to both FOSIP and the Bank. Fiduciary risk mitigating measures are being put in place for all the follow-up operations, including Governance 21, capitalizing on the lessons learned under FOSIP and the preventive measures that were subsequently adopted.

2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable) The framework provided by the SNIP Law (Law No. 24.354) guarantees the institutionalization of the SNIP. By law, the SNIP constitutes an element of the formal budget (Proyecto de Ley de Presupuesto). Only those public investments that are included in the BAPIN can have a budgetary allocation, thus ensuring that all investments in the PNIP meet the basic quality requirements established the DNIP. The DNIP is a permanent entity within the Ministry of Economy’s Secretariat of Economic Programming, with its own budgetary allocation. The follow-up operation currently being prepared—Governance 21—will continue to support the further development of the SNIP and the SIDIF.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) At the government’s request, a follow-up operation (Governance 21, FY 2008) is currently being prepared, which will consolidate and expand upon the progress achieved under FOSIP, including expanding the integrated financial management information system (SIDIF) at the national level and the public investment management system (BAPIN) at the sub-national level. More than a decade after it was prepared, the FOSIP project is still consistent with the objectives established under the current CAS. Specifically, by strengthening transparency, efficiency and accountability of public expenditure management at different levels of government, the operation is fully consistent with the current CAS objective of improved governance (p. 30, CY 2006-2008 CAS).

3.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) Overall, the operation is ranked as moderately satisfactory. Despite the obstacles and challenges faced during its implementation, the operation has made a substantial

2 The hiring of government staff is no longer acceptable to the Bank under the new Bank Consultant Guidelines (May 2004).

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contribution toward improving Argentina’s investment processes, strengthening project analysis capabilities, and building up project and program evaluation capacity. While the tools, processes and human capacity developed under FOSIP have contributed to enhance the effectiveness and efficiency of the government’s public expenditure management under the SNIP, the government has yet to fully capitalize on the potential benefits of this enhanced institutional and technical capacity by including all major public investments—including those presently financed under fiduciary funds—under the SINP. Hence, the project is ranked moderately satisfactory with respect to the original PDO of enhancing the effectiveness and efficiency of the government’s public expenditure management. The additional PDO added in 2000 has been only partially met; while the FOSIP operation succeeded in furthering a results-oriented management approach within the national government though the implementation of financial management tools, it has not significantly advanced the development of management tools focusing on the monitoring of services to the public. The achievement of objectives can be summarized as follows: PDO 1 - Enhancing the effectiveness and efficiency of the government's public expenditure management: The operation has moderately satisfactorily met the objective of enhancing public expenditure management. Having succeeded in: i) improving the investment process; ii) strengthening project analysis capabilities; and iii) building up project and program evaluation capacity, the operation has set the foundations for enhancing public expenditure management not only within the SNIP but also among sub-national governments. Although it is not yet possible to fully gauge the impact of the operation in terms of improved project execution rates, increased internal rates of return and other performance measures (in fact, an M&E system that includes these and other performance measures will be developed under the follow-up operation), the public investment management tools developed under FOSIP have been critical in allowing the current administration to implement a massive increase in public investment without overwhelming the national government’s management capacity. Specifically, the FOSIP operation provided needed support to the newly established DNIP, so it could fulfill its responsibilities under the law, including: creating a public investment evaluation system within the national government; developing an inventory of public investment projects; providing training for public officials at all levels of government on project evaluation; annually preparing the public investment plan; and expanding the SNIP among provincial and municipal governments. However, the government has not yet fully capitalized on the potential benefits of the institutional and technical capacity built under FOSIP, as a significant proportion of public investments are not included under the SNIP. For example, major public investments in the areas of energy and transport are financed under fiduciary funds. These public investments are implemented outside the SNIP and, therefore, are not subjected to the SNIP’s legislative and technical controls. The individual achievements can be summarized as follows: National Public Investment System (Sistema Nacional de Inversión Pública – SNIP): With support from the operation, the DNIP has successfully established a National Public Investment System (SNIP), including developing a set of principles, norms, procedures, as well as an information system to support the preparation and management of the

15

national public investment plan. The main characteristics of the SNIP can be summarized as follows:

Dynamic outlook: It encompasses the entire life span of public investment projects, from identification to ex-post control and evaluation.

Decentralized conceptual design: It was designed for multiple users, taking into account the different actors, their multiple roles, and the three levels of government.

Supportive ICT platform: The web-environment utilized for the inventory of public investment projects permits users from locations across the country to access the system through Internet.

