TECHNICAL COORDINATING COMMITTEE DRAFT October 13, 1996
In spite of recent achievements, Guyana's infrastructure is still weak. The road network suffers from inadequate maintenance; frequent breaches of sea defences pose a major risk to settlements and economic activities; absence of a true deepwater harbour constrains competitiveness; and flooding threatens the economic lives of the some of the most productive regions of the country. Further, power supplies are irregular, the transmission and distribution systems are archaic and these restrain the full potential of economic growth. The issues are the same in the social sectors. The long neglect of the educational and health systems has severely affected human resource development; education standards have fallen; infant and maternal mortalities are high; and poor quality of water has led to the prevalence of water borne diseases in most parts of the country.
In addition, some of the potentially most productive areas of the country are outside existing the infrastructural network. Most of mining and forestry reserves are neither linked to the transportation and power networks, nor benefit from the country's social development. The savannahs, a rich agricultural area, lack basic infrastructure such as water and sewerage, electricity, roads, schools and hospitals to attract investors and convert its potential into concrete growth and development. One of the key issues in broadening the economic base and generating and maintaining rapid growth in the medium term, will be the speed at which existing infrastructure is rehabilitated and new ones constructed to support private sector investment.
The weakness of many investment programmes of the past in Guyana and in many other countries is the inadequate linkage of investments to national development priorities. The importance of the policy framework within which public investments are often made has also not been accorded the importance it deserves.
The lack of coherence in development planning and poor coordination are nowhere more evident than in the ways foreign-funded projects are identified, financed and executed in the different sectors. In theory, the State Planning Secretariat is charged with coordinating all aspects of the investment program. However, in practice, institutional weakness precludes this, and as a result each sector deals directly with external agencies in project identification. As such, the overall macroeconomic impact, especially on the balance of payment and public financing of public-funded projects, is not reviewed, as the information is not available. Duplication of donor efforts and adverse macroeconomic impacts from foreign-funded projects and financial commitments that are beyond the capacity of the economy and the Government are not uncommon. The lack of projections and analysis of resource availabilities eventually leads to the perennial problem of a dearth of counterpart funds (examples are the primary education and health projects).
The medium term prospects of the economy are good. Led by mining and agriculture in the first half, and manufacturing and non traditional exports later, Gross Domestic Product (GDP) is projected to average about 7 percent in the medium term. Gross fixed capital formation is projected to average about 41.7 percent of GDP of which central government investment will account for 34 percent of the total. The incremental capital output ratio (ICOR) will decline gradually from 9.0 in 1996 to 6.5 in 2004 on account of slowdown of private sector investment in 1999 although Government investment is projected to show modest increase between 2000-2004.
Public sector finances are projected to improve over the medium term. The non-interest current account balance will increase from 20.8 percent of GDP in 1995 to 21.2 percent of GDP in 2004 on account of (i) a broadened tax base; (ii) improvement in tax administration; (iii) higher tax compliance; and (iv) gains in efficient allocation of resources.
Although interest payments are projected to increase between 1999 and 2004 containment of the non-interest current expenditures will contribute to higher surpluses in the fiscal current account. This in part accounts for improvement in the overall balance despite increased capital expenditures over the medium term.
Prospects for the balance of payments in the medium term are favourable. The trade balance is projected to improve on account of higher exports volume, more diversified export base and increased value added of Guyana's exports. Although net factor income is expected to worsen beginning 1999, the decline is not sufficient to erode the gains in the trade balance. As a result, the current account deficit of the balance of payments will decline to about -7.6 percent of GDP. Long term borrowing will average US$88 million in the medium term of which multilateral financing will amount to US$81 million or 93.4 percent. Net private investment is projected to double by 2000 and thereafter grow at an annual rate of 2.8 percent.
Gross international reserves are projected to increase on average by US$28.4 million between 1996 and 2004 to maintain an import cover ratio of about 6.4 months. The financing gap in the medium term is projected to average about US$16 million per year.
Between 1992 and 1995, G$36.1 billion were disbursed out of a total programme budget of G$45.4 billion. This suggests an implementation ratio of 79.6 percent. Broken down by funding sources, about 36.2 percent of grants and loans, 10.9 percent of counterpart funds, and 52.9 percent of Central Government expenditures took place out of the total investment expenditures. The high implementation ratio is largely on account of the large component of government financing. Disbursement of external financing has been low. Of multilateral project loan approvals of US$431 million between 1989 and 1995 only US$110 million during the period. Commitment fees of undisbursed project loans amounted to about US$1.6 million in 1995.
