In our latest blog, International Secretariat Executive Director and Board Member, Petter Matthews
highlights five lessons for the new Global Infrastructure Forum that can help to deliver better value for money from infrastructure investment. The Forum was announced at the Third International Conference on Financing for Development.
Infrastructure underpins almost every aspect of economic growth and human development. It is not surprising therefore that the preparatory discussions for FfD3 were littered with references to infrastructure and the urgent need to increase investment. This has led to the proposed establishment of a new Global Infrastructure Forum to bridge the infrastructure investment gap. The role of the new forum is described as
“improving alignment and coordination among established and new infrastructure initiatives, multilateral and national development banks, United Nations agencies, and national institutions, development partners and the private sector. It will encourage a greater range of voices to be heard, particularly from developing countries, to identify and address infrastructure and capacity gaps in particular in least developed countries, landlocked developing countries, small island developing States and African countries”
However, questions remain about how we ensure that any increase in investment delivers value for money and meets the needs of the poorest.
The draft Addis Ababa Accord described “enormous unmet financing needs for sustainable development” (p. 1) and acknowledges that “investing in sustainable infrastructure … is a prerequisite for achieving many of our goals” (p. 3).This highlights a sobering reality: unless we find ways to rapidly expand the stock of good quality infrastructure in low and middle income countries, the Sustainable Development Goals currently being negotiated are likely to remain unattainable.
The proposed solutions to this challenge were also evident in the draft. The focus is on increasing investment through: improving the enabling environment, (p. 3), mobilising additional public spending on social infrastructure (p. 6), ensuring a pipeline of well-prepared investable projects (p. 10), establishing new investment platforms (p.10 & 12) and scaling up PPPs (p. 20). These solutions are important and if implemented as part of a concerted international effort, could make an important difference, but gaps remain too. The following five ‘lessons’ can help plug those gaps and ensure the effectiveness of any additional investment.
1. Promote Public Sector Transparency
The public sector accounts for the lion’s share of infrastructure investment in many low and middle income countries, but where governance is weak and decision-making opaque, citizens will inevitably lack opportunities to influence that investment. Transparency addresses this deficiency by providing citizens with the information they need to hold decision-makers to account. Informed citizens and responsive public institutions combine to create a virtuous circle that helps to ensure that infrastructure investments deliver value for money and meet the needs of the poorest.
2. Focus on Efficiency
Closing the infrastructure funding gap is not just about mobilising additional investment; it is also about increasing the efficiency of investments. Estimates of losses through corruption range between 10 and 30 percent. We estimate that losses through mismanagement and inefficiency are on a similar scale. CoST baseline studies in eight countries for example, showed that 40 per cent of projects experienced time over runs of up to twice the initial estimates and cost over runs of up to 140 per cent3. This means that up to a third of any new investment in infrastructure could be lost unless it is accompanied by measures to improve management and efficiency.
3. Politics Matter
A range of factors determine the success or otherwise of a CoST programme, but the most important are often political. Understanding what these factors are and how they might affect the programme requires looking beyond the formal structures to reveal the underlying interests and incentives of those involved and the distribution of power between them. CoST undertakes political economy (PE) analysis whilst assessing applications to join the programme, as part of the ‘scoping studies’ that follow the approval of applications and on an on-going basis over the entire life cycle of a programme. Some multilateral and bilateral donors have introduced PE analysis into their decision-making and this should be extended to all investments.
4. Strengthen Data Management
The potential of big data and open data to help achieve human development goals is widely recognised, but the application of these approaches to infrastructure investment is still in its infancy. CoST demonstrates that good quality data not only enables the measurement of change, it can be the fuel that drives change. CoST requires procuring entities to disclose information in the CoST Infrastructure Data Standard format. It comprises 40 items that people need to hold decision-makers to account. There are numerous examples of the media amplifying problems identified through disclosure and of this leading to the cancellation of failing contracts (with the intention to retender) and significant cost savings. Data can also enable comparative analysis of performance at a sector level and between geographical regions and be a driver of improved performance.
5. Encourage Collective Action
Multi-stakeholder initiatives have emerged as an effective collective action approach to solving complex governance challenges. They provide an environment in which government interacts directly with civil society and industry stakeholders and a mechanism to ensure that those effected by change (or at least those representing their interests) have an opportunity to influence it. Each CoST national programme is overseen by a multi-stakeholder group, or MSG, comprising representatives from government, industry and civil society. It provides a high degree of legitimacy to reform efforts and can help sustain that effort in challenging political circumstances. It also helps drive accountability by building interest in the disclosed data and by influencing policymakers to act on it. The barriers to effective infrastructure investment are complex and collective action solutions are proving effective in overcoming them.
Transparency and accountability are necessary, but not sufficient conditions for ensuring value for money from infrastructure investment. Other conditions are important too, but transparency and accountability are fundamental. They ensure that decisions are subject to public scrutiny and that those responsible are held accountable for their actions. Without transparency and accountability the prospects for meeting the infrastructure commitments contained within the Addis Ababa Accord will be significantly reduced.
This text was first published as Briefing Note 1.