Given “Opportunistic public projects” of the past… Absence of controls leads to financial abuse– Presidential Advisor

Jul 12, 2015 News

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By: Kiana Wilburg
Presidential Advisor, Dr. Clive Thomas, believes that given the series of “opportunistic public projects” that prevailed under the previous government, it becomes critical for the new administration to establish a public infrastructure management initiative.
Prof Thomas, an economist, said that the high priority that such a programme should attract would restore the much needed confidence and sense of accountability and transparency to the Ministry of Public Infrastructure.
“I think that this is priority. I was writing about it before the elections in a series called “Lessons for a new government.” I think one of the problems in Guyana is that people don’t understand what makes a project viable. Some people believe that a project is viable when it “seems technically feasible but a project being technically promising and commercially possible are two different things.”
The economist said that projects in the future need to undergo what he termed, “an efficiency test.” He explained that this is to determine whether the project would amount to the best use of the nation’s resources.
“We never had any sort of check and balance in that regard under the previous administration. So it becomes imperative for the new administration to implement this in some form to demonstrate that public infrastructure projects will be carried out differently. There are other tests like the Social Impact Assessment but we don’t have that mechanism or any of its kind and that I feel this is the sort of major gap we have when it comes to fiscal discipline and responsibility.
“I would hope that soon when people settle in, this will be looked at,” the Presidential Advisor said.
He added, “The Marriott would have been avoided if we had those mechanisms as well as the madness surrounding other public infrastructure projects. We need to get down to proper scrutiny of these projects, the manner in which the contracts are awarded as well as whom they are awarded to and the nature of the contracts.”
Dr. Thomas reminded of comments he made in his previous columns on the said matter, particularly, the four phases of effective public management.
He said that the first phase is where the investment strategy is formulated. Dr. Thomas explained that in many developing countries, the formal undertaking of this task is the responsibility of either a Ministry of Planning or an autonomous or semi-autonomous body like a National Planning Commission or Agency.
Such bodies, he said, are usually tasked with the responsibility for preparing, monitoring, and generally superintending what is commonly described as the National Development Plan.
Dr. Thomas identified the second phase to be the use of project evaluations/cost-benefit analyses/ feasibility studies to establish what projects are selected to proceed with, and the time sequence for their implementation.
“As I had indicated previously in related discussions on ‘Guyana’s troubled projects’, unless the investment strategy is filtered through the economic analytics, the selection of projects from the investment strategy would in effect amount to little more than guesswork and operating in the dark.”
“This judgment applies irrespective of how well articulated and reasoned is the investment strategy. Indeed this is the environment in which “the way to hell is frequently paved with good intentions” and therefore the need to proceed carefully is the greatest,” he said.
As for phase three, Dr. Thomas said that surveys of experiences in a number of developing countries reveal that effective management of the public investment regime is only possible where the selected projects are well integrated into the annual national budgetary process, particularly in light of its broader medium-term budgetary framework.
He said that therefore, phase three is centered on the integration of a country’s annual national budget cycle with the public investment project cycle.
The fourth and final phase in the management of a country’s public investment management regime, Dr. Thomas asserted, is post-evaluation audits of projects.
He said that this takes one of two general forms: either immediately after the project has been completed, or after some pre-determined lapse of time, usually two to four years. He said that the former audit focuses on issues like variations between projected project and actual costs, identifying delays in project implementation and the reasons for these, while the latter focuses on issues like overall project goals and whether these are being met.
Dr. Thomas said that in the absence of an effective investment management regime; there have been major types of project failures and weaknesses observed in Guyana’s public investment during the 2000s.
He said that two types of Guyana-specific project weaknesses/failures are those originating from the National Commercial and Industrial Investments Limited (NICIL) public investment spending and the class of troubled public investment projects that he labeled, “opportunistic”.
The economist said that NICIL is the single largest location for public investment project weaknesses and failures in Guyana.
Dr. Thomas noted that over the past decade NICIL has become responsible for about 20 percent of Guyana’s total public investment spending. He said that by the end of this year this total investment spending could represent as much as $100 billion, of which $20 billion would be controlled by NICIL.
He said, “Therefore the inference is straightforward. The absence of an effective public investment management regime for Guyana together with NICIL’s ability to avoid those commercial rigors routinely faced by private corporations in private markets results in NICIL’s public investment spending being wide open to political direction with little or no concern for commercial tests of market efficiency or public tests of economic efficiency.”
Dr. Thomas said that those who still doubt the need for a public infrastructure management initiative should carefully examine the failures which took place under the previous administration.
The Presidential Advisor said, “I would implore readers not to forget the Amaila Falls Hydropower Project (AFHP) Access Road project, which carried a cost overrun that doubled the original budgeted project cost of US$30 million; the largest and longest incomplete project, the US$200 million Skeldon Sugar Modernization Project (SSMP); and the East Coast and East Bank roads scheduled for completion two years ago.”
“There is also the Cheddi Jagan International Airport Extension Project, deemed a “white elephant” by analysts, except for its runway extension); the collapsed Brazil to Guyana Fibre Optic Cable project which has been budgeted for, to date, US$20 million in questionable undertakings and is presently being resuscitated under suspicious circumstances; and the Government Specialty Hospital Project caught up in fraud.”
To this litany of well-known troubled public projects he said one should add funds wasted on diverse “small projects” for road repairs and community and government buildings as well as large bailouts provided to ailing state enterprises without prior independent economic evaluation or required oversight reporting to the National Assembly: especially on sugar (GuySuCo) and power, the Guyana Power and Light (GPL).
“One cannot forget to mention too, the illegal procurement practices, especially sole sourcing for pharmaceutical supplies and the presidential spectrum giveaway by former President Bharrat Jagdeo before he left office,” Dr. Thomas concluded.

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