ROMANIA Reimbursable Advisory Services Agreement on Strengthening the Capacity of the General Secretariat of the Government to Accelerate Public Investments in Romania (P171255) Summary Note Status, Key Issues and Recommendations for the Implementation of the Inter-Institutional Coordination Mechanism for Public Investment Output 3 and 4 This report was developed delivered in May 2023 under the Reimbursable Advisory Services Agreement on Strengthening the Capacity of the General Secretariat of the Government to Accelerate Public Investments in Romania (P171255) signed between the General Secretariat of the Government and the International Bank for Reconstruction and Development on November 11, 2019. It represents a summary note and corresponds to Outputs 2 3 and 4 under the above- mentioned Reimbursable Advisory Services Agreement. Disclaimer This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank 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. This report does not necessarily represent the position of the European Union or the Romanian Government. Copyright Statement The material in this publication is copyrighted. Copying and/or transmitting portions of this work without permission may be a violation of applicable laws. For permission to photocopy or reprint any part of this work, please send a request with the complete information to either: (i) General Secretariat of the Government (Piaţa Victoriei nr. 1, Sector 1, Bucharest, Romania) or (ii) the World Bank Group Romania (Vasile Lascăr Street, No 31, Et 6, Sector 2, Bucharest, Romania) ii SUMMARY NOTE Status, Key Issues, and Recommendations for the Implementation of the Inter-Institutional Coordination Mechanism for Public Investment 1. The Government of Romania (GoR) and the World Bank signed a Reimbursable Advisory Services Agreement (RAS) on Strengthening the Capacity of the General Secretariat of the Government (GSG) to Accelerate Public Investments in the country.1 The overall recommendation of the RAS is to develop and operationalize a strategic, inter-institutional coordination mechanism for public investment management (PIM) in Romania. 2. The outputs submitted together with this note conclude the work of the RAS. Figure 1 below provides an overview of the RAS deliverables. The blue part of the figure shows the previous outputs, while the yellow part shows the final package of deliverables submitted with this note (Outputs 3 and 4). Figure 1: Completed and ongoing work of the RAS Source: Author’s elaboration 3. The purpose of this note is to assist GoR officials and decision-makers in accelerating the implementation of the proposed inter-institutional coordination mechanism and ensuring its sustained, positive impact on the quality and efficiency of public investment in Romania. To this end, the note makes suggestions for an overall implementation strategy, and outlines key messages and recommendations for the GoR on the remaining issues that need be addressed. It also summarizes key findings and recommendations of the RAS and assesses the 1 Reimbursable Advisory Services Agreement on Strengthening the Capacity of the General Secretariat of the Government to Accelerate Public Investments in Romania (P171255). 1 status of implementation of the proposed inter-institutional coordination. The note ends with a summary of proposed next steps. The Importance of Strengthening PIM Coordination: Key Findings and Recommendations of the RAS 4. According to a 2022 estimate by the IMF, inefficiencies in public investment management (PIM) are causing Romania to lose a staggering 49 percent of returns on public investments in comparison to the best-performing countries with similar levels of capital stock per capita. This loss has serious implications for the country's economic development. To put this into perspective, the lost returns could have significantly accelerated the amount of investment without increasing the cost. 5. In light of a tight fiscal situation and the need for significantly scaling up public investment, it is urgent that Romania addresses the persistent weaknesses in its PIM system. Romania’s structural fiscal deficit reached 6 percent of GDP in 2021, one of the highest in the EU. At the same time, only about a third of the projected investment needs, estimated at EUR 211-275 billion until 2031, are expected to be covered by EU budgetary allocations, leaving a large investment gap to be covered by the national public budget, the private sector, and different international financial institutions (IFIs) to finance, among others, COVID 19 recovery and green investments. Poor quality and high cost of public investment, and absorption rates of EU funds well below those of peers, are indicative of the PIM weaknesses. Unresolved issues in the design and implementation of regulations and methodologies for identification, appraisal, and prioritization of public investments together with unpredictable financial allocations to projects are important causes of suboptimal infrastructure outcomes.2 6. Inadequate strategic coordination among PIM actors and stakeholders is an urgent and critical management challenge for Romania that adds significantly to the unsatisfactory infrastructure outcomes. Poor coordination, both within and between sectors, is leading to misallocation of resources and inefficiencies in the delivery of infrastructure and other public services, as confirmed by recent assessments by the World Bank and the IMF.3 The mechanisms leading to these negative impacts are illustrated in Figure 2. Evidence collected by the World Bank from extensive consultations with technical leaders across the Government confirms the significant coordination challenges, both vertically (between levels of government) and horizontally (across sectors, programs, and financing sources) and across PIM stages from planning to implementation. It is not possible to put a precise number on the cost of Romania’s coordination challenges, but an 2 See findings and recommendations of 2015 RAS implemented by WB. Output 1a of the current RAS (“Report with Baseline Diagnostic and Recommendations on the Public Investment Management Framework.” World Bank, 2021 ) summarizes the status of these recommendations. 