National Public Investment Systems (SNIP) are comprised of the set of state institutions that govern the public investment process in a country. These systems employ methodologies, standards and procedures which guide the formulation, execution, and evaluation of investment projects, and are key to enhancing the economic and social impact of public investment by improving the quality and efficiency of public spending.

1. The National Public Investment Policy Cycle¹

The National Public Investment Cycle (Figure 1) consists of at least four phases² , each of them made up of different processes in which actors from different sectors of the State, the market and civil society interact: 1) Public investment planning, 2) Allocation of public resources to sectors and projects, 3) Implementation and management of public investment assets, and 4) Ex post evaluation of the investment.

Figure 1
National Public Investment Policy Cycle

 

 

_{Source: Own elaboration}

 

Table 1 summarizes the structural characteristics that would strengthen the effectiveness of each phase of the process, as well as improve alignment and coordination among phases and with national planning and public management processes for development. It also incorporates some factors that would make it possible to mitigate the challenges of planning for development that ILPES/ECLAC has proposed (Máttar and Cuervo, 2017). These include: the management of planning timeframes (short, medium and long); alignment and coordination between levels of government; the management of intersectorality and the comprehensiveness of public intervention; and the incorporation of civil society and key stakeholders in decision-making, implementation and public policy evaluation.

Table 1: National Public Investment Policy Cycle

Characteristics According to Phase

Phase		Institutional features
Planning		National and/or sectoral public investment strategies (or plans) are published. Project costing is considered in national and/or sectoral public investment strategies (or plans). Output and outcome indicators are included in investment projects. Investment strategies or plans allow for sets of associated projects (cross-sectoral, by sector, in a territory). Strategic investment guidelines are consistent with national / sectoral medium or long-term planning.
Resource allocation/Budgeting		Multi-year budgeting: Capital spending (public investment) is projected at the multi-year level by ministry. There are ceilings for investment spending for ministries (or for sector investment programs). Total (life cycle) cost projections are published for large investment projects.   Budget comprehensiveness: Information on investment projects financed by a) external agents and b) public-private partnerships is included in the national budget. There is significant capital spending by extra-budgetary entities that is not expressed in the budget or does not have congressional authorization. Unified budget (capital and recurrent expenditures).
Evaluation		Existence of ex post audits national or sectoral investment strategies or plans.
Cross-cutting		Participation, transparency and accountability in the national public investment policy cycle. Coordination with sub-national levels.

_{Source: Own elaboration based on: International Monetary Fund (2018), UN/ECLAC/ILPES (2018), World Bank (1998).}

 

2. National Public Investment Systems

SNIPs are defined as a set of institutions, norms, instruments and procedures common to the public sector and private sector entities that execute public investment, through which they relate and coordinate among themselves, to prepare, evaluate, prioritize, finance, monitor, and execute public investment projects, within the framework of development policies, plans and programs (Ortegón, E., & Pacheco, J. F. (2004a)). The main objective of the SNIP is to implement the most economically, socially and environmentally profitable public investment options, according to the guidelines of the country's development policy. In other words, the existence of the system seeks to ensure an efficient allocation of scarce resources to the investment alternatives with the greatest benefits for societies. The objectives of the SNIP reflect the aspirations of each government in relation to the results they aim to achieve through the efficient allocation of resources to public investment. The definition and comprehension of these objectives in each country is imperative, as they shape the guidelines and the horizon of national public investment policies.

The SNIP, as systems, are made up of stakeholders, processes and interactions, and are regulated by a specific structure (Figure 2). This structure defines the roles of each agent and the norms, requirements and standards for the development of specific processes and interactions within the system.

Figure 2
National Public Investment System
 

_{Source: Own elaboration}

 

Among the SNIP stakeholders, at least three types of entities can be identified^₃

 

• Statutory Governing Body: Public agency in charge of issuing rules, instructions, processes, and procedures for decision making related to public investment.

 

• Operational Entities: These entities perform multiple functions that are procedurally linked and related, configuring the SNIP. Each must deliver and maintain products/outputs and, adapt and comply to SNIP guidelines in accordance with their specific objectives, relating and integrating throughout the process of preparing and evaluating public investment projects.

