GOVERNANCE GOVERNANCE EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT The Evolving Role of the Planning Function: International Experience and Reform Options for India © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Graphic Designer: Maria Lopez / lopez.ten@gmail.com >>> Contents Executive Summary 1 Introduction 4 Background 4 Strategic Planning Approaches 6 Findings from International Experience 8 Trends in Strategic Planning 8 Main Strategic Planning Trends: The Case Studies 9 1. Strengthening the outcome focus of strategic planning 9 2. Embedding strategic planning at the program and project level 11 3. Promoting the generation and use of performance information 12 4. Boosting fiscal discipline and allocative and technical efficiency 13 5. Using territorial and land-use planning 14 6. Strengthening institutional and managerial capacities 15 7. Coordinating across different levels of government 16 8. Enhancing participation, accountability, and transparency 17 Recommendations 19 Lessons Learned 24 >>> Acknowledgments This technical note was prepared by a team of World Bank experts from the Governance Global Practice, including Farah Zahir (Senior Economist), Pedro Arizti (Senior Public Sector Specialist), and Manuel Fernando Castro (International Consultant). It also received valuable inputs from Avani Kapur (Fellow at the Centre for Policy Research and Director of the Accountability Initiative), Joy Elamon (Director General, Kerala Institute of Local Administration), Alejandro Medina Giopp (Senior Monitoring and Evaluation Specialist), Deryck R. Brown (Senior Public Sector Specialist), and Serdar Yilmaz (Lead Public Sector Specialist). This note is based on the full report, “The Evolving Role of the Planning Function in India: International Trends & Recommendations,” commissioned by the World Bank with Manuel Fernando Castro from the firm Economia Urbana, assisted by Daniel Monsalve and Andres Podlevsky. The note was edited by Patricia Carley. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< i >>> Executive Summary Following the discontinuation of India’s national Planning Commission.2 To move forward, the Indian Government is Commission and in line with the trends and good practice currently interested in understanding the emerging trends in observed across countries, Indian states will need to find the evolution of strategic planning in a range of countries and a way to respond to the changes in the planning and fiscal effectively adapting this function across public administration structures at the federal level.1 Structures in and approaches at the national and subnational levels. to planning in various Organisation for Economic Co-operation and Development (OECD) and middle-income countries This technical note presents the main trends, outlined below, have evolved differently over time, but all provide strong in strategic planning across public sector administrations in indications that planning remains necessary. Planning is seven countries: Australia, Canada, Brazil, Mexico, Malaysia, also consistent with the guidance of India’s Fifteenth Finance South Korea, and Colombia. S T R AT E G I C P L A N N I N G : K E Y T R E N D S F R O M I N T E R N AT I O N A L E X P E R I E N C E i. Strengthening the outcome focus of v. Using strategic planning for territorial strategic planning as part of a larger and land-use policy making and effort to mainstream results-based implementation initiatives across the public sector ii. Embedding strategic planning at vi. Strengthening institutional and the program and project level as managerial capacities across the part of a larger effort to mainstream public sector performance budgeting iii. Promoting the generation and use vii. Using strategic planning to enhance of performance information for coordination across levels of strategic planning purposes government, both horizontally and vertically iv. Using strategic planning to underpin viii. Leveraging strategic planning to fiscal objectives, namely, fiscal enhance participation, accountability, discipline as well as allocative and and transparency in government technical efficiency 1. The Planning Commission was a national institution in India that formulated the country’s Five-Year Plans. It was dissolved in 2014 and replaced by a new institution named NITI Aayog. 2. The Finance Commissions are periodically constituted by the president of India under Article 280 of the constitution to define the financial relations between the central government and the individual state governments. The Fifteenth Finance Commission was constituted in November 2017 to provide policy advice primarily on fiscal matters for five fiscal years commencing on April 1, 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 1 After reflecting on international experience and the specific political and institutional context in India, the following options for policy reform are presented to strengthen and mainstream the strategic planning function within all levels of government. M A I N R E C O M M E N D AT I O N S i. Enhance the results focus of the states’ management and development priorities by complementing and disaggregating the Strategic Development Goals (SDGs) with the technical definition of the states’ regional-, sectoral-, and program- level integrated outcomes. ii. Ensure the systematic evaluation of strategically selected outcomes and the integration of evaluation findings into the states’ institutional management structure. iii. Increase the results orientation of budget allocations by reviewing and strengthening the states’ program structure and improving strategic planning at the program level. iv. Ensure the integration of state-level and sector planning work (including the SDGs) into annual budget program allocations. v. Strengthen the availability and quality of state, sector, and territorial performance data according to internationally accepted standards on information management. vi. Integrate the use of administrative records and performance information into all phases of the planning and budgeting processes by ensuring the interoperability of crosscutting planning, budgeting, investment, and monitoring and evaluation IT systems. vii. Increase the sustainability and predictability of strategic planning by strengthening the fiscal discipline parameters of integrated plans and budgets and introducing multiannual budget planning. viii. Improve the quality, sustainability, and predictability of public investment planning. ix. Complement conventional sectoral planning with a territorial development approach, in line with OECD trends and international standards, that integrates local land-use and states’ regional development planning perspectives. x. Develop the potential of land-use economic instruments to help counteract the fiscal space that currently reduces states’ autonomy. xi. Overcome the states’ ad hoc and unconnected planning activities by establishing explicit formal provisions or regulations that define a single and integrated reference strategic planning framework at the state or other subnational level. xii. Streamline and strengthen the organizational structure and capacities of the states’ planning departments, line agencies, and program managers to undertake quality outcomes-based planning and related work. xiii. Narrow the fiscal imbalance, duplication, and overlap of policy interventions and allocated resources between the central government and the states, and between the states and local bodies, by increasing multilevel coordination, concurrence, and complementarity. xiv. Strengthen the role of each state’s State Finance Commission in supporting the development of subnational financial management capacities to help reduce state-local imbalances. xv. Improve and institutionalize consultation and validation mechanisms to enhance consensus building around strategic planning priorities and increase accountability and transparency through sound and robust citizen reporting channels. xvi. Effectively integrate regional and local civil society organizations (CSOs) into planning participation, consultation, and validation processes, recognizing and addressing the differentiated territorial needs of CSOs and other stakeholders. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 2 Considering the trends and recommendations, several lessons for India and other countries can be learned from the experiences and common patterns identified in the reviewed country cases. This note underlines five major points on how the planning function has evolved and been institutionalized over time. LESSONS LEARNED ON HOW THE STRATEGIC PLANNING FUNCTION HAS EVOLVED OVER TIME • Planning structures and approaches have changed over time, but the experiences of all seven countries reviewed indicate that planning remains necessary. • New challenges to pursue and comply with national and global goals, including COVID-19 recovery, need cohesive and renewed growth and fiscal and expenditure management blueprints. • Planning functions are still operational in both advanced OECD and developing countries. • Sound planning needs to review and adjust institutional arrangements, structures, and provisions to ensure a suitable and politically viable model in each case. • Robust government strategic planning requires persistent efforts to build capacity. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 3 >>> Introduction Background Following the discontinuation of India’s national Planning only helps improve the identification of government priorities Commission and in line with the trends and good practice at different levels but is critical to enhancing performance observed across countries, Indian states will need to overall. Although most developed countries no longer find a way to respond to the changes in the planning and formulate national development plans—similar to India’s fiscal structures at the federal level.3 Effectively addressing current situation at the federal level —it does not mean differentiated, challenging, and multifaceted development that the planning function has been rejected; rather, it has tasks, including the Sustainable Development Goals (SDGs), evolved and transformed to emphasize other dimensions of will still demand that the states’ management structures government management to better serve the fiscal objectives execute sound coordination and performance measurement of fiscal discipline, allocative and technical efficiency. Other functions to inform policy formulation, budget allocation, and middle-income countries, including OECD members, have not implementation in their daily operations. Merely pursuing the only maintained centrally driven plans and structures but also SDGs as the strategic planning framework will not be enough strengthened them, particularly at the subnational levels. to tackle the interrelated poverty reduction and inclusive sustainable growth objectives of the states, regions, districts, Recognizing success in implementing or improving or even villages. As stated by the country’s Fifteenth Finance planning functions is challenging. There is no single Commission, the stability and predictability of resources will model or country trajectory, and the systems are designed be an essential part of long-term fiscal management at the and carried out in dissimilar country institutional settings union and state levels.4 (e.g., federal or unitary, centralized or decentralized political systems). Some countries address particular sectoral or Structures in and approaches to planning in a range budget program and project needs, while others display much of Organisation for Economic Co-operation and broader government-wide perspectives. Further, although Development (OECD) and middle-income countries have in some cases planning features have been determined by evolved differently over time, but all provide strong more general policy objectives (e.g., democracy transitions, indications that planning remains necessary. Planning not transparency initiatives, fiscal reforms, etc.), they have 3. The Planning Commission was a national institution in India that formulated the country’s Five-Year Plans. It was dissolved in 2014 and replaced by a new institution named NITI Aayog. 