3 Output 2 Chapter II of the current RAS includes a detailed discussion on Romania’s PIM inadequate coordination. In addition, the IMF has found that the fragmentation and complexity of the organizational and legal arrangements for PIM have negative effects at all stages of PIM, but especially at the planning stage where responsibilities are described as fragmented and uncoordinated (see ‘Romania, Public Investment Management Assessment’, IMF, March 2022). 2 important share of the 49 percent efficiency gap – very large for an Emerging Market Economy – is likely to be attributed to this. Figure 2: Consequences of sub-optimal intra-sectoral or inter-sectoral coordination Source: Authors’ own elaboration 7. There are multiple challenges to be overcome in addressing the coordination deficit. Focus-groups and interviews with central and local stakeholders conducted as part of the RAS pointed to the following challenges, which are further illustrated in Box 1: • Sector strategies are developed in silos, often for compliance purposes, and with limited perspective on the wider strategic framework. • There are multiple players in the PIM system and the institutional arrangements binding them are complicated and, at times, inconsistent, making coordination more difficult. • Limited coordination among the key players in public investment management is holding back the development of a more integrated approach to planning and prioritizing public investment. Box 1: Selected Quotes from 2021 Focus Group Discussions and Interviews ”The major problem is that most of the investments within the investment program have expired terms. However, we are still adding new investments to the list. We (the MoF) have no mechanisms to intervene when projects started for more than 10 years do not progress, to see where the blockages are.” Ministry of Finance representative ”Problems arise especially from the perspective of correlating the planning of the investments that fall under the responsibility of various actors (e.g. investments in the field of environment, infrastructure, etc.). Implementation schedules are often not coordinated. At the same time, there is no culture of inter-institutional cooperation.” Ministry of Regional Development representative ”Setting priorities is the biggest problem, there are too many projects in the Transports Master Plan. (…) At country level, the order of priorities should be clearly established, and everyone should adhere to it, we all must follow the same direction.” 3 National Company for Roads Infrastructure representative ”The main problem is that the national approach when priorities are set is the shopping -list. We don't have targets to reach, we choose the interventions, we size them according to the available funding (…). The fact that we don't have clear analyses by domain, we don't have benchmarks that lead us to those impact-generating interventions, determines a large part of the situation in which we find ourselves. We found that institutions do not communicate, neither institutionally nor personally. In fact, there is no flow between institutions. We felt the need for inter-institutional coordination, at the level of the prime minister and ministers. Somehow, we mimicked the role of GSG using the influence and decision-making ability of the Prime Minister. We ended up filling in for government functions that we noticed didn't exist. We tried to provide this substantiation ourselves, when we could, when we found out, when we managed to organize ourselves, without having access to the information inside the government apparatus. […] The GSG should set up a committee to monitor these projects and provide opinions. Coalition for the Development of Romania representative Source: “Report with Baseline Diagnostic and Recommendations on the Public Investment Management Framework.” Output 1a, World Bank, 2021. 8. Reversing the coordination weaknesses identified above could bring significant benefits to Romania in terms of social welfare and economic growth. Improvements in vertical coordination could, for example, ensure improved connectivity between local and national road networks or make sure that investments in locally-driven urban developments are well-served by nationally provided transport infrastructure and services. Improvements in horizontal coordination across local governments can increase economies of scale of local investment projects and help avoid duplication of capacity in areas such as water supply and sanitation facilities. Better coordination between the public and private sectors can also play a vital role in ensuring that economic productivity gains are realized by providing timely and adequately sized public sector infrastructure services, such as transport connectivity, power, and water, to private sector industrial or commercial developments. Finally, strengthened strategic coordination will facilitate cross- cutting agendas such as green growth, resilience, and inclusiveness. This can be achieved by ensuring that sector strategies are aligned with wider strategic frameworks and that multiple players in the public investment management system work together in a coordinated manner to achieve shared goals. By improving coordination, Romania can unlock its potential for sustainable economic growth and development, benefitting its citizens now and in the future. The Proposed Inter-Institutional Coordination Mechanism 9. An inter-institutional coordination mechanism has been designed to address the challenges and resolve the coordination gaps across the PIM system. The mechanism involves a political-level coordination committee giving a strong voice at the table to the main actors in public investment, and a technical support facility providing objective technical support in long- term strategic investment planning and coordination. 