More and better infrastructure services: Let’s look at governance; financing will follow

Photo: AhmadArdity | Pixabay 

There are many reasons why infrastructure projects often fail to materialize, meet their timeframe, budget, or service delivery objectives. Important examples include weak and insufficient planning and assessment of affordability as well as uncertainty over the rules of the game. 

These issues severely constrain the ability of governments to mobilize finance to deliver key services that help achieve the Sustainable Development Goals (SDGs). The World Bank estimates that achieving the SDGs would require some $4.5 trillion in public and private investment by 2030.

In light of the financing requirements for the SDGs, the World Bank has developed the Maximizing Finance for Development (MFD) approach to help governments and other stakeholders crowd in private sector solutions while optimizing the use of scarce public resources. The success of the MFD initiative will depend in large measure on whether good infrastructure governance practices and tools are adopted. 
 
The World Bank Group and the African Development Bank, with support from key development partners, have organized the second Infrastructure Governance Roundtable, to be held in Abidjan, Cote d’Ivoire, June 21-22, to foster a robust dialogue on how best to improve infrastructure governance practices to create sustainable infrastructure, and to assist with building capacity in this area.

The Abidjan event will be opened by African Development Bank Vice President Pierre Guislain, and World Bank Group Vice President Pascale Dubois, and bring together ministers, senior officials and leaders from the private sector and civil society. The aim is to share lessons on how to unlock the project pipeline, make World Bank Group and other tools available, and build political momentum to close the infrastructure governance gap.

Recent World Bank data provide evidence there is much to do if we are to ramp up investment. The Private Participation in Infrastructure Database showed that while investment in 2017 at $93.3 billion across 304 projects marks an increase of 37 percent from 2016 levels, it remains the second lowest level of investment in the past 10 years and is 15 percent lower than the past 5-year average investment level of $109.8 billion. Procuring Infrastructure Public-Private Partnerships (PPPs) 2018 shows more work is needed to improve infrastructure governance and practices.

This PPP benchmarking study assesses PPP frameworks across 135 economies in all regions. It looks at preparation, procurement, contract management, and unsolicited proposals. The study shows what we might intuit naturally: the higher the income level of the group, the higher the performance in these areas. Preparation and contract management are the areas that have the most room for improvement across all income level groups. Performance also varies greatly by region.

This is critical. PPPs and other forms of public investment should first be subjected to a sober assessment of whether the projects make sense, and should be included in the investment program, and then the procurement method should be decided on a value for money basis.  

A sound appraisal of a project is also crucial to bringing quality projects to the market. However, the Procuring Infrastructure PPPs report shows that less than one-third of the economies surveyed have adopted specific methodologies that ensure consistency across projects, and an even smaller percentage make those assessments available online.

There’s another important point: while most countries require the private provider to provide regular performance information to the public authorities, countries need to do a better job in consulting with stakeholders and communities affected by major infrastructure projects. Only 13 percent of the economies surveyed allow this information to be made publicly available. As part of this community engagement, inclusion of small and medium enterprises (SMEs) in infrastructure public-private initiatives is also an important consideration, particularly in fragile and conflict-affected environments. There,  SMEs make up a substantial share of the private sector and may be critical to filling the infrastructure services gap. A Toolkit* aimed to assist key stakeholders on how to enhance SME participation will also be presented in the Abidjan conference.

Returning to the benchmarking study, while its data applies to PPPs, it is also relevant for infrastructure overall which is expensive, important, and difficult to get right. Shortcomings in country systems undermine the ability to identify, develop, and procure good projects that are sustainable, affordable, and bankable. The OECD publication Getting Infrastructure Right: A Framework for Better Governance makes the case that poor governance of infrastructure remains one of the most fundamental bottlenecks to achieving long-term development objectives. 

When it comes to infrastructure, we not only have a financing gap but a governance gap.