Ready, Set, Grow: Developing Countries Need to Take the Lead in Project Readiness

Project readiness is crucial for the long-term success and viability of development projects. Photo: ADB
Project readiness is crucial for the long-term success and viability of development projects. Photo: ADB

By Rishikesh Singh

Project readiness is a crucial factor for the effective preparation and implementation of infrastructure projects. Developing countries and their partners must enhance project readiness to maximize the impact and sustainability of these investments.

Multilateral development banks have been a driving force for development, but they need to shorten project preparation timelines and streamline procedures, according to an independent expert group commissioned by the Indian G20 Presidency last year.

Making projects shovel-ready immediately upon approval involves a wide range of readiness issues, which have a strong bearing on the start-up phase and subsequent implementation. Therefore, project readiness has emerged as one of the key determinants for the speed and efficacy of project preparation and implementation.

Project readiness assures the efficient use of public resources while also maximizing impact, building trust among stakeholders, ensuring sustainability, and being responsive to the urgent needs of the people that development projects are designed to help.

Multilateral development banks are one of the most effective partners of developing countries when it comes to providing long-tenure, low-cost financing for development needs. But the projects they finance need to be managed efficiently. Project time and cost overrun puts a burden on the taxpayers’ contribution to nation building and raises questions about the impact of the investments made.

Irrespective of whether the financing terms are concessional or otherwise, inadequate preparation before project approval often leads to extension of loans and grants and decreases their success rate. Besides, it is essential that the infrastructure developed remains sustainable and its operation and maintenance is supported by local funding. 

Design and procurement issues are the most complex aspects of project readiness for an infrastructure project. The lack of a detailed engineering design at the time of approval of a project means that a considerable length of time is spent on this aspect in the start-up phase. Countries which use their own resources to get detailed engineering designs prepared at an early stage have an advantage, as that kickstarts the procurement process.

Dependence on loans or grants to prepare detailed engineering designs can make the preparation phase longer. In some countries, rules don't allow advance procurement, which means that tenders for civil works can only be advertised after the project is approved. Also, if an implementing agency isn't familiar with the procurement policy and rules of multilateral development banks, it can make the process even more complicated.

Safeguards compliance is another crucial factor in project readiness. The parcels of land required for projects in urban or semi-urban settings are usually located in densely populated areas. Manual land records could lead to title disputes while encroachment could derail the process. This and other challenges related to safeguards compliance can be daunting for developing countries. They need additional support in this area. 

An institutional structure which facilitates statutory and administrative approvals and puts together a project management unit should be the cornerstone of the project edifice. Without it, project preparation remains a non-starter. Lastly, availability of timely and adequate funding for the project in a government’s annual budget exercise determines the pace of reimbursements and liquidation of advances through the project account.  

Project readiness assures the efficient use of public resources while also maximizing impact, building trust among stakeholders, ensuring sustainability, and being responsive to the urgent needs of the people that development projects are designed to help.

There are several ways in which the readiness issue can be addressed. Governments can prioritize projects based on national considerations and when possible, use their own resources to prepare detailed engineering designs to the extent they can. 

Alternatively, project readiness financing can be leveraged to complement efforts to develop a shelf of projects with high readiness through due diligence and advance action on design, procurement, and safeguards. 

Procurement reforms, which usher in decentralization of authority, put in place an enabling framework for advance contracting, and facilitate electronic procurement. This is key to accelerating pre-construction activities. 

Wherever required, policy-based loans can come in handy to incorporate these reform elements, and together with technical assistance, lay the groundwork for a time-bound action plan. Land acquisition requires a well-coordinated effort during the preparation phase by bringing local government authorities on board which are largely responsible for land acquisition. 

Developing countries should start putting together project implementation structures in earnest. Such an institutional set up would require that a nodal ministry or bureau drives the processes, facilitates inter-agency coordination, obtains timely internal approvals, and resolves budget and fund flow arrangement-related issues.

This is easier said than done as ground realities are often enmeshed with myriad problems, but countries would benefit from formalizing the pieces of this jigsaw puzzle in the form of a project readiness checklist or criteria for projects funded by multilateral development banks, clearly delineating who does what and by when. In some countries, such checklists are either non-existent or exist mostly on paper only. Unless governments own the checklist and make all stakeholders, including the multilateral development banks, adhere to the timelines and responsibilities, readiness will remain elusive. Some countries have already demonstrated how this can be done.

For their part, multilateral development banks need to offer support to countries (and states or provinces within the country) with relatively weaker capacity. Countries facing compliance challenges in terms of procurement and safeguards should also receive greater assistance. 

Pipeline building and strategic programming exercises need to incorporate readiness elements early on and bring together national planners, policymakers, and practitioners as part of project prioritization and resource planning. This is becoming more and more crucial when projects by nature are multisectoral and need a high degree of coordination in planning. 

Financing products should be more flexible to meet the specific needs of each country. Projects should also be planned and completed efficiently and on time.

Balancing the need to commit to new loans and ensuring projects are ready is a delicate task. Success depends on how well these two aspects are managed together.