Post on 08-Aug-2020
Efficiency gains from improving sustainable
infrastructure project preparationEvidence from Latin American and Caribbean countries
Ancor Suárez Alemán
Public Private Partnership Team
Inter-American Development BankWebinar 2: Developing climate resilient infrastructure PPPs –An introduction to the tools and how
to use them to prepare resilient projects
June 10th, 2020
Inadequate project preparation is a bottleneck for the good development of infrastructure in developing countries
Lack of capacity, experience, and / or public sector resources for project preparation, particularly in
developing economies.
Infrascope index for project preparation facilities, by region (2019)
Project preparation is a complex critical activity for good infrastructure development
Source: GIH (2018)
Identification of a need or a project
Project solution / technical design
Project feasibility analysis
Project structuring, etc.
The costs of preparing infrastructure projects in developing countries generally range between 5-10%
of the total project investment and about 3-5% of the project costs in developed countries.
…
Improving sustainable infrastructure project preparation
Inadequate project
selection:1
• selection with political
criteria instead of
socioeconomic
• poor design
• lack of planning
Low service quality:3
• weak contract supervision
• lack of maintenance of
existing assets
Excessive cost of
the projects that are
executed2
• Cost overruns
• Delays
Improving sustainable infrastructure project preparation
Infrastructure investment – Not only more, but also better
Inadequate project
selection:1
• selection with political
criteria instead of
socioeconomic
• poor design
• lack of planning
Improving sustainable infrastructure project preparation
Efficiency in the provision of infrastructure services - Inefficient expenditure
0
10
20
30
40
50
60
70
80
90
100
Chile Panama Trinidad andTobago
Mexico Costa Rica Guatemala Colombia Ecuador Peru Brazil Honduras Paraguay Nicaragua Bolivia
Infr
astr
uctu
re e
ffic
iency
score
Score 2000 Score 2016
0
10
20
30
40
50
60
70
80
90
100
Advanced Economies Eastern Europe North Africa Asia Latin America & Caribbean Sub-Saharan Africa
Infr
astr
uctu
re e
ffic
iency
score
Average efficiency 2000 Average efficiency 2016
Source: Suárez-Alemán, Serebrisky, y Perelman (2019) Background paper BID DIA2020
Inadequate project
selection:1
• selection with political
criteria instead of
socioeconomic
• poor design
• lack of planning
Improving sustainable infrastructure project preparation
Efficiency in the provision of infrastructure services – how to improve
B. INFRASTRUCTURE EFFICIENCY AND COMPLIANCE (2016)
Source: Suárez-Alemán, Serebrisky, y Perelman (2019) Background paper BID DIA2020
Inadequate project
selection:1
• selection with political
criteria instead of
socioeconomic
• poor design
• lack of planning
Improving sustainable infrastructure project preparation
Efficiency in the provision of infrastructure services - Inefficient expenditure
Execution of capital budgets in five Latin American countries, 2015
Source: Background paper BID DIA2020
Inadequate project
selection:1
• selection with political
criteria instead of
socioeconomic
• poor design
• lack of planning
Improving sustainable infrastructure project preparation
Inadequate project
selection:1
• selection with political
criteria instead of
socioeconomic
• poor design
• lack of planning
Low service quality:3
• weak contract supervision
• lack of maintenance of
existing assets
Excessive cost of
the projects that are
executed2
• Cost overruns
• Delays
Improving sustainable infrastructure project preparation
Sources of potential savings in public infrastructure spending
Excessive cost of
the projects that are
executed2
• Cost overruns
• Delays
Improving sustainable infrastructure project preparation
Infrastructure Development – cost overruns
LAC vs WORLD MDBs
Source: Background paper BID DIA2020
Excessive cost of
the projects that are
executed2
• Cost overruns
• Delays
Improving sustainable infrastructure project preparation
Infrastructure Development – time delays
Days required to complete authorization and approval procedures, by country
Source: Background paper BID DIA2020
Excessive cost of
the projects that are
executed2
• Cost overruns
• Delays
Improving sustainable infrastructure project preparation
Inadequate project
selection:1
• selection with political
criteria instead of
socioeconomic
• poor design
• lack of planning
Low service quality:3
• weak contract supervision
• lack of maintenance of
existing assets
Excessive cost of
the projects that are
executed2
• Cost overruns
• Delays
Improving sustainable infrastructure project preparation
Infrastructure quality and maintenance
0
1
2
3
4
5
6
Advanced economies Asia Eastern Europe North Africa Latin America &Caribbean
Sub-Saharan Africa
Quality
of
Infr
astr
uctu
re (
1-7
Best)
Infrastructure quality
2008 2018
Source: Background paper BID DIA2020
Low service quality:3
• weak contract supervision
• lack of maintenance of
existing assets
Improving sustainable infrastructure project preparation
Infrastructure quality in the region is lower than what it corresponds to LAC
0
1
2
3
4
5
6
7
2,5 3 3,5 4 4,5 5 5,5
Quality
of
Infr
astr
uctu
re (
1-7
Best)
Log of GDP per capita PPP
Rest of the World LAC countries Linear Trend
Source: Background paper BID DIA2020
Low service quality:3
• weak contract supervision
• lack of maintenance of
existing assets
The importance of advancing sustainability - Social, environmental and land conflicts in infrastructure development
Source: IDB (2017)
0
10
20
30
40
50
60
70
80
90
100
Planificacióndeficiente
Falta de consulta Agentes externos Expectativaspoco realistas
Oposiciónhistórica aproyectossimilares
Reasentamientosforzosos
IDB database +200 infrastructure projects in LAC affected by conflicts
Again, planning
and proper
preparation of
projects in
response…
Towards a more sustainable infrastructure through PPPs
Diagnosis of environmental, land and social conflict, and recommendations for action for Latin America and the Caribbean countries
Source: BID – PPP & CCS
soon to be released
Towards a more sustainable infrastructure through PPPs
Diagnosis of environmental, land and social conflict, and recommendations for action for Latin America and the Caribbean countries
Source: BID – PPP & CCS
soon to be released
Towards a more sustainable infrastructure through PPPs
Diagnosis of environmental, land and social conflict, and recommendations for action for Latin America and the Caribbean countries
Source: BID – PPP & CCS
soon to be released
Up to 70% of total budget
Up to 80% of total budget
Up to 68% of total budget
Investing in sustainable project preparation: incurred vs. avoided costs
Conceptual scheme of cost and benefits of investing in proper project preparation
3-5%
project
cost
Time delays
(10% project
costs)
Lower quality
and lack of
maintenance
Environmental,
social, and land
conflicts that can
increase budget
up to 80%
48% cost overruns
Efficiency gains from improving sustainable
infrastructure project preparationEvidence from Latin American and Caribbean countries
Ancor Suárez Alemán
Public Private Partnership Team
Inter-American Development BankWebinar 2: Developing climate resilient infrastructure PPPs –An introduction to the tools and how
to use them to prepare resilient projects
June 10th, 2020