Investment in infrastructure is universally agreed to be a primary ingredient in the facilitation of economic growth and/or diversification, irrespective of where in the world such investment takes place. However, what is often missed from this conversation is that the appraisal systems put in place to estimate future ‘value’ or ‘benefit’ for money invested are so typically rigid that local and regional socio-economic circumstances are effectively removed from the calculation. I write this blog from a UK perspective, having particular regard to the rigorous and world-renowned appraisal methodologies speer-headed by the Department for Transport which have been developed and refined over many years to measure the relative costs and benefits of wide ranging transport proposals. Whilst these methodologies are sound for the purposes for which they have become established, they remain timid in terms of addressing the broader and less direct benefits and costs of infrastructure investment.
Academic and empirical research has demonstrated that the impact of transport improvements are wide-ranging, especially for major projects. These benefits or positive impacts can be largely summarised as being:
The value capture mechanisms of investment and employment effects are by far the least well developed and accepted in terms of appraisal methodology. Indeed, it is my opinion that appraisal systems need to be extended and made more flexible to embrace fully the impact of infrastructure investment on location decisions alongside dependent land-use changes, regeneration and place-making effects. It should be highlighted that, for some infrastructure schemes, these ‘neglected’ benefits can be substantial in terms of:
There are many challenges to putting in place appraisal techniques which objectively and fairly assess the relative benefits and costs of infrastructure proposals. These include the problems of:
The main challenge, however, is to overcome the existing constraint that all schemes are assessed in isolation of their local economic and political context.
It’s universally agreed that investment in infrastructure is a primary ingredient in the facilitation of economic growth and/or diversification, irrespective of where in the world such investment takes place. So often, no systems are put in place to estimate the future ‘value’ or ‘benefit’ for money invested or they are so rigid that local and regional socio-economic circumstances are effectively removed from the calculation.
Here is set out our approach to advising Governments, investors and scheme promoters which builds an evidence base and narrative that fully embraces local factors which sit along-side robust estimates of additional value capture. We consider that a straight-jacket approach to value estimation will continue to simply reinforce market forces, do little to re-balance the economic geography of countries and prevent investors from making healthy returns whilst also delivering tangible social benefits.
In order to capture the benefits which appraisal systems have largely neglected to date, we consider it imperative for business case assessments to:
With these assessments in place, a clearer picture will develop to enable infrastructure investors to make better decisions and help move projects forward.
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