 

• Related Entities: Systems that cross horizontally the management of the public apparatus and that actively participate in the investment process. For example, public agencies in charge of the national budget; agencies in charge of national planning; agencies in charge of national accounts; auditing and transparency agencies, among others.

 

• Incorporated Entities: Public sector, private sector, and civil society (national, regional, and local level) entities that may submit investment projects and programs for approval and subsequent execution with public funds. For example: all central government institutions; decentralized and deconcentrated entities; regional councils and governments; local governments and municipalities and public universities. The delimitation of incorporated entities depends on the regulations in force in each country.

In general terms, the structure of the systems regulates the interaction between the stakeholders (defining roles, functions, and attributions) and conditions the processes in which they participate. The structure is the component that integrates the parts of the system into a whole. Given the heterogeneity -in terms of density and precision- of this component in the countries of the region, the diversity of elements that make up the structure is grouped into two levels: legal-institutional and procedural-methodological.

The legal-institutional level includes the regulatory framework that defines the entities, their functions, and responsibilities within the system. These are laws, decrees, regulations and instructions that are mandatory for each entity. In the case of the SNIP, these are the norms that support the architecture of the investment system and the place that each of the entities involved occupies in it.

This level also includes the rules that regulate certain forms of relationship between the entities of the investment system and other related entities (belonging to other systems). Such is the case of coordination relations with other sectors of the public administration, with the different territorial levels and with the private sector, for example, regulations on the formation of public-private alliances, or other actors in the environment.

 

At the procedural-methodological level are the theoretical bodies that regulate technical and operational processes within the system. In the case of SNIP, these are mainly the methodologies and norms that regulate the preparation, presentation, prioritization, selection, monitoring and evaluation of public investment plans, programs and projects, i.e., the different processes linked to the management cycle of public investment projects.

The SNIP structure, in turn, is affected and conditioned by elements that do not belong specifically to the system but come from the environment. These are, for example, national and state constitutions; budget or fiscal framework laws; general national planning regulations; international agreements; to mention a few.

The adoption of methodologies in the SNIP responds to the need to homogenize and give consistency to the demands for investment resources in the different areas and specific sectors; to adequately evaluate programs and projects, countries must determine how they were formulated, what their methodological approach is and how their economic, social and environmental benefits will be evaluated. The structures of project formulation and evaluation methodologies tend to be similar in the countries of the region, varying only in the degree of depth in which issues are addressed.

 

The processes that take place within the SNIP are those that make it possible to transform the system's inputs (investment needs) into outputs (investment products) and are thus linked to the investment project management cycle. The specific processes developed within the SNIP framework are intrinsically linked to the stages of the national public investment project management cycle -a cycle in which other actors and systems participate (Figure 3)- as well as to the functions of the SNIP.

Figure 3
Public Investment Project Management Cycle

_{Source: Own elaboration.}

 

The operation of the system is based on the following principles⁴

• Efficiency in the allocation of resources
• Compatibility of development of policies, plans and programs.
• Delimitation of responsibilities
• Timeliness and rationality in decision making
• Complementarity of efforts
• Operational sustainability
• Regulatory centralization and operational decentralization

 

Table 2 summarizes some institutional characteristics that, as structural aspects, seek to ensure efficiency, effectiveness and transparency in the processes that constitute the public investment project management cycle.

 

Table 2
The Public Investment Project Management Cycle
Institutional Criteria

Phase		Criteria
Technical-financial analysis; Ex-ante evaluation		1. Investment projects are subject to standardized and published cost-benefit evaluations. Process supported by a central entity. 2. Methodological consistency in the preparation and evaluation of public investment projects. 3. Independent project appraisal, which allows for credibility in the selection of investment projects. 4. Incorporation of risk in the ex-ante evaluation. 5. Incorporation of risk associated with disaster management in the ex-ante evaluation (adaptation to climate change). 6. Incorporation of issues associated with climate change mitigation in the ex-ante assessment (carbon price).
Selection		Existence of a recognized authority with sufficient powers to approve or reject investment projects.
Implementation		Efficient public procurement, budgeting and monitoring of the implementation and operation of public investment projects.
Operation		Existence of a register of assets to monitor their maintenance.
Ex-post evaluation		Conduct ex post evaluations of projects to improve the public investment process.
Cross-cutting processes		1. Transparency and accountability 2. Citizen participation in formulation and selection processes. 3. Adequate legal frameworks 4. Information systems 5. Training

