Cost, time: 2,000 projects incur overruns

ISLAMABAD  (January 28, 2011) : Meeting the financial requirements of about 2,000 through forward approved projects and schemes with Rs 3 trillion liability, has become a challenge given the revised estimated budget deficit target of 8.5 percent. “Our current accumulated backlog of approved projects where investment is lagging, is around approximately Rs 3 trillion comprising about 2,000 projects and schemes which suffer from cost and time overruns,” reveals a paper titled ‘Pakistan: New Growth Framework (PNGF)’, prepared by Planning Commission.

“The question about where this investment will come from, still remains unanswered. Traditionally it has been a combination of both public and private investments primarily driven by foreign aid and loans respectively and in Pakistan, public investment has consistently been given greater emphasis than private investment,” Planning Commission says in PNGF draft. “This (currently prevalent) strategy has led to Public Sector Development Programme (PSDP) being skewed towards brick and mortar projects, where the government is involved in building assets that could have been furnished by the private sector, more efficiently,” says PNGF.

Examples such as: government building houses, office buildings, roads and related infrastructure in commercially viable areas lead to encroachment in private sector initiatives and activities. The high share of civil works in PSDP (almost 50 percent) leaves little space for training and retaining human capital in productive and social sectors. In PNGF, Planning Commission says that there is a tremendous need to review Pakistan’s development planning process. Even within the structure of public investment, there is an urgent need to review underlying incentives for planners and project directors to assess the quality aspects of PSDP, timeliness, cost efficiency, and compute the net present values of the projects and return to the total portfolio of existing and potential investments.

“The current narrative of growth that focuses on ‘my project’ and ‘my allocation’ combined with distortive incentives (subsidies and protectionism) for industrialisation needs to be shifted to a new narrative that drives us beyond excessive focus on building infrastructure and overly diversified public investment, and towards the pillars of ‘new growth theory’ ie, towards productivity (improving returns/yields) of assets and all factors of production and efficiency (producing goods and services cost-effectively),” PNGF reveals – Brecorder