Table 41-1
Key Economic Indicators, 1995-2004
| 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2004 | |
| (Real growth rates) | |||||||
| Gross Domestic Product |
5.1 |
7.5 |
7.0 |
7.2 |
7.5 |
7.2 |
6.7 |
| Per capita income |
4.8 |
7.2 |
6.7 |
6.9 |
7.2 |
6.9 |
6.4 |
| Export (GNFS) |
9.2 |
5.8 |
5.4 |
5.1 |
5.4 |
6.2 |
7.2 |
| Imports (GNFS) |
5.2 |
6.6 |
6.1 |
6.2 |
6.2 |
5.7 |
5.3 |
| Investment/GDP |
46.9 |
40.5 |
42.3 |
43.9 |
44.2 |
43.2 |
37.8 |
| Government |
13.1 |
12.5 |
12.3 |
12.9 |
14.2 |
14.8 |
14.5 |
| Debt service (US$) |
169.0 |
116.0 |
103.0 |
99.1 |
93.6 |
119.8 |
137.1 |
| Debt service /XGS |
39.0 |
24.6 |
20.4 |
18..1 |
15.9 |
18.8 |
16.3 |
| Debt/GDP |
326.8 |
222.3 |
197.4 |
183.6 |
160.0 |
154.7 |
110.3 |
| Interest/XGS |
19.9 |
11.1 |
9.3 |
8.6 |
8.1 |
7.9 |
7.0 |
| Export/GDP |
67.5 |
65.3 |
63.8 |
62.7 |
60.4 |
59.2 |
52.1 |
| Imports/GDP |
70.3 |
68.1 |
67.3 |
65.6 |
63.7 |
63.1 |
56.1 |
| Current account/GDP |
-12.4 |
-6.4 |
-6.8 |
-5.6 |
-6.1 |
-6.9 |
-7.6 |
| (-) deficit | |||||||
Source: Ministry of Finance.
The Central Tender Board (CTB) operates within the Financial (Amendment) Regulations Act of 1958. Apart from the outdated laws governing the tendering system, the CTB is weak, staffing levels are low, there are no equipment and operational manuals are lacking. As a result, evaluation and approval of tenders take time and this in part has caused delays in programme implementation. In addition, the tendering system is viewed with suspicion by the contracting community and the general public for its lack of transparency and accountability, yet it plays a critical role in the delivery of government services. Through the public sector investment programme, it awards contracts worth billions of dollars and through the procurement of common user items within the public sector, it holds the potential of generating significant savings for the Government.
Table 41-2
Financing Requirements, 1997-2004
(U$ million)
| 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | |
| Total requirements |
-137 |
-108 |
-139 |
-156 |
-160 |
-174 |
-180 |
-181 |
| Current account |
-53 |
-47 |
-58 |
-73 |
-84 |
-111 |
-122 |
-119 |
| Amortisation |
-31 |
-30 |
-23 |
-43 |
-37 |
-38 |
-48 |
-62 |
| Change in reserves |
-54 |
-31 |
-57 |
-40 |
-39 |
-24 |
10 |
1 |
| Total financing |
133 |
105 |
134 |
140 |
142 |
149 |
148 |
154 |
| Grants |
13 |
13 |
14 |
14 |
14 |
9 |
7 |
7 |
| Gross disbursements |
82 |
66 |
86 |
88 |
89 |
95 |
98 |
105 |
| IMF purchases |
17 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
| Direct foreign investment |
21 |
26 |
34 |
38 |
39 |
45 |
43 |
42 |
| Financing gap |
5 |
3 |
5 |
16 |
18 |
25 |
32 |
27 |
Source: Ministry of Finance.
The limited capacity of the contracting industry is another major hindrance to programme implementation. Cost of construction equipment is beyond the reach of many contractors. Where equipment is available, it is not appropriate enough to undertake large projects. This is compounded by the lack of equipment leasing companies to supplement the stock of local contractors. At the same time, most projects in the investment programme are small and their high mobilisation cost makes it difficult for regional and international contractors to bid. As a result, (i) some projects tendered do not receive offerors; (ii) it takes too long for contractors to complete projects; (iii) the quality of some completed projects are below standards; and (iv) there is a backlog of projects waiting to be implemented.
