Infrastructure projects can add value but warrant careful scrutiny

CONCERNS have been voiced - including by Deputy Prime Minister Tharman Shanmugaratnam - that enthusiasm among policymakers to build more physical infrastructure in advanced and emerging economies could lead to the construction of so-called "white elephant" projects that are financially non-viable and wasteful of resources.

Such concerns are understandable given the fact that, with nominal interest rates at historically low levels and likely to remain there for some time to come, the cost of borrowing to finance infrastructure and other major projects has fallen significantly.

At the same time, with unconventional monetary policy (quantitative easing and other forms of financial stimulus) regarded by many as having reached the limits of its effectiveness, the appeal of resorting to fiscal stimulus as a means to bolster flagging economic growth has grown. It is no coincidence that against the backdrop of cheap and easy money, the volume of global debt - public and private - has reached what the International Monetary Fund says is a record US$150 trillion.