10. The general objective of the new coordination mechanism will be to improve coordination of decision-making on public investment through evidence-based strategy development, monitoring and evaluation to inform a more strategically aligned project portfolio, and higher readiness/maturity of projects at entry to higher stages of the project cycle. Specific objectives include: building stakeholder consensus on investment priorities that 4 are fiscally sustainable over the long-term; increasing economies of scale for public investment projects; improving the alignment of investment policies across sector strategies, levels of government and financing sources; integrating consultation on priority setting for public investment; and achieving greater accountability for the results of public investment by capturing and disseminating lessons learned from completed projects. 11. The mechanism has been designed to respect certain core operating principles focused on ensuring a collective and inclusive approach that builds on the existing mandates of stakeholders: • Respect that line ministries, regional bodies and local authorities have responsibility for generating input to and for implementing the Government’s public investment. The new governance mechanism should build on the sector expertise and policy mandates of line ministries and local authorities, and guide and challenge them from a whole-of-government and cross-sectoral perspective where needed but should not try to duplicate them. • Relentlessly focus on improving, with the MoF, the front-end and back-end aspects of the PIM cycle. The coordination mechanism should work within the framework of the PIM system formalized in regulation and seek to continuously add value to it by strengthening strategic coordination. • Be non-bureaucratic and avoid unnecessary administrative burdens. This implies, for example, building on existing data sources where possible and seeking to limit additional data and information requests to line ministries and other authorities, including through the use of automation. • Create solutions in partnership with MoF, MIEP and line ministry inter-agency teams. Recognizing that each partner has a contribution to make based not just on their mandate but reflecting the synergy of a strategy of the whole of government. 12. Functions of the new coordination mechanism complement rather than duplicate existing legal mandates, contributing strategic direction and insights only at specific stages of the PIM system. The project appraisal, selection/budgeting and implementation functions will continue to reside with the MoF, MIEP and line ministries; the proposed coordination mechanism will focus on the front and back ends of the public investment cycle, where there are critical gaps in consolidated strategic guidance and strategic lesson learning from implementation experience. Five PIM-specific tasks are seen as necessary to strengthen coordination and are therefore envisaged to come under the remit of the coordination mechanism: i. developing a consolidated government investment strategy (CGIS); ii. providing methodological and analytical input to preliminary screening of projects from a strategic perspective; iii. providing strategic input to project selection (which remains a mandate of the MoF), including through (re)assessments of maturity of concept, strategic alignment, and maturity for implementation; 5 iv. strategic monitoring of the whole-of-government investment project portfolio (as a complement to project-level monitoring by the MoF and line ministries), with a focus on maturity of implementation and portfolio-level risks; and v. commissioning, overseeing, and coordinating ex post (impact) evaluations of selected projects (in collaboration with the MoF and line ministries). Figure 3 below identifies the roles and responsibilities at the various PIM stages, including the entry points of the central coordination mechanism. 13. The coordination mechanism will also foster an enabling environment for better strategic coordination by convening fora for dialogue and enhancing the quantity, quality, and transparency of information on public investment, to the benefit of all actors involved. Creating this enabling environment will involve: i. collating, analyzing, and disseminating information on investment gaps, needs, and opportunities to inform and improve coordination of planning among sectors and levels of government; ii. leading coordination of investment planning among sectors, levels of government and funders; iii. leading coordination with the private sector to identify infrastructure constraints on private sector investment (and so contributing to ‘crowding in’ of private sector investment); iv. centralized data collection on projects, mainly during pre-implementation (the critical phase for strategic orientation), using an integrated information system, across levels of government, regulatory regimes, and financing sources; and v. disseminating PIM lessons learned for strategic planning. 6 Figure 3: Complementarity of the Proposed Inter-Institutional Coordination Mechanism with the PIM System Note: A full line means a direct responsibility; a broken line indicates an oversight role relating specifically to strategic coordination of the investment portfolio, not project-level management and decision-making, which rests with the actors identified in the figure. Source: Authors’ own elaboration 14. The functions of the coordination mechanism will inform and enrich the work of stakeholders in numerous ways, both at the decision making and technical levels. For example, the CGIS and assessment of maturity of concept will make MoFs screening of projects for strategic relevance more effective and help avoid poor quality project ideas gaining momentum, thus allowing a more efficient use of line ministry resources for appraisal; the data platform will support line ministries in monitoring and reviewing their project portfolios; and ex post evaluations will increase the evidence base for preparing new projects and allow for making more informed selection choices. 15. Three options for the practical application of the inter-institutional coordination mechanism have been explored and presented in a public policy proposal. 