‘Why the worst infrastructure gets built’

When big ticket infrastructure projects such as highways, tunnels, bridges and airports are pushed through, the lack of proper business plans and robust cost-benefit analyses is often glaring.

In the process, costs are underestimated (we have seen happening with the North South Expressway and the Second Penang Bridge) and the benefits overstated. The social and environmental costs are often ignored or downplayed.

A research paper ‘Survival of the unfittest: why the worst infrastructure gets built—and what we can do about it’ by Bent Flyvbjergsays, published by Oxford Review of Economic Policy) provides much food for thought. The author points out we should not trust “the budgets, patronage forecasts, and cost–benefit analyses produced by promoters of major infrastructure projects”.

As the promoters try to steamroll these projects through, financial projections and project feasibility are often inadequately and inaccurately carried out while public consultation is often reduced to a formality, a public relations exercise:

In his paper, the author notes:

The consultants interviewed confirmed that appraisals often focused more on benefits than on costs. But they said this was at the request of clients and that for specific projects discussed ‘there was an incredible rush to see projects realized’.

One typical interviewee saw project approval as ‘passing the test’ and precisely summed up the rules of the game like this: ‘It’s all about passing the test [of project approval]. You are in, when you are in. It means that there is so much focus on showing the project at its best at this stage.’

In sum, the UK study shows that strong interests and strong incentives exist at the project approval stage to present projects as favourably as possible—that is, with benefits emphasized and costs and risks de-emphasized. Local authorities, local developers and land owners, local labour unions, local politicians, local officials, local MPs, and consultants all stand to benefit from a project that looks favourable on paper and they have little incentive actively to avoid bias in estimates of benefits, costs, and risks.

Thus, genuinely independent oversight and review are needed to ensure that the cost-benefit analyses are accurate and the projects viable.

But such is the indecent haste in bulldozing these mega projects through that other alternative, smaller and more financially manageable and sustainable projects are overlooked.

Read this Sydney Morning Herald article, “When it comes to infrastructure, small can be beautiful too”. (Thanks to S H Tan for the link.)

Haven’t we overlooked more sustainable options in our haste to push through big-ticket infrastructure projects?