4. The Finance Commissions are periodically constituted by the president of India under Article 280 of the constitution to define the financial relations between the central government and the individual state governments. The Fifteenth Finance Commission was constituted in November 2017 to provide policy advice primarily on fiscal matters for five fiscal years commencing on April 1, 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 4 also been significantly influenced by existing—or the lack Considering their potential relevance to India, this of—managerial capacities and the power of championing technical note reflects on the experiences and planning agencies, among other factors. practices of a mix of OECD and middle-income countries. It includes an analysis of countries with federal systems— The evolution of planning systems and tools among Australia, Brazil, Canada, Malaysia, and Mexico—and two various OECD and middle-income countries show several that are unitary republics: Colombia and South Korea. The common characteristics. Even with different institutional experiences of each of these countries reflects some of the backgrounds and implementation approaches, the function dominant trends and salient features of the planning function, objectives, types of information produced, incentives, indicating how they have approached and institutionalized methodologies, procedures, and tools used to improve the strategic planning in government at different levels. The function have to a large extent followed somewhat similar document also addresses the trends in the various planning standards. In most cases, improvements have been built systems, the links between planning and other core policy on, or have been implemented alongside, other public functions, and the role of central government agencies relative sector objectives, particularly budget and performance to sector and subnational entities. management reforms. > > > T A B L E 1 - Features of Selected OECD and Middle-Income Country Cases GDP Position GDP per Territorial Urbanization Area Country Population ($US PPP) (GDP) capita (PPP) organization (%) (Sq km)* Australia 23.5 million US$1.25 20th US$45.378 8 territories (6 states, 86 7.62 trillion 2 federal territories) million Brazil 208.8 million US$3.25 7th US$14.283 26 states, 86.6 8.46 trillion 1 federal district million Canada 35.9 million US$1.77 17th US$44.078 13 provinces 81.4 9.09 trillion (3 territories) million Colombia 47.8 million US$745.4 30th US$13.321 32 departments, 76.2 1.04 billion 1 capital district million India 1.3 billion US$9.47 3rd US$7.200 29 states, 34 2.97 trillion 7 union territories million Malaysia 31.6 million US$930.7 25th US$28,200 16 territories 74.7 328,550 billion (13 states) Mexico 126 million US$2.46 12th US$18.134 32 states 80.2 1.92 trillion million South 51.4 million US$2.03 14th US$36.777 7 regional entities 81.5 98,190 Korea trillion *Land area is a country’s total area without inland water bodies, national claims to the continental shelf, and exclusive economic zones. Sources: World Bank, “World Development Indicators” (database), 2019; for land statistics: CIA, “The World Factbook” (online), 2018. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 5 In general, the country selections take into account necessarily commence with legal or other formal reforms, as representative economies that, in many respects, might the daily behavioral changes of officials and departments can be similar to India’s. It involves a combination of advanced help to introduce legal and procedural adjustments or can and developing countries that are highly populated and have simply reduce the need for them. federal structures (Brazil and Mexico) as well as significantly urbanized countries (81 percent on average), though the latter With different emphasis, formal institutions and actual is in sharp contrast to India’s generally low level of urbanization behaviors tend to be mutually consistent across the (34 percent). It also involves geographically large (Australia seven case studies. Most combine formal and informal and Canada) and high-income (Canada and South Korea) mechanisms in their management systems, which, in countries, as well as middle-income economies (Malaysia turn, relate directly to planning or indirectly to budgeting, and Colombia). The group also includes countries with performance management, or evaluation practices. For similar numbers of administrative tiers (TL2) of subnational instance, Brazil, South Korea, Mexico, and Colombia have governments, ranging from 7 to 32 (19 on average for the high-level formal requirements (constitutional or other legal group). Table 1 summarizes the main characteristics of the provisions) for national, subnational, sectoral, or program reviewed countries. and project planning that are also reflected in administrative regulations, technical methodologies, and procedures for Each country selected for review also has a relevant all government departments. Canada and Australia, on the profile regarding the size of its subnational level. On other hand, have relied much more on informal agreements, average, the participation of subnational government such as the managerial culture and capacities of sector and expenditures as a proportion of GDP amounts to 18 percent, program officials, or the strong results-oriented practice of and as a percentage of total spending it is 53 percent. India’s the Treasury Board or the Department of Finance. In these subnational government expenditures amount to 15 percent cases, informal practices have also been built into lower-level of total GDP, slightly below the selected countries’ average, operational regulations, methodologies, and guidelines that even the federal ones.5 Nonetheless, India’s subnational have been extended to all agencies to reinforce, standardize, expenditure as a share of total government spending and broaden the practice. represents 65 percent, one of the highest in the world. Implementation approaches to strategic planning can also be centralized or decentralized (devolved). A central Strategic Planning Approaches planning method involves the formulation of national or subnational plans, directly guided by central government institutions, that can be either legally binding or indicative for other levels of government (states, municipalities, etc.) and Depending on the institutional tradition or managerial other managerial units (sectors, programs, or projects). A capacities of each country, strategic planning approaches devolved approach, on the other end, implies that planning can be formal or informal. Formal approaches rely on legal formulation is led by the sectoral departments and agencies and administrative mandates that provide the de jure bases for or by their program and project managerial units. Essential to carrying out planning activities. Informal frameworks refer to this approach is the notion that managers should be granted the de facto behaviors and practices of agents that guarantee some operational freedom and incentives to deliver the results that strategic planning activities are embedded in day-to- and services for which they are accountable. day government operations. As observed, planning does not 5. OECD and UCLG, “Subnational Governments around the World: Structure and Finance” (Paris and Barcelona: Organisation for Economic Co-operation and Development and United Cities and Local Governments, 2016). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 6 > > > F I G U R E 1 - Typology of Countries: Levels of Centralization and Formality Informal Canada Australia South Korea Colombia Mexico Brazil Malaysia Formal Centralized Decentralized Rooted differently across formal institutions, the choice of centrally driven capacity development support programs in between the two approaches critically depends on all agencies, as in Canada. The experiences of Brazil, Mexico, the managerial culture and capacity level as much as Malaysia, and Colombia, with lower public sector capacities, countrywide performance management or budgeting particularly among subnational governments, have maintained reforms. Countries with more robust public sector managerial and even strengthened the formulation of government-wide capabilities, such as Australia, Canada, and to a lesser plans over the years. Performance management and budgeting extent South Korea, abandoned government-wide planning reforms have also been adopted, and capacity-building efforts formulation several years ago and have adopted performance are ongoing. Nevertheless, given the more limited capacities management and budgeting reforms to enhance accountability of sector and program officials, their planning and budgetary and service delivery. Accordingly, planning and program autonomy still rely heavily on the influence and technical budget decisions have transited to, and been reinforced at, knowledge of central government institutions, particularly the sector, agency, and program levels, including the provision finance ministries and/or planning agencies. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 7 >>> Findings from International Experience Trends in Strategic Planning Based on the data analyzed, at least eight major trends (vi) Strengthening institutional and managerial capacities were identified in the referenced country cases related across the public sector to how strategic planning functions are evolving, Each captures a series of standards of practice on strategic (vii) Using strategic planning to enhance coordination across planning that reveals its interdependence with other policy all levels of government, both horizontally and vertically areas, as well as the role of government agencies according to minimum technical or institutional canons. (viii) Leveraging strategic planning to enhance participation, accountability, and transparency in government. (i) Strengthening the outcome focus of strategic planning as part of a larger effort to mainstream results-based The trends have varying degrees of emphasis or initiatives across the public sector robustness in the examined country cases. In some countries (Canada, Australia, and South Korea), there are (ii) Embedding strategic planning at the program and signs of good practices in all the trends. In others (Brazil, project level as part of a larger effort to mainstream Malaysia, Mexico, or Colombia), most are indicated but performance budgeting with lower degrees of implementation (e.g., performance budgeting), as confirmed with the available information. (iii) Promoting the generation and use of performance Nonetheless, even though some in the latter group do not information for strategic planning purposes represent good practices, they were selected for analysis to show how such countries are moving forward with their (iv) Using strategic planning to underpin fiscal objectives, planning arrangements. namely, fiscal discipline as well as allocative and technical efficiency (v) Using strategic