Shared methodology: It establishes shared norms and procedures to be used by public sector users at all levels of government. As a result, the evaluation methodology and criteria such as shadow prices, discount rates, and foreign exchange rates, are now homogenous throughout Argentina’s public sector, with the consequent gains in terms of transparency and internal consistency.

Quality control: The DNIP is now working closely with public agencies within the national government during budget preparation in the ex-ante evaluation of projects that are greater than Arg.$5.6 million.

Although the SNIP has achieved a considerable institutional presence and identity within the public sector as a whole, its insertion within individual agencies remains uneven. The number of investment projects being incorporated to the BAPIN varies greatly among agencies, as does the quality of the information. In some agencies, the impact of FOSIP’s training has been rather diluted. Some entities, however, such as the Armed Forces, have wholeheartedly embraced the SNIP, its evaluation methodologies and the use of the BAPIN as indispensable management tool. Out of BAPIN’s 1160 users, 250 correspond to the armed forces. The Aeronautical Higher Education Institute (Instituto Universitario Aeronáutico - IAU) has incorporated the post-graduate course on project evaluation as part of its regular curricula, opening enrollment to students outside the armed forces and even international students. The IAU regularly conducts training on the use of BAPIN for administrative units of the armed forces across the country, inviting also municipal and provincial personnel to attend the courses. Inventory of Public Investment Projects (Banco de Proyectos de Inversión Pública - BAPIN): The operation has effectively supported the development and implementation of an information system on all public investment projects identified by government agencies. The BAPIN provides an updated inventory of all public investment projects, which is organized in three basic modules: pre-investment, implementation and operation. In its new version, the BAPIN operates in a decentralized manner, with each government agency being responsible for uploading the information on its investment projects. Its ICT platform operates on a relational database (SQL server) that permits the large quantities of registries associated with such system and ensures the security and integrity of the information. The BAPIN II has a use-friendly Window-based interface, which has facilitated the expansion of the system among a wide array of institutional users. The consolidation of the BAPIN system has been gradual and steady since it was first implemented in 2003. As of October 2006, it had 1,160 institutional users and 6,455

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projects amounting to Arg.$212 billions. At the national level, the BAPIN is operational in 392 administrative units within 120 administrative units (Servicios Administrativos Financieros - SAFs) distributed among 233 public agencies, including, among others, 113 national government agencies, 34 decentralized state enterprises, 17 fiduciary funds, and 39 national universities. Figure 1. Evolution of the BAPIN – 2003-2006

The BAPIN system has been universally accessible through its public web-site since January 2006, permitting the consultation of basic data of public investment projects using various data filters through a user-friendly interface.3 This constitutes a major step toward enhanced transparency and accountability, as the projects presented by individual government agencies as well as the quality of the information they upload to the system is now available to the general public. The SEP has subscribed a cooperation agreement with the Central American Bank for Economic Integration (CABEI) by which it will share the BAPIN software among member countries interested in developing their own public investment systems. National Public Investment Plan (Plan Nacional de Inversiones Públicas - PNIP): Since 2003, the DNIP has regularly prepared a National Public Investment Plan, which includes

