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Efficiency gains from improving sustainable

infrastructure project preparationEvidence from Latin American and Caribbean countries

Ancor Suárez Alemán

Public Private Partnership Team

Inter-American Development BankWebinar 2: Developing climate resilient infrastructure PPPs –An introduction to the tools and how

to use them to prepare resilient projects

June 10th, 2020

Inadequate project preparation is a bottleneck for the good development of infrastructure in developing countries

Lack of capacity, experience, and / or public sector resources for project preparation, particularly in

developing economies.

Infrascope index for project preparation facilities, by region (2019)

Project preparation is a complex critical activity for good infrastructure development

Source: GIH (2018)

Identification of a need or a project

Project solution / technical design

Project feasibility analysis

Project structuring, etc.

The costs of preparing infrastructure projects in developing countries generally range between 5-10%

of the total project investment and about 3-5% of the project costs in developed countries.

…

Improving sustainable infrastructure project preparation

Inadequate project

selection:1

• selection with political

criteria instead of

socioeconomic

• poor design

• lack of planning

Low service quality:3

• weak contract supervision

• lack of maintenance of

existing assets

Excessive cost of

the projects that are

executed2

• Cost overruns

• Delays


Infrastructure investment – Not only more, but also better

Inadequate project

selection:1


criteria instead of

socioeconomic

• poor design



Efficiency in the provision of infrastructure services - Inefficient expenditure

0

10

20

30

40

50

60

70

80

90

100

Chile Panama Trinidad andTobago

Mexico Costa Rica Guatemala Colombia Ecuador Peru Brazil Honduras Paraguay Nicaragua Bolivia

Infr

astr

uctu

re e

ffic

iency

score

Score 2000 Score 2016

0

10

20

30

40

50

60

70

80

90

100

Advanced Economies Eastern Europe North Africa Asia Latin America & Caribbean Sub-Saharan Africa

Infr

astr

uctu

re e

ffic

iency

score

Average efficiency 2000 Average efficiency 2016

Source: Suárez-Alemán, Serebrisky, y Perelman (2019) Background paper BID DIA2020

Inadequate project

selection:1


criteria instead of

socioeconomic

• poor design



Efficiency in the provision of infrastructure services – how to improve

B. INFRASTRUCTURE EFFICIENCY AND COMPLIANCE (2016)

Source: Suárez-Alemán, Serebrisky, y Perelman (2019) Background paper BID DIA2020

Inadequate project

selection:1


criteria instead of

socioeconomic

• poor design



Efficiency in the provision of infrastructure services - Inefficient expenditure

Execution of capital budgets in five Latin American countries, 2015

Source: Background paper BID DIA2020

Inadequate project

selection:1


criteria instead of

socioeconomic

• poor design



Inadequate project

selection:1


criteria instead of

socioeconomic

• poor design





existing assets

Excessive cost of


executed2

• Cost overruns

• Delays


Sources of potential savings in public infrastructure spending

Excessive cost of


executed2

• Cost overruns

• Delays


Infrastructure Development – cost overruns

LAC vs WORLD MDBs


Excessive cost of


executed2

• Cost overruns

• Delays


Infrastructure Development – time delays

Days required to complete authorization and approval procedures, by country


Excessive cost of


executed2

• Cost overruns

• Delays


Inadequate project

selection:1


criteria instead of

socioeconomic

• poor design





existing assets

Excessive cost of


executed2

• Cost overruns

• Delays


Infrastructure quality and maintenance

0

1

2

3

4

5

6

Advanced economies Asia Eastern Europe North Africa Latin America &Caribbean

Sub-Saharan Africa

Quality

of

Infr

astr

uctu

re (

1-7

Best)

Infrastructure quality

2008 2018





existing assets


Infrastructure quality in the region is lower than what it corresponds to LAC

0

1

2

3

4

5

6

7

2,5 3 3,5 4 4,5 5 5,5

Quality

of

Infr

astr

uctu

re (

1-7

Best)

Log of GDP per capita PPP

Rest of the World LAC countries Linear Trend





existing assets

The importance of advancing sustainability - Social, environmental and land conflicts in infrastructure development

Source: IDB (2017)

0

10

20

30

40

50

60

70

80

90

100

Planificacióndeficiente

Falta de consulta Agentes externos Expectativaspoco realistas

Oposiciónhistórica aproyectossimilares

Reasentamientosforzosos

IDB database +200 infrastructure projects in LAC affected by conflicts

Again, planning

and proper

preparation of

projects in

response…

Towards a more sustainable infrastructure through PPPs

Diagnosis of environmental, land and social conflict, and recommendations for action for Latin America and the Caribbean countries

Source: BID – PPP & CCS

soon to be released

Towards a more sustainable infrastructure through PPPs

Diagnosis of environmental, land and social conflict, and recommendations for action for Latin America and the Caribbean countries

Source: BID – PPP & CCS

soon to be released

Up to 70% of total budget



Investing in sustainable project preparation: incurred vs. avoided costs

Conceptual scheme of cost and benefits of investing in proper project preparation

3-5%

project

cost

Time delays

(10% project

costs)

Lower quality

and lack of

maintenance

Environmental,

social, and land

conflicts that can

increase budget

up to 80%

48% cost overruns

Efficiency gains from improving sustainable

infrastructure project preparationEvidence from Latin American and Caribbean countries

Ancor Suárez Alemán

Public Private Partnership Team

Inter-American Development BankWebinar 2: Developing climate resilient infrastructure PPPs –An introduction to the tools and how

to use them to prepare resilient projects

June 10th, 2020

efficiency gains from improving sustainable infrastructure project ...€¦ · mexico costa rica...

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