Originally posted in Dhaka Tribune on 12 October 2021
Appropriate allocation of investible resources among the contending sectors and activities, and allocative efficiency concerning implementation of the PIPs, are of crucial importance to ensure good value for the taxpayers’ money
It will be no exaggeration to say that a good infrastructure is the foundation on which economic development of developing countries such as Bangladesh has to be built.
In developing country contexts, a large part of such investment is made by the public sector, by implementing public infrastructure projects (PIPs).
This is because such projects produce outputs that are of public goods in nature and involve significant investible resources, profit maximizing private sector is often not interested to come forward with its own resources to invest in such projects.
The direct and positive externalities accruing from the PIPs, in the form of facilitating production and trade, delivery of public services and utilities and in crowding-in private sector investment are quite well-evidenced.
Justifiably, the government of Bangladesh is currently spending a significant amount of resources in PIPs, to build the needed infrastructure, both physical and social, to cater to the increasingly growing developmental needs of the economy.
Indeed, over the past years, the share of public investment in Bangladesh’s GDP has gone up from less than 6% to more than 8%; as per the 8th Five Year Plan, this is set to rise further by FY2025.
It is also to be noted that while the SDG 9 has special focus on infrastructure, it is estimated that it is directly or indirectly related to 72% of all SDG targets, including those associated with providing energy, ensuring quality health and education and delivery of various public services and utilities.
According to the SDG Financing Strategy of Bangladesh, between FY2017 andFY2030, the country was estimated to require an investment of $928.5 billion (about $798.0 billion between FY2021-FY2030) to implement the SDGs, including about $250.0 billion for SDG 9 alone.
It goes without saying that appropriate allocation of investible resources among the contending sectors and activities, and allocative efficiency concerning implementation of the PIPs, are of crucial importance to ensure good value for the taxpayers’ money and generate and deliver the expected benefits to the economy.
It is in this backdrop that issues of good governance in PIP implementation assumes such heightened interest for Bangladesh at this crucial juncture of its journey, and in going forward.
PIP implementation
It is widely known that the PIP implementation in Bangladesh is afflicted with many challenges, with the attendant concerns exacerbating with the rise in scope and scale of public sector involvement in the PIPs in recent years.
These include lack of alignment with national strategic plans, absence of proper feasibility study, frequent change in design and operational plans following approval of a PIP, frequent time escalation leading to delays in delivery of projects and cost escalation, scant attention to resource efficiency, corruption, mismatch between physical and financial progress and weak sequencing and phasing of project-related activities.
The estimated per kilometer road construction cost in Bangladesh, according to the Asian Infrastructure Investment Bank (2019), is found to be $6.35 million, as against $1.45 million for India, $2.95 million for Pakistan, $2.15 for Indonesia, $1.70 million for Turkey and $3.90 million for China.
High land acquisition cost, soil condition, geo-environmental specificities, dealing with flood and riverine conditions and import intensity of construction materials used are often mentioned as reasons for the high cost of infrastructure implementation in Bangladesh.
However, even when these are factored into the equation, it is highly improbable that per kilometer construction cost in Bangladesh should be about 4.4. times when compared to India and more than double that of Pakistan.
A thorough comparative study will provide many useful insights in this connection.
A review of the reports prepared by the Implementation Monitoring and Evaluation Division (IMED), the body in the Planning Commission mandated to oversee and monitor the quality of implementation of PIPs, shows that observations and comments as regards many of the aforesaid problems afflicting the PIPs have featured repeatedly in the IMED documents.
Weak governance concerning PIP implementation results in consumers not getting the services on time, producers and entrepreneurs paying higher prices for the services produced which undermine their competitiveness, both in home and overseas markets, and in the taxpayers having to bear the burden of cost escalation and the subsidies that often have to be provided to compensate for the inefficiencies and to keep costs of public services and utilities at reasonable levels.
Steps taken
To be true, over the past years the government has taken a number of steps to address some of the concerned issues – introduction of e-procurement, avoiding frequent changes of project directors, facilitating release of funds and revising the way Development Project Proformas (DPPs) are prepared, putting in place special monitoring mechanism for mega-projects, to name only a few.
