Private Participation in Infrastructure 2017
PHOTO: EXPRESS
NORTHAMPTON: There is no denying the importance of modern, efficient and reliable infrastructure for the overall economic growth and progress.
Infrastructure is the enabling factor which is essential for trade, powers businesses, connects the labour force to their jobs and protects citizens from an unpredictable environment.
Both the public and private sectors have a role to play in the provision of infrastructure. Private investment in key infrastructure projects such as telecommunication systems, energy and transport is crucial for the provision of an enabling economic environment, which would form the backbone of a healthy and progressive economy.
A recent World Bank report titled ‘Private Participation in Infrastructure 2017’ records private participation in infrastructure investment totalling $93.3 billion in 2017, an increase of 37% from the previous year.
Yet, this still remains the second lowest level of investment in the past 10 years. According to the report, the increase over 2016 was attributed to mega projects in China and Indonesia as well as a recovery in construction activity in South Asia, led by Pakistan.
As witnessed from the mega project, the China-Pakistan Economic Corridor (CPEC), China has made investments in infrastructure across many countries including Pakistan.
According to the latest World Bank PPI report 2017, 52 countries received investments from China with Indonesia, Pakistan, Mexico and Brazil accounting for 58% of the total.
An important question that arises here: How important is the efficiency of infrastructure spending? We have seen the experiences of many countries that despite huge outlays in public infrastructure such as roads, there is still evidence of massive traffic congestion.
A recent academic article published in The American Review of public administration explores the efficiency of public infrastructure spending on public highways in America and finds there is large efficiency variation among states in terms of producing quality highway infrastructure services.
Variables such as interstate competition, jurisdiction size, fiscal capacity and political and fiscal institutions are the key factors influencing efficiency performance of state highway infrastructure systems.
Construction data and Pakistan
Ultimately, monitoring of a project based on its deliverables and its efficiency analysis starts with analysing the data collected on the construction sector from various angles.
A cursory glance at important government institutions, which record activities of the sector from different angles, shows poor results. The only thing which is publicly available is its contribution to the gross domestic product (GDP) and loan disbursement to the sector.
The search reveals that the sector contributed 2.3% to GDP at market prices in FY18. Moreover, in March 2018, loans to the construction sector comprised 3.5% of overall loans to private sector businesses.
With these two pieces of information how one can analyse whether the various projects that have been inaugurated in the past five years are efficient and delivering on their promised goals?
The Planning Commission of Pakistan website has various reports on CPEC, but all of them are in the narrative form and do not contain particular details in terms of financing mechanisms, rates, etc.
Construction is a very big sector and has multifarious linkages across many other sectors. Furthermore, it is a growing industry in Pakistan and is gaining importance in its contribution to the national economy.
Now is the time to analyse and monitor it so that its role can be made optimal as well as efficient.
Perhaps government officials from various departments such as Pakistan Bureau of Statistics, Commerce Division, State Bank and Planning Commission can come together to take templates of some of the crucial data that advanced economies collect and how it is used to measure the performance of the sector.
A great resource is the Office for National Statistics, which collects data of the value of construction output both in public and private sectors; value of new orders; number, size, regional placement and employment.
There are multiple advantages to having open and public data. These benefits can be financial in terms of policymaking, resource allocation or operational management. They can also be non-financial in terms of meeting legislative or other requirements.
The writer is a doctoral candidate at The Bartlett, UCL
Published in The Express Tribune, April 30th, 2018.
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