Lao PDR - NGPES Prioritization and Costing - Capacity Enhancement Workshops

LAO PDR

NGPES Prioritization and Implementation Workshops

Draft Proposal

for Joint UNDP and World Bank Support to Lao PDR

Background

  1. The Government (GOL) of the Lao Peoples’ Democratic Republic (PDR) aims to achieve rapid economic growth in order to improve the living conditions of its poor, and graduate from its status as a least-developed country (LDC) by 2020. The development strategy to achieve these goals has been articulated in the National Socio-Economic Development Plan (NSEDP - 2001-05), the Interim Poverty Reduction Strategy Paper (I-PRSP) and the recently-prepared National Poverty Eradication Plan (NPEP), approved by the National Assembly in October 2003. In early 2004, the NPEP has been reviewed, and upgraded to a national strategy. The final document takes the name of National Growth and Poverty Eradication Strategy (NGPES), and was officially submitted to the World Bank, IMF, and UNDP on April 1, 2004. The authorities intend to submit the NGPES for consideration of the IDA and IMF Boards as their Poverty Reduction Strategy Paper (PRSP) by August 2004. In addition, the Government has prepared its first Millennium Development Goals Report (MDG report), which will be submitted to the UN Secretary General by mid May 2004. The MDG report sets the goals to be met by the Government 2015. Ideally, the MDG goals are to be met through the implementation of the NGPES.
  2. There are high expectations among the donor community for the implementation of the NGPES/PRSP in the Lao PDR. The Government intends to focus on an overall strategy for poverty reduction and demonstrate progress in implementing that strategy. The next few months will be critical for NGPES/PRSP implementation: the GOL needs strategic inputs in August, in order to take informed decisions in view of the budget preparation and approval by the National Assembly in September. Also, in April 2005 the PRSP process will require an update of the NGPES.
  3. The NGPES implementation could benefit from a frank assessment of the capacity constraints, both on sectoral and cross-cutting issues, such as financial management (PEM, banking reform and SOEs restructuring), private sector development, gender, organizational incentives, and not least the specification and communication of policy priorities through the administration.
Implementation Challenges to be Addressed
  1. Four distinct implementation challenges need to be addressed if NGPES is to be effectively translated from a strategic to an operational planning instrument. These challenges are:

a)Sector programming and action planning. Implementation of the sector programs outlined in NPEP will require further work on formulation of sector policies, strategies, expenditure frameworks and performance indicators and targets, which in turn feed into annual budgets and annual action plans as well as the localized MDG targets. CPC and MOF will need to provide some guidance to this process, identifying how the programs should be developed and monitored over the medium-term. Ideally, this would be tied to the development of a donor sector wide approach, thereby strengthening the sector agencies' role in guiding and managing the external financing portfolio.

b)NGPES expenditure programming and financing. While the sector programs can help align external financing with government priorities, inter-sectoral resource allocation and programming issues that have to be addressed by CPC, MoFA and MoF. This will require mechanisms for allocating and programming domestic financing for both recurrent and investment expenditures and external financing. Part of this agenda is also to maximize the donor financing made available to Lao PDR. An iterative approach is most likely to be effective, with agencies preparing preliminary costs of priority programs based on simple unit costing, whilst the Government provides some top down indicative allocations for the plan period. Over the longer-term the Government would move towards a coherent, comprehensive multi-year expenditure program, integrating external financing.

c)Public Expenditure and Revenue Management Program. Implementation of NGPES will require resources to be mobilized, allocated and applied effectively in line with Government's policy priorities. Weaknesses in the public expenditure management system constitute a critical constraint on NGPES implementation. These include: poor articulation of expenditures with policy priorities, recurrent and investment spending; weak expenditure control leading to growth in arrears; delays in the payment of salaries of public officials; incomplete remittance of central government revenues by local authorities; weak compliance with procurement and payment procedures; poor reporting and lack of an effective independent audit. These challenges can only be addressed over the medium-term and will require external support, both as technical input and resources for capacity building and systems development. A comprehensive sector program would provide a mechanism for mobilizing these resources.

d)Bottom-up planning and local initiatives. The GOL has indicated its strong commitment to a bottom-up approach to planning at the district and provincial level, alongside the sector program approach presented in the NGPES. This presents distinct challenges, notably how to identify the local development priorities and channel resources in support of these initiatives.

  1. The present proposal identifies the next steps in addressing these challenges, focusing on the period to December 2004, when the Government intends to present preliminary work on NGPES implementation to the donor community.