Guyana is not in a position to do all it wishes in its investment programme and must concentrate on selected areas of high priority new investment, rehabilitation and maintenance that would generate quick supply responses. There are several reasons for this. First, under the conditions of solvency and creditworthiness, there is an upper bound to how much Guyana can borrow to finance its development program. New debt is projected to grow at about 2 percent per year over the medium term. This means that a large component of the public sector investment programme (PSIP) financing may have to come from grants and the private sector. Second, the public sector is weak and the capacity for programme implementation is low. In addition, the procurement and tendering process is deficient and a severe backlog of tender awards remains a critical issue. Third, the capacity of the contracting and consulting industry to implement large projects are low. The capital base of many local contractors is low, contracts take too long to complete and standards are not high. At the same time, most projects are small by international procurement standards and do no attract large firms to compete because of the large mobilisation costs. These and other implementation issues should be addressed so as to provide a viable framework for project implementation in the medium term.
The objectives of the medium term investment programme are to (i) rehabilitate existing infrastructure to support productive activities; (ii) undertake new infrastructure to open the country to private sector investment; (iii) rehabilitate, equip and reform education and health facilities to overcome constraints in human resource development; and (iv) strengthen private sector institutions. The sectoral composition of the medium term programme, summarised in Table 41-3, proposes a tentative reallocation of development expenditure away from capitalised periodic and routine maintenance projects and toward economic infrastructure and social services. It also represents a serious effort to eliminate low priority projects. Such a reallocation is justified on account of (i) immediate requirements of the private sector to stimulate the economy; (ii) the need for skills training to take advantage of new employment opportunities; and (iii) the need for human resource development at a more general level to sustain medium term growth prospects.
Table 41-3
Sectoral Allocations of the PSIP, 1997-2004
| 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | |
| Productive support services |
12.1 |
13.9 |
17.3 |
20.1 |
18.6 |
20.9 |
20.9 |
18.9 |
| Transportation |
22.3 |
30.2 |
30.0 |
43.5 |
51.0 |
51.8 |
52.4 |
67.3 |
| Water |
5.1 |
5.2 |
6.7 |
7.4 |
7.4 |
8.3 |
8.3 |
7.6 |
| Sea defences |
18.2 |
18.0 |
17.9 |
20.1 |
18.6 |
20.9 |
20.3 |
18.9 |
| Urban |
5.1 |
5.2 |
6.0 |
6.7 |
6.2 |
7.0 |
7.0 |
6.3 |
| Institutional strengthening |
5.6 |
5.7 |
7.2 |
8.0 |
7.4 |
7.0 |
6.5 |
7.6 |
| SIMAP |
10.1 |
10.3 |
8.4 |
9.4 |
8.7 |
9.7 |
9.5 |
8.8 |
| Education |
15.2 |
15.5 |
17.9 |
20.1 |
18.6 |
20.9 |
20.5 |
18.9 |
| Health |
7.5 |
6.0 |
8.0 |
8.8 |
7.6 |
9.5 |
10.8 |
7.5 |
| Total |
101.2 |
110 |
119.4 |
144.1 |
144.1 |
156 |
156.2 |
161.8 |
Source: Ministry of Finance.
The medium-term investment programme(1)
will amount to US$1,092.8 million, of which external financing will account for US$953 million or 88 percent and domestic resources the remainder. Of external financing, US$396.7 million is expected to be met from existing loans, US$324 million from new loans, US$33 million from grants, and US$139.2 million from Central Government resources, leaving a financing gap of US$207 million or about US$26 million per year. The large financing gap from 2000 to 2004 is attributable to uncertainties about the policy direction of future bilateral assistance to Guyana. Under the assumption that the IFIs will continue to support Guyana's development program at current levels, the PSIP is projected to average about US$137 million per year. Clearly, this is a large programme and reforms may have to be introduced quickly to remove key constraints in project implementation.
In regard to the sectoral composition of the programme, for each sector consideration has been given to a range of relevant issues: the Government's objectives and targets as established in this Strategy, implementation constraints, the role of the private sector and the priority of individual project proposals. An attempt has also been made to ensure broad consistency between the sectoral programmes and the availability of financing.
The individual chapters of this Strategy lay out the sectoral priorities in respect of both policies and investments. In the case of social sectors, productive sectors and infrastructure, those priorities are summarised in Chapters 7 through 9. Many of the investments outlined in this programme cannot be viewed in isolation from the policy reforms outlined in detail in the chapters, for those reforms have a direct bearing on the viability of the projects, i.e., on their economic and social rates of return.
