International Transport Forum (101 pages).
This report explores the actual and potential use of strategic planning by governments in ITF member countries as a means of improving the quality of major infrastructure policy making and investment decisions. This includes the scope and content of strategic plans, and the extent to which decision making on individual infrastructure projects takes account of the priorities and directions established in the plans.
Secondly, the report investigates the emerging role of independent infrastructure advisory bodies as a tool to help governments adopt a long-term, cross-sectoral approach to infrastructure planning and decision making. Thirdly, it explores current practices and trends in relation to project identification, appraisal and selection, and the role of ex post evaluation.
Strategic planning is a relatively commonly used policy tool and is becoming more widespread. However, the nature and scope of strategic plans vary widely: some are sectorally based, some regionally focused and a few are cross-sectoral, or even have a whole-of-government perspective. Some are limited to the identification of broad strategic orientations and/or objectives, while others identify individual projects – typically those large in scale and/or transformational in impact. Strategic plans enable more co-ordinated decision making, which takes account of synergies between projects, considers the demand for, as well as the supply of, infrastructure services, weighs the competing claims of different sectors and enables investment decisions to be oriented towards national priorities.
There is an apparent correlation between the adoption of strategic plans and the establishment of independent infrastructure advisory bodies. The relatively recent establishment of these bodies in most countries means firm conclusions as to their effectiveness in improving decision making cannot yet be drawn. The widely differing range of responsibilities given to these bodies also complicates such judgements. However, the independent expert advice on infrastructure needs and priorities these bodies provide appears to improve the information base for decision making, as well as enhancing transparency and accountability.
Project appraisal is subject to explicit process and methodological requirements in most countries, and cost-benefit analysis (CBA) is central in virtually all cases. Many countries report proposed projects must meet certain benchmarks (e.g. have a positive net present value [NPV]) to be eligible for approval. Others report CBA is only one among several analyses conducted, and a positive NPV may therefore be neither necessary nor sufficient for a project to be selected. Differences in the scope of CBA may explain some of these apparent differences, with some countries adopting broader CBA by requiring the use of indirect valuation techniques that enable the quantification of many non-market benefits and costs.
Appraisals of large-scale infrastructure projects increasingly include wider economic benefits (WEBs). This adds an element of macroeconomic analysis to the microeconomic approach of CBA. WEB assessment is both data- and resource-intensive. As WEBs are likely to add only 10-30% to traditional benefit estimates for all but the most transformative projects, WEB assessment is generally reserved for projects that are expected to have a large impact on labour markets. Significant uncertainty surrounds most WEB estimates, but WEB analysis can help provide a clearer picture of the beneficiaries of the project.
Many infrastructure assets serve numerous, often quite different economies and societies. Developing shared infrastructure can yield efficiencies of scale and scope and deliver higher quality infrastructure more quickly. By deepening economic inter-dependence, such arrangements can also promote further efficiency gains and function as a force for positive engagement between countries or regions. However, the effective operation of shared infrastructure requires sound institutional architecture, clear policy objectives and agreed allocations of responsibilities.
Strategic infrastructure planning includes the allocation of expenditure between new infrastructure projects and the maintenance and upgrading of existing infrastructure. This means strategic infrastructure planners should address the stewardship of existing assets, as well as the means by which new projects are chosen and developed. Efficient asset management will significantly reduce the life-cycle cost of infrastructure.