3 The BAPIN’s URL address is http://www2.mecon.gov.ar/pnip/basehome/invpub.php.

Number of BAPIN Users2003-2006

373 429505

687 733822

957 9471050 1126

1160

0200400600800

1,0001,2001,400

May-03 June-03 Sept.2003


May-05 June-05 January-06

May-06 October-06

Number of BAPIN Projects2003-2006

7471202

1954 21793015 3255

39254609

5158 54836455

01,000

2,0003,000

4,0005,000

6,0007,000



May-05 June-05 January-06

May-06 October-06

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all public investment projects proposed for implementation within a three-year time horizon that have full or partial financial support from the national government—even if they are implemented by provincial or municipal governments. The National Public Investment Plan is formulated taking into consideration public investments from two main perspectives: i) as means to increase the productive capacity of Argentina’s public sector—in this regard, public investments are evaluated in terms of their economic, social and environmental impacts; and ii) as generators of financial commitments, both in terms of the actual investments and the operational costs. The 2007-2009 PNIP includes over 2,000 public investment projects for a total amount of roughly Arg.$4.9 billion. The quality of the individual public investments has improved considerably, as to be included in the PNIP and to have a budget allocation, public investments have to be incorporated into the BAPIN. The required use of BAPIN, which is based on the logical framework (i.e., it requires the definition of objectives linked to outcomes, to monitor their implementation and impacts), has contributed toward establishing a system aimed at enhancing project quality. Moreover, public investments greater than Arg.$5.6 million are required by law to have the DNIP’s approval in terms of their technical and economic soundness. Projects with an EIRR estimated in excess of 12 percent are considered a higher priority for realization. In this regard, the fact that the DNIP is within the jurisdiction of the Ministry of Economy helps ensure the independence and soundness of quality-control mechanisms. There is still substantial room for improvement regarding the PNIP selection process. The DNIP takes into consideration the public investment projects proposed by individual government agencies and, based on the specific budget allocation for each agency and explicit technical criteria, it then recommends to each government agency the relative priority it should assign to its various public investment projects. The final selection, however, is the responsibility of each individual agency. Congress also has a say regarding the composition of the PNIP, while Jefatura, with its newly acquired ‘superpowers,’ has a final veto power over the PNIP. Therefore, although the current PNIP prioritization process is clearly superior to the previous selection practices, which were more ad hoc and less transparent, there are still some loopholes to be closed. Expansion of the SNIP among sub-national governments: Sub-national governments have exhibited a strong interest in the development of the SNIP, both nationally and within their own jurisdictions. DNIP’s statistics show that provincial users are the most frequent users of the national BAPIN system—i.e., provincial users show on average 3.1 visits per month to the national BAPIN site compared to 1.7 visits per month for their national counterparts. Provinces and municipalities have also been invited to adopt a public investment system of characteristics similar to those of the SNIP within their own jurisdiction. The development of these systems and local BAPINs is proving to be of strong interest among provincial and municipal governments. Specifically, provincial governments were invited to subscribe a formal agreement with the Minister of Economy to join the SNIP. By this agreement, the province agreed to develop a public investment system of similar characteristics at the provincial level and to establish a counterpart office. In turn, the Ministry of Economy agreed to install the BAPIN system in the province, provide technical training on both BAPIN and project evaluation

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methodologies, and supply the necessary equipment. Today, all provinces except La Pampa have formally adhered to the SNIP. Thirteen provinces have uploaded 230 projects on the national BAPIN system (provinces can incorporate their own projects as well as those under the jurisdiction of national agencies that are of provincial interest but have not been incorporated to the BAPIN by the responsible agency). In addition, 18 provinces have their provincial BAPIN systems operational, containing information on over 4,700 projects (it is important to note, however, that the quality and level of development of provincial BAPIN varies greatly among provinces). Following the example of the national government, two provinces—Santa Fe and Entre Ríos—also publish their BAPINs online. An overall respect for the autonomy of provincial governments has facilitated the expansion of the SNIP at the sub-national level. While the SNIP provides full accessibility from the bottom-up—i.e., provincial governments have full access to the national BAPIN system—there is no top-down visibility (that is, the national government does not have access to the provincial BAPINs), except for those projects that are voluntarily included in the national BAPIN by provincial and municipal governments. Some groups of provinces, such as those in the northwest region (i.e., Catamarca, Jujuy, Salta, Santiago del Estero and Tucumán) have formally agreed to share the information on their provincial BAPINs to facilitate inter-provincial coordination. The SNIP has also begun its expansion at the municipal level, as provincial governments have, in turn, subscribed agreements with their municipal governments. By mid-2006, more than 200 municipalities in six provinces had established their own municipal BAPINs. Equipment to support the establishment of the BAPIN at the provincial level has been provided to 21 provinces. In addition, the DNIP has provided training to all but two provinces on basic project evaluation methodology and the utilization of the BAPIN, as well as to municipalities in four provinces. Capacity Building in Project Evaluation: The operation supported an extensive and wide ranging capacity building strategy, which proved vital to the establishment of the SNIP within the national government as well as sub-national governments. With the operation’s support, the DNIP’s evaluation methodologies were disseminated among public officials throughout the national administration and sub-national governments, together with training in the utilization of the BAPIN. In addition, over 565 professionals received post-graduate training under the operation on project evaluation throughout a network of 12 national universities located throughout the country and ASAE, the majority of which are public employees. Over 112 projects were formally evaluated as part of the post-graduate courses. In addition, a large array of capacity building activities was carried out under the operation, as detailed in Table 1. The results from two electronic surveys aimed at measuring the impact of the post-graduate courses offered by the network of universities are described in Annex 5. In brief, course coordinators stress the impact of the capacity building activities implemented by the universities in terms of establishing a common evaluation methodology, promoting an inter-disciplinary approach to project evaluation, and setting the foundations for a national network of project evaluators. Course participants—the majority of whom are public employees—report that the

