Thursday, 2 October 2014

A Centralised Institution for Selecting and Appraising Infrastructure Investment?

© Depositphotos.com/@Paha_L
One of the key findings from my comparison of communications technology policies in Canada and Australia was that there are so many varieties of particularism - that is, the various user requirements and preferences, technologies, types of infrastructure, geographical and cultural circumstances, and so on that require bespoke solutions - that a centrally-controlled, one size fits all solution will inevitably provide a suboptimal strategy in meeting infrastructure demand.

Yet when planning infrastructure, there may well be a case for a centralised body to independently vet project selection and the relevant cost-benefit analyses before government-led investment in infrastructure occurs.

An IMF staff study, released as "Chapter 3: Is it time for an infrastructure push? The macroeconomic effects of public investment" in the latest instalment of the 2014 World Economic Outlook, suggests that centralised institutions designed to appraise major infrastructure projects may improve the efficiency of public investment in infrastructure:
"project appraisal can be strengthened by instituting a centralized, independent review process to ensure robust estimates of the costs, benefits, and risks of potential projects, as has been done in Australia, Chile, Korea, and Norway" (IMF 2014: 31).
As I wrote in The Conversation earlier this year, the NBN was the last of the great romantic infrastructure projects. Indeed, the federal government's cost-benefit analysis signalled the end of an era in major infrastructure project selection and deployment.

It would appear that different types of infrastructure might benefit from different deployment strategies. However, it makes a good deal of sense for government-led investment in infrastructure to be appraised and selected by an independent body.

One of the major problems with transport infrastructure, for example, is that political incentives, specifically votes, may encourage a myopic planning approach that suits the election cycle. Surely long-term infrastructure planning should be beyond the control of short-term caretakers.

Of course, a centralised institution brings with it a whole raft of other problems for the practice of liberal democracy. But in the meantime, Australia is suffering from infrastructure bottlenecks that might be solved with some clever planning and investment. 

Whether Infrastructure Australia can gain the necessary political clout to fix Australia's infrastructure woes is another story. The biggest problem for any centralised institution in a federation is the constitutional legacies of responsibilities granted to the different levels of government. 

Indeed, it seems that, despite the federal government's apparent best practice in infrastructure policy, the states may just (pardon the pun) de-rail Infrastructure Australia's good work unless Mr Hockey's asset recycling policy begins to develop some traction.

Nonetheless, it is entirely regrettable that Rob Sitch's "Nation Building Authority" (see ABC's Utopia) provides a timely counter-point to such best practice.


Creative Commons License Except where indicated otherwise, Le Flâneur Politique by Michael de Percy is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 2.5 Australia License. Based on a work at politicalscience.com.au. Background image ©Depositphotos.com/ @redshinestudio