- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 18 Jul 2017
How to tell which infrastructure projects will work
It’s the classic conundrum that governments typically grapple with - which projects are most beneficial in the long-term? How do large, expensive projects impact on the debt dynamics and macroeconomic stability?
Typically, the tools used to evaluate projects differ within governments. Moreover, current models are often complicated, time-consuming and do not take into account the localised impacts of specific projects or fail to assess the full impact on the economy.
As the appetite for large infrastructure projects rises in developing countries demand for an adequate user-friendly model is likely to rise.
With this in mind and in response to a request from the Nigerian authorities, we developed a simplified model that assessed the impact of a specific project on the economy. The model was designed to estimate the impact of this investment project on a discrete set of macroeconomic variables, such as trade, growth, inflation and debt.
To do this, it was explicitly developed to take into account the increase in demand that occurred during the project’s implementation as well as the estimated impact of the project’s anticipated returns on the economy. The model helps better understanding how the execution of investment projects affect debt sustainability, as debt sustainability analyses often overlook the economic impact of funds borrowed and overly focus on their financial terms.
As a test case, we used the Kandadji Dam project in Niger to simulate the macroeconomic impact of a large infrastructure project. With a fairly large project cost – estimated at $785 million or around 10% of Niger’s gross domestic product (GDP) in 2013 – it was vital to estimate the net impact the project would have on Niger’s economy.
Interestingly, we found that the revenues generated by the project would add 0.45% to the GDP and the increased demand for domestic production during the construction phase of the project would increase the country’s GDP by 0.25% above the current projection.
The model also revealed that certain sectors such as construction and transportation would benefit from the increased demand during the construction phase and once operational, the dam would primarily boost agricultural output and electricity generation.
Throughout the project’s implementation phase there would be a marked increase in imports, which would adversely affect the balance of payments. However, upon completion of the project there would be a beneficial shift in terms of trade, with imports falling back to normal levels coupled with a boost to exports.
The impact of the project on debt dynamics and macroeconomic stability was also assessed. While the costs for the program are significant, since a large proportion of financing is concessional the model estimated there would be limited effect on the fiscal deficit and debt burden for the government.
Our aim is that the model will enable governments to obtain a long-term view on the macroeconomic impacts before they undertake large infrastructure projects so that they are able to make informed choices. With minimal customisation, the model can be used to assess projects or programs across various sectors and can be replicated across countries.
The Niger Macroeconomic and Fiscal Team works on improving the quality of public investment management and efficiency in Niger taking into account the country’s budgetary resources, weak private sector, and fiscal management challenges.
Olivier Beguy is an Economist based in Chad.
Sebastien C. Dessus is the Program Leader based in Washington, DC.
Abdoulahi Garba Economist based in Niger.
Hayman Jason is an Economist and Consultant.
Johannes Herderschee is a Senior Economist, based in Washington, DC.
[Image: Workers level the earth on the Mombasa-Nairobi highway construction project in Athi River, 20 km (12 miles) from Nairobi. REUTERS/Elizabeth Nganga.]
For more information on the computational aspects of the model, please see Modeling the Impact of Large Infrastructure Projects: A Case Study from Niger.
--Future of Construction 14:55, 16 Jun 2017 (BST)
 Related articles on Designing Buildings Wiki
- 3 ways the world’s fastest growing economies can close the infrastructure gap.
- Advancing the outcome of challenging infrastructure projects through project alliancing.
- Global Construction 2025.
- India needs to build more infrastructure fast. Here’s how.
- State of the construction industry in Uganda.
- These giant infrastructure projects are set to reshape Africa.
Featured articles and news
There are many ways of classifying types of building. Have a look at our range of building articles.
BSRIA have launched the 'major update' of the go-to design framework guide for building services.
How to get results with building life cycle assessment.
Government publishes a prospectus inviting proposals for new 'garden communities'.
The Morandi motorway bridge in Genoa collapses during rainstorm while undergoing maintenance works.
'Developed design' is a phrase coined by the RIBA for their 2013 Plan of Work. But what does it actually mean?
New green paper published aiming to rebalance the relationship between landlords and residents and tackle stigma.
RIBA calls for a comprehensive ban on combustible materials.
Lump sum contracts can be referred to as ‘fixed price’ contracts, although strictly this is not correct. Find out more here.
Ramboll offer guidance to civil engineers on how to make projects 'off-site ready'.
Government announces its Rough Sleeping Strategy, with further funding for social housing.