2015/16 Knowledge Sharing Program with Kuwait Sharing Program 2015/16 Knowledge 2015/16 Knowledge Sharing Program with Kuwait: Evaluation of Public Investment Management System (PIMS) in Kuwait 2015/16 Knowledge Sharing Program with Kuwait 2015/16 Knowledge Sharing Program with Kuwait Project Title Evaluation of Public Investment Management System (PIMS) in Kuwait Prepared by Korea Development Institute (KDI) Supported by Ministry of Strategy and Finance (MOSF), Republic of Korea Prepared for The Government of the State of Kuwait In cooperation with General Secretariat of the Supreme Council for Planning and Development, Kuwait Program Directors Si Wook Lee, Executive Director, Center for International Development (CID), KDI Kwang Eon Sul, Senior Fellow, CID, KDI Program Officer Jiyu Ha, Research Associate, Division of Planning & Policy Consultation, CID, KDI Senior Advisor Jong Chan Choi, Former Minister of Construction and Transportation Project Manager Kang-Soo Kim, Senior Fellow, Department of Land and Infrastructure Policy, KDI Authors Chapter 1. Yeonseob Ha, Professor, Yonsei University Chapter 2. Sungmin Han, Associate Fellow, KDI Meesoo Park, Senior Research Associate, KDI Chapter 3. Jongyearn Lee, Associate Fellow, KDI English Editor Seoul Selection Government Publications Registration Number 11-1051000-000700-01 ISBN 979-11-5932-132-0 94320 979-11-5932-117-7 (set) Copyright ⓒ 2016 by Ministry of Strategy and Finance, Republic of Korea Government Publications Registration Number 11-1051000-000700-01 2015/16 Knowledge Sharing Program with Kuwait: Evaluation of Public Investment Management System (PIMS) in Kuwait Preface In the 21st century, knowledge is one of the key determinants of a country’s level of socio-economic development. Based on this recognition, Korea’s Knowledge Sharing Program (KSP) was launched in 2004 by the Ministry of Strategy and Finance (MOSF) and the Korea Development Institute (KDI). KSP aims to share Korea’s experience and knowledge with the partner countries to achieve mutual prosperity and cooperative partnership. Former high-ranking government officials are directly involved in the policy consultation to share their intimate knowledge of development challenges, and to complement the analytical work of policy experts and specialists who have extensive experience in their fields. The government officials and practitioners effectively pair up with their counterparts in the development partner countries to work jointly on pressing policy challenges and share development knowledge in the process. The program includes policy research, consultation and capacity-building activities, all in all to provide comprehensive and tailor-made assistance to the development partner countries in building a stable foundation and fostering capabilities to pursue self-sustainable growth. In 2015, policy consultation and capacity building workshop were carried out with 32 partner countries covering over 100 research agendas. As a new partner, Nicaragua and Visegrad Group were selected in consideration of the country’s policy demand, growth potential, and strategic economic partnership. The 2015/16 Knowledge Sharing Program with Kuwait was carried out with the aim of exchanging socio-economic development experience of two countries for improving Kuwait’s policy making capacity and achieving her socio-economic development. Under the MOU signed between the Ministry of Strategy and Finance of Korea and the General Secretariat of the Supreme Council for Planning and Development of Kuwait, the joint research and seminars were conducted in order to support the establishment of “Evaluation of Public Investment Management System (PIMS) in Kuwait”. I would like to take this opportunity to express my sincere gratitude to Senior Advisor Mr. Jong Chan Choi, Project Manager Prof. Kang-soo Kim, as well as the project consultants including Prof. Yeonseob Ha, Dr. Sungmin Han, Dr. Jongyearn Lee and Ms. Meesoo Park for their immense efforts in successfully completing the 2015/16 KSP with Kuwait. I am also grateful to Executive Director Dr. Si Wook Lee, Program Director Dr. Kwang Eon Sul, and Program Officer Ms. Jiyu Ha, and all members of the Center for International Development, KDI for their hard work and dedication to this program. Lastly, I extend my warmest thanks to the Kuwaiti counterpart, the General Secretariat of the Supreme Council for Planning and Developmentand other related agencies, program coordinators, and participants for showing active cooperation and great support. In your hands is the publication of the results of the 2015/16 KSP with Kuwait. I believe that KSP will serve as a valuable opportunity to further elevate mutual economic cooperation of Kuwait and Korea to a new level. I sincerely hope the final research results on the selected areas could be fully utilized to support Kuwait in achieving economic development goal in the near future. Joon-Kyung Kim President Korea Development Institute Contents 2015/16 KSP with Kuwait .................................................................................................. 011 Executive Summary ......................................................................................................... 014 Chapter 1 Public Investment Management Systems in Korea and Kuwait Compared Summary ....................................................................................................................... 018 1. Introduction ........................................................................................................... 020 2. Public Investment Management: Issues and Challenges ................................................... 021 2.1. Goals of PIM .................................................................................................... 021 2.2. Stages of PIM .................................................................................................. 022 3. PIM in Kuwait ......................................................................................................... 023 3.1. Duplication and Fragmentation of PIM Decision-making .......................................... 023 3.2. No Gatekeeping Function in PIM ......................................................................... 024 3.3. Linking Public Investment Projects to Development Plans ......................................... 024 3.4. Quantitative and Qualitative Appraisal of Public Investment Projects ......................... 026 3.5. No Link between Capital and Current Expenditures ................................................ 027 4. PIM in Korea ........................................................................................................... 027 4.1. Evolution of PIM in Korea .................................................................................. 027 4.2. Public Financial Management Reform and PIM ...................................................... 030 4.3. Total Project Cost Management (TPCM) System ...................................................... 040 4.4. Preliminary Feasibility Study (PFS) ........................................................................ 045 4.5. Performance of PIM .......................................................................................... 046 5. Conclusion and Policy Suggestions ............................................................................... 050 5.1. Preconditions for Effective Reform ....................................................................... 050 5.2. Policy Recommendations: Short Term ................................................................... 051 5.3. Policy Recommendations: Long Term ................................................................... 052 References .................................................................................................................... 053 Chapter 2 Improvement of Project Appraisal and Monitoring System in Kuwait Summary ....................................................................................................................... 058 1. Introduction ............................................................................................................ 060 2. Project Appraisal and Monitoring System of Kuwait ....................................................... 063 2.1. Economy and National Development Plan ............................................................ 063 2.2. Project Appraisal System in Kuwait ...................................................................... 071 2.3. Project Monitoring System in Kuwait ................................................................... 074 3. Project Appraisal System in Korea ............................................................................... 076 3.1. System in Early Stage of Economic Development .................................................... 076 3.2. Ex Ante Evaluation: Preliminary Feasibility Study (PFS) .............................................. 079 4. Project Monitoring System in Korea ............................................................................ 091 4.1. Intermediate Evaluation: Reassessment Study of Feasibility (RSF) ............................... 091 5. Conclusion and Policy Suggestions .............................................................................. 096 References .................................................................................................................... 098 Chapter 3 Methodological Framework to Evaluate Public Investment Projects Summary .....................................................................................................................