THERE is a need for governments to take off their macroeconomic hats and put on their microeconomic hats in ensuring that every project has a pay-off that justifies the cost.
Deputy Prime Minister and Coordinating Minister for Economic and Social Policies Tharman Shanmugaratnam said this in his opening remarks at the World Bank-Singapore Infrastructure Finance Summit 2016 on Monday.
He noted that this is especially so in the low interest rate environment: "We have got to avoid white elephants and we have got to keep a sharp eye on costs of infrastructure projects. It is a very unfortunate fact that cost overruns in large projects are the norm almost everywhere, and the overruns range from on average 20 to 45 per cent, and that is clearly not a desirable situation ... And it is a waste of resources, so we have got to keep our microeconomic hats on, assess every project for its pay-offs, do vigorous cost-benefit analyses."
Mr Tharman added: "This is also why the public-private partnership is important. We have got to bring the private sector that is concerned about ensuring that there is a profitable return for projects, together with the public sector that rigorously assesses and prioritises the need and ensures that we are opening up projects that are the most important for our countries."
According to him, technology can play a part in driving down costs. Information management or modelling systems, for example, can be used to map out infrastructure projects and spot problems early on, so as to reduce costs significantly down the road.