Sector Programming and Action Planning: Next Steps

  1. The various NGPES sectors are likely to adopt different approaches to the translation of policies, MDGs and strategies into operational plans. Not only do their needs differ (planning for the road network has different requirements to planning for education services), the various Government agencies are also at different points in the policy and strategic planning process. Nevertheless, some harmonization is required to provide Government and the central agencies with mechanisms for guiding plan implementation, allocating resources and monitoring progress. In this context, there is a need for a simple instrument to facilitate the formulation of programming NGPES implementation and preparing action plans.
  2. Key outputs for the period to December 2004 include, for each NGPES sector:
  • Specification of program scope and objectives;
  • Identification of selected key performance indicators linked to MDGs;
  • Identification of a number of quick wins including policy measures or - where feasible - program outputs to be delivered in the first year;
  • Preliminary sequencing of major program activities and – where feasible – program outputs over a period of three years;
  • Preparation of a very simple program costing, based on unit cost estimates where there is adequate information and policy guidance on the key cost drivers;
  • Consultation with pilot districts and provinces on the identification of NPEP priorities interventions needed to support delivery; and
  • Identification of key capacity constraints and capacity enhancement interventions needed to support delivery of the proposed program.
  1. The proposed steps in preparing these outputs, the expected time frame and proposed inputs are:
  • Formulation of simple guidelines and matrix formats to guide sectors in the preparation of the required outputs. This task would be undertaken by consultants working under CPC supervision, based on a review of the Government’s internal planning instruments and consultations with sector agencies. Guidelines and matrix formats would, ideally, be prepared by end-July. The matrix would include target indicators related to MDGs as well as cross cutting targets such as strengthen governance. CPC will be supported in consulting with the district and provincial level on what to include in the guidelines and matrix formats[1].
  • Nomination of sector teams responsible for prioritizing the NGPES (in particular for the Ministry of Health, Ministry of Education, Ministry of Agriculture and Forestry (incl. STEA), and the Ministry of TCPTC). Teams may include representatives from pilot provincial and district administrations, as well as representatives from cross-cutting departments such as DPACS, CPC and MOF as well as the MDG working group. Where necessary, agencies may request short-term consultancy inputs to support the sector programming and action planning.
  • First Workshop, in end-July, for dissemination of guidelines and review of policy priorities and implementation issues. This workshop would seek to raise awareness in GOL on the importance of prioritization and NGPES implementation, provide guidance on the Government’s policy priorities and review programming and prioritization techniques. The workshop will be facilitated by WB and UNDP short-term consultants. The workshop would launch the sector programming and action planning exercise, through working groups.
  • Sector Programming and Action Planning. Sector teams will start work on the key outputs identified in para 7 above, over the period end-July to end-September. Two short-term consultants will be available to provide guidance to this task[2]. Additional consultancy inputs may be requested from bilateral partners. To this end the UNDP will host a donor meeting to propose the donor community to allocate existing and/or new technical expertise to support the sectors in following up on the sector programming, prioritization and action planning exercise. The meeting will advise that donors choose to assist the sector in which they are most involved already.
  • Second Workshop. In early October a follow-up workshop will provide an opportunity for CPC, MOF and sector teams to review the outputs of the sector programming and action planning exercise. The workshop will focus on sequencing, capacity building requirements and reconciliation of the proposed expenditure programs with financing constraints. The workshop will provide guidance on follow-up actions, including the formulation of an action plan for updating and monitoring of the sector programs through to June 2006.[3]
  • Presentation of preliminary sector programs. Following the workshop, sector teams will be asked to prepare a preliminary sector program and supporting matrix. The matrix will include sectoral cross-cutting target areas such as for example MDGs, governance and gender. This outputs may be shared with external partners, as work in progress.

The abovementioned inputs would ideally be overseen by the party responsible for monitoring the NGPES implementation.

NGPES Expenditure Programming and Financing : Next Steps

  1. Development of a comprehensive, medium-term expenditure framework to guide resource allocations in support of the NGPES and its successors is a long-term objective. Preliminary work would seek to provide a simple framework, covering the NGPES implementation period and beyond. While this framework would not necessarily influence the FY2005 budget process, which is already underway, it would incorporate FY2005 and forward estimates. The objective would be to influence the FY2006 budget process and, through iteration, progressively improve the scope, quality and practical application of expenditure and financing estimates.
  2. Key outputs for the period to December 2004 include:
  • A review of data sources and existing models for preparation of macro-framework, revenue estimates and programmed external financing.
  • Preparation of a simple forward estimates for aggregate revenues and expenditures;
  • Preparation of a simple framework of indicative expenditure envelopes for NGPES priority and other sectors, covering domestic financing for both recurrent and investment expenditures.
  1. This would be supported by short-term consultancy inputs, through at least one international consultant with experience in expenditure modeling and programming in low-income countries, preferable a consultant with extensive experience from the region. The consultancy would be overseen by MoF (either the Budget or the Policy Departments) with significant inputs from CPC. The consultant would also provide guidance to sector teams working on program costing where required.

Public Expenditure and Revenue Management Program: Next Steps

  1. The NGPES lays out the broad strategy for strengthening public sector financial management over the next few years. This now needs to be transformed into an operational plan, along the lines of the sector programs identified above. At the same time, it is recognized that a number of critical issues require further analytical work before the program of work can be developed, including, for instance, fiscal relations between central and local authorities, and the configuration of treasury operations. There is, furthermore, a need to move towards a more coordinated approach to capacity building in the sector, ideally supported by a Government-led program that would provide a framework for external partners’ support to the sector.
  2. Key outputs for the period to December 2004 include:
  • Preparation of a broad framework for the public expenditure and revenue management program, identifying the broad objectives of the program, quick wins for the next twelve months, sequencing of key reform measures and identifying those areas where further analytical and policy work is needed. Detailed specification if the program is likely to extend beyond December 2004.
  • Preliminary identification of the capacity building challenges facing the sector and associated external financing requirements.
  1. This would be supported by short-term consultancy inputs, through an international consultant with experience in the development of public expenditure and revenue reform and institutional development programs. Additional funding can be made available for sector workshops, involving, as necessary, personnel from provinces and districts.

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  1. [1] This support will be provided under the UNDP funded NGPES support project in CPC.
  1. [2] The monitoring expert from the CPC-UNDP NPEP project may be involved in this activity.
  1. [3] In particular the assistance for the production of a full-fledged monitoring system for the implementation of NGPES, has been proposed by UNDP to the CPC, as a long term support initiative.