October 24, 2014Doug Hadden
Doug Hadden, VP Products
It’s scary when economists are in general agreement. And, it makes common sense. Countries can’t escape the poverty trap without infrastructure. History shows economic growth brought on by railways and roads.
But there’s a catch: many observers suggest that infrastructure development can get out-of-hand. Can deplete revenue resources so that the infrastructure will be unsustainable. There’s sometimes a patronizing edge to this where it’s assumed that finance ministries in developing countries are unable to model this. Or, that corruption interferes too much with infrastructure development. (As if infrastructure corruption hasn’t happened in developed countries, as in North American trans-continental railways. Or, isn’t happening today in road construction contracts.)
Polarized Opinions on Timor-Leste Infrastructure
La’o Hamutuk, the Timor-Leste Institute for Development Monitoring and Analysis, has significant concerns about the cost-benefits of many infrastructure projects and the sustainability of the petroleum fund.
On the other hand, Stephen P. Groff, Asian Development Bank Vice-President for East Asia, Southeast Asia and the Pacific, suggests that despite concerns that it could suffer from the “resource curse,” Timor-Leste’s leadership has followed a different path, adopting lessons from other resource-rich countries that prioritize stability and good governance. I’m no economist, but it seems to me that everyone has access to the same sets of facts. It’s difficult to rationalize Groff’s assertion that in “many instances Timor-Leste is already applying good practices” with assessments from La’o Hamutuk.
Transparency and Infrastructure
Groff points out that good procurement practices for infrastructure contracts has been established. And, there is an e-Procurement Portal, built by FreeBalance for tenders and publishing winning bidders. La’o Hamutuk uses information from this and the Timor-Leste Budget Transparency Portal, implemented by FreeBalance, to design in depth graphs with analysis. The results of infrastructure projects, including in-progress updates, is provided with pictures and documents on the Timor-Leste Government Results Portal, also built be FreeBalance. These data sources ought to align opinion more closely than it has.
Controls and Transparency
Many countries have implemented transparency and procurement portals. Most of the systems that I’ve seen are standalone. There is often limited or superficial integration with back-office systems. Many Public Financial Management (PFM) professionals seem to think that this is the natural order of things. Different domains and different technology. This is where I disagree. But, it might be because I have better access to information.
PFM is all about controls – budget controls, commitments and segregation of duties. These critical government functions often become disconnected. Procurement contracts exceed the budget vote. A lack of funds in the bank to pay for completed work. Payment for phantom work.
The important thing about the portals in use by the Government of Timor-Leste is the tight integration with the back office. It’s a unified system.
- No tender is issued in the Procurement Portal unless estimates have been budgeted and there is budget available – linking the core Financial budget control with the back end Procurement module process that is integrated with the Portal
- This integration continues when the procurement document for the Portal is rendered from the back-end system as are the tender rules (such as how long before closing that the tender must be available
- Of course, purchase orders are produced by the back-end system, if there is sufficient budget
- The Contract Management module prevents improper payments and registers all actual expenditures to the core Financial system that updates the Budget Portal and Government Results Portal daily
- Pictures and documentation collected in the Contract Management module update the Government Results Portal
No system is perfect, but this is the kind of technical infrastructure designed to reduce risk. And, to provide accurate data.
Now, if we can only get economists to agree…