Prioritising & Planning in the Transport Infrastructure Policy-Making Process
Evaluating the policy-making process with the intent of identifying bottlenecks is vital to making transport policies more effective. Four distinct phases can be identified in this process: prioritisation and planning, execution, operation and maintenance. In each stage it is necessary to consider assessments, accountability mechanisms and project oversight. Appropriate allocation of responsibilities at each stage and an adequate integration of policies throughout the whole project cycle —with their corresponding technical analysis— help increase the effectiveness of public transport policies. The transport sector faces different obstacles throughout the project cycle, but especially in the prioritising and planning stage. At this stage low technical capabilities for adequate project design and the lack of a framework for policy implementation stand out (see Box 5.1).7 However, states are seeking to improve the selection and evaluation of projects through the implementation of national systems of public investment. Along with improving the quality of public finances, these systems seek to improve resource allocation to develop and strengthen assessment systems for public programmes and investment. Promoting co-ordination between institutional strategic plans where the synergies between different public or private projects are considered can reduce inefficiencies in public infrastructure spending (see Box 5.2). The selection of projects must be improved. It is also necessary to establish an appropriate balance between new projects and the maintenance of existing ones. An analysis of transport policy-making in various countries in the region points to the challenge of improving the selection process and the quality of roads in Latin America.8 The overall cost of transport and of investment and maintenance is between three and seven times less for a road in optimal state versus one that is not maintained.9
Problems of dynamic inconsistency —the incentive to change the initial rules of the game— have an impact on the efficiency of the transport infrastructure sector. The political cycle may encourage the tendering of projects that are poorly prepared. This can create cost overruns and delays that drastically affect a project’s ex post profitability.10 In addition, the scarcity of professional resources leads authorities to prefer new projects over rehabilitation and maintenance because they can obtain greater political dividends from them. In order to avoid these problems, some countries have established greater budgetary rigidities as a way of guaranteeing the resources needed for road maintenance.
Failures from dynamic inconsistency could be addressed through the development of institutions that broaden the scope of public decision-making.11 Bias towards new infrastructure projects instead of rehabilitation and maintenance can be reduced through independent assessment of levels of service. Some Central American countries created infrastructure maintenance funds with resources from fuel taxes. However, in practically all instances, these schemes have been difficult to maintain due to a lack of appropriate incentives.
During the first phase —project identification and design— it is necessary to evaluate various alternatives and variants in terms of project profile and pre-feasibility. It is necessary to identify the different possibilities for satisfying demand in the first phase, which has lower costs, before proceeding to the technical and economic feasibility phase, which is more expensive. Once the best option has been selected, the project moves on to the social feasibility phase, where public action should be guided by the principle of multimodal transport —that is, the use of more than one mode of transport for a journey or group of journeys for people or goods, making journeys as efficient as possible. Multimodal transport is a central part of a modal-shift strategy, which is part of an integrated, sustainable logistics and mobility policy.12
This assessment should consider as benefits the actual savings of economic resources, including time savings of users, valued according to reasons for travel, and incorporate negative externalities. If the project is economically and socially profitable, different alternatives for its implementation must be evaluated, whether as a public works project, as an integrated public-service concession or as a combination of the two for some infrastructure and services components, bearing in mind the sustainability of the solution.
Road Infrastructure Policy-Making in Latin America
The policy-making process in transport is complex and inefficient. In general, LatinAmerica significantly lags behind other regions with similar economic characteristicsin terms of road infrastructure. One of the reasons for this lag seems to be theperception of institutional weakness in this sector in comparison with other areas ofinfrastructure. This situation is particularly visible in Colombia.a
The effectiveness of transport policy is hindered by a lack of prioritisation and planning,information problems that complicate monitoring and evaluation, and the weaknessof vertical and horizontal co-ordination. Quantitative data (e.g. official data, priorresearch) and qualitative data (e.g. interviews with public employees and analysts)are needed to determine the bottlenecks in each of the road transport policy-makingphases. The following failures should be noted:
i) A lack of planning and prioritisation. This is manifested in the construction ofprojects without preliminary analysis, the adjudication of contracts withoutdefinitive designs and prior land studies, often without even having propertyrights to said land. This causes delays and cost overruns. Furthermore, severalcountries lack a national system of public investment corroborating the socialevaluation of prospective projects as a necessary requirement to initiate them.
ii) Information problems. These make monitoring and evaluation difficult: Ingeneral, projects are designed without concrete physical goals (e.g. targetedkilometres), which makes it impossible to monitor the physical executionof the project. There is no inventory of existing roads, nor of their currentstate, especially secondary and tertiary roads. This makes it difficult to carryout estimates of costs per kilometre and is an obstacle in determining thecost-benefit ratio for building new roads vs. performing maintenance onexisting ones.
iii) C o-ordination problems. Institutional weaknesses affect the rules of thegame for road policy making. Firstly, there are no regulations that favourthe development of multimodal transport, and secondly, responsibilitiesand resources available for road infrastructure are not clearly defined anddistributed among the different levels of government (i.e. national, regionaland municipal).
Rise of Public Investment in Peru: The Benefits of Better Regulation & National System of Public Investment
Levels of public investment have grown continuously in recent years in Peru. During the 1990's public investment reached similar levels, but it was largely financed by fiscal deficits accompanied by high levels of public debt. At the beginning of the 2000's this scenario changed radically, as public investment fell to below 3% of GDP. The 1999 Fiscal Prudence and Transparency Act (LPTF) established limits on the fiscal deficit of the consolidated public sector, on public spending and on the total debt for the consolidated public sector. In addition, the National System of Public Investment (SNIP) was created, an administrative system of the state charged with improving the efficiency of investment in Peru by following a series of principles, procedures and technical regulations and certifying the quality of public investment projects.
Under this scenario, public investment fell between 1.5 and 2.0 points of GDP between 2000 and 2006 in comparison to the previous decade’s figures. This was due to the fiscal restraints imposed by the LPTF and the creation of the SNIP, which significantly decreased the number of investment projects being implemented (projects which previously were carried out without prior socio-economic evaluation).
Extraordinary income from the boom in prices of mining exports and reduction of public debt improved public accounts and enhanced the investment process. Also, in 2006 the limits on public spending were modified to exclude infrastructure maintenance costs, and in 2007 they started to be applied only to government consumption. Thus, public investment no longer faced budgetary constraints beyond those imposed by the fiscal deficit.a An Economic Stimulus Plan was implemented in 2009 and 2010 under this new fiscal framework. It focused on infrastructure, and as a consequence public investment rose again to nearly 6% of GDP in 2010. These levels should be maintained until 2013 according to the Macroeconomic Multi-Year Framework approved by the Ministry of Economy and Finance.