4 All options build on the establishment of three key entities: i) an Inter-ministerial Coordination Committee (ICC) – chaired by the Prime Minister and with the Minister of Finance, Minister of European Investments and Projects, Minister of Transport and Infrastructure, and other key line ministers as members – as the key entity at the decision-making level; ii) a PIM Coordination Team for general secretariat functions and other coordination tasks; and iii) a PIM Technical Team for technical secretariat functions, advice and support. However, the options vary with respect to the organizational placement and governance arrangements of the secretariat and technical support teams, and these variations can have a significant impact on the costs and effectiveness of the coordination mechanism: • Option 1 places the PIM Coordination Team and the PIM Technical Team as two separate structures without legal personality within the General Secretariat of the Government (GSG). 4 See Output 3a of the RAS. 7 • Option 2 establishes the PIM Coordination team and PIM Technical Team within the same structure without legal personality, under the subordination of the Government (Department under the PM), led by a State Secretary. • Option 3 establishes the PIM Technical Team as an external body with legal personality, under the subordination of the Government (Department under the PM) and introduces an experienced Advisory Board to guide the PIM Technical Team on critical technical issues. 16. Based on the assessment carried out in the public policy proposal, Option 3 is technically superior, but also more costly than the other options. Options 2 and 3 will both have more weight and political leverage than option 1 due to their stronger leadership and subordination arrangements. Option 3 has the added technical advantage of granting legal personality to the PIM Technical Team, which is expected to raise its leverage, profile and recruitment options, and it will benefit from the oversight of an advisory board. The choice between options 2 and 3 is essentially a balance between the expected higher quality and credibility of the technical advice provided by Option 3 and the higher cost. Because the PIM Technical team will have legal personality under Option 3, it will be required to put in place its own administrative functions requiring a higher staffing level, which is the main source of additional costs. The estimated total annual budget cost of the implementation of Option 2 and 3 are RON 4,704,705 and RON 8,380,462, respectively. In comparison, Option 0 does not imply any additional costs, and the budgetary impact of Option 1 is RON 4,354,205. The higher cost of Option 3 is relatively small when set against the total cost of Romania’s public investment program and the efficiency gap estimated by the IMF and when bearing in mind the potential for more objective and time- consistent strategic guidance. 17. Given the recent set-up of an inter-institutional mechanism for the implementation of the National Recovery and Resilience Plan (NRRP), one option to implement the proposed PIM coordination mechanism would be to gradually build on the existing NRP mechanism, to complement it and extend it to fully reach the envisaged coordination functions. NRRP reforms and investments are currently under implementation covering a significant share of new public investment. The monitoring of their implementation is done through specialized line ministry units, coordinated by the Ministry of European Investments and Projects (MEIP) and reporting to the Inter-ministerial Coordination Committee for the implementation of the NRRP. The monitoring process is currently focused on reforms, but it will gradually be pivoted towards large investments foreseen in the program until 2026. A strong coordination, or even a possible merge of the functions, instruments and working methods of these two inter-institutional mechanisms should be considered by the authorities, given their focus on investments and the need to build on existing and functioning workstreams, that have been implemented with the assistance of the World Bank.5 5 The World Bank is implementing a RAS providing technical support aimed at strengthening the institutional capacity regarding the implementation of the NRRP. The RAS is carried out with the support of the General Directorate of Support for Structural Reforms of the European Commission, fully financed through the Technical Support Instrument of the European Union. 8 Current Status of Decision-Making and Implementation 18. Based on the RAS, the GoR has already taken some steps to prepare for the implementation of the proposed coordination mechanism. As an initial, but crucial step to facilitate decision making by the GoR, the agreement between the GSG, as the client of the RAS, and the managing authority for the EU funds used for the RAS under the POCA mechanism requires not only that a public policy proposal is drafted, but also that it is submitted to the GoR. 19. A second step forward is the establishment of a department with some of the technical functions foreseen for the proposed coordination mechanism. A dedicated Department for Integrated Evaluation and Monitoring of Programs Financed by Public and European Funds has been set up in the CoG. The Department was established in February 2022 to ensure integrated monitoring and evaluation of the various funding programs from public sources (European or national).6 The Prime Minister has subsequently agreed that the Department could incorporate some of the key envisaged functions of the proposed inter-institutional coordination mechanism. As a result, work has begun to amend the Government Decision based on which the Department was founded, and its mandate and responsibilities defined. In late 2022, the Department drafted and submitted an amendment to the Government Decision for public consultation, which proposed a change in its mission and name. Following the consultation, the Department was renamed the Department for Strategic Integration of Public Investments, signifying its focus on more effective management of public investments in Romania. This represents a significant step forward accelerating the change process towards strengthening the coordination of public investments in Romania. 