1. Investment Programme and National Development Priorities
Each year's investment programme must be reviewed against the medium-term objectives of the National Development Strategy and its attendant Annual Operating Plans, and by the same token steps must be taken to ensure consistency of the recurrent expenditures in the Budget with the investment programmes.
2. Resource Availability
In the next two years Guyana faces two mutually exclusive choices: Either it significantly cuts down on its domestic funding of investments and utilises existing loans contracted at concessional terms to finance the investment programme, or it continues to allocate more domestic resources for the PSIP and thereby foregoes the opportunity to improve its public sector wages and the operation and maintenance of its capital stock. Table 41-4 provides a preliminary estimate of the financing of the investment programme by donor.
Cost recovery in the medium term will be important, not only for the financial viability of social sector institutions, but also to finance much-needed recurrent expenditures and incorporate private sector participation in the provision of social services. Between 1989 and 1995, recurrent expenditure at constant 1986 prices increased by 44 percent in real terms; excluding debt service payments and subsidies, the residual allocated for personnel and materials rose by 46 percent. Furthermore, the sectoral composition of routine expenditure has generally been fixed, with little flexibility to move resources to priority area. As a result, allocations for operations and maintenance (O&M) have become increasingly inadequate, reducing the returns on investment and the quality of services provided. In a number of sectors, such as irrigation and drainage, education and health, water and sanitation, the choices are limited. Either, Government increases the budget allocations for operations and maintenance in addition to internalising capital expenditure, or it institutes cost recovery mechanisms to meet fully operations and maintenance expenditures of these sectors. While there are legitimate social reasons for wanting to limit the burden of cost recovery on the poorer segment of society, the need to rehabilitate and maintain the economic and social infrastructure in the context of the medium-term budget constraints makes it impossible for the Government to carry the full load of both recurrent and capital expenditures.
Table 41-4
PSIP Financing by Donor, 1997-2004
(US$ million)
| 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | |
| Identified |
83.2 |
98.0 |
107.4 |
116.1 |
114.1 |
121.0 |
119.2 |
126.8 |
| External |
63.3 |
76.1 |
87.4 |
90.2 |
95.3 |
100.3 |
96.7 |
102 |
| IDB |
31.3 |
40.3 |
51.8 |
55.6 |
59.5 |
63.4 |
66.3 |
70.6 |
| IDA |
18.5 |
22.1 |
22.7 |
23.3 |
24.0 |
24.8 |
25.5 |
26.3 |
| CDB |
3.5 |
3.5 |
4.0 |
4.3 |
4.4 |
4.6 |
4.9 |
5.1 |
| EU |
6.5 |
6.7 |
6.9 |
7.0 |
7.4 |
7.5 |
0.0 |
0.0 |
| Other |
3.5 |
3.5 |
2.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Domestic |
19.9 |
19.9 |
20.0 |
25.9 |
18.8 |
20.7 |
22.5 |
24.8 |
| USAIDa/ |
3.0 |
3.0 |
3.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| CIDAa/ |
4.0 |
2.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| EUa/ |
2.0 |
2.7 |
3.1 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Government |
10.9 |
12.2 |
13.9 |
15.4 |
18.8 |
20.7 |
22.5 |
24.8 |
| Unidentified |
18 |
12 |
12 |
28 |
30 |
35 |
37 |
35 |
| Grand Total |
101.2 |
110 |
119.4 |
144.1 |
144.1 |
156 |
156.2 |
161.8 |
a/ Commodity assistance that generate counterpart funds to support the PSIP.
Source: Ministry of Finance.
3. The Role of User Charges
The structural composition and rigidities in Central Government finances in the medium term, the requirements of rehabilitating social and economic infrastructure and the need to arrest the decline in the country's capital stock make user charges or cost recovery an inescapable option of generating additional revenue for operations and maintenance.
User charges are a viable means of mobilising finance for certain goods and services provided by the Government, as well as a means for increasing efficiencies in their consumption. Little data are available on user charges, but subsidies made available to consumers through the budget suggest they could play an increasingly important role in revenue mobilisation.
