28 February 2019

Project Preparation – Enabling environment: what are the prerequisites required to facilitate the preparation of quality infrastructure projects?

28 February 2019

Globally, governments are accountable for the development of infrastructure and the delivery of basic services in an affordable and inclusive manner.

The ability of governments to nurture a conducive enabling environment for infrastructure investment has often been found to be a key differentiator between countries that successfully scale up infrastructure and those that face challenges in doing so.

An effective enabling environment for infrastructure development, discussed in Chapter 2 of the Global Infrastructure Hub’s Reference Tool on Governmental Processes Facilitating Infrastructure Project Preparation, comprises two key ingredients:

  1. A robust policy framework; and
  2. Well-governed public institutions

A clear, stable and transparent policy and legislative framework signals government commitment to infrastructure development, to both private sector investors and its citizens

This framework should align with the strategic needs and priorities in the country and allow flexibility to meet the changing infrastructure development needs of the country and its citizens. A robust policy framework should articulate, in clear terms, if, when, and how any changes in policy may occur.

Additionally, it is important that the policy framework:

  • defines accountability and accompanying resource allocation for various aspects of infrastructure provision; and
  • clearly demarcates the responsibilities, both of different levels of governments, and of a range of government authorities in charge of specific sectors.

Coordination between and within relevant government authorities and the cascading of policies to subnational governments is also critical.

Institutional collaboration in action

For example, the Netherlands’ Ministry of Infrastructure and Water Management (MIWM) houses and oversees separate directorate-generals responsible for designing overarching policies in specific sectors, and the roles and responsibilities of the various entities are clearly separated.  For large infrastructure projects, the MIWM implements a collaborative solutions-focused approach, called the Multi Year Programme for Infrastructure, Spatial Planning and Transport (MIRT).

A typical solution to fix regular traffic jams on a motorway would be to upgrade the motorway, perhaps by adding another lane. MIWM looked at the issue holistically and consulted all stakeholders to determine the cause of the traffic jams. Following this, a “Move Yourself to Health” program was implemented that encourages residents to cycle to work, in combination with agreements with employers regarding flexible working hours. This had the double effect of influencing the behaviour of motorway users to improve traffic circulation and promote a healthier lifestyle.

Delivering on policy

This policy and legislative framework cannot be implemented and enforced if there is insufficient or inefficient public institutional capacity to do so.

The capacity of public institutions to plan, prepare and deliver infrastructure projects is central to effective infrastructure development.

Different institutional models may be used or required for various facets of project preparation. In most countries, a large part of the project preparation mandate resides with the government contracting authorities, which are typically the line ministries. However, in the last few decades, line ministries have faced challenges in developing the skills to handle scaled-up infrastructure development, and this is where central agencies, like an infrastructure planning agency or a PPP unit, can be created to help prepare long-term plans and institutionalise project preparation capacity and standards.

The Public and Private Infrastructure Investment Management Center (PIMAC) in Korea, for example, was created to enable both public investment projects and PPPs, and is responsible for activities like project approvals, stakeholder engagement, formulating guidelines for preparatory activities, revising risk sharing frameworks and capacity building programs.

However, when central agencies are vested with multiple roles, capacity and conflicts need to be handled carefully. Again, roles and responsibilities should be clearly demarcated, and institutions should be held accountable. Distinct governance structures may be necessary to prepare and implement large complex projects, such as the MIRT framework used in the Netherlands.

The backbone of project preparation

A robust policy framework that provides stability and alignment with government commitment to infrastructure development, coupled with an empowered and well-governed institutional framework which can effectively translate policy into bankable projects, forms the backbone of infrastructure project preparation. These two key ingredients are foundational requirements to support effective infrastructure project preparation and implementation.

Our next blog in the series will examine another crucial enabler of project preparation - the sustained and diversified availability of financing for project preparation.

You can read the first blog in the series here.