20. While there is a broad consensus at the technical level on the necessity for a strategic coordination mechanism at the center of government and its primary functions, there is less agreement on its specific design. The initial stakeholder analysis, the technical-level consultations and training conducted as part of the RAS have shown recognition of the underlying issues, and a considerable degree of agreement on the objectives and functions of the coordination mechanism; however, the same events have also revealed uncertainty among stakeholders regarding the feasibility of implementing significant changes to the system, as well as concerns about how this decision might affect their current mandates and responsibilities. In the current context of uncertainty, there is a clear need for government leadership to rally all stakeholders behind the purpose of the proposed mechanism and to engage them in further developing and refining its functions. The engagement of high level stakeholders at this stage will have a positive impact on the implementation of the proposed coordination mechanism, while successfully navigating the uncertainties that come with change. Implementation Strategy 21. The implementation strategy should follow a phased approach to comprehensively capture all aspects of implementation while proceeding gradually in line with the absorptive 6 Government Decisions no. 137/2020 and 205/2022 9 capacity of all stakeholders concerned and the need for thorough consultations. There are four main considerations for the GoR in designing the implementation strategy: • Comprehensiveness: the inter-institutional coordination mechanism is carefully designed around a set of institutions to carry out selected PIM-specific and coordination functions. Given the interdependencies between these institutions and functions, it will be critical to implement the proposed mechanism in full. A piecemeal approach to the implementation is not likely to yield good results. • Gradualism: while comprehensiveness is critical, it does not mean that all elements of the coordination mechanism should be implemented at the same time. On the contrary, a gradual approach will be important to ensure a logical flow and sequence in implementation. For example, the new institutions of the coordination mechanism will need to be legally established before methodologies are adopted so that they can play a role in the finalization of the methodologies. Likewise, the prerequisites for a data platform, such as business requirements, including unique project identifiers and links to budget classification, data governance, and exchange standards and protocols, need to be in place before its roll-out. But a gradual approach is also important to ensure that the changes brought about by the coordination mechanism do not overwhelm stakeholders and are paced according to their absorptive capacity. • Engagement: the success of the coordination mechanism depends on the quality of the involvement of key stakeholders. This is particularly important in the current institutional context, as the GSG and other CoG entities do not have direct implementation responsibilities in relation to PIM – the legal mandate for implementation lies with the MoF, MEIP, and line ministries. Therefore, it is crucial that the implementation strategy allows for necessary additional consultations and, later, collaboration throughout all implementation phases. • Change management: cross cutting change management and communication activities need to continue and ensure that: i) urgency is created for policy decision making and for the operationalization of the coordination mechanism, by engaging in subsequent Cabinet meetings the decision makers in line ministries with responsibilities in public investments; ii) a coalition of “change agents” including experts and managers across government is created and is able to explain and disseminate the benefits of the coordination mechanism at the operationalization stage; iii) stakeholders' awareness about the rationale and benefits of the coordination mechanism increases gradually through communication of targeted and customized key messages; iv) potential resistance or pushbacks are addressed by involving stakeholders and support them to take ownership over the changes.7 7 Research shows that without change management around 70 percent of change programs do not succeed, mostly due to resistance to change and management behavior (Keller and Price, 2011). With change management the odds of success go from 30 percent to 79 percent and they achieve, on average, 1.8 times more impact (Keller and Schaninger, 2019). 10 22. Based on these considerations, four main phases of the implementation could be identified with change management and communication being a cross-cutting component of all phases: • A decision phase: creating the urgency for, preparing, and adopting the public policy proposal; • An establishment phase: establishing the key entities through the adoption of appropriate decisions/regulation; profiling and recruitment of staff and formation of teams; • An operationalization phase: piloting and adopting methodologies and instruments, like strategic portfolio risk assessments and maturity assessments; preparing PIM legislative updates; preparing measures to improve data governance and data platform design in support of the coordination mechanism; and • An enhancement phase: adopting the data platform; adopting PIM legislative changes; drafting and adopting the first CGIS. Table 1 shows implementation benchmarks and timelines in each of the phases. As the timing of a decision to adopt the inter-institutional coordination mechanism is not known, the timeline is formulated in number of quarters following the decision. Box 2 and the following paragraphs elaborate supporting recommendations for the GoR on how to deal with remaining issues across the implementation stages. Table 1: Key implementation benchmarks Phase Benchmark Timeline (quarters following the decision) Decision Approve public policy proposal - Start the implementation of the Q1 Communication Plan Establishment Formally establish the new Q1 institutional structures: ICC, PIM Coordination Team, PIM Technical Team, Advisory Board Finalize profiling and recruitment Q2 of teams for the PIM Coordination Team, the PIM Technical Team, and the Advisory Board