For example, there is a net transfer to road users of about G$128 million per year, representing the extent to which the subsidy on gasoline prices, and low vehicle registration and licensing fees exceed tax collected from road users, even before taking account of any contributions road users should make towards capital costs. The public health system is almost entirely financed out of budgetary resources, although the Georgetown and other regional hospitals recover a very small share of costs through user charges. In education, primary schooling through university education is entirely financed by the Central Government. Chapters 19 and 20 provide extensive discussion of the role of user charges in health and education, and Chapter 40 does the same with respect to maintenance of the sea defences.
Since there is scope for increased use of cost recovery measures, the Government would undertake a comprehensive review of the goods and services they provide and identify those for which user charges would be introduced or increased. The review would incorporate: (i) the nature of the user charge which would be most appropriate for the goods or services provided; (ii) the appropriate level of user charges taking into account the economic value of service and the capacity of the beneficiaries to pay; (iii) the means of collection and the way in which funds would be managed.
User charges would be considered when the beneficiaries can be readily identified, assessment and collection is feasible and their adoption can be justified on efficiency and or equity grounds. Where practicable, activities within a sector would be "unbundled" or "repackaged" to more clearly differentiate private and social costs/benefits so as to provide a more suitable basis for the imposition of user charges. More precise rationales for the adoption or extension of cost recovery measures are spelled out for each sector. Also, the activities within a sector should be grouped by priority for application of user charges, with high priorities being given to those: (i) which are user specific in that the beneficiary is easily discernible and externalities are minimal; (ii) which are more efficiently rationed by price rather than quantity; and (iii) on which charges are readily assessable and collectable.
The nature of the user charges would be principally determined by the ease of collection and accountability. Wherever possible, they would be monetary. As a general rule for the activities assessed as high priority for user charges, the charges would at least be such that no operating subsidies (even for periodic maintenance) are required. Where the activities are essentially commercial, the inability to operate without subsidies within a reasonable incentive policy environment would be regarded as a prima facie case for discontinuation. For other activities, capacity to pay would be a major determinant of the structure and level of charges.
In the case of social services, appropriately designed user charges, such as those mooted in Chapters 19 and 20, would be consistent with efficiency considerations but would: (i) not discourage use and access of basic needs by the most vulnerable and poor groups; and (ii) be focussed mainly on higher level services (e.g. higher education and specialised hospital care) for which a small proportion of the population are the beneficiaries, especially the urban higher income groups.
It is accepted that it may not be practicable to immediately impose the 'optimum' level of user charges. This phased introduction and/or increase may be required although the move towards the optimum level would not be delayed unnecessarily.
Responsibility for collection of user charges would principally rest with the provider of the goods and/or services unless the nature of the charge dictate otherwise. In addition, "community collection" would be used. Also the extent to which user charges would be kept earmarked (as appropriate) for use by the provider, activity or sector (as appropriate) needs to be determined.
Where some subsidies are still required, even to be phased out, the payments would be planned and structured in a way that they will not discourage efficiency in the collection of the user charges. The possibility of levying joint user charges (i.e. covering a number of activities such as water and sanitation) to minimise collection costs and ease assessment procedures would be looked into.
4. Areas of Application of User Charges
(a) Water supply, and sewerage, where better cost recovery can be promoted by making investments in these facilities contingent on both improved operation and maintenance and on the introduction of appropriate tariff levels and structures.
(b) Health, where fees could be levied in community and public hospitals at least to meet operations and maintenance costs, while ensuring that services remain accessible to indigent groups. At the same time, fee structures should be revised to reflect relative cost of the services provided. See the detailed recommendations in Chapter 19.
(c) Tertiary education, where fees or a loan scheme will supplement government resources in improving facilities, equipment, and increasing salaries of staff.
(d ) Transportation, where road, ferry, aviation, port charges will needed resources and assist to improve maintenance, security and safety (see Chapter 38).
(e) Sea defences, for which specific recommendations are formulated in Chapter 40.
(f) Drainage and irrigation, where the charges would be administered by users' associations (see also Chapter 40).
5. Project Implementation and Project Cycle Management
To overcome some of these problems, the Project Cycle Division (PCD) within the State Planning Secretariat (S.P.S.) will become the coordinating agency for project formulation. The Project Cycle Division will (i) meet with the sector ministries once every quarter to discuss project ideas in the context of the Strategy; (ii) coordinate with sector ministries and donor agencies in the formulation of projects; (iii) submit evaluation reports for all completed projects including donor funded ones so as to determine if initial objectives were met; and (iv) with input from the Policy Analysis Division at S.P.S., undertake the programming of the three-year rolling investment programme.