planning for territorial and land-use policy making and implementation EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 8 > > > F I G U R E 2 - Strategic Planning Trends by Country Colombia Australia Trend 1: Outcomes-based planning and evaluation Trend 2: Program planning and performance-based budgeting Trend 3: Performance information and IT systems Mexico Canada Trend 4: Fiscal sustainability and development planning Trend 5: Territorial and land use planning Trend 6: Institutional strengthening and managerial capacities Trend 7: Multilevel governance Malaysia South Korea Trend 8: Participation, accountability, and transparency * Shadowed blocks represent partially developed trend Brazil Overall, the countries reviewed have consolidated or are progressively moving toward the identified trends. In most cases, there is some form of outcome-based planning, performance-based budgeting, and use of IT systems to manage performance information. It is also worth noting the growing relevance of participation in planning and the emphasis on accountability to enhance transparency. For instance, middle-income countries encourage citizen participation in planning prioritization and validation, whereas developed and OECD countries have more robust internal accountability mechanisms. Although to varying degrees, in every country, planning supports coordination and enhanced governance among different levels of government. Finally, even though less documented, the links between strategic and land-use planning appear to be of growing importance. Main Strategic Planning Trends: The Case Studies actions on high-level medium-term strategic priorities and to 1. STRENGTHENING THE OUTCOME disaggregate those priorities at various levels into programs, FOCUS OF STRATEGIC PLANNING outputs, and so forth. It also emphasizes performance measurement, facilitates the direction and achievement of short- and medium-term performance targets, ensures Many public administrations have strengthened the consistency among participating stakeholders, and improves results and outcomes focus of strategic planning as part service delivery. An outcomes-based approach provides a of a larger effort to mainstream results-based initiatives more solid base and strategic orientation to implementation in the public sector. This is usually to focus all government objectives, while increasing coordination, alignment, and EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 9 complementarity among government agencies—and between A significant innovation was Australia’s outcomes and the government, private sector, and civil society—around outputs framework, introduced in 1999. The framework common targets. was intended to reinforce the shift in focus from inputs to results (outputs and outcomes) and required that departments In Canada, for instance, the outcomes focus in public agree with their ministers on the outcomes―the government sector management was preceded by outcome monitoring. objectives―and also on the departmental outputs (e.g., Formalized and centralized planning and evaluation practices services for specific groups) that would be produced to help were introduced in 19696 This was replaced in 1977 by the achieve these outcomes.9 The departments were authorized notion of “letting the managers manage,” that is, allowing to allocate appropriations across different types of outputs deputy ministers to assume greater responsibility over their to achieve the desired outcomes, and the Department of departments and programs but also be accountable for Finance provided guidance on performance management and program performance and the use of public funds. The current reporting. Reflecting a private sector paradigm, departments model is based on strongly institutionalized performance and agencies became accountable for results rather than and accountability frameworks that are the basis of strategic for bureaucratic procedures, and excessive administrative planning at the sector and program levels, where agencies controls were discouraged.10 As in Canada, these changes clearly set their outcome targets, called Results for Canadians. reflected a “let the managers manage” and an outcomes- Performance evaluations are conducted to assess the based, purchaser-provider philosophy that had existed in the achievement of outcomes, and reports to the parliament are public sector since the early 1980s11 and had its intellectual mandated to oversee and hold agencies accountable. Since basis in a series of public sector reforms in New Zealand.12 2000, greater emphasis has been placed on linking outcomes to funding renewal decisions, and evaluations have become Malaysia’s outcome-based and centrally driven approach mandatory to assist ministerial decision making. is illustrative in how it defines national objectives and outcomes that are then resourced through program-based Outcomes-based planning also takes place in Australia at budgeting. Through the Economic Planning Unit (EPU), the budget program level under the aegis of “outcomes- Malaysia has introduced various reforms to strengthen and based budgeting” (OBB). In the state of Victoria, for fill in the gaps of a more systematic and structured strategic instance, the Department of Treasury and Finance has led planning process at the program level. The budgetary system the process according to principles set by the Department of has thus been reviewed and adjusted to meet the requirements Finance at the national level. In this context, specific program of a program-based approach to planning and performance planning and the definition of outcomes are the responsibility budgeting. This is a formal framework, embedded in more than of each department and agency. Implementation of OBB in 60 years of experience with national development planning.13 Australia involved streamlining departments and agencies, However, since 2011, the process has been adapted to making them fewer in number but larger in size. In Victoria, changes in the environment, such as in political leadership 13 out of 25 departments were dismantled to ensure that “the and overall institutional and governance arrangements, as skills necessary for implementing an outcome-based planning well as to external economic shocks and domestic disruptions. and evaluation approach were less diluted across agencies and that the state’s program structure was less fragmented.”7 In Malaysia, the integrated framework comprises five Although the skills had been developed in previous decades, national mission thrusts as the basis of strategic the transference of additional authority to agencies and planning. Key result areas (KRAs), or national priority targeted programs was supported by administrative provisions, outcomes, are identified for each thrust with related key improved inter-agency communication, and a strong advisory performance indicators (KPIs). Based on the framework, all and oversight committee.8 national priorities are narrowed down to program and project 6. R. Lahey, The Canadian M&E System: Lessons Learned from 30 Years of Development, ECD Working Paper 23 (Washington, DC: Independent Evaluation Group, 2010). 7. World Bank, “Implementing the Outcomes-Based Approach in Malaysia,” Program Budgeting in Malaysia, Final Report (Washington, DC: World Bank, 2010). 8. Ibid. 9. M. Chan and others, “Australia,” OECD Journal of Budgeting 1, no. 4 (2002): 35–69. 10. D. Russell, “Performance Management and Evaluation: the Australian Experience,” in Developing a Performance Evaluation System in Korea, ed. Jay-Hyung Kim (Seoul: Korea Development Institute, 2003). 11. C. Campbell, “Juggling Inputs, Outputs, and Outcomes in the Search for Policy Competence: Recent Experience in Australia,” Governance: International Journal of Policy and Administration 14, no. 2 (2001): 253–82. 12. A. Schick, The Spirit of Reform: Managing the New Zealand State Sector in a Time of Change (Wellington: State Services Commission, 1996). 13. National planning involved a variety of instruments, including long-term policies, five-year plans, annual plans, and industry-specific plans. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 10 outcomes, ensuring assignment of responsibility for quality However, in South Korea, the implementation of strategic planning in a three-tiered time horizon: long term (more than planning at the program and project levels required five years); medium term (three–five years); and short term changes in the central budget authority’s role. A strategic (one–two years). The process must also consider potential planning bureau and performance evaluation unit were modifications and institutional reforms, the global agenda and created to reinforce planning and evaluation capacity within economic trends, and stakeholder involvement in the process the central budget authority and to emphasize its role in policy of shaping and implementing the plans. making beyond traditional budgeting. With the extensive involvement of line ministries, this authority now plays a crucial role in setting standards and monitoring the development of the program structure. Under this arrangement, South 2. EMBEDDING STRATEGIC PLANNING Korea combines both a centralized and decentralized AT THE PROGRAM AND PROJECT LEVEL approach, where the central budget authority plays a pivotal role and line ministries develop the program structures and strategic plans.14 Embedding strategic planning at the program and project level as part of larger public sector reform to Another example of a robust decentralized approach with mainstream performance budgeting has long been a performance budgeting focus is Canada. There is no common in many public sector administrations. One clear-cut division between planning and budgeting in Canada, key objective is to reinforce the focus on budget results by as both are interconnected at the program and department prioritizing and allocating resources through a robust program levels. Results-based management and accountability structure developed by line ministries under minimum frameworks (RMAFs)15 are drafted by program managers technical standards set by the central budget authority. In this and serve as the central strategic planning documents context, resource allocation considers program performance that contain all information on each program, including information to allow the government to increase the strategic design, objectives, expected outcomes, timelines, cost- budget orientation at individual programs and, as a whole, effectiveness, and the resources needed. Department heads to expand the performance measurement and accountability are responsible for producing a management accountability of budget allocations. Performance-based budgeting thus framework (MAF), which comprises an annual assessment strengthens strategic planning and results measurement from of the “quality of management, resources, and results of the bottom (projects) to the top (national, subnational, sector) their programs; the capacity to undertake and use program objectives and strategies. evaluations; and overall quality of reports to Parliament.”16 The Treasury Board of Canada Secretariat (TBS) uses South Korea carries out strategic planning at the sector and these frameworks to approve any new program or program agency levels and has a solid program budget structure to modification and to exert accountability over the results. allow performance budgeting. Planning in South Korea has evolved to produce performance information to feed into the In Mexico, a federal constitutional reform introduced budgeting process. Line ministries’ mid-term frameworks have performance budgeting in 2005 and centered the substituted for national development plans. Accordingly, line focus of planning at the program level. Replicated in ministries and agencies formulate strategic plans that are of state constitutions and budget laws, the reform involved three–five year duration and also prepare annual performance the alignment of budget programs with federal and state plans. Both these plans provide the strategic orientation for priorities as reflected in national, subnational, and sectoral budget programs, which also constitute logic frameworks that plans. At the same time, evaluation was enforced through set outcome and output targets with specific performance the Performance Evaluation System (SED, by its acronym indicators. The plans include the operational procedures and in Spanish) using different methodologies and tools. resources needed for implementation. 