_{Source: Adapted from Rajaram, A., Le, T. M., Biletska, N., & Brumby, J. (2010); Rajaram, A., Le, T. M., Biletska, N., & Brumby, J. (2014); International Monetary Fund (2018).}

 

The SNIP fulfills specific functions within the National Public Investment Cycle. These functions are distributed among the subsystems that constitute the SNIP. However, despite the operational decentralization that governs the operation of the system, all of its functions are coordinated by a governing body/agency. Coordination and feedback between functions is key to avoid inefficiencies and duplications. For this reason, it is important to have a clear delimitation of responsibilities, attributions and competencies within each SNIP subsystem.

 

The functions performed by the system may be characterized as follows^₅

 

1.- Production: This is the general function of transforming investment needs into investment products. This is a complex process, since entities with different specializations, such as Education, Health, Enterprises, NGOs, etc., intervene simultaneously (related and incorporated entities).

 

2.- Coordination and Management: This falls mainly on the governing body, which dictates norms, generates procedures, methodologies, trains, advises and has an information subsystem that uses technological means (IT). In this way, it centralizes the system's information and distributes it according to needs. This function ideally generates order within the system, seeks horizontal and vertical coordination.^₆

 

3.- Control: The Governing Body is responsible for the control function. That is to verify that the investment is in line with government policies. It is also exercised by other systems such as:

 

• The Budget Office, as regards to the allocation, monitoring and execution of public funds.
• Treasury, for the availability of resources.
• Government accounting; collaborate in all activities required by the comptroller in order to provide transparency in the use of public finances.
• External indebtedness or public credit; especially in countries where public investment is mostly financed with external resources.
• Legislative power and the citizenry, although not formally incorporated, also exercise control, as they should be incorporated in the sense of obtaining feedback in a systematic way. This would also help to make the system transparent and balanced.

 

4.- Information: This function not only refers to the needs of the system's own administrative procedures and coordination needs. It should also incorporate information for the community -such as, for example, the dissemination of results-. Project Banks are tools of the information subsystem whose purpose is to provide the SNIP with an inventory of projects, regardless of their stage or phase, in order to have reliable and timely information to support the analysis and decision-making process. Generally, Project Banks are structured in modules that allow the different users to have information about the type of financing, budget, execution and evaluation, among others.

 

5.- Financing: In terms of public investment, financing corresponds to economic and financial resources that support and make possible the implementation of programs and projects, which makes it possible to meet the objectives set forth by the SNIP. There are two main categories of financing sources: internal and external. The internal sources are mainly represented by the budgetary system, i.e.: contributions from the Central Government, funds granted by decentralized entities, local governments and community contributions. In most cases, the budgetary system (financing) is procedurally linked to the SNIP and in others, it is the governing body itself. External sources correspond to external loans sanctioned with bilateral and multilateral organizations and governments of other nations and donations made by international organizations and other governments.

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_{[1] Considering that public policies are configured as a general line of conduct for governments and public administrations and that, in this sense, they guide decision-making processes within the State (Sadler & Verheem, 1996), public investment is a public policy, since it sets itself objectives and goals to be achieved in order to satisfy social demands and public problems. As a public policy, its operationalization at institutional levels depends on the translation of the policy into plans, programs and projects, including technical variables, strategies, deadlines, measurements and results.
[2] Adapted from: International Monetary Fund (2018) and World Bank (1998).
[3] Classification adapted from Ortegón, E., & Pacheco, J. F. (2004a, 2004b).
[4] Ortegón, E., & Pacheco, J. F. (2004a)..
[5] Classification adapted from Ortegón, E., & Pacheco, J. F. (2004a, 2004b).
[6] Coordination relationships can be classified into at least three types. Vertical coordination: (from the strategic to the operational) vertical coordination occurs between those entities that participate directly in the production of public investment goods and services. Horizontal coordination: (between institutions at the same level) horizontal coordination occurs between entities that are part of the organizational structure of the State and the public administration, which intervene in a cross-cutting manner, supporting the production process carried out by the vertical systems. Inter-level coordination: (between the macro and the micro) these are coordination relations to articulate the national level with the regional and local levels (Ortegón, E., & Pacheco, J. F. (2004a)).}