Operationalization Operationalize the ICC Q2 Operationalize the PIM Q3 Coordination Team, PIM Technical Team, Advisory Board 11 Pilot maturity assessments and Q3 strategic performance and risk monitoring Q3 Draft a coordinated Action Plan covering the necessary legislative changes and updates to PIM legislation, in accordance with the roles, responsibilities and functions of the new structures Adopt the methodologies and Q3 instruments package by the ICC (based on the documents submitted by the World Bank and adjusted as needed by the PIM Technical team) Create the Operating manual for the Q4 Coordination Mechanism (Regulation of Functioning and Organization for each of the structures, internal procedures) Finalize functional specifications Q4 and design of a data platform, including investment maps Enhancement Start the procedures for PIM Q5 legislative changes and updates Pilot data platform and data Q5 governance arrangements User-test the data Platform Q9 Draft and adopt the CGIS Q10 Supporting Recommendations for Dealing with Remaining Issues Box 2: Summary of Supporting Recommendations for the Implementation of the Inter- Institutional Coordination Mechanism • Review the recommendations in the public policy proposal with a view to consolidating these into the necessary regulatory changes, including the GD currently being prepared for the Department for Strategic Coordination of Public Investment; • Level up change management and communication activities during the decision-making stage based on the draft communication plan and develop a roadmap for further change management activities; 12 • Consider linking the coordination mechanism to ongoing policy programs by piloting maturity assessment and strategic performance and risk monitoring, e.g., on the large National Recovery and Resilience Program (NRRP) investments; • Initiate the planning for a data platform to support the data needs of the inter-institutional coordination mechanism as part of the operationalization phase to allow time for analysis, design, piloting, and raising of the necessary financing; • Formalize the work on a data platform in a project organization led by within the PIM Technical Team to ensure that all aspects of the planning and implementation are effectively managed; • Establish a PIM reform committee led by the MoF and reporting to the ICC to lead a stock take of PIM reform proposals, develop a roadmap for reform and monitor subsequent reform implementation; • Upgrade the framework for screening, appraising and prioritizing project proposals based on climate-smart criteria and develop the underlying methodologies to guide project proponents and assessors. Decision phase 23. It will be important to arrive soon at a final decision on the organizational responsibility for the full implementation of the inter-institutional coordination mechanism. A decision will help move the consultations from the abstract into reality and give clarity on which entity will lead discussions at decision making and technical levels. A decision will also help accelerate the recruitment of staff for the technical and coordination teams and, hence, the capacity to lead the change process across the government. It is recognized that the Department for Strategic Integration of Public Investment will take on most of the responsibilities, while some aspects of the coordination mechanism, including the establishment of the ICC, will require a separate legal mandate. It is therefore recommended that the Government reviews the recommendations in the public policy proposal with a view to consolidating these into the regulatory changes. 24. To maintain the credibility of the coordination mechanism, it is essential that the CoG takes an active leadership role in convening and coordinating the relevant stakeholders. A good shorthand for the overall function of the coordination mechanism is that of a “strategic integrator”. Embodying this role requires moving from being a “conference organizer”, i.e., a neutral party with no stake in the mechanism and limited authority, to an “owner” of the process who takes a strategic position and talks publicly about performance expected, as well as a “project manager”, who ensures that things get done including that objectives, plans, and KPIs are clear, agreed by all stakeholders, and regularly monitored and evaluated. 25. Change management and communication must advance in the decision-making stage. This will allow the GoR to tailor the mechanism to the specific needs of relevant stakeholders and ensure a smooth implementation as the process moves forward. Given the considerable amount of consultations already conducted at the technical level, there is a need to now focus on engaging a selected group of decision-makers, who can influence the speed and scope of decision making, 13 including ministers, advisors to ministers, as well as General Secretaries in line ministries planning and managing public investments. Such an approach would also ensure that the planned mechanism complements existing processes and systems and creates synergies in the system. Additionally, it encourages stakeholders to share potential resistance and find collaborative solutions to overcome them. Establishment phase 26. Concerns over expected difficulties in attracting senior officials with PIM expertise and skills for the PIM Technical Team have been voiced by several stakeholders. Indeed, structural factors in the Human Resource and Public Administration system risk inhibiting the recruitment of staff with the level of technical expertise needed to provide high quality advice and lend credibility to the coordination mechanism. This is a reason why the recommended staff profiles of the PIM Technical Team include a combination of experienced and less experienced staff, where the latter category is expected to grow their capabilities through internal learning and knowledge exchange.8 Recruited staff could be either contractual personnel or public servants, and if the latter option is chosen, GSG will be able to use the job descriptions provided in Output 3a to design the specific competencies needed to employ public servants, in line with HR management recommendations