14. N. Park, “Performance Budgeting in Korea,” Presentation at the World Bank, IADB Latin American M&E Network. 15. Also known as performance frameworks or performance management frameworks, the common concept is to map program theory or logic to show how program activities eventually lead to the results (outputs and outcomes) envisaged by program planners. 16. R. Lahey, “The Canadian Monitoring and Evaluation System.” PREM Notes 11 (Washington, DC: World Bank, 2011). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 11 Based on constitutional provisions, Brazil, particularly activities, outputs, and outcomes linked to state and national in certain states (e.g., Minas Gerais, Ceara), is another priorities. A corporate performance framework, called a example of progressive transition to program planning, management resources and results structure, defines the performance budgeting, and evaluation. In Minas Gerais relevant results-oriented performance information, including under existing constitutional mandates and budget legal input, output, and outcome indicators, for performance frameworks, a shift to performance budgeting has taken place monitoring and reporting at the department level. These logic since 2007. The governor’s office has led the reform effort, models should have a flow chart that connects the result of but it has technically been executed by the planning and each activity or output to departmental and national outcomes. finance agencies. Priority areas were translated into strategic At the program level, the RMAF maps out the program logic outcomes with measurable indicators and targets reflected and serves as the basis for performance indicators set and in sectoral agendas. These, in turn, were directly cascaded monitored at the individual program level. Program managers down into strategic budget programs and investment projects. are accountable for monitoring systems, and evaluation The “State for Results,” as it was called, lay the foundations “specialists” at internal evaluation units within departments for strengthening planning at the program/project level in are responsible for ensuring that evaluations are conducted. connection with a broader outcomes focus over time. Strategic (spending) reviews directed by the TBS are used in Canada to enlarge the range of performance information available to support decision making. By assessing 3. PROMOTING THE GENERATION AND existing spending over a four-year cycle, the reviews help USE OF PERFORMANCE INFORMATION ensure alignment between priorities and effectiveness and efficiency. All programs are expected to demonstrate results in support of priorities, and budget officers and department The robustness of strategic planning systems seems to heads are encouraged to use them in decision making as depend heavily on the ability of governments to connect objective, evidence-based information. A TBS IT platform, the planning, budgeting, and implementation to results using Planning and Performance Gateway, supports management performance information systematically.17 This implies of and access to all available performance data, including creating the capacities and using the IT tools to generate reliable strategic reviews. and timely performance data that allow government planning systems to create strong baselines (points of departure) that, The South Korean model of performance information in turn, lay the foundations for realistic and achievable targets management run by the Ministry of Strategy and Finance (the destination). Consequently, the seven countries observed is worth signaling. In South Korea, a high technology here have sought to establish meaningful and accountable public financial management (PFM) IT system in this ministry performance information to obtain and manage reliable output supports the integration and administration of performance and outcome data from an array of sources that must be information for strategic planning and performance budgeting continuously updated (e.g., administrative records, surveys, at three layers: the performance goal management system studies, etc.). In functional strategic planning systems, the (PGMS); the self-assessment of budgetary programs (SABP); different types of performance information appear to feed into and the in-depth evaluation of budgetary programs (IEBP). each other and, to a significant extent, be used in conjunction. These systems produce different types of performance information. The PGMS plays the role of traffic signal that gives Sound production and utilization of performance the first feedback on program performance, the SABP collects information that makes use of different tools has been comprehensive information and categorizes the programs a long-term, widespread, and evolving trend. All the according to their ratings, and the IEBP strategically selects selected cases have been working to improve their outcome several programs and subjects them to thorough evaluation. and output measures and to increase their information in support of strategic planning, performance budgeting, and In Mexico, all budget programs are also required to set implementation. In Canada, for example, each departmental “indicator matrices” (logic frameworks) that provide the program must have a logic model with technically defined basis for monitoring and evaluating information. The 17. M. Robinson, “Performance Information for Performance Budgeting,” (Washington, DC: International Monetary Fund, 2007). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 12 results orientation adopted by Mexico has created a strong The consistency of strategic planning with MTFFs and demand for performance information and, as set out by the MTEFs to ensure that priorities are implemented is a Ministry of Finance and Public Credit, to have the National major trend in most countries. Successful integration of Development Plan as a reference point to align sector these core functions can be found in federal models, such as plans and budget programs and to measure their progress Australia, Canada, Brazil, or Malaysia, and in unitary countries through evaluation. Since 2005, it has also used performance like South Korea and Colombia. information to operationalize performance budgeting and to support implementation of the SED. In this regard, the In Australia’s horizontal integration model, for example, Ministry of Finance uses an IT tool that displays all program the Finance Department prepares and communicates logic framework indicators and the performance evaluations the fiscal policy and outlay settings for the forthcoming conducted with a view to strengthening strategic budget budgets. At the state level, this includes, where relevant, planning and enhancing fiscal transparency. capital expenditure for the coming years, the most significant thrusts from government, and any movement in the expansion Performance information in Malaysia is also structured and contraction of state outlays. Altogether, these allow line and monitored through results frameworks for long- and departments and agencies to set their own outcome targets medium-term plans and budget programs. A logic framework coherently and then disaggregate them into program outcomes approach focusing on outcomes is required at all ministries and outputs. At the national level, as part of OBB, Australia has and agencies to formulate and introduce development produced some simple techniques to document government initiatives and to help operationalize and link ministerial and strategic outcomes through the outputs and outcomes program objectives to national planning goals. Each ministry framework, which generates the preparation of business cases must set KPIs by KRAs. Performance information also covers and submissions for ongoing and new programs, including their the development of objective hierarchies to ease prioritization, corresponding KPIs. The Department of Finance ensures that implementation, monitoring, and evaluation.18 line ministries and agencies adhere to these guidelines when requesting a budget, with a view to enhancing purchaser- provider arrangements and accountability. 4. BOOSTING FISCAL DISCIPLINE AND ALLOCATIVE AND TECHNICAL Malaysia (federal) and Colombia (unitary) also have EFFICIENCY MTFFs and MTEFs that form stringent bases for their integrated planning structures. In both cases, these tools establish the fiscal limits and overall budget allocation Fiscal planning aims to ensure the sustainability of possibilities across sectors and departments to allow better public finances, which, in turn, is necessary to guarantee prioritization of expenditures. In Malaysia, this creates a strong the government’s capacity to assume and undertake foundation for the formulation of the National Plan, outcomes- public policy objectives and goals. Within the limits of a based budgets, and program agreements. This integration is healthy and adequate macro-fiscal context, countries seek an essential feature of the Malaysian planning system since it to ensure that strategic planning objectives are consistent lends credibility to strategic planning and ensures that it is not with fiscal objectives. In doing so, countries implement a seen purely as an aspirational exercise. The same is the case variety of measures, emphasizing specific features and in Colombia, where the National Plan, which should include institutional arrangements, usually integrating medium-term a multiannual investment program, must ensure technical fiscal frameworks (MTFFs) and medium-term expenditure consistency with the mid-term fiscal projections and MTEF frameworks (MTEFs) with national, subnational, or sectoral prepared by the Ministry of Finance before it is submitted for planning exercises. As observed, the main purpose is to legislative approval. In both countries, the parliament and provide consistency and to create a virtuous tandem for a congress, respectively, need to approve the National Plan, broader results-based strategic planning system.19 thus underscoring the relevance of a technical formulation— 18. World Bank, “Malaysia’s Experience with National Development Planning,” Primer (Washington, DC: World Bank, 2017). 19. World Bank, Beyond the Annual Budget: Global Experience with Medium-Term Expenditure Frameworks (Washington, DC: World Bank, 2013). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 13 under realistic fiscal grounds—to ensure that projects and root only in the early 2000s. In all cases, evaluation became programs outlined in the plans and approved by the legislative a part of core planning and budgeting functions to support body will be implemented. allocative and technical efficiency through an evolutionary approach in which governments built on previous steps. Brazil developed a planning and budgeting integration system in 2003 in which the integration of MTFFs also plays a substantial role. At the state level, both the planning 5. USING TERRITORIAL AND LAND-USE and finance agencies coordinate the fiscal framework, which PLANNING defines the ceilings for state plans and multiannual investment plans (MPAs). These definitions seek to ensure a commitment to fiscal balance and to increase alignment between the budget and mid-term strategy so that project quality and total Ultimately, strategic planning objectives and interventions expenditure can be enhanced. materialize in the territories and localities where the policies and budgets reach people. Therefore, country Another example is South Korea, where MTEFs and the planning approaches have progressively tried to more formulation of sectoral plans by individual ministries accurately identify the policies and programs that best solve have replaced development planning. The initial attempt the complex and differentiated problems among regions, to introduce modern fiscal and expenditure planning tools integrating a crosscutting territorial approach to the different was in response to the 1997 Asian financial crisis, but real forms of planning. Accordingly, land-use management plans reform was achieved in 2003. A robust government program that support the protection of ecological structures, define and supported the transition to a devolved structure and the move foster different uses of land for economic activities, and help from traditional line-item budgeting to performance budgeting. to sustain state and local resources, among other measures, It also included cost accounting and an integrated financial have been integrated—to different extents—into broader information system. The MTEF was introduced as part of that strategic development planning exercises. In that context, broader PFM reform package and called the National Fiscal sounder formulation of policies, institutional coordination Management Plan.20 The purpose was to incorporate a longer- among multilevel planning structures and tools, and better term perspective into the annual budget process in response prioritization of investments are only a few of the dimensions to such issues as the increasing government debt, aging that seem to directly benefit from an enhanced understanding population, and expanding social welfare, which traditional of the urban-rural dynamics and linkages that a proper annual budgeting could not easily accommodate. integration of these two different approaches provides. Integrating an evaluation process to support allocative The examples of Brazil and Colombia underline the and technical efficiency, particularly through budget relevance of this integration to enhance the impact of rural/ programs, is also a major international trend. In Mexico, the urban development as part of broader country and regional operational integration of planning, budgeting, and evaluation objectives. In Brazil, with the 1988 federal constitution, a new takes place under the broader perspective of the above- legal-political paradigm to address territorial development mentioned SED, which is led by the Secretary of Finance. emerged. It strengthened the socio-environmental function of In Canada and Australia, formal and centralized evaluation property and reinforced the integration of land-use planning practices were introduced in the early 1970s and 1980s, and policy approaches into the management of cities and rural respectively. Mexico built its current evaluation system at the areas. It also reemphasized the need to clarify and regularize end of the 1990s when the rigorous and influential impact the property rights of consolidated informal settlements, both evaluations of the Progresa-Oportunidades cash transfers urban and rural.21 Specific federal and state competences were program were conducted. Similarly, in Colombia, evaluation added to planning agencies to deal with land-use problems was integrated into planning to support investment allocations and their potential development benefits. and effectiveness between 1991 and 1994, although these took 20. J. Choi and N. Park, “Achieving Medium Term Expenditure Framework Reform: A Case Study of Korea,” Policy Research Working Paper 6342 (Washington, DC: World Bank, 2013). 21. E. Fernandez, “Main Aspects of the Regulatory Framework Governing Urban Land Development Processes,” in Brazil. Inputs for a Strategy for Cities: A Contribution with a Focus on Cities and Municipalities, Volume II: Background Papers (Washington, DC: World Bank, 2006): 137–67. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 14 Further integrating land-use perspectives, technically which they are accountable. Improvement of organizational and operationally, into strategic planning frameworks structures and deployment of capacity-building strategies, enhances sustainable and territorial development. In including incentive schemes and controls to allow managers most OECD countries, this integration has strengthened more autonomy, appear critically connected to an operational coordination and resource allocation between federal and strategic planning system. state-level projects of all types (mainly infrastructure projects), thus enhancing their potential impact in territorial development. In both OECD and middle-income countries, making Unlike those with centralized development plans, advanced strategic planning work properly has demanded both time OECD countries have addressed this type of integration and new managerial capabilities. In the Australian state through crosscutting territorial policies in strategic planning at of Victoria, for instance, developing a strong OBB practice the level of sectoral budget programs. has required many new budgeting skills, including business case writing, project assessment, and project management Colombia, a recent OECD member, is another example tools. These are now essential to translating priorities into of the progressive integration of land-use planning action because they form the empirical basis for the selection into central and subnational government development of initiatives. planning functions. A regional planning structure was introduced in 2016 to coordinate planning and investment in The same is the case in South Korea and Mexico, where departments with similar characteristics.22 The implementation strategic planning and performance budgeting had to be of a peace agreement to settle a long-lasting internal conflict strengthened. In South Korea, the Ministry of Strategy and created new development challenges at the regional level, Finance needed new strategic planning and performance particularly in remote rural areas traditionally more affected evaluation units to reinforce these skills within the central by violence and conflict. Accordingly, specific development budget authority and to assist capacity development more strategies were defined for those areas under the Development broadly in departments and agencies. Similarly, in Mexico, Plans with a Territorial Approach, a vehicle for integrating the Ministry of Finance created a Performance Evaluation land-use and strategic development plan objectives (national Unit alongside the Budget Unit to build the program base and and subnational) and carrying out rural and territorial reforms results frameworks under the new SED. One of the purposes involving participatory planning mechanisms. The main of the SED and the Performance Evaluation Unit was to objective was to accelerate the structural transformation of enhance managerial capacity to strengthen program planning targeted remote rural areas by mobilizing public and private and performance evaluation, thus allowing performance investment to improve service delivery. budgeting to take root. Canada is another example of the importance of permanent capacity building. Although capacities had 6. STRENGTHENING INSTITUTIONAL been created over the previous three decades, the system’s AND MANAGERIAL CAPACITIES evolution toward a much stronger results-based management and accountability model demanded that the TSB create the Centre of Excellence for Evaluation (CEE). The role of Robust strategic planning systems require sound the CEE is to support the government’s evaluation policy, to institutional and managerial capacities. These may favor provide technical assistance and capacity-building services or deter a country’s consolidation of its strategic planning to line ministries, and to monitor the quality of program practices and work. Formal and informal mechanisms and evaluations to strengthen results and accountability. The CEE behaviors shape the institutional architecture and the enabling also: promotes capacity building and guidance on program environment in which strategic planning functions evolve. planning, develops operational oversight of monitoring and Central to strategic planning in “good practice” countries is evaluation standards, encourages the TSB and line ministries the notion that managers should be granted some operational to use evaluation results, and conducts government-wide freedom and incentives to deliver the results and services for evaluations, particularly since 2009.23 22. OECD, “Regional Outlook, Colombia” (Paris: Organisation for Economic Co-operation and Development, 2019). 23. Lahey, The Canadian M&E System. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 15 Strategies to develop capacity have also been expenditure management system. Finance officials prepare observed in Brazil, Mexico, and Colombia, including the budget for the parliament’s consideration and advise at the subnational levels. These have involved technical on new spending proposals. The Finance Department also assistance to aid agencies and officials to formulate results manages the government’s fiscal framework. TSB officials frameworks and evaluation plans to strengthen the strategic shepherd the estimates through the parliament, manage the direction of budget programs and sectoral MPAs (in Brazil), strategic reviews, and work with departments and states to including more stringent methodologies and procedures improve performance measurement and reporting on national for the appraisal and prioritization of investment projects. priorities. The Privy Council Office acts as a gatekeeper to Capacity development has also included improvements in the cabinet in the consideration of new program proposals the identification of objectives and priorities, the integration of that might impact future spending. A cabinet-level Expenditure planning and budging to reinforce allocative efficiency, program Review Committee also strengthens multilevel coordination management arrangements across sectors, and monitoring and strategic direction. This committee, composed of and performance evaluation tools and methodologies. In government ministers and chaired by the TSB president, is Mexico, both the National Council for the Evaluation of Social responsible for reviewing all federal spending. Its mandate is Policy and the Performance Evaluation Unit of the Ministry of “to ensure that government spending remains under control, is Finance offer regular training on the formulation of indicator accountable and accords with the priorities of Canadians, and matrices and the use of different evaluation methodologies that every tax dollar is invested with care to achieve results within federal and subnational agencies. It is the same in for Canadians.”24 Colombia, where the National Evaluation System (Sinergia) and the National Planning