19

training on project evaluation has been relevant for their professional activities. In general, both course coordinators and participants gave high marks to the quality of the course and the bibliography. Alternatively, the low enrollment and graduation rates corresponding to ASAE’s e-learning course on project evaluation suggest that further improvement is needed in terms of the course’s content, delivery and marketing.4 Table 1. Capacity Building Activities Conducted under FOSIP

Capacity Building Activities

Participants

I. Capacity Building - Post-graduate Courses Course by the Secretariat of Economic Programming-ASAE (2004, 2005 and 2006) * 99 Course by National Universities (2003 and 2004) 565 Course by National Universities (2005 and 2006) ** n.a. II. Training to Provinces and Municipalities - BAPIN DNI y universities 2,057 III. Strengthening of the Secretariat of Economic Programming Productive Forums - Foros Productivos (5) 289 Seminars on Territorial Development 50 Seminar on Projects Formulation (Consumers’ Assoc.) 25 IV. Other Capacity Building Activities a. Capacity building E-learning course on project evaluation (ASAE) *** 86 Course on project management (ASAE) **** 103 Workshop on public management and finances (3) 170 b. Large-audience events Inter-American Seminars (3) n.a. Seminar on Good Government Preparatory workshops (2) 71 Seminar 1,600 Professional development workshops FOSIP-ASAE-CFI (9) 13,500 Congress on Democracy + Development Preparatory workshops (2) 150 Congress 300 Evaluation workshops FOSIP-DNIP- ASAE 90

Source: Own elaboration based on FOSIP’s Progress Report (2006) unless specified otherwise. * Based on Uña (2006), 35 students were enrolled in 2005 (of which 27 completed the course satisfactorily) and 38 were enrolled in 2006 (completion rates are not available since the course was still ongoing at the time of the report’s preparation). Enrollment data for 2006 show a total of 26 students. ** These courses did not receive financing under FOSIP. *** Data provided by ASAE during ICR mission. **** Based on Uña (2006), 41 students were enrolled in 2004 (of which 39 completed the course satisfactorily) and 30 were enrolled in 2005 (of which 28 completed the course satisfactorily). Data provided by ASAE show 27 students satisfactorily completing the course out a total of 33 students enrolled in the two sessions taught during 2006.

4 There were 70 students enrolled in ASAE’s electronic course in 2005, with only 25 students completing it. Only 16 students enrolled in 2006.

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The main characteristics of the capacity building strategy implemented under the FOSIP operation can be summarized as follows:

Capacity building was conceived as a vital tool to ensure the development, expansion and consolidation of the SNIP.

It targeted not only the national government but provincial and municipal governments as well.

Learning from the failure of the capacity building efforts due to the excessive academic focus early on in the project, after the 1999 restructuring, capacity building was conceived as a menu of alternatives that responded to the different audiences, purposes, and tools, including:

Capacity building activities of a more general nature aimed at a wider audience. Training on basic project evaluation and utilization of the BAPIN among public

officials at all levels of government. Post-graduate courses on project evaluation for professionals working within both

the public and private sectors through a network of national universities. Post-graduate courses on project evaluation for public sector professionals within

the national government, offered by the SEP in conjunction with ASAE. An electronic course on project evaluation has been developed to expand capacity

building beyond traditional classroom setting. A total of 12 national universities—six in 2003 and an additional six in 2004—were

recruited to offer post-graduate courses on project evaluation to professionals in their respective geographic areas. This constituted an important first step toward developing a permanent capacity building network covering the entire country that capitalizes on the universities’ academic resources and infrastructure, as well as their knowledge of local conditions and needs, as well as their links with local actors, both public and private, that play key roles in the regional development process.

All individual capacity activities sought to bring together a diverse audience with multi-disciplinary backgrounds.

The adopted evaluation methodology and vocabulary was systematically used in all capacity building activities to ensure homogeneity of criteria and internal consistency. A through textbook authored by a renowned project evaluation specialist was printed under the operation and distributed among the course participants.

A non-government organization (Asociación Argentina de Evaluadores – ASAE) was established to achieve the sustainability of capacity building efforts beyond the life of the project and the financial support of the SEP, although so far such experience has had limited success.

The SEP has played a key role as the architect and engine of the capacity building strategy.