previously provided by the WB9. As part of the establishment of the mechanism, it will nevertheless be crucial that the GoR seeks new and innovative ways of mitigating these staffing issues, including through exchange of staff with other ministries and from external parties, and external consultancies. The implementation of the communication plan may also help to “brand” the coordination and raise its profile among potential candidates. Operationalization phase 27. While the ultimate goal is the adoption of a CGIS, the process of getting to this point will be as important as the end product, if the strategy is to embody the necessary consensus, continuity and technical rigor. The government should not, therefore, rush at the strategy before essential technical and consultative building blocks are in place. This will require an extended Foundation Phase, during which the technical capacities of the PIM Technical Team will be fully established and tested, and the informational and analytical foundations for the strategy will be laid. The PIM Technical Team will need to grow its professional standing during this phase through performing its other functions and supporting the ICC. The Foundation Phase will include an infrastructure needs assessment involving consolidation of existing data, consultations with key stakeholders, collection of new data and demand modelling. Alongside this work on the demand side, the parameters for the fiscal sustainability of the strategy should be explored. The work during 8 See output 3a, Appendix G. 9 In 2022, the World Bank completed a large technical assistance project for the National Agency for Civil Servants (NACS), aimed at developing a unitary Human Resource Management (HRM) system with the public administration. Currently, NACS is piloting the recruitment process for high-level civil servants in line with the WB recommendations. 14 the Foundation Phase should be closely coordinated with work on the data platform, as described below. 28. The Development Phase that follows should not be a uniquely technical exercise, although technical robustness will be important. The Development Phase must include consultation on priorities, identification of competing trade-offs for financial and human resources, and a process for resolving these trade-offs so that the result bears the test of time. Critical to this resolution will be a reputation for independence and quality gained by the PIM Technical Team during the Foundation Phase, together with the effective functioning of the ICC as a forum for resolving difficult investment-related issues at the political level before they arrive in front of the Government. 29. Piloting of key coordination mechanism functions on existing investment programs could be explored to demonstrate early benefits. Maturity assessments and strategic portfolio performance and risk monitoring are functions that could lend themselves well for piloting as the methodologies and frameworks are already developed and could be piloted relatively quickly and with limited cost. Given the significant share of new public investment projects taking place under the NRRP, the 30+ large NRRP investments or a subset of these could be subject to the pilot to demonstrate early benefits for all stakeholders. 30. The planning for a data platform to support the data needs of the inter-institutional coordination mechanism should be initiated as part of the operationalization phase to allow time for analysis, design, piloting, and raising of the necessary financing. A separate set of detailed recommendations and an action plan has been proposed as part of the RAS.10 From this action plan, a few priorities can be extracted: to establish a data platform implementation team by recruiting or assigning two full-time positions as Senior Data Engineer and Data Analyst as part of the PIM Technical Team; collect and prioritize inter-institutional questions and use cases that the integrated data platform would be required to support based on the initial mapping developed under the RAS; prototype an investment map by using readily available investment data; define and adopt data exchange standards and establish a common inter-institutional data exchange framework; build capacity in partner institutions, including through a formal training program to operationalize the inter-institutional data exchange standards, systems, and tools. 31. The successful launch of a data platform eventually requires a formalized project organization led by the PIM Technical Team to ensure that all aspects of the planning and implementation are effectively managed. This includes facilitating and managing change within the GSG, as well as across partner institutions and other stakeholders. The team would need to secure an authorizing environment and resources and have a clear definition of success from the outset. 10 See Output 3c: Data Platform and Investment Map 15 Enhancement phase 32. While the proposed coordination mechanism deals with strategic coordination aspects of PIM, its formation is an opportunity to consider wider improvements in the PIM framework and system. There are three aspects to this: • Some changes following from the introduction of the coordination mechanism will directly require legal changes. As an example, the roles and responsibilities of entities involved in the proposed new procedures for ex post evaluation will need to be mandated by amending the legislation (GD 225/2014). • There are also certain changes following from the proposed coordination mechanism that could in principle co-exist with existing PIM legislation but where it will be preferable to amend the legislation to incorporate the new functions and procedures in a coherent fashion. As an example, the maturity assessment (maturity of concept) has the potential to considerably strengthen the existing procedures for preliminary screening of projects, so rethinking the existing procedures and amending the corresponding legislation will be preferable. Likewise, the proposition to develop a data platform in support of the coordination mechanism functions can be carried out as stand-alone development. It would, however, be hard to overlook the gap