Department provide a range of The role of strategic planning in multilevel coordination ongoing training through different courses and workshops. in Colombia is also worth noting. The central government’s National Planning Department and Subnational Planning Departments permanently coordinate plan formulation and implementation and ensure alignment, concurrence, and 7. COORDINATING ACROSS DIFFERENT harmonization of the different sources of investment. This is LEVELS OF GOVERNMENT particularly important for royalties-funded projects, on which multilevel Collegiate Bodies for Administration and Decision (OCADs) make the final prioritization and resource allocation The lack of integration between state, sector, and local decisions. The OCADs are composed of national, subnational, plans, and the resulting weak reflection of such plans in and municipal representatives (usually central ministers, budget programming, weakens the allocative efficiency of governors, and mayors or their delegates), and given their public investment and reduces the impact of policies and unique and operational multilevel decision-making role, have related budgets on development. As observed, enhanced often been called a “triangle of good government.” Planning multilevel governance approaches enable collaboration, agencies at the subnational level and the National Planning complementarity, and concurrence in policy efforts and Department separately carry out the technical functions funding sources among different levels of government and of these collegiate bodies. In addition, for all planning and across government agencies. It facilitates the identification investment matters, a National Economic and Social Policy and alignment of priorities at subnational levels of government Council (CONPES) serves as the coordination and decision- and effectively links them to federal targets, objectives, and making institution that facilitates the alignment of priorities and resources, thus avoiding overlaps. plan investment projects. The president heads the CONPES and the National Planning Department, which houses the In Canada’s decentralized strategic planning system, technical secretariat. three central agencies help facilitate coordination across levels of government. The Finance Department, Another successful example of intersectoral coordination the TSB, and the Privy Council Office coordinate decision is Malaysia’s planning process, which is explicitly making and oversight implementation in the government’s governed by centrally defined organizational rules, 24. L. McCormack, “Results-Based Management: Lessons from Canadian Experience” (Ottawa: Treasury Board of Canada Secretariat, 2007). EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 16 methodologies, and procedures. The planning process is commission performance evaluations and report their findings led and coordinated by the EPU, which ensures both bottom- to the TBS and parliament. The TBS also directs several up and top-down planning. Several institutional solutions for strategic reviews under which budget programs are assessed integration and coordination, such as inter-agency planning to reinforce expenditure prioritization, as well as efficiency and groups, technical working groups, and focus groups that effectiveness more generally. These reviews allow the TBS include representatives from the private sector and civil society, and parliament to identify the lowest performing programs and have been created for planning within state- and federal-level to reallocate resources to other pressing priorities. bodies. Brazil and Mexico follow a similar model, combining center of government agencies (ministries of finance or Accountability became institutionalized in Canada by the planning agencies) with planning units in line agencies that 2009 Evaluation Policy. The policy demands that “complete, foster and support program and project strategic planning, approved evaluation reports along with management mainly through the use of logic frameworks. responses and action plans are made easily available to Canadians in a timely manner while ensuring that the sharing of reports respects the Access to Information Act, Privacy Act and the Government Security Policy.”25 Public 8. ENHANCING PARTICIPATION, disclosure of accountability frameworks and performance ACCOUNTABILITY, AND TRANSPARENCY reports plays an important role in expanding public (including media) accessibility to information on government objectives and results. Additionally, Auditor General reports have Stakeholder involvement in government-wide program increased public focus on the performance and results of planning exercises strengthens strategic direction—by government programs. including the views of related agencies, citizens, and program beneficiaries—and also social control and In Australia also, the integration of the evaluation function internal accountability. When properly institutionalized, into strategic planning has enhanced transparency and participatory mechanisms in strategic planning enhance accountability. In the early stages, the overarching objective inclusion, since the recipients of the state’s services, or their was to improve cost-effectiveness and budgetary priorities, representatives, contribute directly to the design, formulation, though since the 2000s, the focus has been on accountability implementation, and assessment of development policies and results-based management more broadly. After the and programs. As observed in country planning systems, abolition of the initial model—implemented by the Department participation fosters transparency and provides mechanisms of Finance—evaluation has been conducted by line ministries for holding governments accountable for both their decisions and agencies under a principles-based framework. The Public and omissions. Service Act (1999) sets out the values that public servants must uphold and the procedures through which public servants In Canada, accountability and transparency are critical should be held to account. dimensions underlying the government’s strategic planning frameworks and have evolved into the Horizontal integration of evaluation to strengthen organizational culture. In Canada’s results-based model, accountability in service delivery has also been employed the initial objective was to have higher accountability to the in Mexico and Colombia. In Mexico, seven decades of one- parliament. Nonetheless, over the years, the emphasis has party rule has been replaced by a more democratic system broadened to increase program efficiency (i.e., value for and calls for the greater government accountability. With 20 money) and government accountability to the public also. percent of the population in extreme poverty and facing the The tools that structurally support the system, namely, impacts of two financial crises, questions about the efficacy departmental MAFs and program RMAFs, all reemphasize of social spending were raised. The congress demanded the focus on outcomes and accountability. These tools support evaluation reports, though it was only later in 2005, as part a very mature performance measurement and reporting of performance budgeting reforms, that these started to be infrastructure that commands all departments and agencies to progressively used to inform program improvement and 25. TBS, “Policy on Evaluation” (online) (Ottawa, Treasury Board of Canada Secretariat, 2009), https://www.tbs-sct.gc.ca/pol/doc-eng.aspx?id=15024 EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 17 resource allocation. In Colombia, evaluation was initially a agencies accountable for program performance with the technical response to the need to improve the results focus allocated funds. Evaluation has an outcomes focus and is of national planning, but it subsequently gained political becoming systematically linked to improved accountability and legal endorsement as a means to fight inefficiency and and transparency, particularly since the Government Policy corruption and thus, improve transparency and accountability Evaluation Act of 2000 and broader fiscal and performance in government. In both countries, the call for accountability management reform initiatives, such as MTEFs, that were was embedded in the constitution and other legal frameworks, enacted into law in 2006. which helped ensure the sustainability that the integration of evaluation, strategic planning, resource allocation, and In all seven countries examined for this report, strategic accountability required over time—that is, beyond the timeline planning systems ensure the participation of research and interest of a particular government. institutions and civil society organizations (CSOs) in various forms and at different stages of the planning Brazil and South Korea have also developed evaluation process. In countries like Colombia, Brazil, or Mexico, citizens schemes in support of strategic planning and and CSOs have an institutionalized role to play in the planning accountability. In the state of Minas Gerais in Brazil, annual formulation process. They are consulted about priority evaluations have been used to address the execution of interventions and also involved in formally validating planned development plans, the results of performance agreements, priorities as a central pillar of enhanced governance. Citizens and the achievements of selected priority programs and to and CSOs also play a critical role in monitoring and exerting report internally to the government and externally to the general social control over the implementation of plan priorities and, public. At the federal level, connecting national planning equally important, in using performance information to support and the budget process through program management has or oppose government policies while holding the executive favored a more outcomes-based approach. In South Korea, to account for program performance. From a governance evaluation’s integration into strategic planning is run by the perspective, the participation of such actors appears to be an Ministry of Strategy and Finance, which monitors KPIs and integral part of a well-functioning strategic planning structure. budget reviews and conducts in-depth evaluations to held EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 18 >>> Recommendations For over two decades, there were increasing calls that India move away from its centralized planning structure, STRENGTHENING THE OUTCOMES which finally occurred with the Fourteenth Finance FOCUS OF STRATEGIC PLANNING Committee’s recommendations. The evolution of India into a multiparty political system and the economic liberalization in 1991 led to a shift in center-state relations and also increased criticisms of the role of the federal Planning Commission and Recommendation 1: Enhance the results focus of the planning framework, which were considered outdated. state management and development priorities by These views gained traction among many CSOs, academic complementing and disaggregating the SDGs with the institutions, and policy makers, including in the parliament and technical definition of states’ regional-, sectoral-, and state legislatures.26 program-level integrated outcomes. State planning in India has been conducted in a significant ad hoc manner over the Based on the experiences and major trends identified, past several decades, owing mostly to capacity shortages this report proposes a set of 16 concrete policy and the heavy reliance on the highly sectoral programs of recommendations and related implementation actions the previous federal plans, rather than focusing on broader that can inform Indian states’ responses to their current state social and economic outcomes. The declaration of changing planning structures. The recommendations arise national goals and the SDG framework alone has not been from an examination of the experiences and major trends in enough to enable the states to provide strategic direction to the evolution of planning functions in the seven case study policies, budgets, and implementation under unified technical countries. Knowing about or even integrating some of these standards. trends can be valuable as states move to adapt and reshape their planning structures. The recommendations are grouped Recommendation 2: Ensure the systematic evaluation according to the eight major trends outlined above and provide of strategically selected outcomes and the integration guidance on potential courses of action in the way forward. of evaluation findings into the states’ institutional 26. See the Sarkaria Commission set up in 1983 by the central government of India. The Sarkaria Commission’s charter was to examine the central-state relationship on various portfolios and to suggest changes within the framework of the country’s constitution. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 19 management structure. The evaluation architecture and process due to the absence of clear short- and medium-term capacities have long been weak in many Indian states, and strategic direction. management, in most cases, still operates in a significantly reactive way. Although the development of evaluation bodies and an operational evaluation function at the state level has PROMOTING THE GENERATION AND USE been recommended at least since the Administrative Reforms OF PERFORMANCE INFORMATION Commission in 1966, mainly to strengthen management and accountability, this has not occurred in many states. This not only weakens strategic planning but reinforces states’ limited capacities to take a more proactive and managerial outcomes- Recommendation 5: Strengthen the availability and based approach. Ensuring the systematic evaluation of quality of state, sector, and territorial performance data planned outcomes and the integration of evaluation findings according to internationally accepted standards on into the institutional structure of state government processes information management. The federal output-outcome is still a pending assignment for many states. monitoring framework defines an agenda—still in progress— to develop relevant and measurable outputs, outcomes, indicators, and targets approved by the respective ministries and departments at the national and state levels. Nonetheless, EMBEDDING STRATEGIC PLANNING AT the Public Expenditure and Financial Accountability THE PROGRAM AND PROJECT LEVEL assessments have highlighted the need to improve the availability of and public access to indispensable fiscal and performance information, which appears to be more possible Recommendation 3: Increase the results orientation at the subnational levels. Although the Ministry of Finance’s of budget allocations by reviewing and strengthening “Quality of Information Index” shows some progress, there is the states’ program structure and improving strategic room for improvement, given the importance of strengthening planning at the program level. Currently, performance outcomes-based planning and evaluation linked closely to data for informing budget allocations decisions at the state program budget allocation processes. Performance measures level are limited, and weaknesses in the planning structure should be defined at subnational levels and technical of budget programs and classifications restrict the use of this standards strengthened to incorporate budget and investment information to assess the results (outputs and outcomes) monitoring using IT systems and databases. achieved. This deficiency increases the fragmentation of expenditure in program and project portfolios and creates Recommendation 6: In addition to the integration of a potential duplication of efforts between the union and the performance data, foster the use of administrative records states, notably through the centrally sponsored schemes in all phases of the planning and budgeting process by (CSS), which reduce the allocative efficiency, quality, and ensuring the interoperability of crosscutting planning, impact of spending on state development objectives. budgeting, investment, and monitoring and evaluation IT systems. There has been enormous progress in recent Recommendation 4: Ensure the integration of state and years in the implementation of IT programs to manage sector planning work (including the SDGs) into annual administrative records both at the federal and state levels, and budget program allocations. Traditionally, both at the currently, most of the flagship programs have their systems federal and state levels, there has been a lack of integration in place. However, performance information management between plans and the annual budgeting process. Without a systems to monitor progress on resource use accessibly and direct connection between them, planning in many states has in aggregate do not always exist, particularly at subnational become, at best, no more than an indicative exercise and has levels. With the devolution of significant fiscal responsibilities, little influence in actual decision making and implementation. states in India must have sound PFM and accountability This lack of integration has resulted not only in a very limited systems with integrated IT tools that allow all performance planning function but also in a severely restricted budgeting data on government outcomes and priorities (regardless of EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 20 their source) to be compiled to expedite management and where guidelines and submissions are not publicly available. performance reporting. Disaggregated monitoring information As a result, there is an uneven project appraisal process, and is particularly important on state CSS and other grants since the fiscal impact, affordability, and technical feasibility of major the publicly available data on several CSS provide basic public investments, in line with the available fiscal space, are timeline information, but the data are not accessible in a way not rigorously assessed before budget decisions are made. that is conducive to statistical and performance analysis.27 USING TERRITORIAL AND LAND-USE BOOSTING FISCAL SUSTAINABILITY PLANNING AND ALLOCATIVE AND TECHNICAL EFFICIENCY Recommendation 9: Complement conventional sectoral Recommendation 7: Increase the sustainability and planning with a territorial development approach, in predictability of strategic planning by strengthening line with OECD trends and international standards, the fiscal discipline parameters of integrated plans and that integrates local land-use and states’ regional budgets and introducing multiannual budget planning. development planning perspectives. According to In line with the Fifteenth Finance Commission findings and India’s constitution, every state should, at the district level, recommendations, changes in the fiscal structure aimed at consolidate plans prepared by the panchayats (villages) and increasing devolution to the states has reduced their fiscal municipalities and draft a development plan for the district space in many cases and therefore their capacities to plan as a whole. Nonetheless, there are no efforts to harmonize and fund their priorities. Likewise, limited revenue planning land-use plans at the state, district, watershed, city, village, does not allow the states to effectively counteract the low or other local levels. Territorial planning can be strengthened levels of income coming from their tax structures. At present, by preparing and properly updating cadasters (mapping of although the states are receiving a higher share of the property and land use) and linking and using their information divisible pool of taxes, the fiscal space for untied grants has to enhance the quality of territorial planning formulation and not increased significantly and many states have increased investment allocation. their dependency on the central government’s CSS. Unlike the federal government, most states do not have a standalone Recommendation 10: Develop the potential of land-use and legally established MTEF or a medium-term fiscal policy economic instruments to help counteract the limited plan to help enhance the sustainability and predictability of fiscal space that currently reduces states’ autonomy. their budget projections (e.g., to protect public investments States still have relevant sources of revenue that are not fully in a tight fiscal situation). Further, since multiannual budget exploited, including taxes on minerals and related income and planning tools are fragile or non-existent, multiannual plan on agriculture and property. These yields can be increased objectives—where state plans are in place—see their actual by updating fiscal cadasters, implementing efficient appraisal budget possibilities reduced, rendering them uncertain and methods, and enhancing transparency. In 2008, the federal less credible. government implemented a Computerisation of Land Records program to include the automation and redrawing of cadastral Recommendation 8: Improve the quality, sustainability, maps using modern techniques under the National Land and predictability of public investment planning. There is Records Modernization Program.28 The system should be little evidence that systematic investment project appraisals replicated in all the states to integrate land-use records into exist in many states, nor any unified ex ante evaluation territorial rural-urban planning decisions and to update the methodologies based on international technical standards. cadastral bases to strengthen local governments’ revenue, Thus, appraisal of investment projects, regardless of their lessening their dependence on state grants and CSS. size, is subject mainly to each line department’s discretion, 27. Chakraborty, “Deficit Fundamentalism vs Fiscal Federalism: Implications of 13th Finance Commission’s Recommendations” Economic and Political Weekly 27 (2010): 56–63. 28. U. Jha-Thakur and A. Rajvanshi, “Strategic Environmental Assessment in India: Trends and Prospects,” in Handbook on Strategic Environmental Assessment, ed. T. B. Fischer and A. Gonzalez (Cheltenham, UK: Edward Elgar, 2021): 388–401. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 21 STRENGTHENING INSTITUTIONAL AND COORDINATING ACROSS LEVELS OF MANAGERIAL CAPACITIES GOVERNMENT Recommendation 11. Overcome the states’ ad hoc and Recommendation 13. Narrow the fiscal imbalance, unconnected planning activities by establishing explicit duplication, and overlap of policy interventions and formal provisions or regulations that define a single and allocated resources between the central government and integrated reference strategic planning framework at the states, and between the states and local bodies, by the state and other subnational levels. Planning in India increasing multilevel coordination, concurrence, and has had a very formal and centralized structure, and in most complementarity. Despite significant policy reforms in recent cases, the state and district levels reflect the federal structure. years, India’s intergovernmental finance and coordination Nevertheless, planning at the subnational level has typically systems still present several critical imbalances. Although been ad hoc, owing mostly to capacity shortages and the states are responsible for providing most social services and previously “overwhelming and overriding” influence of the share responsibility with the central government for many federal planning structure, which in practice supplanted the other services, actual implementation happens at the local subnational structures and hindered their autonomy and the level. However, there are significant mismatches between the development of state planning capacities. Accordingly, the revenue raising and spending and implementation capacities changes to the federal planning structure are still evolving and of the three tiers of government that, in practice, limit the being mainstreamed. This void has reinforced the improvised achievement of decentralization (devolution) and development nature of institutional planning at the subnational level, which objectives at all levels. The discontinuation of the Planning therefore requires a new integrated reference framework for Commission and the changes to the federal planning structure conducting strategic planning. demand more robust intergovernmental coordination and collaboration mechanisms to increase the concurrence and Recommendation 12. Streamline and strengthen the complementarity of policy interventions and funding (including organizational structure and capacities of the states’ the generation of subnational government own revenues) that planning departments, line agencies, and program are critical to reducing the still considerable economic and managers to undertake quality outcomes-based planning fiscal disparities across and within states. and related work. Before the Fourteenth Finance Committee recommendations, the main body responsible for planning Recommendation 14. Strengthen the role of each at the state level was the State Planning Department, which state’s State Finance Commission (SFC) in supporting worked directly under the control of the state’s chief minister. the development of subnational financial management The State Planning Department was also the liaison to the capacities to help reduce state-local imbalances. Although Planning Commission at the federal level and to the different grants from the central government to local bodies are more state government departments in coordinating development significant than grants from states, it is the complementarity planning work. During the time of the Planning Commission, and concurrence between these two finance sources that the State Planning Department usually functioned through ultimately determine the availability of resources and the a system of working groups, formulating a plan based on incentives for service delivery at the local level. In the current directions from the Commission and recommendations from system of resource transfer from the central and state the working groups and the state’s Council of Ministers. With governments to local bodies—and considering the latter’s the abolition of the federal Planning Commission, the State often limited administrative capacities—the SFC should help Planning Departments will also need to adapt to fill in the gaps support the development of financial management capacities left by the Commission, and to lead the renewed strategic at the subnational level and provide greater stability and planning work at the state level according to international predictability to the transfer mechanism. standards. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 22 social and financial controls to match the increased financial ENHANCING ACCOUNTABILITY AND responsibility. TRANSPARENCY Recommendation 16: Effectively integrate regional and local stakeholders into planning participation, consultation, and validation processes, recognizing Recommendation 15: Improve and institutionalize and addressing the differentiated territorial needs consultation and validation mechanisms to enhance of stakeholders. Demand for accountability has been consensus building around strategic planning priorities increasing since the Right to Information Act of 2005, and the and increase accountability and transparency through government’s output-related targets are now publicly available. robust citizen reporting channels. Apart from the State CSOs in India have often taken the initiative to assess the Planning Boards and planning departments, there are many social impact of key development projects, programs, and other critical players in the state-level planning process in plan objectives. Sectoral thinks tanks and CSOs frequently India. These include finance departments and line agencies provide valuable feedback on government policies. Moreover, as well as other layers of subnational government and external federal and state governments have issued many directives stakeholders—the primary beneficiaries of the planned that focus on enhancing transparency in the use of funds. One outcomes and programs. All of these entities should work outcome has been the creation of a “fourth tier” of institutions, together to ensure the quality formulation of and commitment that is, community-based organizations. The goal is to bolster to planning work and coordination during plan implementation. the participation of people closest to project execution and The federal government has also widely extended a social to expect greater accountability from them. Accordingly, the audits system to promote participation. However, a reshaped challenge is to reshape the states’ planning functions and state planning function in agreement with international procedures, taking advantage of the rich structure base for standards should strengthen the focus on accountability, accountability, in an ordered, institutionalized, and effective transparency, and participation issues, particularly if planning manner, so that outcomes-based planning and evaluation is to be centered on state and program outcomes. It is also reinforces accountability—and the other way around. important to evaluate results performance to ensure that there are mechanisms to guarantee adherence to basic EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 23 >>> Lessons Learned Several lessons can be learned from the experiences and Lesson 2. New challenges to pursue and comply with common patterns or trends identified in the reviewed national and global goals, including COVID-19 recovery, country cases. This technical note underlines five major need cohesive and renewed growth and fiscal and points on how the planning function has evolved and been expenditure management blueprints. In contrast to “old institutionalized over time. style” developmental planning, often grounded in a straight defense of state intervention in the economy, modern strategic Lesson 1. Planning structures and approaches have planning has a more pragmatic and managerial approach. changed over time, but the experiences of all seven It is seen as instrumental to supporting the government’s countries reviewed indicate that planning remains performance measurement efforts that are directly related to necessary. Most developed countries no longer have the allocation and use of resources and to the decisions on national development plans, but this does not mean that the how resources will be acquired and sustained to guarantee planning function has been rejected. It has evolved and been public services and achieve national goals. Thus conceived, transformed to emphasize other dimensions of government strategic planning contributes to three main expenditure operations, particularly those related to sound expenditure management objectives: i) the increased sustainability management. As such, strategic planning helps improve the and predictability of policies and public finances through identification of government priorities at different levels and aggregate fiscal discipline; ii) improved allocative efficiency is critical to strengthening the strategic direction, quality, and through strengthened medium-term expenditure and budget impact of spending. It also enhances multilevel coordination frameworks; and iii) enhanced technical efficiency through and dialogue (alignment, complementarity, concurrence) stronger and integrated sector/department/program/project among national, subnational, and local governments and planning. New government challenges to pursue and comply between the private sector, organized civil society, and the with global goals to reduce extreme poverty and foster general public. Finally, coherent planning helps ensure sustainable development, including the SDGs, and now to an outcomes focus in government, allows the monitoring ensure a fast-paced post-pandemic economic recovery, are and evaluation of results, and enhances performance and significantly reinforcing this government focus in different reporting overall. country contexts. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 24 Lesson 3. Planning functions are still operational in both and/or review and strengthen multilevel coordination solutions advanced OECD and developing countries. In contrast to foster cooperative and competitive decentralization to generalized perceptions, the planning function has and federalism. not fully disappeared but has evolved and reemerged in very different forms. Recent research has identified that the Lesson 5. Robust government strategic planning requires number of countries with reshaped development plans and persistent effort to build capacity. Sound planning involves other forms of planning increased from 62 in 2006 to 116 in a good understanding of government business, which, 2016, and as many as 134 by 2018, which implies that “over in turn, critically depends on the available capacities 80 percent of the world’s population currently lives in a country in each country and also supports managerial capacity with some form of strategic planning.”29 development. The main challenges are to overcome the institutional and technical obstacles to changing government Lesson 4. Sound planning needs to review and adjust structures and, more importantly, the actual practices of institutional arrangements, structures, and provisions officials (the managerial culture) that a robust planning to ensure a suitable and politically viable model in each function in government implies. Achieving the needed capacity case. Regardless of the formal or more informal approaches for strategic planning and for embedding it within and across to strategic planning in each case study, over time all the all other government functions takes years, not months. Thus, countries have redesigned or adjusted their institutional capacity building needs to start at some point, and ensuring structures to adopt new and innovative tools and arrangements its continuity requires leadership and commitment as well as for strategic planning or to adapt their configurations to the investment. Accordingly, a clear vision is needed to provide evolving contexts and national and global conditions. Other some room for significant experimentation and adaptation to reform motivations include the need to: overcome ad hoc overcome any potential disintegration between planning and and unconnected planning activities by harmonizing planning budgeting and/or to design and adopt incentives (rewards and and finance department functions, methodologies, and tools; sanctions) to ensure that planning provides strategic direction establish integrated government strategic planning systems; to all levels of the policy cycle. 29. A. Chimhowu, D. Hulme, and L. T. Munro, “The ‘New’ National Development Planning and Global Development Goals: Processes and Partnerships,” World Development 120 (2019): 76–89. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 25