Table 41-5
Implementation Ratios, a/ 1991-1995
(percent)
| 1991 | 1992 | 1993 | 1994 | 1995 | |
| Domestic financing |
195.1 |
135.1 |
134.3 |
91.6 |
95.5 |
| Government |
296.6 |
145.1 |
183.3 |
93.4 |
97.1 |
| Bilateral assistanceb/ |
29.7 |
81.2 |
62.0 |
47.6 |
89.3 |
| Loans |
32.6 |
40.0 |
67.3 |
68.9 |
66.1 |
| Grants |
13.8 |
67.7 |
76.6 |
47.6 |
77.8 |
| Total |
54.5 |
62.7 |
86.4 |
76.4 |
82.0 |
|
(actual expenditure in total; %) | |||||
| Memorandum item | |||||
| Government |
64.5 |
51.4 |
34.3 |
39.0 |
40.6 |
| External (loans) |
27.9 |
32.2 |
48.8 |
34.4 |
36.8 |
a/ Implementation ratio is defined as the proportion of expenditures to budgetary allocation.
b/ Commodity and other assistance that generate counterpart funds for the PSIP.
Source: Ministry of Finance
A key to investment planning is good project selection and design. Project appraisal and priority ranking are oftentimes given insufficient weight in project design. Projects in which foreign assistance agencies are involved will usually be prepared by international consultants with established norms of analysis and subjected to extensive appraisal by the donor agency, while projects prepared by the line ministries and agencies usually do not attract any such attention at all.
However, this function is necessary, if appraisals are based on consistent and realistic assumptions (e.g., macroeconomic developments and shadow prices) and they provide results that can be readily absorbed by non-specialist decision makers in establishing the project portfolio. For this purpose, economic cost-benefit analysis can be a very useful tool, insofar as it collapses into one common yardstick, such as the net present value (NPV) or the economic rate of return (ERR).
It is equally important for decision makers to be aware of the assumptions used in the analysis, major uncertainties and risks involved and the range of options considered. This applies not only to different investment options, but also to alternatives, such as better operation and maintenance of existing assets. Finally, project analysis cannot just be done once at the feasibility stage and then left on the shelf. Rather, regular updating should be undertaken, especially for major projects, to reflect aggregate resource availability and market conditions.
The Project Cycle Division will be strengthened to perform these crucial functions. In particular, it will:
(a) issue, on a regular basis, guidelines on parameters to be used in project evaluation -- assumptions on foreign exchange rates, discount rates, wages and inflation rates -- to apply to all central government projects;
(b) issue and update formats for feasibility studies. For larger projects these should include financial and economic rate of return calculations, sensitivity analysis, and explicit statements on the nature and phasing of other investments or policy actions that are required within this or other sectors for project benefits to be fully realised and scheduled;
(c) in cooperation with relevant institutions, develop planning and implementation methodologies for repetitive small projects. These should incorporate a minimum cost-benefits analysis and cost-minimising implementation standards and procedures;
(d) in cooperation with sector ministries, develop criteria for core project identification and use them for developing core programs in all sectors that lack them. In addition to specific sector criteria, core programmes will take explicit account of priorities in the National Development Strategy, intra- and inter-sectoral linkage and phasing requirements;
(e) identify, in all projects the future expenditures required for adequate operation and maintenance, particularly where the projects recurrent expenses have to be financed from the budget, and specify the norms on which such estimates are based. These should lead to specific sector and sub-sector norms for recurrent expenditure budgeting;
(f) include projects in the programme only when their priority is confirmed. This decision should be subject to adequate resource availability for the estimated disbursement profile of the project and its subsequent operation.
Under the assumption that preferred financing is multilateral concessional credit, Government will take early action to overcome some of the key constraints in the project cycle such as the (i) lack of coherence and poor coordination in project identification; (ii) low capacity of the Project Cycle Division within State Planning Secretariat to design, appraise, monitor and evaluate projects; (iii) weak tendering and procurement processes; (iv) endemic human resource constraints within the public sector; (v) low capacity of the local contracting and consulting industry to take on large projects so as to increase the utilisation of donor financing.