in automation in support of the PIM system more broadly. Therefore, the intersection between the development of the data platform and a full-fledged PIM Information System (PIMIS) should be considered to ensure the sustainability of the data platform and an efficient system development approach. • Finally, there are needed changes to the PIM framework that have been identified in previous diagnostics and which have been reconfirmed as part of the analysis of business processes and the legal framework carried out during the RAS. The implementation of the inter-institutional coordination mechanism is a window of opportunity to seek a renewed commitment among all stakeholders to re-program PIM reforms. Examples include the need to consolidate the PIM legislation which is currently spread across several normative acts and aligning thresholds and other documentation requirements; strengthening the review of feasibility studies currently carried out by the Inter-Ministerial Committee for the Approval of Public Works of National Interest and Housing; strengthening budget procedures to improve prioritization and selection of projects and avoid overcommitment of the project portfolio; and implementing a PIMIS as mentioned above. 33. Given the body of knowledge on PIM reforms already developed during the current and previous RASes, it is suggested that the GoR takes stock of previous recommendations as a basis for an updated reform action plan.11 The stock take could include: i) identifying which recommendations have already been implemented; ii) identifying which recommendations from those not implemented remain relevant; and iii) prioritizing the recommendations still to be implemented and drawing up a reform action plan. 11 Sources of PIM recommendations include: Public Investment Management RAS (WB 2015); Output 1A of this RAS (WB 2021); and IMF PIMA (2022). 16 34. The need for accelerating climate-related and other “green” investments calls for upgrading the framework for evaluating and prioritizing project proposals. Romania is currently implementing significant reforms and investments under the National Recovery and Resilience Plan (NRRP). The pressure to deliver green investments within a tight timeline, makes it critical to incorporate climate-smart requirements and procedures in the PIM system so that green and climate impacts of proposed projects can be rigorously assessed and given appropriate weightings during prioritization and selection, and this need will extend and increase beyond the NPRR. As the PIM legislation is being reassessed to mandate the introduction of the Coordination Mechanism, the GoR should therefore consider including provisions on climate-smart PIM and develop the underlying methodologies.12 35. A PIM reform committee could be established to lead the stock take and monitor subsequent reform implementation. It should be borne in mind that general PIM reform is different from strengthening strategic coordination and needs different arrangements. It is recommended that general PIM reform be led by a technical committee that mirrors the composition of the ICC, reports to the ICC and is led by the MoF in close collaboration with the PIM Technical Team. Next Steps to Accelerate Change 36. To build urgency for making a policy choice and moving toward operationalization, several immediate steps could be taken: • The GSG should consult internally at the level of senior management and collaborate closely with the Department for Strategic Integration of Public Investments to agree on all aspects of the draft public policy proposal; based on this agreement, the political-level decision makers should be advised on the adoption of the proposal. • The GSG and the Department for Strategic Integration of Public Investments should undertake consultations with key actors (those who will be members of the ICC), first at senior management level and then at political level to obtain buy-in to the proposal. This could include delivering Technical Information Briefs to the Cabinet, thereby bringing the initiative to the policy agenda, and presenting the benefits of the coordination mechanism, policy options, and calls to action. • Subject to sufficient agreement at the political level, GSG should introduce the public policy proposal at a Government meeting to obtain Government approval. • Once approval is obtained, GSG and the Department for Strategic Integration of Public Investments should make arrangements to: o Meet with the advisors of line ministers who plan and manage public investments, to increase their awareness of the initiative and take stock of ministry agenda priorities, possible risks, and resistances. 12 This could build on the recently published Reference guide for climate-smart public investment management: https://documents.worldbank.org/en/publication/documents- reports/documentdetail/099455012062224218/P1725690cd27300c30b5f101fd728276fe7 17 o Collaborate with advisors of ministers to prepare monthly briefings that debrief ministers on the progress made in operationalizing the mechanism. o Provide monthly updates to all stakeholders on the progress made towards institutionalizing the Mechanism until the details are agreed upon and established. o Support the process of sending the Policy Document in the legal approval circuit and supporting the process through regular meetings with each ministry. 37. The World Bank can support the GSG and the Department for Strategic Integration of Public Investments by co-facilitating stakeholder meetings, building capacity in professional facilitation and offering expert resources for the meetings. This co-facilitation role can be conducted in a way that promotes ownership of the change process and development of the Department for Strategic Integration of Public Investments as a technical facilitator. In addition, the World Bank can accelerate the process by providing executive and team coaching to the Department. Previous experiences with similar RASes have shown that this type of individual and team support can help change agents and leadership overcome obstacles, find innovative solutions, and build effective relationships with internal and external stakeholders. 18