However, many of the attendant concerns continue to persist.
As Bangladesh prepares for the LDC graduation in 2026, with new challenges, and in the context of Bangladesh’s middle income graduation, with more stringent terms of finance, ensuring quality implementation of PIPs has become even more urgent.
The resources that are being spent for PIPs come from domestic resources generated through revenue generation, internal borrowings and from foreign loans.
These involve significant opportunity costs and direct costs to the economy.
There is no harm in incurring debt for investing in PIPs as long as this generates the expected benefits, the economic and financial rates of returns are justified and debt servicing is manageable.
However, if this is not the case, the debt servicing liabilities could become unsustainable.
There are many examples which show how countries, having graduated from low income countries (LICs) to the status of middle income countries (MICs), have fallen into the dreaded middle income trap, accompanied by debt trap, Bangladesh must plan in a way that ensures good governance in PIP implementation and enables to avoid such traps.
A review of the FY2021-22 Annual Development Program (ADP) by the Centre for Policy Dialogue (CPD) shows that the number of carry-over projects in the ADP was 622 which accounted for about a-fourth of total ADP allocation for the year.
The review also found a significant lack of correspondence between physical progress and financial progress.
Indeed, according to the Global Competitiveness Report, 2019 (of the World Economic Forum), Bangladesh’s score in terms of quality of infrastructure was shown to be the lowest in South Asia (51 out of 100) and was ranked 114th out of 141 countries globally.
Given the high costs of lack of good governance, and the potential benefits that could originate from putting in place the needed measures to improve the state of governance in PIP implementation, and in view of the enormous resources involved in the PIPs, Bangladesh’s policymakers must give highest priority to addressing the identified weaknesses.
OECD infrastructure governance
In this backdrop, The OECD Infrastructure Governance Framework could serve as an excellent reference point for ensuring good governance in PIP implementation in Bangladesh.
The Framework has ten pillars: (a) Develop a strategic vision for infrastructure, (b) Manage threats to integrity; (c) Choose how to deliver infrastructure; (d) Ensure good regulatory design; (e) Integrate a consultation process; (f) Coordinate infrastructure policy across levels of govt.; (g) Guard affordability and value for money; (h) Generate, analyze and disclose useful data; (i) Make sure the asset performs throughout its life; and (j) Ensure resilience public infrastructure.
Thus, the OECD framework covers the entire PIP implementation cycle: from ensuring alignment with strategic development plan to execution to maintaining good governance in implementation and maintenance.
Each of the ten pillars has a number of indicators (in total 47) which allows assessing the state of the involved parameter and to measure progress over time.
Bangladesh’s policymakers can consider this global best practice and contextualize it, to ensure good value for money in implementing PIPs in Bangladesh.
No doubt, the complexities of PIP implementation have been on the rise in the recent past years.
And this is only to be expected given the need for catering to the newly emerging demands of the economy.
Involved institutions and oversight organizations must be prepared and geared to adequately address the tasks of ensuring good governance in PIP implementation.
The government has declared ‘zero tolerance’ against corruption; PIP implementation should be seen as the battle ground to test this out.
As the pre-eminent institution tasked to ensure good governance in PIP implementation, the IMED’s institutional strength and capacity must be raised significantly to enable it to perform its mandate with efficiency and professionalism.
Adequate resources must be allocated towards strengthening the IMED.
Active engagement of independent professionals in IMED activities will facilitate its work and help achieve its objectives.
Concerned Parliamentary Standing Committees should take more interest in monitoring the progress and governance in implementation of PIPs by the relevant Ministries.
Suggestions have been made in recent times by some non-state actors to allow Citizens Committees to work with implementing entities to ensure that local communities are included in monitoring PIP implementation.
Such committees could serve as useful watchdogs in ensuring good governance in PIP implementation and delivery of expected outputs.
A well-governed PIP implementation process could be a critically important driver in enabling Bangladesh to attain the aspirations of an upper middle income country by 2030 and a developed country by 2041, as envisaged in Bangladesh Vision 2041.
The author is distinguished fellow at the Centre for Policy Dialogue (CPD)