Only properly maintained infrastructure assets yield the desired economic and social returns.
Making infrastructure development sustainable in the long term is a perennial challenge throughout the Pacific.
Development partners have been helping Pacific countries build infrastructure for decades, starting in the 1960s and 1970s. However, most assets were not properly maintained due to weak governance, excessive reliance on development partner funds, and political economy challenges. Funding for ongoing maintenance was hindered due to competing expenditure priorities.
Lack of maintenance constrained the expansion of existing projects and popular access to even basic infrastructure. It has also made current assets highly vulnerable to climatic threats.
In many cases, poor maintenance has resulted in infrastructure assets deteriorating to a point where they need to be completely rebuilt, the paradigm of “build-neglect-rebuild.”
This is a serious concern for Pacific governments, as the returns on their investments become lower than originally planned. Poorly maintained infrastructure assets don’t yield the desired economic and social returns.
Public infrastructure investment is usually justified by the expectation that additional capital stock contributes to productivity and stimulates growth. The inherent cost disadvantages of being small and remote mean Pacific governments commence the investment process anticipating a lower “bang for your buck” for their investments.
Weak management can undermine this expectation, resulting in projects realizing low or even negative returns that ultimately do not promote long-term growth at all, and instead add to fiscal stability risks.
Upstream, downstream solutions not in sync
Development partners have been working with Pacific governments to tackle this issue on several fronts. To improve public financial management, practitioners work with finance ministries to focus on upstream and basic process and system requirements.
Diagnostic tools are helping steer governance reform efforts across the region. However, they provide limited guidance on practical solutions for more effective infrastructure service delivery, or to overcome challenges like political economy issues and development partner dependence.
To bolster infrastructure service delivery, the Pacific Region Infrastructure Facility (PRIF) is working with Pacific governments to develop national infrastructure investment plans (NIIPs) and asset management frameworks. These new approaches aim to improve the selection and prioritization of infrastructure investments, and ensure assets are properly maintained.
Practical guidance, however, is not integrated with national budgeting frameworks and political decision-making processes. In other words, upstream and downstream solutions are not in sync.
Frustrated with the slow progress and limited impact of across-the-board reforms, infrastructure ministries and development partners are more willing to consider dedicated approaches such as public investment programs (similar to NIIPs), and off-budget infrastructure funds to create separate funding streams with their own process and management arrangements.
Public financial management officials are generally wary of such arrangements, pointing out fragmentation of the budget may lead to suboptimal economic outcomes. There is no guarantee that dedicated approaches will result in better management.
Further complicating matters is the need to respond to climate change and the frequent occurrence of natural disasters. The rapidly growing focus on disaster risk management in the region seeks to climate-proof infrastructure assets and manage how they are impacted when disasters occur.
Integrate infrastructure reforms into broader policy dialogue
The example of the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), which helps governments assess their exposure to natural disasters, provides some optimism about the future of the nexus between public financial management, infrastructure service delivery, and disaster risk management.
The PCRAFI exposure database was developed in 2010 and list the major infrastructure assets of 15 countries. It shows where assets are located and how much replacements would cost.
But many finance and Infrastructure ministries in the region, as well as public financial management and infrastructure service delivery practitioners—for whom this type of information is crucial—were not aware the database existed.
Recent examination of the database has revealed its true potential.
PRIF, the Pacific Financial Technical Assistance Centre (PFTAC) and the World Bank have identified major synergies between the PCRAFI database, PRIF’s own asset registries, and PFTAC asset accounting tools – particularly where different nomenclature and methodology were being used to refer to similar solutions.
Pacific development partners have established a multi-donor, multi-disciplinary working group, coordinated by PRIF, to better leverage the data in their efforts to make Pacific infrastructure sustainable in the long term. It will develop a common approach to updating the database later this year in a way that it informs disaster risk management, public financial management practices, and infrastructure service delivery.
The long-term goal is to integrate infrastructure-related reforms into a broader policy dialogue between development partners and governments in the Pacific. That way, once infrastructure is built, we can ensure it is properly maintained so we don’t have to rebuild it all over again decades later.