The chapter offers concise diagnosticsof the public investment management (PIM) system inEquatorial Guinea. It provides specific examples of howunderperforming institutions throughout the investmentprocess raise the risk of selecting white elephants,reducing the value for money of investment projects andundermining the quality of completed projects. Politicallycompatible recommendations unlock the opportunities forovercoming the major institutional and procedural bindingconstraints to improve the country s PIM in a sequencedmanner. The set of analysis and derived policy implicationsprovides policy insights for countries in similar situationsthat need clear and pragmatic guidance on where to startbuilding a better performing investment system in achallenging country context. Equatorial Guinea, one of thepoorest countries in Africa prior to the discovery ofhydrocarbons in the 1990s, has made a significant effort totransform this new wealth into public infrastructure. Aftera first phase focus on improving the dilapidatedinfrastructure and supply of capital in the country, theGovernment embarked on a second investment round toimplement the National Development Plan, adopted in 2007with the aim of diversifying the economy out of petroleumproduction and improving living standards. However, thecountry is ill equipped for such a massive investmenteffort, with oil comprising 22 percent of GDP in 2008.Public expenditure is thwarted by cumbersome administrativeprocedures encouraging informal shortcuts that render therigorous capital budgeting both irrelevant and impossible.The absence of reliable budget data undermines themonitoring of budget implementation. As a result, the publicbudget fails as a tool for resource allocation and control.The country s business laws promote a liberalized economybut the overall business climate remains poor. Efforts tocreate an atmosphere conducive to investor interest have notbeen sufficient and application of the laws remainsselective, corruption among officials is widespread, andbusiness rules and institutions are nontransparent. TheGovernment is attempting to create a more favorableinvestment climate to promote foreign investment, forexample, by adding numerous incentives to its investmentcode for job creation, such as training, promotion ofnontraditional exports, support of development projects andindigenouscapital participation, freedom for repatriationof profits, exemption from certain taxes and capital, andother benefits.
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