Project delays and escalating costs are driven by frequent revisions and lack of good governance

Development projects in Bangladesh have a tendency to go through multiple phases of revision resulting in time escalation and cost escalation. Because of this, when juxtaposed against the initial projections as regards expected outcomes and deliverables, the majority of projects fail to attain the objectives and targets set initially  including the estimates of internal rate of return, financial rate of return and the economic rate of return.

For instance, when the construction of a road connecting major business hubs gets delayed, private investors and businessmen who were expected to gain from the particular project in areas of investment, employment generation, production and reduced supply and transportation costs fail to do so. Consumers are deprived of the timely delivery of services accruing from the investment. All these  undermine the cause of economic growth of the country and socio-welfare of citizens.

Secondly, because of the delayed implementation and high costs involved, the cost of the services to be delivered by the project also rises. If it is a power plant, then the price of electricity would rise each time the project's implementation is delayed, if it is a bridge then either the toll or subsidy or both will need to rise when it is built and operationalised. In the final analysis, the burden falls either on the  consumers or the producers. Consumer welfare is reduced, producer's competitiveness is adversely affected.

There are many reasons for the delays- lack of proper regulation, below quality project feasibility study, corruption, connivance among involved parties, lack of appropriate sequencing and phasing of works, lax monitoring, weak institutional capacity to implement and monitor the project. Evidently, institutional capacities, regulatory and enforcement regime and governance structures have failed to develop in tandem with the country's ever increasing size of annual development programmes and growing number of mega-projects.

For instance, the Implementation, Monitoring and Evaluation Department (IMED) of the Planning Ministry which is the entity responsible to monitor implementation of public projects does not have the needed human and financial resources, laboratory facilities, training infrastructure for professional development to properly and efficiently perform its duties. Quality of monitoring work and accountability in the implementation process suffer because of these weaknesses. The capability of relevant institutions, particularly the IMED, must be expanded to address the attendant challenges through allocation of the required resources.

Thirdly, in case of projects involving foreign funds, negotiations are time-consuming and pre-project initiatives including feasibility studies and land acquisition work are not well sequenced, leading to delays in getting the projects off the ground speedily. 

Finally, corruption and use of influence and discretionary powers in selection of implementing contractors and in the course of implementation also affect the quality of projects and the deliverables from the projects. Procurement anomalies, syndication and an absence of results based monitoring undermine the cause of good governance in implementing public infrastructure projects.

Bangladesh is at present investing a significant amount of resources to lay the foundation of socio-economic infrastructure that it will need to attain its developmental aspirations.  These are geared to ensuring high GDP growth rate, provide much needed services to her citizens and improve the well being of her people. Infrastructure has many  positive multiplier effects on the economy. However, lack of good governance will undermine the cause of good value for money, reduce returns on investment and create debt servicing burden for current and future generations. There is a need for greater awareness as regards the costs of lack of good governance in view of implementation of public Infrastructure projects. 

The initiatives undertaken by concerned authorities in recent times in the areas of release of funds, land acquisition, retention of project directors and public procurement must be continued and further strengthened. Last but not the least, the IMED's institutional capacities must be expanded adequately, through adequate allocation of needed resources for it to be able to undertake its mandated tasks.

Disclaimer: Professor Dr Mustafizur Rahman spoke to The Business Standard's Sheikh Rafi Ahmed over phone. This article is an excerpt of the conversation.