6. Tendering and Procurement Process
In order to improve the tendering and procurement process, Government will:
(i) replace the CTB (and eventually all other tender boards) with a Tendering and Procurement Secretariat (T.S.). The T.S. will develop guidance and standard procedures and documents for Government tendering and contracting at all levels including: (i) prequalification; (ii) contract forms and clauses; (iii) tendering packages; (iv) different methods of procurement and the rule of their employment; (v) contract bonding and guarantees; (vi) tender evaluation; (vii) protests; and (viii) monitoring and enforcement of performance contracts.
(ii) broaden the laws on conflict of interest so that those involved in adjudicating tenders and awards of contract and consultants involved in preparing specifications and other parts of the tender package are also not interested in any of the contending parties or potential tenderers;
(iii) contain provisions for payment of interest to contractors for overdue payments and will also provide methods of dispute resolution;
(iv) include in tender advertisement in addition to items presently required by law, a description of the goods, services, and works, identification of the project, source of financing, the engineer's estimate, requirements of contractors and materials eligibility;
(v) develop registers of prequalified consultants and contractors, and to restrict invitations to such prequalified consultants and contractors so as to speed the procurement process;
(vi) create and maintain database on contractor qualifications including experiences of actual contracts performed;
(vii) staff the T.S., provide accommodation, computer hardware/software, filing cabinets and necessary support to ensure the efficient operations; and
(viii) revise the Financial (Amendment) Regulation Act, 1958 to reflect these changes.
7. The Local Contracting Industry
At issue is developing a formula to strengthen the local contracting and consultancy industry without jeopardising program implementation and causing cost overruns. To overcome these problems, Government will:
(i) bunch common projects (e.g. major road projects) and tender them as one or in lots. Contractors can either bid for the entire project or bid for lots;
(ii) in cases, where foreign companies are successful in bidding for "bunched" projects, they will be encouraged to sub-contract to local companies although responsibility for project completion will rest with them;
(iii) encourage the establishment of construction leasing plants to ameliorate the capital requirements needs of the local construction industry; and
(iv) support joint ventures between local contracting firms and foreign companies; this will facilitate technology transfer and assist in developing the contracting industry.
8. Human Resources and Program Implementation
As noted, the capacity of the public sector to implement Government programme is weak and efforts to reform it may take time. At the same time, the size of the PSIP is projected to double over the next seven years. Therefore, considerably increased reliance will be placed on private participation in the development process. This will have significant implications on the priorities for public expenditures. A distinction will be made between those activities which are best left to private initiatives and those which have to be provided by the Government (a "negative" list could be used for this purpose, which identifies a limited number of activities reserved for the public sector, the rest being open to the private sector). The productive sectors of agriculture, manufacturing and mining and commercially oriented services are clearly areas in which the private sector would dominate.
The private sector can also play a very much enhanced role through the concessioning of infrastructure projects. In such cases, the private sector's investment can be recovered through user fees. This approach is particularly applicable to transport projects (see Chapter 38) but may be used in other areas as well.
In the social services NGOs can provide a useful vehicle of private sector participation in the delivery of government services. SIMAP and some line ministries will be reorganised so that they contract a large proportion of their investment programmes to NGOs. For example, activities such as the school feeding programme, nursery education, immunisation, preventive medical care, food and cash supplements; support in developing micro enterprises, and skills training could best be handled by NGOs. This will relieve the SIMAP agency and the line ministries some of the severe human resource constraints that they currently face. Besides, the capacity of NGOs to attract donor funding could reduce domestic funding required for the PSIP. Government will seek technical assistance from the donor agencies in establishing the modalities of providing a more meaningful role for NGOs in the implementation of the PSIP.
These observations suggest that public and private investment need to be visualised in a unified and more coherent conceptual and administrative framework in order to maximise the complementarities with private investment and to ensure that public commitments to supporting it are cost-effective.
The public sector investment program will play a key role in overcoming some of the constraints that retard private sector growth. The challenges in improving human resource development, opening up the hinterland to economic development, and restoring the health system are daunting. Yet, the issue is not financing. Guyana has contracted loans with the IFIs that is not drawing down.
The frustrations with disbursement from donor funded loans have in recent years led to a higher component of the government financing of the PSIP. The bottlenecks to multilateral disbursement would have to be overcome soon to allow Guyana to devote more of its internally generated resources to areas where donor financing is generally off limits such as operations and maintenance and wages and salaries. Government in the short term will improve the framework for project implementation and sustain the investment in basic human infrastructure by introducing realistic cost recovery measures to improve budgetary allocation for operations and maintenance.
1. 0 / This refers only to the Central Government.