Equatorial Guinea : Public Investment Management Review

Abstract

The chapter offers concise diagnostics
 of the public investment management (PIM) system in
 Equatorial Guinea. It provides specific examples of how
 underperforming institutions throughout the investment
 process raise the risk of selecting white elephants,
 reducing the value for money of investment projects and
 undermining the quality of completed projects. Politically
 compatible recommendations unlock the opportunities for
 overcoming the major institutional and procedural binding
 constraints to improve the country s PIM in a sequenced
 manner. The set of analysis and derived policy implications
 provides policy insights for countries in similar situations
 that need clear and pragmatic guidance on where to start
 building a better performing investment system in a
 challenging country context. Equatorial Guinea, one of the
 poorest countries in Africa prior to the discovery of
 hydrocarbons in the 1990s, has made a significant effort to
 transform this new wealth into public infrastructure. After
 a first phase focus on improving the dilapidated
 infrastructure and supply of capital in the country, the
 Government embarked on a second investment round to
 implement the National Development Plan, adopted in 2007
 with the aim of diversifying the economy out of petroleum
 production and improving living standards. However, the
 country is ill equipped for such a massive investment
 effort, with oil comprising 22 percent of GDP in 2008.
 Public expenditure is thwarted by cumbersome administrative
 procedures encouraging informal shortcuts that render the
 rigorous capital budgeting both irrelevant and impossible.
 The absence of reliable budget data undermines the
 monitoring of budget implementation. As a result, the public
 budget fails as a tool for resource allocation and control.
 The country s business laws promote a liberalized economy
 but the overall business climate remains poor. Efforts to
 create an atmosphere conducive to investor interest have not
 been sufficient and application of the laws remains
 selective, corruption among officials is widespread, and
 business rules and institutions are nontransparent. The
 Government is attempting to create a more favorable
 investment climate to promote foreign investment, for
 example, by adding numerous incentives to its investment
 code for job creation, such as training, promotion of
 nontraditional exports, support of development projects and
 indigenous capital participation, freedom for repatriation
 of profits, exemption from certain taxes and capital, and
 other benefits.