Timor-Leste: Strengthening Major Public Investments

Sovereign Project | 44397-012

Summary

The latest country strategy and Country Operations Business Plan were oriented to implementation of the National Development Plan, which is being replaced by the SDP. The Government has asked ADB to support the SDP by continuing its lead role in infrastructure. The TA responds by addressing cross-sectoral issues central to delivery of major infrastructure projects.

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Project Name Strengthening Major Public Investments
Project Number 44397-012
Country Timor-Leste
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 7712-TIM: Strengthening Major Public Investments
Technical Assistance Special Fund US$ 250,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector Public sector management - Economic affairs management - Public expenditure and fiscal management
Gender Equity and Mainstreaming No gender elements
Description The latest country strategy and Country Operations Business Plan were oriented to implementation of the National Development Plan, which is being replaced by the SDP. The Government has asked ADB to support the SDP by continuing its lead role in infrastructure. The TA responds by addressing cross-sectoral issues central to delivery of major infrastructure projects.
Project Rationale and Linkage to Country/Regional Strategy

The economy of Timor-Leste has grown rapidly in recent years. Its gross domestic product (GDP) of 2009, excluding offshore petroleum production, was increased by 12.2%. The GDP growth forecasts for 2010 and 2011 are 10.4% and 7.7%, respectively. The high growth rates owe much to higher levels of government expenditure funded by the country's earning from offshore oil and gas production. The 2010 government budget increased state-funded expenditure by nearly 40% through a mid-year supplementary budget approved in June 2010. Much of this is allocated for small-scale capital works and cash transfers, which will keep aggregate demand high. A key issue for public investment now is whether implementation capacity has been adequately developed so that additional resources, monetary or nonmonetary, can be utilized effectively and in a transparent and accountable manner.

A summary of the Strategic Development Plan 2010-2030 (SDP) was released at the annual Development Partners' meeting in April 2010 by the Government of Timor-Leste. The SDP is to encompass a Vision to 2030, a Framework of Action to 2020 and a Public Investment Plan to 2015. A specific implementation timetable is to be set, with key performance indicators and objectives established that can be benchmarked for progress. A country-wide program of community level consultation commenced in May 2010, and the SDP is expected to be presented to Parliament by early 2011.

The SDP aims to sustain double-digit rates of economic growth to fast track development. A key goal of the SDP is the eradication of extreme poverty through universal access to basic services, and the creation of ample job opportunities and development in all regions of Timor-Leste. The next decade (2011-2020) will see a focus on creating the basic conditions for development. This is to be achieved by a three-pronged public investment program in human capital, infrastructure, and the strategic sectors (e.g., agriculture and tourism), that will in turn induce additional private investment. The large increase in public investment is to be funded through either draw-downs from the Petroleum Fund (that holds accumulated revenue from offshore petroleum developments), concessional loans or public-private partnerships.

The Government will establish an Economic Planning and Investment Agency (EPIA) to lead implementation of the SDP. The EPIA will be tasked with streamlining the government's planning and implementation functions. It will serve a role similar to a national planning authority, adopting design features from the National Development and Reform Commission in the People's Republic of China, the Economic Policy Unit of Malaysia, and the Planning Commission of India. The EPIA will be responsible for economic planning, program monitoring and evaluation, procurement and contracting, project implementation, budgeting, international cooperation and information. It will build its own staff capacity in economic planning and contract negotiation, to be able to negotiate the contracts with domestic and external management teams needed to put key elements of the SDP in place.

The EPIA will implement major public investments through its Project Implementation and Coordination Unit (PICU). The PICU will be responsible for major projects, projects of strategic importance, and loan-financed projects, with local capacity concentrated in a leadership role. Additional human resources will be made available through out-sourcing. It will thus mobilize the external resources needed for an early scaling-up of government capital expenditure and implementation of the Public Investment Plan to 2015. By absorbing some of the pressure arising from the scaling-up in public investment, the PICU will help avoid an overloading of the capacity of other government agencies responsible for public investment projects, and thereby facilitate an orderly development of their capacity. It is envisaged that the existing government agencies will eventually take over the responsibility of operating and maintaining the infrastructure assets, once the construction and early operation is done by PICU.

To provide for an early start-up, the PICU has begun operations as a Major Projects Secretariat (MPS) within the Ministry of Finance. The MPS is responsible for establishing the PICU and preparing the project pipeline under SDP. The MPS and its successor agency will need to streamline and, sometimes, reform the systems and procedures that are already in place for public investment. The major projects planned under the SDP will place new demands on these systems and procedures, and adaptation will be required if major projects are to be prepared and implemented timely. When elements of the required systems and procedures, such as project formulation procedures, are still missing, the gaps will need to be filled. The main areas requiring attention are budgeting and programming, project conceptualization and processing, project implementation, and monitoring and evaluation.

An effective MPS (and its successors) would be important in continuing progress towards achievement of the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action. Notably, an effective system owned by the government would maximize the utilization of government resources, and reduce the need for development partners to create parallel project implementation systems. Development partners have an important role to play in facilitating major projects and thereby assisting the planned increase in public investment. As a general principle, development partners will aim to align with the investment program in the SDP, rather than funding projects that could conflict with or undermine the SDP targets. They can provide knowledge, capacity and funding in support of the SDP, and its main implementing agency, the EPIA. Their contribution would be enhanced if the MPS adopts policies and procedures that satisfy development partner requirements, specifically in relation to social, environmental and financial safeguards. The development partner activities would then be better integrated with government systems.

The TA will assist the MPS (or its successor) in preparing the systems, processes and procedures needed for public investment to facilitate infrastructure-project implementation. Through engaging in the preparation and implementation of a few pilot projects, the TA will develop or refine the business processes to meet the demands of delivering major projects. It will emphasize building capacity within the MPS (or its successor), aiming to achieve an improvement in systems and procedures that will provide ongoing benefits.

The TA will complement activities underway in other areas of Government with development partner support. It will complement support provided by ADB to the Ministry of Infrastructure to improve the project management of infrastructure, and the support provided by the World Bank and other development partners to improve public financial management.

Impact Major Project Secretariat (MPS) (or its successor) is the leading agency in large-scale public capital investment.
Project Outcome
Description of Outcome The capacity of MPS (or its successor) is strengthened in project preparation and implementation.
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Business processes are established in MPS (or its successor) for project implementation.

2. Monitoring mechanism is established and functioning.

3. National staff of MPS is capable of leading and monitoring project implementation.

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services The TA will require about 19 person-months of consulting services (9 international and 10 national) and is expected to be completed in 18 months from January 2011 to June 2012. A mix of international consultants in association with national consultants will be engaged on individual basis.
Responsible ADB Officer Shane J. Rosenthal
Responsible ADB Department Pacific Department
Responsible ADB Division Timor-Leste Resident Mission
Executing Agencies
Ministry of FinanceGovernment Building 5
Palacio do Governo, Avenida Presidente
Nicolau Lobato, Dili, Timor-Leste
Timetable
Concept Clearance 19 Nov 2010
Fact Finding 28 Feb 2010 to 13 Mar 2010
MRM -
Approval 15 Dec 2010
Last Review Mission -
Last PDS Update 14 Feb 2011

TA 7712-TIM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
15 Dec 2010 18 Jan 2011 18 Jan 2011 30 Jun 2012 31 Dec 2014 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
250,000.00 0.00 25,000.00 0.00 0.00 0.00 275,000.00 15 Dec 2010 231,438.65

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Safeguard Documents

See also: Safeguards

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Evaluation Documents

See also: Independent Evaluation

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