As part of the FOSIP’s capacity building strategy, the DNIP has actively supported the expansion of the SNIP at the sub-national level through an aggressive dissemination strategy. Regional meetings were held to present the SNIP and the BAPIN to provincial governments. Subsequent meetings with participation of provincial authorities have been conducted regularly, both in Buenos Aires and at the regional level, to identify common challenges confronting provincial governments and facilitate the exchange of information among them. In addition, the DNIP has actively supported provincial governments in

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their efforts to develop their own public investment systems and those of their municipalities through ongoing technical assistance. PDO 2 – Establish within the public administration at the national level a: i) results-oriented management approach; and ii) monitoring tools for citizen review of agency performance. This objective, which was added as part of the loan amendment of June 2000, was only partially met. Although the PDO responded to the reform modernization agenda of the incoming de la Rua administration, the implementation of the corresponding loan components soon lost momentum, once the champion of the modernization efforts—vice-president Alvarez—resigned in October 2000. The objective of contributing toward the establishment of a results-framework approach was achieved, albeit indirectly, through the implementation of two financial administration tools: i) a management and budget control system (UEPEX) for executing units funded by external loans; ii) the further development of the financial administration system (SIDIF) through the implementation of the Local Unified SIDIF (SLU); and iii) the conceptual development of the web-SIDIF, the next generation of the SIDIF. Conversely, no progress was made toward the development of public service standards, for which this part of the PDO was not achieved. The individual achievements of the FOSIP operation contributing toward the second PDO can be summarized as follows: Management and budget control system for project executing units - UEPEX): This system was aimed at supporting the financial administration of executing units funded by loans from International Financial Institutions (IFIs). Specifically, the project supported the upgrading of the UEPEX system—which was designed under a previous IADB operation—transforming it into a multi-annual budget and multi-currencies system. The system’s redesign also included the production of reports requested by the DIFIP, including conciliation of funds, financial and disbursement reports and details of payments. In addition, the UEPEX’s technology platform was also updated. The UEPEX can accommodate the significant variation exhibited by the projects, including decentralized executing units at the sub-national level, allowing up to 30 simultaneous users per project. Provincial governments that receive direct international loans are also provided free access to the UEPEX. As of mid-2006, the UEPEX had been implemented in 65 projects, 48 of which are still active. Presently, the UEPEX covers approximately 54 percent of the overall number of projects (48 out of a total of 89 projects) and 27 percent in terms of IFI financing (US$2.3 billion out of a US$8.45 billion overall portfolio). Of the 48 projects under UEPEX, 21 have IADB financing (US$ 1.1billion); 13 projects have IBRD financing (US$953 million), and four projects have financing from other IFIs (roughly US$220 million). The implementation of the UEPEX affects positively several actors. The executing units are given access to the UEPEX software, as well as its adaptation to the specific characteristics of the project and training at no cost, thus saving considerable resources for the purchase of similar systems (over US$400,000 depending on the complexity of the project, as illustrated by a recent private bid to develop the financial administration system for an upcoming health loan). Likewise, the UEPEX results in significant savings

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for public control organisms, such as the Auditing Office (Auditoría General de la Nación - AGN) as well as the international institutions financing the projects, as the systems produce standardized reports in a timely manner and in the format required by each institution. Local Unified SIDIF (SIDIF Local Unificado – SLU): The project has supported the implementation of the SLU, which was developed under a previous IADB operation, in public agencies at the national level. Prior to the implementation of the SLU, there were multiple local applications of the SIDIF, including the SIDIF OD, AC, COMPRE as well as other systems developed by the agencies themselves. The SLU system has been implemented in 83 SAFS out a total of 104 SAFs, representing 56 percent of the national budget (excluding the social security administration - ANSES). The number of users has also increased from 155 in 2002 to 5014 users in 2006. The expansion of the SLU through the agencies at the national level is the result of the inherent advantages for individual agencies, as its adoption was voluntary. Some of the advantages include: substantial savings in maintenance costs (estimated at roughly US$2 million per year); simplified back-up processes, as these are now centralized within the Ministry of Economy; optimization of the SIDIF’s overall security and communications; cost reductions in the updating of obsolete systems; and the possibility to migrate databases to newer versions. A committee of SLU users meets regularly on a bi-weekly basis to share their experiences and prioritize the applications and additional functionalities to be developed. The strong support and close involvement from the leadership in Hacienda, including the Treasurer and the Budget Director has been vital to the successful implementation of the SLU. Web-SIDIF: The project also supported the architecture and model design of a new Internet-based financial management system (Web-SIDIF). In terms of technology, the new version capitalizes on the last generation of open-source software, such as