Craig Dodds Correspondent
The World Bank started out with the same ideals as the Brics countries’ New Development Bank – to build infrastructure and promote development – yet today it has lost focus and is unsure of its purpose.
The so-called Brics bank could fall into the same trap if it didn’t do things differently, said Luke Jordan, a former private sector development specialist at the World Bank.
Speaking at a colloquium on China-Africa relations held at UCT this week, Jordan said there was an “explicit expectation” that the New Development Bank would be different to other multilateral financing institutions as it emerged from the developing world, had emerging economy roots and would “sidestep some of the conditionality and cumbersome bureaucracy of existing multilaterals and will be focused squarely on infrastructure”.
But he argued the assumption that a funding gap was the “binding constraint” on the building of infrastructure, which in Africa was estimated to require between $30 billion and $50 billion a year, neglected the fact that infrastructure projects were “wicked hard” to do. Data compiled by an Oxford University research group on projects from around the world were quite shocking, Jordan said.
Nine out of 10 infrastructure projects had cost overruns. Overruns of up to 50 percent or more were common and once the infrastructure was built the demand forecasts used to scope them were almost always wrong.
The “iron rule” for infrastructure mega-projects all over the world was “over budget, over time, over and over again”.
This was largely thanks to five major barriers.
One was poorly selected or located projects, Jordan said, giving the example of Cape Town’s famous freeway to nowhere.
The second was a lack of inter-departmental co-ordination, which was required in any large project. South Africa’s R1 trillion infrastructure programme was a classic example, severely behind schedule and with low disbursement levels.
The third was political and judicial processes that tended to dog large projects, which also invited litigation because of the large sums involved.
The scale and complexity of procurement processes, if sufficiently robust to limit corruption, took time to complete.
Finally, by the time the project had cleared all these hurdles, the assumptions underlying the initial planning were well out of date.
When the New Development Bank opened its doors it was likely to be flooded by loan requests for projects that had been on hold for lack of funding.
But these would quickly become snarled up in the same difficulties experienced by other projects.
Before long the bank could be sitting on large numbers of undisbursed commitments, non-performing loans, unused capital and civil society resistance, resulting in balance sheet stress.
It would be tempted to follow the World Bank in revamping its screening processes, setting governance, regulatory and institutional requirements according to which potential borrowers would tailor their applications.
This became an “elaborate dance”, resulting in the bank being asked for technical assistance to meet the requirements and it would soon resemble all the existing multilateral funding institutions.
In the face of such failures, the World Bank had opted for the structural adjustment programme imposed on many African states, and after the “failure of the Washington consensus”, retreated and now “doesn’t really know what it’s doing”.
There was “another way”, however.
Instead of imposing outside “expertise” and conditions, the bank should treat its work as a continuous learning process to generate and spread the knowledge of how to do infrastructure by doing.
In all countries there were potential “bureaucratic entrepreneurs” who could achieve extraordinary results if they were supported and allowed to experiment.
The bank should monitor these projects and require each to share its experiences of what worked best, and what didn’t work, with others at regular report-back sessions.
The Brics countries already had a rich tradition of similar systems of learning by doing.
Africa had the Nepad peer-review system, which could be rejuvenated to be more learning oriented, while Brazil and India had begun to experiment with new bottom-up planning models, Jordan said. – Sunday Independent.